On August 21, 2001, the FMC filed a document with the US Copyright Office to answer the request for public comment on the Copyright Arbitration Royalty Panels (CARP) proceedings. In the document, FMC General Counsel Walter McDonough makes a compelling argument that Sound Exchange, the entity created by the RIAA to collect digital performance royalties, is fundamentally flawed and that its operations must be reformed before it is allowed to participate in the collection and distribution of royalties for all artists.

The FMC made three recommendations:

• first, a clarification as to the proposed forty-five (45%) percent direct payment to recording artists of DPRSRA monies;
• second, the need to establish a “protocol” to allocate such monies; and
• third, the establishment of procedures pursuant to the collection and ownership of data.

Specifically, the FMC suggested that:

• each record company that is a member of Sound Exchange agree that DPRSRA monies payable to artists for any and all statutory licenses would be paid directly to artists and would, therefore, be non-recoupable;
• all so-called “major” record labels would be members of Sound Exchange;
• the structure of Sound Exchange have recording artists and labels each controlling an equal number of elected board seats; and
• there be a guarantee that both artists and labels will have equal access to all data collected by Sound Exchange in addition to approving all methods of data collection.

If you would like to read the proposal, there is a PDF of the document available here.

While summer is typically a slow time in Washington, DC, we find it to be a great opportunity to make the rounds in an effort to educate staff members on core issues we are focusing on. We are encouraged to see the level of interest and concern shared by staff on Capitol Hill and related agencies - these are people who truly love music and are eager to help create solutions that benefit artists.

A. Music Online Competition Act (MOCA) Introduced Last month, Representatives Rick Boucher and Chris Cannon introduced the Music Online Competition Act (MOCA), a bill strongly backed by the webcasting industry in an effort to boost those firms’ ability to compete.

While it is difficult to see this bill becoming law in its current form, given opposition from the RIAA, there are a number of important ways that simply the introduction of a bill can shape the debate around a specific set of issues. In particular, the FMC is interested in two provisions that are critical to a thriving independent music industry:

i) Provision of Statutory License Payments to Artists This language is from Boucher’s staff: “The sound recording statutory performance license provision specifies that royalty payments should be shared equally by performing artists and recording companies. Current law funnels these payments to artists through the recording companies. Our bill requires these payments instead to be made directly to the artists or to a collective organization representing the artists.”

This indicates the bill’s support of payment of the digital royalty directly to the artist, rather than having royalty monies flowing through the artist’s record company. The major labels have been staking a claim to this webcasting royalty, arguing that these royalties could or should be applied to artist debt. The FMC takes the position that webcasting royalties are analogous to broadcast royalties — royalties based on radio airplay in the terrestrial world. Ever since the creation of the performance rights organizations in the early 20th century, broadcast royalties have been paid directly to the artists, and we believe that this method should continue for music broadcast on the internet. We applaud Reps. Boucher and Cannon for standing up to the RIAA and including the direct payment of the 45 percent royalty to artists as a component of their legislation.

ii). Assurance of Nondiscriminatory Licensing to Affiliated and Non-Affiliated Entities: This language is from Boucher’s staff:”Recording companies recently have entered into the online music distribution business by establishing joint ventures with other record companies (e.g., MusicNet and Pressplay) and by acquiring well-known, formerly independent Internet services (such as CDNow, EMusic and MP3.com). It is anticipated that the distribution services owned by record companies will cross license each other, so that each site will be authorized to distribute over the Internet approximately 80 percent of all recorded music. If the major record companies do not also license independent unaffiliated distribution services, this could create a competitive imbalance that could threaten the establishment and survival of independent online music services. Such an imbalance mirrors the concern in 1995 with respect to cable and satellite subscription services, which Congress addressed by requiring vertically-integrated companies that both owned content and distribution services to offer nondiscriminatory license terms and conditions to all similarly-situated noninteractive performance services. The bill extends this existing nondiscrimination provision interactive performance services and digital distribution services.”

In essence, this provision attempts to ensure that new competitors are able to receive non-discriminatory license terms and conditions. The major labels won’t be able to simply block competition from companies who are not affiliated with the majors by skewing the licensing agreements. In other words, if Sony cuts a deal with Universal, Sony would then have to offer the same terms to another company. While this concept needs a lot of thought and examination, it might lead to entrants having a shot at competing against MusicNet and Pressplay.

As this very long process moves forward there will be many opportunities to debate both the specific goals of this legislation and examine whether the legislation as drafted will lead to the intended consequences. To that end, we welcome discussion, critiques or recommendations regarding the concepts addressed in this bill.

B. Low Power Radio Gains Strength In addition, Low Power Radio is becoming a reality. The FCC received over 3,400 applications for these licenses, and it looks like we may see as many as 1,000 new non-commercial stations get on the air over the next year and a half. While the broadcasters were successful in barring the initiative from urban areas, the success of the rural stations will form the foundation for opening up the service to the cities, ideally in the next several years. The Future of Music Coalition is committed to doing anything we can to ensure these new stations have the visibility and support they need to prosper. The length of the process is surely frustrating, but that’s the old cliche about Washington - there are no permanent victories or defeats. Take what you can get and keep pushing…

It’s been a long time coming but hopefully you all will find it was worth the wait. After much aesthetic and structural struggling we now have a beautiful and, we hope, useful new version of the website. We’ve cleaned up the design and added some pretty significant sections to help users to inform themselves and share information among one another. There will also be a way for you to register for our second annual Policy Conference, January 7-8, 2002!

In order to flex our mental muscles and focus on the bigger pictures in an environment of seemingly endless details, the board members of the FMC are engaging in a reading course this summer and fall dealing with activism, music, technology and copyright. We are about to embark upon a discussion of our second book, The Future of Money by Bernard Lietaer. Curious folks are heartily encouraged to read along and join the online discussion. Email Kristin at Kristin [at] futureofmusic [dot] org for more info!

The free flow of information over the web makes it difficult to keep unfair business practices private. As imbalanced standard industry practices become common knowledge to people outside the music industry, those people can’t help but begin to see these businesses and institutions as hostile to musicians, greedy and morally corrupt. Recent articles that make a good case that the music business is broken are:

Recording Industry’s Top Lobbyist Seeks Harmony in a Time of Discord by Laura Holson
New York Times, August 20, 2001

Lawmakers Take Aim at Music Industry Contracts Recording: Officials prepare to examine what artists call the ‘unconscionable’ agreements of the Big Five conglomerates by Chuck Philips
LA Times, August 8, 2001

Suit: Clear Channel is an illegal monopoly by Eric Boehlert
A tiny Denver promoter is taking the most powerful force in the music industry to court.
Salon, August 8, 2001

More Waves in the Radio Business by Eric Boehlert
Salon, August 6, 2001

Payola City by Eric Boehlert
Salon, July 24, 2001

What’s Wrong with the Music Biz? by Eric Boehlert
Salon, July 19, 2001

We’re putting it all together and taking it on the road. Between Oct 8 and Nov 16 Jenny and Kristin and other FMC board members will be touring the country with a full band to give Jenny a chance to promote her new double CD, Antidote. While they are on the road they will also be stopping in at more than a dozen universities to speak about issues impacting citizens and creators concerning music and technology.

Issues of discussion with include:

• Traditional Music Business Models. Do they serve musicians, do they serve citizens?
• The Copyright Bargain. Have recent increases in copyright protection served their intended purpose: to guard the value of creative labor?
• The Digital Commons. How will musicians and citizens benefit from a future where knowledge and creativity is increasingly patented and owned?
• What does History have to say? Are there historical analogies and anecdotes we can use to better understand this period of rapid legislative, technological and legal change?

When we relaunch the website on September 1, we will have a full list of University and Rock club tour dates. If you would like to help volunteer to promote the shows, let us know!

Jenny Toomey
Just returned from ten days of recording in Tucson but hit the ground running upon return working with Kristin to solidify details for her fall tour and to begin to organize the Future of Music Policy Conference next January. Earlier in the month she spoke at the Jupiter Plug In Conference, The Center for Arts and Culture Policy and at The Net Media Conference in London.

Michael Bracy
Besides working on the Policy Conference planning, Michael has been analyzing the various pieces of legislation introduced on Capitol Hill in the past two months, including the Boucher/Cannon bill and the Department of Justice’s recent announcement about anti-trust investigations surrounding Musicnet and Pressplay. He is also keeping tabs on California State Senate’s investigation of the so-called “Seven-Year Statute.” Don Henley and Courtney Love are expected to testify at the hearing, which will be held by the newly formed Select Committee on the Entertainment Industry.

Brian Zisk
Brian’s been working to rustle up panelists worthy of the Policy Summit’s name. He’s been addressing how the CARP proceedings regarding a digital performance royalty have been slanted in a way where the artists’ and smaller media’s best interests are not being sufficiently represented. He’s also working to stimulate some thinking into the issue of how non-quantifiable exchanges and alternative currencies might benefit musicians. He’s trying to figure out how many of the college fall tour dates he’ll be able to attend (after having just taken a bit of travel time, visiting hot springs through Idaho and Mountains in Montana).

Walter McDonough
Walter McDonough is following up on the recent FMC comments to the Copyright Office regarding the RIAA’s Sound Exchange proposal. The FMC is also examining the Bush Administration’s efforts to compensate European music publishers and songwriters, but those in the United Stats, for nonpayment of performance royalties. The FMC is continuing its discussions with colleges and universities throughout North America for common music business research efforts. Finally, we welcome any submissions from published authors for the upcoming 2002 FMC CLE book. walter [at] futureofmusic [dot] org.

Kristin Thomson
Kristin has been working on the logistics for the Fall Speaking Tour, advance planning for the Policy Conference, doing research into the impacts of radio consolidation, and reorganizing the website. In mid August she traveled to Indianapolis to speak on a panel at the Midwest Music Summit.

Peter DiCola
Peter DiCola is continuing his research on compulsory licenses for recorded music, and their possible effects on musicians and consumers. He has focused on three areas to investigate this question: a study of the contractual relationship between musicians and recording labels, a consideration of lessons from the economic literature on patent law, and an application of certain legal research on property law to intellectual property law. His research is funded by a grant from the John M. Olin Center for Law and Economics at the University of Michigan.

If you have any feedback, questions, or suggestions please send an email to suggestions [at] futureofmusic [dot] org, and let us know how we’re doing.

Thanks for your support and see you next time.

xo Jenny Toomey
Executive Director, Future of Music Coalition
jenny [at] futureofmusic [dot] org