In a move certain to spark a new round of posturing by participants in the controversy over the sale of used compact discs, the National Academy of Recording Arts & Sciences is expected to announce its support of record distributors who refuse to sell product to retailers that market used CDs.
The official announcement is expected to be made today by NARAS president Mike Greene, three weeks after four major record distributors were named in a federal suit by the 339-store Wherehouse Entertainment chain.
The NARAS move also follows acknowledgements by distribs that the Federal Trade Commission is conducting an inquiry into the sale of used CDs. Separate class-action lawsuits by a pair of Midwest retailers and an association of independent retailers also were filed last week against the four distribs.
NARAS’ involvement, according to an entertainment industry attorney who requested anonymity, “is like the MPAA getting involved in the homevideo issue. It lends a certain prestige behind the cause. But the only way anything will change is if there’s a big enough stink and Congress gets involved. And that’s possible considering we now have a president who is closer to the music business than any of his predecessors.”
The lawsuits claim Sony Music Distribution, CEMA Distribution, Uni Distribution and WEA Corp. have conspired to withhold cooperative advertising dollars to stores carrying used discs.
The FTC inquiry centers on whether distributors are violating any antitrust or unfair competition statutes.
CEMA also has refused to sell new product to stores that carry used CDs, supporting a stand taken by country music artist Garth Brooks, who requested his label not sell his upcoming release to those stores. Other distribs are expected to adopt a similar stance.
“It doesn’t surprise me that NARAS would take that stance,” said Bruce Jesse, spokesman for Wherehouse. “After all, for all intents and purposes they’re representatives of all the major companies, and they are not in touch with the needs of consumers. It’s another industry tactic to bring strong pressure on retailers to get out of the used-CD business. This, I’m sure, is just the beginning.”
The NARAS announcement is hardly surprising, since the group’s membership of producers, songwriters and artists would benefit most if used CDs were not sold, or if a royalty formula was created. The NARAS decision presumably jump-starts their lobbying efforts in that direction.
Presently, the first-sale doctrine of the Copyright Act requires royalties be paid the first time an album is sold, but the disc can then be resold without additional payments.
Sources have confirmed the FTC sent letters to all six distributors to determine whether the resale of used CDs violates the FTC act. Several retailers acknowledge also being contacted by the FTC, but an FTC spokesperson refused to confirm or deny its involvement.