Netcos argue for tweaking c'right law

WASHINGTON — Play the song any way you want, but in the end it still comes down to a battle over compensation.

That was the tune filtering out of a Capitol Hill hearing Thursday on music and the Internet, one of this year’s hot topics in Congress. It’s around the issue of royalties and licensing that the government may weigh in on the frenzy to distribute tunes via computer by tweaking copyright policy.

An impressive lineup of music industry dignitaries — including Vivendi Universal vice chairman Edgar Bronfman Jr. — may have sat at one table when giving testimony before the House Subcommittee on the Internet and Intellectual Property, but a deep division punctuated the afternoon hearing.

Execs from Netcos such as MP3.com and RealNetworks testified that trying to determine how to license music on the Internet using current, outdated copyright law is a virtual nightmare. They complain that they’re forced to negotiate with several different rights holders and even then aren’t guaranteed that they’ll be immune to lawsuits.

New licensing urged

They urged Congress to streamline the licensing process by allowing music distribution sites to obtain a blanket compulsory license that pays publishers a flat royalty rate to compensate them for online distribution of their music.

“Simple logic dictates that we set up a licensing system that allows for one-stop shopping and the license of all required rights for digital delivery. To accomplish this, we will need the cooperation of music publishers, who we believe must offer more flexible licenses that reflect the function of these new digital distribution systems,” RealNetworks chair-CEO Rob Glaser.

RealNetworks recently teamed with music labels BMG, Warner Music and EMI to form MusicNet, a subscription-based music distribution service that plans to launch late this summer. But Glaser said the venture’s viability is threatened by the existing licensing scheme given the difficulty in striking separate deals with myriad rights holders.

During the hearing, Glaser publicly demonstrated the service, which included Napster-like download functionality, for the first time. The downloads have a built-in expiration date that requires users to pay again to continue listening after a month.

Songwriters sing out

Recording artist Lyle Lovett, who testified on behalf of the American Society of Composers, Authors and Publishers, stressed that individual songwriters will be the ones penalized by any blanket license for music on the Internet, because they’ll be forced to accept a flat, government administered royalty rate.

Lovett added that negotiating licensing deals with individual publishers needn’t be prohibitively complex; in fact, ASCAP licenses more than 2,200 Web sites already and that process isn’t chaotic, he argued.

“Compulsory licenses should be repugnant to those who believe in the free market and the sanctity of private property, including intellectual property,” Lovett said. “I love what I do, but it is a tough business. Have you ever seen in the classified section of any newspaper ad which reads: ‘Songwriter wanted; good salary; paid vacation; health benefits and many other perks?’ I’m sure you haven’t.”

Songwriter Michael Stoller, testifying on behalf of the National Music Publishers’ Assn., likewise urged Congress to keep the artist in mind.

“I was asked how to describe the purpose of today’s hearing. Compensation hits me between the eyes,” said subcommittee chair Rep. Howard Coble (R-N.C.).

Clarification sought

Bronfman said Vivendi U isn’t out-and-out advocating a compulsory licensing scheme but that it is among those asking the U.S. Copyright Office for some clarification to see if existing compulsory license rules that allow for the mechanical reproduction of phono records can be amended to cover Internet distribution as well.

Coble and others directly questioned Bronfman about whether his company would block the flow of music on the Internet by refusing to license song libraries to third-party ventures.

Bronfman assured lawmakers that the conglom also has licensed songs in its catalog to a number of third-party outfits — including Click Radio, MTV, MP3.com, Digital on Demand, ComedyContent.com and Starmedia — and that several additional licensing deals are in the process of being finalized.

Vivendi U music arm Universal Music Group has also teamed with Sony Music to form Duet, a forthcoming digital music subscription service similar to MusicNet. Duet has already agreed to license its offerings to online megaportal Yahoo, which plans to bow the service by fall.

“We want our music to be broadly and widely available,” Bronfman said. “We haven’t been reluctant to license; we just wanted to make sure there was technology to protect the copyright holders.”

Coble and Rep. Howard Berman (D-Calif.) urged all parties to work together and determine a way out of the quicksand. Lawmakers said they are reluctant to propose specific legislation; attention now turns to the U.S. Copyright Office.

(Justin Oppelaar in New York contributed to this report.)

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