Vanderbilt Journal of Entertainment & Technology Law
Volume 1 Issue 1 Article 3
1999
The Times They Are a Changin': How Technology Has Forced the Law to Deal with a New Era in Music Distribution
Mark Plotkin
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Recommended Citation Mark Plotkin, The Times They Are a Changin': How Technology Has Forced the Law to Deal with a New Era in Music Distribution, 1 Vanderbilt Journal of Entertainment and Technology Law 46 (1999) Available at: https://scholarship.law.vanderbilt.edu/jetlaw/vol1/iss1/3
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Yc. angin
early 30 years ago, Bob Dylan recorded the clas- sic song The Times They Are A Changin'7i
Back then, Dylan probably had no idea that technology would someday exist to distribute his songs throughout the world in near-perfect digital reproductions. Today, through the advent of the Internet and digital net- works, consumers have increasing access to digital down-
loads and digital broadcasts of copyrighted musi*c.2 Downloaded music on the Internet alone is estimated to become a $4 billion business by 2002.:, By Mark Plotkin
Internet'? MP3? Digital? How technology has forced the law to The United States has attempted The DMCA's allowance of sound sive contracts with songwriters and to keep pace with emerging digital recording royalties in streaming recording artists. They will also music distribution technology Internet broadcasts is particularly directly distribute, broadcast and sell 4 4 through its copyright law. problematic.1 Most streaming their music via the Internet in wide- 23 However, the perfect quality, limit- Internet broadcasts are non-interac- spread low-cost distributions. less geographical scope, and expo- tive and non-subscription broadcasts nential growth of digital music deliv- of music, as in traditional radio A Crash Course in ery implicate the varied and conflict- where, no sound recording royalties Music Copyrights 1 5 ing interests of songwriters, perform- exist. Additionally, in streaming To understand how the 1995 Act ers, record companies, broadcasters, broadcasts the end user does not and the DMCA change music licens- and the public. 5 Reconciling the retain a tangible copy of the song ing, one should be aware that, in gen- interests of these groups in digital that can be recopied. By allowing eral, two distinct copyrights exist for music delivery has not been, and will song copyright royalties in streaming each song that is recorded: the song 6 not be, easy. Internet broadcasts, the DMCA copyright and the sound recording 24 In November 1995, Congress first treats these broadcasts as radically copyright. First, the song copy- addressed the copyright problems different from traditional analog right secures the actual song itself posed by digital music delivery in the broadcasts. 16 while the sound recording copyright Digital Performance Right in Sound Because digital delivery promises protects the particular recording of 2 5 Recordings Act of 1995 ("the 1995 to become an increasingly popular the song. Therefore, every time Act").7 The 1995 Act breaks with means of music distribution, the cur- someone covers one of Bob Dylan's traditional copyright law by creating rent law presents multiple problems songs, Dylan, through his music pub- 1 7 a digital public performance right in for the interested parties. First, lisher, receives a royalty payment the copyright owners of sound this new legislation stands to hurt because the song copyright protects 26 recordings. 8 The 1995 Act provides songwriters because their exclusive him. The artist and producer who that when a song is broadcast by a performance rights have been com- cover the Dylan song are only creat- 18 digital subscription service, the promised in this new digital arena. ing a sound recording of a song, and owner of the sound recording-usual- Additionally, it may delay the growth therefore only have a copyright on ly the record company-is entitled to of "streaming" broadcast technology their particular version of the song, royalties. 9 However, traditional as many future "streaming" broad- and not on the underlying song 2 7 copyright law still recognizes that if casters are not entitled to govern- itself. The practices of the music 19 the same song is broadcast in an ana- ment-set royalty rate protections. industry dictate that when a record log format (such as AM or FM radio), The public also stands to lose by company commissions the recording the owner of the sound recording being denied access to the full poten- of a song by either its author or a sec- 10 receives no royalties. tial of streaming technology by yield- ondary artist, the sound recording The newly enacted Digital ing cost control of downloaded songs copyright is conveyed to the record 20 2 8 Millennium Copyright Act of 1998 to the large record companies. company. (the "DMCA") is a further departure A likely outcome of the onerous The difference between a song and 1 1 from traditional copyright law. provisions of the 1995 Act and the a sound recording copyright is partic- Among other provisions, the DMCA DMCA will be the emergence of new ularly important during a public per- 2 9 expands the 1995 Act by allowing the smaller "Internet-only" record com- formance of the song. A public per- 2 1 owners of sound recording copyrights panies. These companies will have formance results from a live stage a right to royalties in "Internet an alternative business structure, show or a media broadcast of the 12 3 0 Radio" or "streaming" broadcasts. which will not require them to rely work. Traditionally, songwriters, The Act also clarifies that sound on the DMCA and the 1995 Act pro- as owners of song copyrights, have 2 2 recording copyright owners are enti- visions. Such companies will com- an exclusive right to royalties from public performances of their songs, even if someone else's sound record- deal with a new era in music distribution ing is performed. 3 1 As customary owner of the sound recording copy- tled to royalties whenever a tangible pletely circumvent the large record right, the record companies typically 13 copy of the song is downloaded. companies by directly signing exclu- do not receive royalties from public performances or broadcasts. 32 The ment fundamentally different from Internet and record perfect quality 1995 Act and the DMCA dramatical- AM/FM broadcast radio. mix" CD's. ly depart from industry practice by The development of MP3 technolo- creating a new performance right for W ithin the past two years, gy has created new problems in com- the record companies when a song is Internet digital music delivery has bating bootleg and unauthorized 35 publicly "performed" in a digital exploded. This extraordinary recording distribution. In 1997, broadcast. 33 growth can largely be attributed to Pearl Jam's newest album was ille- improved software and faster net- gally distributed on the Internet in What is Digital Broadcasting working technology. Right now, the high quality MP3 format even 7 and How It Works Internet music delivery can be divid- before its official release. 3 Because Today, there are two basic meth- ed into three distinct methods: 1) file of MP3's high quality, strong com- ods of digital music broadcasting: 1) downloading, 2) webpage support, pression, and wide availability, this via a private digital network, which and 3) streaming audio broadcasts. audio format promises to long defy is covered primarily by the 1995 Act Users of the Internet have been those attempting to end such illegal 3 8 and, 2) via the Internet, which is able to download music and sounds distribution of music. addressed by the DMCA. In both since the development of UNIX- By the end of 1998, the record instances, the basic technology of based FTP sites, which were prede- companies took legal action against digital broadcasting is similar to that cessors to the Web. FTP sites, how- the MP3 threat because Diamond of a compact disc. Each stores music ever, were not popular with the gen- Multimedia had scheduled a release by translating the sound into a bina- eral public because they were much of a "walkman-like" MP3 player 39 ry series of Os and is. This process more difficult to use than the Web. called the RIO PMP 300 ("RIO"). allows the sound to be reproduced In these "early days" of music distri- The RIO directly threatens the 34 and copied with no loss of fidelity. bution via FTP, a download of a sin- record companies because it allows In the case of digital broadcasting, gle song could take over an hour due playback of MP3 recordings without however, the binary series of Os and to lack of adequate data compression. the use of a home computer. With ls are transmitted to multiple par- Additionally, the end user had to the RIO, consumers can download an ties rather than to just the single lis- purchase an expensive hard drive hour of selected digital songs from tener of the CD. with enough storage for the songs. the Internet using a computer, then So, although it was possible to down- unhook the RIO from their computer Broadcasting CD-quality music load digital music from the Internet, and take the music with them. The over a private digital network today it was highly impracticable and in no Recording Industry of America is a reality. In the United States, way threatened traditional music ("RIAA"), the association that repre- satellite services such as USSB or distribution. sents the record companies' collective Primestar and many cable systems In 1997, a new file compression interests, quickly responded to the already provide access to channels standard for digital music, MP3 threat that RIO poses to record sales. that broadcast specific styles of (Mpegl Layer 3), was developed and The group won a temporary restrain- music. Generally all of these chan- has become wildly popular for down- ing order against the RIO's release in 3 6 40 nels are operated by only three com- loading music on the Internet. The the US. At the time of this writing, panies: Digital Cable Radio MP3 compression format makes the manufactures of RIO filed a suc- Associates, Digital Music Express, Internet distribution of music viable cessful response to the RIAA com- and Muzak. These channels operate for two reasons. MP3 allows a song plaint, and the RIO is now sold like traditional radio stations, play- to occupy less space on the end user's online and at a few of the larger 4 1 ing unannounced songs rather than hard drive. More importantly, how- national electronic stores. entire albums. Arguably, they do not ever, a song in the MP3 format can Despite the RIO controversy, directly compete against CD sales be downloaded in a few minutes and there remains a strong demand for because the consumer cannot antici- replayed on demand by the end user, software that will play MP3 files 42 pate what song will be broadcast at much like a CD. With the develop- directly on the computer. This any given time; that is, the channels ment of inexpensive recordable CD's demand is best illustrated by the 10 are "non-interactive." These stations (CD-R's), many computer users million downloads of Winamp, a pop- 4 3 are subscription services, and already have the capacity to down- ular Windows MP3 Player . The requires a fee for access, an arrange- load MP3-compressed songs from the very efforts to regulate MP3 down- loads have likely made it more er, near-FM quality stereo broad- million dollar Super Bowl television streaming appealing since it now has an "out- casts with supporting video are pos- ad to promote an Internet 48 broadcast of its fashion show. law" allure. 4 4 According to Time, sible. The future of streaming video to the company, more than fast T-1 Internet connections on audio already has converged with According 1.5 million Web users watched the many college campuses have turned the MP3 compression format. This broadcast live. 52 As streaming audio three-fourths of the students into February, beta releases of streaming technology continues to improve, and MP3 music pirates.4 5 In February, MP3 players were available on the 4 9 continue to recognize its Lycos became the first search engine Internet for product testing. as users the Internet will likely to offer searches of both legal and The number of Internet streaming potential, form the backbone of a global digital illegal MP3s by artists and song title. broadcasts and the number of people radio, and possibly television, network. Outside the dominant record compa- who tune into them has grown nies, it appears the rest of the music remarkably. In February, RealAudio The Positions and Plottings of industry, though somewhat appre- announced that downloads of the the Interested Parties hensive, is intrigued by the promise RealAudio player have topped 50 broadcasting has of MP3 album distribution. million, though most of these copies Since digital 50 become so promising, record compa- According to some, MP3 promises to were likely software updates. "even out" artists' access to the pub- nies, songwriters, digital broadcasters, a significant stake lic and make it easier for musicians and the public have 4 6 establishing how it is regulated. to become their "own" record company. in Digital audio has also been audioAs technology The recording industry is cur- increasingly incorporated in actual cont'inues to im1,prov e, rently dominated by a handful of websites to make Web "surfing" a and as us--ers continued major record companies, which have truly multimedia experience. The an interest in maintaining a virtual current versions of both Netscape to r aco-gnize uioton monopoly on music distribution. and Internet Explorer allow users to com lpotentialthen u, e These companies are especially browse sites with music embedded about the growth of into the actual scripting of the web- wvillAsfeen likelystreaming f'orm sccanl the apprehensive music delivery because it page. Internet users also have of' a global1 digital backbone to challenge their strong actively expanded their ability to lis- threatens market position. ten to or script webpages with music All record companies, however, by downloading specialized "plug- are concerned about protecting their ins," such as Macromedia's 4 7 sales of music recordings. Shockwave. traditional Record companies invest heavily in The most important development Additionally, specific sites for finding publicity to generate profitable digitaluc adiSOUadan record sales. If the same recording is for digital broadcasting on the different streaming music channels on the Internet or on an Internet is the realization of stream- on the Internet-such as available digital network, in per- ing audio files. "Streaming" technol- broadcast. comhave also gained interactive fect reproduction, the record compa- ogy permits the user to receive popularity. Streaming audio on the ny loses a potential sale with every music-and now video-in real time Internet still has much untapped illegal download or copy. Even copies via the Internet without having to commercial potential. Through web- downloaded song can be per- download and store entire files. This sites such as SHOUTcast, any of the fectly reproduced again and again, so process is known as "buffering." Internet user who has RealAudio digital distribution of music threat- Progressive Network's RealAudio capabilities can now set up a stream- losses to record com- pioneered Internet audio buffering ing audio broadcast and form an ens exponential panies. The new laws, however, technology in 1995. At this early Internet radio station with no other 5 1 to mitigate some of these losses stage, it could only achieve a poor special equipment. The latest sign serve new performance rights. AM-like quality broadcast due to net of the maturation of streaming by creating Record companies and their trade congestion and compression chal- Internet broadcasts came recently RIAA, have been active lenges. Today, however, with the lat- from, of all places, Victoria's Secret. association, all forms of music est G2 release of the RealAudio play- This lingerie boutique used a multi- in prosecuting piracy. Recently, RIAA has applied cast-songwriters are entitled to roy- to traditional music delivery requires pressure to illegal digital broadcast- alties. Songwriters currently collect a significant amount of money. It is ers who do not pay royalties to record their performance royalties inde- no surprise, then, digital broadcast- companies as provided by current pendently of record companies. ers are reluctant to pay out royalties. law. RIAA has already sent strongly Major songwriter collection societies When the end user downloads music worded letters to such broadcasters such as ASCAP, BMI and SESAC to produce a "tangible copy" of the asserting the record companies' license all of the songs in their song, digital broadcasters all concede rights. Its members have even forced respective catalogues. These groups that record companies have a legiti- some illegal music sites to complete- collect the performance royalties and mate copyright interest. They 53 ly shut down. distribute them to the individual strongly disagree, however, what songwriters based on the amount royalty percentage should be Since songwriters have long their song was performed. The pro- imposed.5 6 When the consumer does enjoyed a traditional public perform- tection of their performance right is not end up with a "tangible copy" of ance right, they and their collection therefore critical to ensure fair com- the song, digital broadcasters are societies are concerned with perpetu- pensation when one of their songs even more opposed to royalty expens- ating this asset in digital broadcast becomes a hit. es. With the enactment of the DMCA format. Every time a song is per- Until this year, songwriters have and the creation of new record com- formed in public-whether in an also enjoyed performance royalties in pany royalties in "streaming" broad- arena, airplane, or media broad- restaurants and bars. Under the casts, it is unclear what the future recent enactment of the Fairness in negotiated royalty rates will be. If Music Licensing Act, however, song- the rates are too high, the DMCA writers lose much of this royalty could severely restrict future growth base. 54 As songwriters see their roy- of Internet broadcasting; consumers alties shrink from performances in may not be willing to pay the high - bars and restaurants, they have a prices needed to cover broadcasters' fundamental interest in expanding, royalty and operating expenses. the homepage of the or in at least preserving, traditional Recently, a consortium of the Real -udio player music copyright law in digital broad- three largest Internet broadcasters casting to ensure continued royalties. formed The Digital Media Association ("DiMA"). 5 7 According to an onlinerecord company that Digital music broadcasters hope Hillary Rosen, president and CEO of posts the3wwwamps latest MPaon news to replace traditional analog broad- RIAA, the sole purpose of DiMA was casts. 55 Despite the 50 million total to undermine the record companies. an MP3 search engine downloads of RealAudio, only a small The DiMA, however, only represents percentage of the public currently the three largest Internet broadcast- 'NwwJ i ~d:I ioco has access to digital music broad- ers and not the digital broadcast an online record comipanly casts. Most people do not subscribe to industry in general. 58 Accordingly, a satellite or cable service with digi- both the DiMA and RIAA share a tal music stations, nor own a com- common interest in suppressing com- thie streamijng audio channel guidte puter with an adequate Internet con- petition in Internet music distribu- nection for practical digital music tion.59 In fact, the DiMA and RIAA delivery. Even regular Internet pooled their special interest pres- an online record comipany users still rely on local analog broad- sure, as evidenced by the successful cast radio stations for most of their lobby for "grandfather" royalty rate music. To establish digital broad- The Recording- Industry of provisions in the DMCA, narrowly Amnerica online casting as the future industry stan- tailored and uniquely favorable to dard, digital broadcasters must DiMA members. invest in online technology to the RIO) (a "walkman-like"' MP3 enhance its quality and to generate The public at large has a stake in player) mnaker's homepage public demand. Establishing digital regulation that encourages digital music distribution as a replacement broadcasting growth. Digitally broadcast music enhances the Web, Copyright Act of 1976 ("the 1976 because it creates a new public per- making cyberspace a more friendly Act"), which contained no automatic formance for record companies. and entertaining environment. expiration provision. The 1976 Act Under the 1995 Act, the law fixes, Today, computers offer not just pic- provided that all sound recordings, if rather than deferring to negotiation tures and text but are fast becoming original and fixed in a tangible the actual rate of royalties paid to 6 4 multimedia machines. In fact, many means of expression, are protected by the record companies. Since this is new home computer systems produce a sound copyright. 63 Like its prede- a compulsory license, this amount sound that rivals even the top hi-fi cessor, the 1976 Act did not create a determines the prevailing royalty stereo. Consumers have an interest performance right for sound record- rates in the industry. in promoting digital broadcasting ing owners. Since the passage of the 1995 Act, because it furthers the versatility there has been wide debate about the and usefulness of home computers. Passage of the 1995 Act, like the proper amount of the statutory royal- Digital broadcasting also promises 1971 Act, was also driven by the ty rate. In July 1998, RIAA and the consumers more choice in music growth of new technology. Congress' three largest cable/satellite digital selection. Consumers can escape the primary concern in the new law was music networks attempted but ulti- technological and geographic bound- regulating digital satellite broad- mately failed to agree on the rates of aries of analog stations and instead casts of music by subscription. The license fees. RIAA maintains that it listen to radio stations from all over 1995 Act departs from the prior acts should receive a royalty rate of 41.5 the world. Finally, "on demand" because 1) it creates a public per- percent of a digital music broadcast- music downloading is more conven- formance right for the owners of er's gross revenues. This figure was ient than buying CD's. Consumers, sound recordings, and 2) it requires a adopted from the revenue percentage in most cases, must buy an entire CD compulsory musical license in cer- rate that cable movie networks (such to get the one song that they like. By tain types of digital music delivery. as HBO or Showtime) pay to movie downloading a particular song, con- The 1995 Act applies only to per- companies when they broadcast their sumers can mix their favorites and formances of sound recordings that movies on TV. The digital audio sub- avoid paying for other songs they are transmitted, digital, and "sound- scription services countered with a never wanted. Also, consumers only." A transmission, by definition, royalty rate ranging between 0.5 to would not have to change and store must result in "digital phonorecord 2.0 percent. CDs, since their entire recording col- delivery," which occurs when the end As provided by the 1995 Act, a lection could be stored on their com- user receives an actual digital copy of Copyright Arbitration Panel heard 60 puter "jukebox." the song. A public performance in a both sides. The panel determined club or concert hall or even playing a that digital audio subscription serv- Evolution of the Copyright Law CD or DAT does not constitute a ices should pay five percent of their of Digital Broadcasting "transmission" of the music and is gross U.S. sales revenue to the record Prior to the Sound Recording Act therefore beyond the scope of the companies. 65 The record companies of 1971 ("the 1971 Act"), federal copy- 1995 Act. Because the phonorecord were displeased with this outcome 6 6 right law did not prohibit musical delivery must be digital, analog and appealed unsuccessfully. recording piracy. 6 1 As recording broadcasts such as AM/FM radio are According to the Register of duplication technology emerged in not covered by the Act. Finally, the Copyrights, the record companies the late 1960s in the form of afford- 1995 Act is limited exclusively to should not be entitled to greater able analog tape recorders, Congress sound recordings; it does not extend royalties on the sound recording decided to protect legitimate record to music that is part of an audiovisu- than the songwriters receive on the sales by making recording piracy ille- al work such as the soundtrack of a songs themselves, which would 6 7 gal.62 Although the 1971 Act did movie or TV show. equal 6.5 percent. authorize copyrights for sound The most interesting provision of recordings, it did not create any per- the 1995 Act was the exemption for As made clear by the need for formance rights for the owners of non-subscription transmissions of the DMCA revisions, there were sound recordings. digital music. This important excep- severe problems with the 1995 Act. The 1971 Act automatically tion has since been amended by the First, the 1995 Act failed to fully expired at the beginning of 1975. In passage of the DMCA. anticipate the development of 1976, Congress enacted the The 1995 Act is revolutionary streaming digital broadcast technolo- gy. The narrow contours of the 1995 The DMCA and its Effects on The music provisions of the DMCA Act reveal that Congress did not Digital Broadcasting not only appear to be shaped by spe- foresee the advent of this technology. In the summer of 1998, Congress cial interests but also appear to be in Related to streaming Internet broad- began to address some of the short- large part actually drafted by 7 1 casts is the additional problem of comings of the 1995 Act. The result them. In the late summer of 1998, "ephemeral recordings." Ephemeral of this effort is the newly enacted while Congress was contemplating recordings are copies of a song, Digital Millennium Copyright Act. the DMCA, the DiMA and RIAA allowed by law, that a broadcaster Though the bulk of the DMCA adopts engaged in direct talks to arrive at a uses to facilitate the broadcast. the 1996 WIPO Performance and compromise of their interests. In the When the 1995 Act was enacted, Phonograms Treaty, tucked away in course of negotiation, these two Congress did not include digital the DMCA's "Miscellaneous Pro- interest groups drafted much of the broadcasts in the ephemeral record- visions" are revisions that greatly music provisions of what would ing exception. modify the 1995 Act. become the law. On August 4, 1998, Second, the 1995 Act failed to Congress incorporated their agree- 72 account for the "royalty shift" away At best, the DMCA represents ments into the DMCA. from songwriters and towards record compromise legislation between Since the DiMA only represents companies. Digital broadcasting is a the three largest Internet broadcast- technology that will likely replace ers, it, like RIAA, sought to discour- analog broadcasts in the future. If ccording to age competition from new digital so, the value of a sound recording Ralph Oman, broadcast companies. The compro- mise with RIAA produced a narrowly copyright will likely increase relative Register to a song copyright since, in digital former tailored "grandfather" clause that broadcasting, the exclusiveness of a of Copyrights, the extends a government-set royalty song copyright performance right is DMCA has clearly rate only to broadcasters who meet compromised. Thus, as digital been subject to the the exact business profile of the broadcasting becomes more perva- DiMA members. All future stream- sive, songwriters may see their "COngresslonal ing Internet broadcasters must nego- exclusive performance rights dimin- sausage factory" of tiate their rates with the record com- ished as a result of the 1995 Act. panies directly, which will likely Third, the 1995 Act failed to interests. result in a higher royalty than the three special 7 3 address pressing international issues members of the DiMA must pay. and problems. The World interested parties in technology reg- Intellectual Property Organization ulation.6 8 At worst, it is the defini- The DMCA changes the 1995 Act ("WIPO"), the major international tive product of special interest legis- most significantly by eliminating the copyright association, generally sup- lation. 69 When examining the sound recording royalty exemption ports the abolition of compulsory DMCA outside the scope of its music for most non-interactive, non-sub- licenses for primary broadcasts and provisions, it is clear that technology scription digital audio transmissions. satellite communications. The 1995 interest groups have directed this Under the DMCA, non-interactive Act deviates form this prevailing view. legislation. Title II of the Act limits audio broadcasts-such as streaming Finally, the 1995 Act failed to ade- the copyright liability of Internet Internet broadcasts-must, without quately address enforcement issues. service providers, while Title III question, pay the record companies a With the growth of Internet music allows computer repairpersons to use performance royalty rate. distribution, any computer user can a customer's copyrighted software. The DMCA, however, creates an become a digital music broadcaster. Remarkably, the end of the Act even interesting exception of its own. If a The 1995 Act only targeted sophisti- tacks on a provision addressing the traditional FCC-licensed analog sta- cated, for-profit private broadcasters. decorative features on the hulls of tion transmits the streaming Had Congress then recognized that ships. According to Ralph Oman, for- Internet broadcast, such a "dual" any computer user could become a mer Register of Copyrights, the broadcaster does not have to pay digital broadcaster, it might have DMCA has clearly been subject to record company royalties. The enumerated clearer and broader the "congressional sausage factory" DMCA then permits existing radio penalties for 1995 Act violations. of special interests. 70 stations to expand their broadcasts 8 0 to the Internet without infringing a provision effectively protects them tion of music on the Internet. At this time it is unclear what effect this sound recording performance right. from these higher royalties. Their future effort will have on Internet down- Conversely, an Internet broadcaster competitors will not be as fortunate. loads of music. As of the time of this can avoid paying record company writing, the initiative was scheduled royalties by buying and broadcasting The DMCA also clarifies the sta- a conference where the par- from an analog radio station. tus of ephemeral recordings used to to hold facilitate broadcast. The new law ticipants are expected to advocate improved watermarking technology. The DMCA replaces the perva- allows their use only by digital Secrecy and uncertainty shroud sive compulsory license requirement broadcasters that also broadcast in a Internet music proposal in the 1995 Act with a more limited traditional format or have a license another named "The Madison Project."8 1 In compulsory license. As strong proof from the FCC. For Internet-only conjunction with all the major record of a successful lobby, the DMCA broadcasters, for whom the FCC labels, IBM is coordinating the devel- allows RIAA to propose its own rates requires no license, the DMCA opment of this test-project. IBM when negotiating with most future extends a statutory license for plans on launching a six-month test streaming broadcasters. According ephemeral recordings, available at a 77 music download system in a to the DMCA, only "eligible nonsub- government- determined rate. of a new San Diego homes this sum- scription transmissions" are subject thousand mer. The Madison System is report- to the government-set compulsory Developments Since the ed to not use the MP3 encoding stan- license and can avoid rate negotia- Passage of the DMCA dard. Instead, the system involves a tion with RIAA. The DMCA defines Since the passage of the DMCA, separate interface that allows a cable an eligible transmission as: new technology has become available a noninteractive, nonsub- to attach a digital watermark to modem user to download songs on a scription transmission music files that have been down- per use basis. Industry insiders made as part of a service loaded from the Internet. 78 This dig- speculate the Madison Project is per- that provides audio pro- ital watermark signals when and fecting a revolutionary piece of hard- gramming consisting... of whether a royalty has been paid for ware that works as an extension of a performances of sound The new device recordings.. .if the primary the download. Watermarks, howev- cable television box. purpose of the service is er, do not prevent additional copies of will also likely incorporate a video- not to sell, advertise, or the music once it is downloaded. on-demand service, another step in promote particular prod- Thus, even a watermarked copy of a the inevitable integration of enter- ucts or services other than song can be reproduced thousands of tainment media. Lawmakers cannot sound recordings, live con- time by the end user. When a song is check this relentless transformation; certs, or other music-relat- 7 4 they can only attempt to respond. ed events. copied, however, the watermark Even once a transmission is found remains, allowing authorities to the Future eligible for the government set royal- trace at least the origin of the first The Sound of 7 9 Despite the strength of the 1995 ty rate, a host of additional restric- illegal copy. In February, RIAA and the DMCA, no law can forev- tions apply.7 5 The most demanding began the Secure Digital Music Act er preserve the current state of the of the restrictions requires that a Initiative to encourage legal distribu- record industry. The major record broadcaster seeking the statutory companies have long enjoyed a near royalty rate must have been trans- mitting on the Web before July 31, 1998. It is no surprise that the require- ments for an eligible nonsubscription mirror the business profiles of the three members of DiMA. In this way, the DMCA leaves the record companies free to negotiate a per- formance royalty rate closer to its goal of a 41.5 percent rate.7 6 The DiMA supported the limited compul- sory license because the grandfather monopoly in music distribution. In a via the Internet. Ultimately, they panies as a test market for new tal- large part, they also determine what hope to generate a profit by eventu- ent. It will be interesting to see how is broadcast on the radio. The 1995 ally selling their artists' music exclu- established artists deal with their Act and the DMCA reveal how the sively online at reduced rates. The record companies in the future. major record companies, have lob- provisions of the 1995 Act and the Some successful artists, such as Todd bied hard to tame digital music DMCA do not apply to the alterna- Rundgrin, who licenses his music delivery instead of embracing it. tive structure of these new record directly to the public on the Internet Despite the prospects of this new dig- companies; these companies will might eliminate the need for record ital age, the major record companies directly broadcast and sell their own companies altogether. 82 seem intent on preserving as much of music to the public. their fading traditional business Despite the opportunity for The development of music copy- model as possible and creating new upstart record companies, the 1995 right law is intertwined with the sound recording royalty rights to off- Act and the DMCA still has perva- development of new technology. The set whatever losses they sustain. sive effects on most digital music dis- 1995 Act and the DMCA are clear The digital delivery of music tribution. The major record compa- legislative responses to the emer- promises to transform the music nies have built up an extensive cata- gence of digital network technology. industry from a conglomerate of a log of songs that they control. These acts illustrate that Congress, few major companies into a more Consumers will not only download under pressure of powerful recording accessible and "democratic" business. new music but will also want to lobbies, is willing to radically change The ease and reduced capital costs of download their favorite old songs, song performance -royalty rights to Internet music distribution and which are inevitably controlled by a protect the interests of large record broadcasting present a unique oppor- major record company. The major companies and established broad- tunity for upstart record companies record companies have no incentive casters. In the process of protecting who embrace its promise. New to allow their songs to be distributed those interests, other parties may be Internet record companies, such as at less than their already proven harmed. The 1995 Act and the goodnoise.com, liquidaudio.com and market rate. For these songs, the DMCA seem to embody a goal to tie atomicpop.com, have already record companies will take full music distribution to the past bypassed the major record companies advantage of the 1995 Act and the instead of promoting its future. and signed artists directly to record- DMCA provisions. The major record However, despite the provisions of ing contracts. Unlike traditional companies are also likely to create the acts, the music industry is, and record companies, these companies their own Internet only record labels. promises to continue to be "a generate popularity for their bands These labels will probably operate changin"' faster than ever. * by giving away their music for free similarly to the upstart record com-
1 Bob Dylan, The Times They are a Changin' (Columbia Records 1964). 11 Digital Millennium Copyright Act, Pub. L. No. 105-304, § 405, 112 Stat. 2860 (1998). 2 See Karl T. Greenfeld, You've Got Music: Record Companies, 12 Id. HearingDisaster, Are Desperate to Keep Their Wares from Being Pirated off the Internet, TIME, Feb. 22, 1999, at 53. 13 Id. 3 Id. 14 See Kohn, supra note 5. 4 Alan N. Sutin and Ellen Goldberg, High-Tech Agenda in Congress, 15 Id. 220, N.Y.L.J., S3 (1998). 16 Id. 5 See Bob Kohn, A Primer on the Law of Webcasting and Digital Music Delivery, 20 ENT. L. REP. 4 (1998). 17 See Note, Disseminationof Digitized Music on the Internet: A 6 See id. Challenge to the Copyright Act, 12 COMPUTER & HIGH TECH. L.J. 97, 107 (1996). 7 The Digital Performance Right In Sound Recordings Act of 1995, 18 Id. Pub. L. No. 104-39, 109 Stat. 336 (1995). 8 Joshua D. Levine, Dancing to a New Tune, A Digital One: The 19 Kohn, supra note 5. Digital PerformanceRight In Sound Recordings Act of 1995, 20 SETON 20 Id. HALL LEGIS. J. 624, 643-48 (1996). 21 See
24 See 17 U.S.C. §114 (1998). 53 A & M Records v. Internet Site Known as Fresh Kutz. DC Scalif, No. 97-CV-1099H (JFS) (S.D. Cal. June 10, 1997) (temporary 25 See id. restraining order, and order for expedited discovery); Sony Music Entertainment v. Internet Site Known as ftp://parasoft.com/MP3s, No. 26 See id. 97-CV-1360-T (N.D. Tex. filed June 9, 1997).
27 See id. 54 105 Pub. L. No. 298, *202; 112 Stat. 2827 (1998).
28 Jay L. Bergman, Digital Technology Has the Music Industry 55 Rachel Lehman-Haupt, Library/InternetRadio; Web Radio Expands Listening Horizons, N.Y. TIMES, Nov. 5, 1998, §G, at 10. Singing the Bules: Creating a PerformanceRight for the Digital Transmissions of Sound Recordings, 24 Sw. U. L. REV. 351, 355 56 Kohn, supra note 19, at 4. (1995). 29 See AL KOHN & BOB KOHN, KOHN ON Music LICENSING 10-14 (2d 57 Id. ed. 1996). 58 Id. 30 See id. 59 Id. 31 Id. 60 See eenerallv Calamita, supra note 34, at 505. 32 Id. 61 See Bergman, supra note 37, at 351.
33 Pub. L. No. 104-39, 109 Stat. 336 (1995); Pub. L. No. 105-304, 62 Id. 112 Stat. 2860 (1998). 63 Id. 34 N. Jansen Calamita, Note, Coming to terms with the celestial jukebox: keeping the sound recording copyright viable in the digital 64 Pub. L. No. 104-39, 109 Stat. 336 (1995). age, 74 B.U. L. REV. 505, 515 (1994). 65 Determination of Reasonable Rates and Terms for the Digital 35 Leslie Walker, Music Fans Assert Freedom, WASH. POST, Feb. 18, Performance of Sound Recordings, 63 Fed. Reg. 25394, 25396 (1998) 1999, at E01. (to be codified at 37 C.F.R. pt. 260). 36 Doug Reece, Online Ventures Meet Real World In '98-Industry 66 Determination of Reasonable Rates and Terms for the Digital Faced Far-ReachingIssues From MP3 To Cdnow /N2K Merger, Performance of Sound Recordings, 63 Fed. Reg. at 25,410. BILLBOARD, Jan. 9, 1999; Russ Devault, Rockin' the Desktop; Music industry sings blues over sites that let folks at home record the hot 67 See Kohn, supra note 58, at 4. hits, THE ATLANTA CONSTITUTION, Feb. 19, 1999, at 01E. 68 Ralph Oman, US Enacts New Law on Internet Copyright, IP 37 David Bloom, Internet Piratingis Sour Note for the Music WORLDWIDE, Jan./Feb. 1999. Industry, THE COMMERcIAL APPEAL (Memphis, TN) Nov. 21, 1998, at F4. 69 Id. 38 Joshua Quittner, Free Music On-Line: A Hot Format Makes CD- 70 See Kohn, supra note 68, at 4. Quality Tunes Available on the Net. Is the Record Industry Doomed? TIME, Sep. 21, 1998, at 116. 71 Id.
39 See
41 Id. 74 Pub. L. No.104-39, 109 Stat. 336 (1995).
42 Greenfeld, supra note 2. 75 See Kohn, supra note 72, at 4. 76 Id. 43 Id. 77 Id. 44 Id. 78 Jacob Ward, MP3: Web music giants form digital watermark coali- 45 Id. tion, (Jan. 27, 1999),
52 Stephanie O'Brien, Victoria's Secret show draws 1.5 million online viewers (last modified Feb. 4, 1999),