Warner Music's tune of folly

Guest post: Editor's note: Music attorney Chris Castle is all for finding a way to boost the music industry out of its current nosedive. But bundling music charges into ISP bills is not the way to go, he says.

Castle, a former executive at A&M Records and Sony Entertainment as well as a former attorney at Wilson Sonsini, one of Silicon Valley's most prestigious law firms, takes issue with a proposal making big headlines after it was outlined on Portfolio.com. Jim Griffin, a former executive at Geffen Records is working with Warner Music Group to come up with a plan whereby consumers would pay their ISP a monthly fee for unlimited access to music. Similar plans have been around for a long time, and plenty of music industry executives have floated similar ideas in the past. But Castle says few of them have been able to overcome the litany of legal issues involved. This one, he says in a guest column, doesn't either.

Jim Griffin's idea sounds very much like the Lawrence Lessig-William Fisher "alternative compensation scheme" that has been around for a long time. Griffin's proposal is voluntary, like the version proposed by the Electronic Frontier Foundation, (which advocates for Internet rights).

There are many problems with the system, but here are three:

First, Griffin's plan produces a disaggregated chunk of money that is collected based on headcount, not based on music usage. One way to divide up that money that advocates often raise is based on some kind of sampling of usage (I think I've heard the Electronic Frontier Foundation talk about the sampling method used by the American Society of Composers, Authors and Publishers as a proxy. If you are going to sample peer-to-peer or BitTorrent files, you need to identify tracks. That can be done with fingerprint technology, and there are several companies out there that do that.

However, if you can identify the tracks on P2P systems enough to sample, you can identify the tracks enough to block and filter. So why not give copyright owners that right? The Portfolio.com story seems to say that Warner Music Group intends the system to cover all the world's music, but that must be a typo, for Warner Music obviously can only speak for its masters and the compositions they administer (even that is subject to artist and writer consent in many instances).

If you are going to divide up the disaggregated sum collected the Griffin's system on a method not based on sampling, then what exactly would that be? I call this the "Carl Sagan Scheme" because it promises "billions and billions" of dollars to the creative community. It also ignores what I think will be billions in the transaction costs of implementing the scheme--ISPs won't do this for free, and will want protection from copyright infringement claims of any stripe.

It's also important, for obvious reasons, that the company holding the data be "Swiss." I doubt that the labels would allow one of their number to control it, and a joint ownership scheme would face an inevitable antitrust challenge if the others were involved.

In order to be effective, Griffin's plan would require amending the Copyright Act. A voluntary plan is unlikely to attract a sufficient number of copyright owners. But without all copyright owners, ISPs and their users would still be exposed to claims of copyright infringement. If you think that gaining relief from prosecution is an incentive for ISPs to adopt this complicated plan, then you would, I think, assume that ISPs would want to protect their users from all claims for copyright infringement.

Which leads to the second problem. In order to get that global protection for users requires amending the Copyright Act. Without amending the Copyright Act, you will always have the "lone gunman" problem, or the copyright owner you missed getting permission from. It's tough enough to amend the Copyright Act on things that people agree on, and you'll never get anyone to agree to amend the Copyright Act on things that people are bitterly opposed to, such as Griffin's system.

In addition to these problems, if you go down the route of amending the Copyright Act, which seems to be the only realistic way to accomplish what Griffin desires, there are people who say such an amendment would violate the U.S. government's treaty obligations, such as the Berne Convention, the TRIPS Agreement, and NAFTA.

Also, it's likely the rest of the world may have a problem with Griffin's system, even if it's a voluntary system. A similar system was resoundingly defeated in the French Parliament, and President Nicholas Sarkozy has clearly come out against any such ideas. One reason is that it is hard to put a border on the plan, but this is really a worldwide solution that Griffin seems to be proposing.

We have only been focused on issues affecting artists and songwriters, but ISPs and P2P operators will likely have many other negative reactions to the plan. I can't imagine the Pirate Bay signing up for this.

It's a head scratcher, that's for sure. I'm sure there's a lot more to it than has come out in the exclusive interview.

There must be.

There are a lot of smart people at Warner Music, and I'm sympathetic to their desire to keep an open mind about possible new business models. But this one is old news and has not been well received in the past, so seems unlikely to bear fruit.

[dascha1]

Red Tape

As I learned from Ma Bell in 1991 and 1992 in Richmond and Arlington, the telecoms are pretty big waters to navigate in exploring this plan. Therefore, cutting the tape is the most difficult part. And convincing the seniors on both sides that it's not that complicated of a thing on the customer's simple bill.

[wyly295]

More to the Plan

You're right, there *must* be more to the grand plan than that which has been disclosed so far because, as you well state, this is an old idea that is basically DOA. There are so many reasons such a socialized music taxation model won't work that I can't even begin to recount them here, but suffice it to say it's just wrong purely on principle if nothing else.

The labels should focus on these action items:

Move from licensing units to licensing on a percent of revenue.

Give up total control and offer blanket licensing to anyone who will pay.

Get behind the business model already in existence that will accomplish the desired result while keeping a direct link between those who use music and those who pay for it, that being the Rhapsody and Napster subscription models. Get behind these guys with wide open licensing at a percent of revenue that makes sense for all and do some joint marketing to awaken the world to the joys of the celestial jukebox. Most of their target demographic does not even know they are legal.

Lastly, mandate a single industry standard hardware agnositic DRM for subscription music so it will all play on all devices owned by the subscribers -- no walled gardens.

Don't make things more difficult than they already are. All this futzing around with "new business models" is leading nowhere because none of them are business models -- they don't generate enough revenue or don't link usage with payment.

[truckle.the.uncivil]

Another SCAM

Caveat: I am not from the USA.

For several decades I paid a "piracy surcharge" on tapes. For
many years and even now I pay a similar surcharge for blank
CDs. FWIW I am not particularly musical, when I want it I buy
(and do not copy) the original music CD.

And now they want to charge me a tax on my use of the
Internet? They have been ripping me off, getting "free income"
from me for decades and they want more?

This is just sheer greed there can be no justification for this.
The Music industry are bigger thieves and pirates than any
individual or collation of individuals.

It isn't as if they even go after the industrial pirates that DO cost
them money.

Right now I would call it a legally fair thing to cancel all
copyrights held by Music/Film companies.

[BRKistler]

What value are Record Labels

Can someone explain to me what value added record labels offer to either the consumer or artist today and tommorow. I know they may have added something in 1955, but in the current environment what do they add? To me they were the first group of thieves who gave artists pennies on the dollar for record sales. Now a second group of thieves enter and steal from the first set of thieves and the first set is up in arms. Maybe I'm wrong and I missed a group of thieves, the copyright stealers. The groups that swoop in on a promising artist and offer them some money for the rights to their songs before they hit the big time and give them rent and food money for a few months (worked out good for the Beatles, NOT). This group of thieves is now upset at the current group of thieves?

[kortp]

Solving the insolvable

When a problem appears insolvable, that usually means you're trying to solve the wrong problem. It's generally easier to use finesse than brute force to get around seemingly immovable obstructions.

Music piracy today has a lot of similarities with legitimate uses of public domain content - except that the scope and duration of copyrights have been extended far beyond their original intended limits, and effectively delaying the intended transition to the public domain indefinitely. The problems with copyrights started centuries ago when they were first created by printers to protect their exclusive "rights" to print a particular book. Authors were just a means to obtain content for books.

The core problem is that the recorded music industry is undergoing major changes as a result of disruptive technologies that are displacing its primary reasons for existence. The legacy record labels have become *partly* obsolete, and are desperately trying to retain their market dominance through other means.

A workable solution will have to accommodate the way the public has already demonstrated it's going to use music recordings regardless of legal prohibitions, while providing a means for creators to receive fair value for their works.

For a more complete exploration of this issue - including an historical perspective of how we got where we are today, and a way to achieve a workable solution - check out: http://www.kortexplores.com/node/174