July 8, 2002 10:40 AM PDT

Labels defend MusicNet, Pressplay

NEW YORK--Record industry executives and critics are trading barbs at an industry conference this week, with an outspoken legislator saying major labels' online subscription services may amount to a "duopoly."

Rep. Rick Boucher, D-Va., warned Monday that the recording industry's efforts to sell music on the Internet could have anti-competitive implications.

During a keynote address at the Jupiter PlugIn online music conference here, the congressman also roundly criticized the recording industry's moves to prevent piracy of their copyrighted works. Among the topics targeted by Boucher's address were the recording industry's attempts to protect CDs, existing federal copyright law, and future legislation that could give content providers more power to take matters into their own hands.

But the creation of the recording industry's online music services Pressplay and MusicNet has long been the focus of Boucher's criticism. He called Monday for legislation that requires both services, which combined own the copyrights to 80 percent of all recorded music, to offer the same license terms to competitors. Boucher added that offering preferential licensing terms could have anti-competition implications.

"That level of duopoly...of content ownership and the ownership of distribution is threatening to the arrival of competition in the delivery of music on the Web," he said.

Record industry executives, however, said Boucher's complaints merely reflected his desire for more regulation.

"I think he (makes such statements) to try to give more weight to his desire to regulate the music industry," said Hilary Rosen, CEO of the Recording Industry Association of America. Boucher has "taken a piecemeal approach to individual complaints and tried to put it in the context of a whole strategy. But it's not a strategy."

The two industry-backed services were created last year in attempts to convince consumers they should be paying for music they access through the Web. Pressplay is a joint venture between Sony Music Entertainment and Vivendi Universal's Universal Music Group, while MusicNet has the backing of EMI Recorded Music, Bertelsmann's BMG Entertainment, AOL Time Warner's Warner Music Group and streaming media company RealNetworks.

Pressplay and MusicNet were reactions to file-swapping services such as Napster, Gnutella and Kazaa, which have lured millions of people by allowing them to share music files for free. The recording industry has successfully sued and crippled Napster, requiring it to create a service that respects copyrights.

Since launching, consumers using Pressplay and MusicNet have criticized the services as inadequate, citing catalog limitations and clunky technology. Meanwhile, online music start-ups have alleged that the recording industry offered them unfavorable licensing terms to hinder their businesses. Such complaints prompted the Justice Department to begin investigating the services.

Boucher also took a shot against the recording industry's attempts to introduce copy-protection technology in new CDs, predicting the industry would "pay a heavy price" among angry consumers. He noted that such technology routinely has been thwarted by homemade measures and that continued practice would only push people toward free file-sharing services.

"I'm quizzical about why this approach is going forward," Boucher said.

RIAA's Rosen, however, argued that technological controls could gain consumer support.

"I am optimistic that if handled right and explained fully, consumers will support formats that give them flexibility and also help us stop piracy," she said.

 

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