Last week, a music site called BlueBeat made headlines by offering Beatles songs as free streams and 25 cent downloads. The Beatles are known for not making their songs legally available on iTunes or any other online forum, so observers rightly asked "how are they doing this legally?"
EMI, the record label that owns The Beatles' recordings, has a simple response: they're not doing this legally. But here's where the story gets very strange.
The legal reasoning in this case is straight out of "Alice in Wonderland."
(Credit: Wikimedia Commons (public domain illustration))BlueBeat is owned by a company called Media Rights Technologies, which specializes in digital rights management technology. DRM is supposed to be used to prevent copyright infringement. But according to a 2007 blog post on HuffingtonPost.com by the company's founder, Hank Risan, MRT backed into this business after being--get this--targeted by the RIAA for copyright infringement.
As Risan explains in his post, he and a partner had posted a bunch of streaming-audio files to a Web site about the history of music. The RIAA issued a takedown notice, and the site took the streams down.
The streams had been protected by Windows Media DRM, but according to Risan, an update to the Media Player broke the DRM. In response to this flaw, Risan created MRT and built his own DRM system, which he claimed would be far more robust than the systems on the market at that time. Then, in 2007, MRT sent cease-and-desist letters to Microsoft, Apple, Adobe, and RealNetworks, ordering them to use MRT's DRM technology instead of their own, on threat of legal action.
The legal reasoning was twisted--basically, MRT argued that the Digital Millennium Copyright Act should force these companies to use the most robust DRM technology available, even if that technology was created by somebody else. Predictably, nothing ever came of this demand.
MRT's legal reasoning is equally funny this time around, as Ars Technica reports. According to the report, MRT claims that it didn't post the exact Beatles recordings. Instead, it posted "psychoacoustic simulations," then added simple video content to them. This constitutes a new audiovisual work, and isn't covered by the existing copyrights, MRT argues. In fact, MRT even went so far as to apply for copyrights on the "new" works!
Perhaps this is all some kind of metacommentary on the frustrating inconsistency of U.S. copyright law, but I predict that MRT is going to be laughed out of court. In the meantime, if you want your Beatles music online, it's still available on BlueBeat as of the time I posted this. I didn't want to give the company a credit card to test the whether the downloads work, but the streams sound pretty close to perfect...especially considering that they're only psychoacoustic simulations.
I'm not a lawyer, but I'm well-acquainted with legal filings from analyzing Microsoft's legal travails for the last nine years. I've seen a lot of aggressive lawsuits, but a copyright infringement suit filed Monday in the U.S. District Court for Middle Tennessee is one of the boldest--and, I'd argue, short-sighted--filings I've ever seen.
The suit appears to have been initiated by Music Copyright Solutions (MCS), which claims to administer copyrights for more than 45,000 compositions. MCS is named as the lead plaintiff, along with a number of songwriters including Mark Farner of Grand Funk Railroad fame. These folks allege that Microsoft, Yahoo, and RealNetworks improperly licensed the rights to more than 200 compositions that they offered as on-demand streams or limited downloads via the Zune Marketplace, Yahoo Music, and Rhapsody.
Surely these companies paid somebody for the rights to offer these songs. But there's a catch, which TechDirt pointed out earlier Tuesday: these companies may have licensed the rights to the recordings, but that doesn't mean they licensed the rights to the compositions (also known as publishing rights). As section 23 of the legal filing puts it:
In order to transmit, perform, reproduce and deliver any sound recording of any musical work via 'On-Demand Streams' or 'Limited Downloads,' Defendants must first obtain not only the rights for the sound recording itself, but also the rights for the underlying musical composition that is embodied on said musical recording.
Maybe, maybe not--that's up to the court to decide. But that's not the insane part. The insane part is that the plaintiffs are alleging that each time one of the defendants made any recording of a covered song available, that's a copyright violation, and they're seeking damages of $150,000 per violation (or the amount the defendants earned from streaming those songs, whichever is more). So, for example, the lawsuit claims that Yahoo Music offered Conway Twitty's recording of "Fifteen Years Ago" on six different greatest hits albums. The plaintiffs allege that constitutes six copyright violations, which would mean damages of $900,000. Overall, the lawsuit names more than 200 songs, and a far greater number of recordings, meaning that the potential liability for each defendant would be tens of billions of dollars--that's far greater than the total amount of revenues these companies ever earned from any of these services.
These types of cases are usually settled for a relative pittance--something much closer to what the defendant would have paid to license the songs properly in the first place. But imagine for a minute that this lawsuit actually goes to trial and the plaintiffs win damages amounting to 1 percent of what they asked for. No company would ever risk building an online music service again--the legal liability would simply be too high.
When it comes to online music, big legal music services like Zune, Yahoo Music, and Rhapsody are the copyright owners' friends--unlike file-trading networks or free on-demand streaming services, these companies actually collect money from users and disburse it to copyright owners. Perhaps the plaintiffs have a legitimate complaint. But by filing such an aggressive lawsuit to recover billions in supposed damages--I mean honestly, how many Grand Funk Railroad streams have been delivered via the Zune Marketplace?--these folks risk killing their allies and driving music back to the darknet where nobody in the value chain sees a dime.
AUSTIN, Texas--At South by Southwest here, I had a short but interesting conversation Wednesday afternoon with Tim Quirk, the vice president of music programming for Rhapsody, wedged in around a set from Jersey punks Titus Andronicus (who had very tight and well-constructed songs with incredible energy and some interesting triple-guitar work, but I don't know if the singer's going to make it another three days).
Quirk, who's been with Rhapsody since before it was acquired by RealNetworks, suggested that streaming music on demand will change the mechanics of the music business because artists (and other stakeholders) won't be compensated based on how many people buy a song or a record, but rather on how many times people actually listen to it.
For labels, it won't make sense to sign cute, disposable artists, and prop them up with hired-gun songwriters and producers in hopes of selling a couple million units over a single summer. Rather, the real moneymakers will be bands whose fans absolutely can't live without their music, and who listen to songs over and over again, for years.
That requires finding artists who already have sizable fan bases and then cultivating them over the years. Terrestrial radio might become even less important--there's no reason to saturate the airwaves with a single song in hopes of selling as many copies as possible before the buzz moves to the next thing; instead, you'll want word to grow more organically, creating lifelong fans along the way.
Of course, this is all predicated on a big "if": somebody has to find a business model for streaming music that works for all parties involved. First, money has to change hands--whether it's through users paying a subscription (the Rhapsody model) or advertisers paying to reach those users (the model espoused by Spotify and others). Then the operators of these services will have to convince copyright holders to accept a level of payment that doesn't drive the operators out of business.
That level of payment may be lower than the percentage derived from CD sales today, which is a big stumbling block for labels to accept. But in the long run, streaming music will lead to greater music consumption overall. When you have no limits on the amount of music you can sample, you're more likely to become a music geek.
Quirk had some statistics to bolster this point: in traditional CD sales, nearly 50 percent of the revenue comes from the top 100 selling records. With Apple's iTunes, it's about 33 percent; lower prices translate to people willing to sample more music. With free peer-to-peer networks, it's less than 30 percent--again, it makes sense that users would sample more music when it's free.
With Rhapsody, it's even lower--less than 25 percent. I suggested that that's because Rhapsody self-selects for music geeks--who else would pay a subscription for unlimited music? But Quirk countered that his usage statistics suggest that Rhapsody turns people into music geeks. That is, once people realize that they can consume unlimited music for the same price, they begin exploring related songs and bands, checking out recommendations from friends that they never would have bothered with otherwise, and so on.
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On Sunday, the Washington Post published a story which suggested the RIAA is expanding its copyright-infringement lawsuits against end-users to encompass files ripped from an audio CD to a user's hard drive. In other words, most of the files on the 100+million iPods sold, not to mention the countless files on computer hard drives and other devices. A lot of readers took the story at face value, and expressed dismay that the RIAA would target such copying for personal use. Isn't that fair use?
Turns out that the story's wrong: as the Patry Copyright Blog (and others) point out, if you read the full legal brief, you'll see that the RIAA's objecting to two things in combination: the fact that the user converted the CD audio to MP3 files, AND the fact that the user put these files in a folder to make them available to a file-trading service. So this actually appears to be the "making available" argument, which the RIAA used successfully in the only file-trading case it's won against an individual (so far).
But even if the story were correct, why is everybody so quick to assume that making a copy of an audio CD onto a hard drive is fair use? The doctrine of fair use is far from clear-cut. For example, there's been enough case law on parody that it's generally deemed to be covered by fair use. But the issue of making personal backups of digital data is still the subject of significant debate. And the recording industry has been fairly consistent in arguing that ripping MP3s is making an unauthorized copy.
The point: just because something's technically easy, widely accepted, and seems "right," that doesn't mean it's legal. That said, I believe the RIAA's tactic of suing customers is heavy-handed and will do more harm than good to the long-term health of the recording industry.
For more about fair use, Stanford University has an excellent overview.
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