There's no mistaking who benefited from a federal-court decision to set licensing fees that three top Web services must pay songwriters and publishers for the right to stream their music.
But the question left unanswered is whether the losers also include consumers.
AOL, RealNetworks, and Yahoo may end up paying the American Society of Composers, Authors, and Publishers (ASCAP) $100 million as a result of a decision by a U.S. district judge to set the licensing fee for streaming music at 2.5 percent of adjusted music-use revenue.
"(The court's decision) is a victory for songwriters, composers, and publishers, and something they have been looking forward to for a long period," said John LoFrumento, ASCAP's chief executive. "In the past, we've settled with (Internet companies) at low rates. We wanted to encourage the growth of these businesses, but these businesses have matured...they have been using our members' music to attract people to their Web sites...it's time to compensate (our members)."
While none of the Web companies involved would comment on the judge's decision, a source close to the three sounded like the players on a baseball team after the other side just hit a walk-off home run.
"This wasn't good for us, to say the least," the source said, adding that the judge's order isn't yet final and that the three companies plan to continue fighting.
If the final fee structure looks anything like what is prescribed in the judge's written opinion, RealNetworks, Yahoo, and AOL would likely have to raise prices. It may also mean that the cost of doing business for anyone streaming music over the Web just went up.
"What this means to other licensees is, they now see what a standard benchmark fee should look like," LoFrumento said. "They now know what to expect from the rate court."
The three Web services had negotiated with ASCAP to obtain a license for unlimited play on the Web of any of the millions of songs in ASCAP's repertory. Following a stalemate, the two sides took their case to a rate court. The court's mission in the case was to determine a fair licensing fee.
The judge considered proposals from both sides. AOL, Yahoo, and RealNetworks wanted a multitiered plan with different rates, depending on the nature of the stream. For example, the three Web services wanted to pay 2.5 percent for on-demand audio, 1.7 percent for Internet radio, and .9 percent for music videos.
ASCAP scoffed at those figures. It said any structure should be set up to charge a percentage of a Web service's net revenue.
When it came to actual dollars, the two sides were worlds apart. Under the formula the Web services proposed, AOL and Yahoo would have paid ASCAP respectively $872,000 and $1.1 million for the year 2006.
Under ASCAP's plan, AOL and Yahoo would have paid $7.8 million and $7.3 million for the same year.
Jonathan Potter of Digital Media Association, a trade organization devoted to companies competing in online audio and video sectors, said the Web services involved absolutely want to fairly compensate songwriters and music publishers.
"We are disappointed, however, that the court ruled that online services' royalties should be based in part on service-wide revenue," Potter said, "(and) not simply on revenue directly attributable to music usage."
A federal district court in New York ruled Wednesday that the American Society of Composers, Authors and Publishers is owed "reasonable license fees" by online media powerhouses AOL, RealNetworks, and Yahoo for the music streamed and distributed on their sites.
Currently, music streamed by sites owned by the three companies is advertising-supported and no dividends are paid to ASCAP.
The U.S. District Court for the Southern District of New York will now determine appropriate fees for AOL, RealNetworks, and Yahoo, all of which have applied for ASCAP licenses but have not been able to agree upon fees. The total payments to the group, which represents over 320,000 songwriters, composers, and music publishers--not record labels--could reach $100 million. (Click here for a PDF of the court's decision.)
The license fees would cover music distributed as early as July 1, 2002, and then up through the end of 2009. Because songwriters and composers often aren't affiliated with record labels that distribute their music as performed by another artist, they presently are left without licensing fees from digital distribution on the three companies named in the court decision.
ASCAP President Marilyn Bergman wrote in a statement following the decision:
The court's finding represents a major step toward proper valuation of the music contributions of songwriters, composers and publishers to these types of online businesses.
It is critical that these organizations share a reasonable portion of their sizable revenues with those of us whose content attracts audiences and, ultimately, helps to make their businesses viable. This decision will go a long way toward protecting the ability of songwriters and composers to be compensated fairly as the use of musical works online continues to grow."
More details to follow.
An extended outage at RealNetworks' Rhapsody music service has locked out an unknown number of users for the second time since March.
While the earlier problem prevented some customers from accessing the site for up to two weeks, this time executives don't know when the problem will be corrected. A handful of Rhapsody users complained on the company's message boards this week that they haven't been able to log on since Friday.
"It's a known issue," said Justine Navaja, a company spokesperson. "We don't know yet when it will be fixed, but it's only affecting a small group of users. We're doing what we can to make sure it gets fixed as soon as possible."
RealNetworks, which competes with Yahoo Music, Napster, and other subscription services, isn't saying whether the glitches are related or what caused them.
Meanwhile, Josh Solera, a Rhapsody customer from Boston, worries that unless the company corrects the problem soon, he'll be cut off from his music.
Songs downloaded off of sites like Rhapsody and Yahoo Music, are restricted by digital rights management. Licenses in the song files must be updated and that can only happen if customers are allowed to sync their computers to the service's Web site. If they can't sync within a specified time, then their music automatically locks up.
Solera, a management consultant, joined Rhapsody in October 2006 and downloads all the songs he wants for a monthly fee. On Tuesday, he tried numerous times to log on but only received error messages.
To make amends, Rhapsody issued Solera a two-week subscription credit. That may not be enough to make him happy. He said that a series of less dramatic but annoying technical issues have worn on his patience. He likes his Zen music player but the problems at Rhapsody have almost convinced him to swap it for an iPod.
"If I could get a subscription service from iTunes, I would sign up in a minute," Solera said. "I think a lot of people would."
To address a security hole being exploited by hackers, RealNetworks has issued a security fix for the Windows versions of RealOne Player, RealOne Player version 2, RealPlayer 10.5 and RealPlayer 11 beta. The Windows versions of RealPlayer 8 and earlier versions of RealNetworks are not vulnerable. Linux and Macintosh versions of RealPlayer are also not affected.
The attack targets an ActiveX object installed by RealPlayer, and affects how that object interacts with the Internet Explorer browser. The exploit, if executed, can corrupt process memory and execute arbitrary code.
Affected users should upgrade to RealPlayer 10.5 or RealPlayer 11 beta and install the the latest patch, which was released Friday.
Correction: this story has been corrected to remove the implication that iTunes sells audio files in formats other than AAC. iTunes did begin selling DRM-free songs earlier this year, but those files are still in the AAC format. Other stores are selling DRM-less MP3s, but not iTunes.
In 1998, the European Commission began investigating Microsoft on grounds that it was illegally using its desktop operating system (OS) monopoly to squeeze into new markets. At some point along the way, RealNetworks complained that Microsoft was repeating its kill-Netscape tactic by bundling the Windows Media player into Windows. In 2004, the EC agreed, and (among other things) ordered Microsoft to ship a version of Windows without the Media Player in Europe. Microsoft appealed, but was forced to comply while the appeal wound its way through the system.
So Microsoft shipped versions of Windows XP without the the Media Player. But because it didn't have to offer any discount, almost nobody bought these versions at retail, and hardware makers didn't preinstall them. (Even if the free Media Player version had been a few bucks cheaper, I don't expect there would have been much demand. Especially from PC makers--the more different software alignments they have to install and support, the higher their expenses.) The company followed up with similar versions of Vista in 2007.
As anybody who follows technology news now knows, yesterday a European court denied Microsoft's appeal on almost every count. (The full ruling is available from the first link on this page--it's long. Lawyer and technologist Mary Kirwan, writing for The Globe and Mail, had an excellent write-up of the ruling as it relates to Windows/non-Windows interoperability, which I'm not covering here.)
In the wake of the ruling, EC Commissioner Neelie Kroes spoke at some length about the harm Microsoft has done to the consumers, but one statement made me check my eyesight. As reported by Todd Bishop in the Seattle Post-Intelligencer, Kroes said, "Microsoft's media player format has, as a result of its conduct, come to dominate the market."
Say what? I suppose that's true if you define the relevant market as player installations--Paul Thurott reports Nielsen/NetRatings figures showing the Windows Media Player at 50 percent, with the RealPlayer at 22 percent and iTunes at 19 percent. Or if you measure it in terms of the number of commercial stores selling music in the Windows Media Audio format versus some other format.
But in terms of actual usage? Apple's iTunes Music Store owns about 70 percent of the market for legal downloads and has sold more than 2 billion songs. Those songs are in the AAC format, a variant of MPEG-4. And illegal downloads still far outweigh legal ones, and most of those are in the MP3 format. Microsoft's attempt to dominate the digital media market with the Windows Media format has failed so completely that the company is now mimicking Apple's end-to-end, control-all-parts strategy with Zune (which will be lucky to get 10 percent market share any time soon.) In fact, Microsoft's moved so far away from Windows Media, it's even licensing a new DRM technology to wireless phone carriers and handset makers that doesn't rely on or use Windows Media in any way.
In other words, Microsoft's OS monopoly hasn't helped it dominate the digital media market one bit. Turns out that users don't care so much which digital media player is preinstalled on their PC--if a competitor (Apple) sells a separate set of products (iPod, iTunes) that are good enough, people will use them. In fact, I'd argue that--apart from the profits and cash flow Windows generates, which fund money-losing businesses like the Xbox--the OS monopoly hasn't really helped Microsoft enter or dominate a new market for many years. (RealNetworks might disagree, but I wonder if its own actions did more to help Microsoft than Microsoft's monopoly. No slam on Rhapsody, which is a good service...I'm talking about the old RealPlayer and the way Real promoted it.)
Meanwhile, Microsoft's European competition just got harder--the iPhone launches in the U.K. on November 9.
MTV, Real, and Verizon Wireless have 'formed Voltron' in an effort to take on the iTunes behemoth.
(Credit: TV Tokyo)With their new joint digital music initiative, MTV Networks, RealNetworks and Verizon Wireless are taking a direct aim at Apple's iTunes powerhouse.
Called Rhapsody America, the yet-to-launch collaboration among the three companies will combine MTV's relatively unsuccessful Urge music store, the Real-owned Rhapsody subscription download service, and Verizon's V Cast mobile media service to create a music store that reaches across the PC, digital music player, and mobile phone platforms.
The new Rhapsody America company is officially a joint venture between MTV Networks and Real Networks, with Verizon Wireless as its exclusive mobile partner. Urge as a brand will cease to exist, with Rhapsody becoming the service of choice for MTV Networks' MTV, VH1, and CMT music brands. Michael Bloom, general manager of MTV's Urge, has been appointed head of the new company, and the company's offices will be located in New York, San Francisco and Seattle.
Urge had been launched as a music store in conjunction with MTV Networks' music brands, but its highly publicized deal with Microsoft had fallen by the wayside as the software company launched its Zune music player and accompanying music store.
Executives from MTV, Real, and Verizon held a joint conference call on Tuesday morning, filled with talk of "alliances" and "joining forces" that evoked superhero Captain Planet or Voltron. "The collaboration of these three companies is like a perfect storm," said Van Toffler, president of MTV Networks' Music/Logo/Films group, who added that they're striving to make Rhapsody America "the best service out there, hands-down."
"The notion of combining with these two marketing behemoths is very, very exciting from our standpoint," said Rob Glaser, chairman and CEO of RealNetworks. "This is a relationship that we spent a long time putting together." RealNetworks, which holds the larger stake in Rhapsody America, has been trying to expand its footprint in the music sales world for some time now through high-profile partnerships.
Few details about the revamped Rhapsody were actually disclosed--pricing, for example, or details regarding finances--but the executives hinted that Rhapsody tie-ins will start to appear as part of the MTV Video Music Awards, which will be broadcast from Las Vegas on September 9.
The executives from all three companies talked up the Verizon deal as crucial to the nature of Rhapsody America. "Our audiences have made it crystal clear that they really want their music accessible wherever they might be," Toffler said. Glaser added that over-the-air downloads through V Cast epitomize Real's goal of a "jukebox in the sky," which he said has been the company's aim since it launched the first RealPlayer in 1995.
More importantly, it's a potential arsenal in the fight to catch up with Apple's iTunes store, the inarguable leader in the digital music sales industry: iTunes offers no mobile download capabilities. John Stratton, Verizon's executive vice president and chief marketing officer, reminded those listening to the conference call that V Cast mobile phones now support 4GB of storage and will support eight by the end of the year--an underhanded nod to the storage capacity of Apple's own iPhone.
The formation of Rhapsody America is the latest move in a music industry trend to prime new strategies for an assault on iTunes. Most recently, Universal Music Group announced that it would not be renewing its contract with Apple's music store and that it would be making portions of its catalog available without digital rights management protection to a number of non-iTunes outlets, one of which is Rhapsody.
The new RealPlayer allows you to download embedded video content right from your browser.
(Credit: Real Networks)Real Networks has announced a new version of their RealPlayer today that will be available as a PC-only public Beta in June. The player allows users to download and organize nearly all embedded internet video content (Flash, WMV, QuickTime) including content from popular video sites like YouTube, Comedy Central, and of course, CNET. The player was demonstrated for me and actually looks pretty impressive. The new video download feature integrates fairly elegantly into your Web browser (yes, it works on Firefox). It works by temporarily displaying a small, fairly unobtrusive download tab in the right top corner of any video content it detects on a given Web page. It's even able to record streaming internet video in real time.
It looks like a great improvement over the slow, intrusive RealPlayer I remember. One feature it lacks, however, is the ability to export your downloaded video content to an iPod-compatible format. You can, however, use RealPlayer to burn your downloaded videos to CD, and if you pony up some money for RealPlayer Plus, they give the ability to burn video content to DVD. Some small improvements have also been made to speed up the load time of the application and cut out many of the annoying installation questions.
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