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Copyright Hurdles Confront Selling of Music on the Internet

Copyright Hurdles Confront Selling of Music on the Internet
September 23, 2002


When the world's major media companies gave in to the idea of selling
music over the Internet, it seemed to herald a sonic paradise...

But for the online services trying to get there - chief among them
MusicNet, Pressplay and Listen.com - the road to paradise is proving to be
more like an intellectual property labyrinth paved with administrative


"It's as if Franz Kafka designed this system and employed Rube Goldberg as
his architect," said Rob Glaser, the chairman of MusicNet, which is
part-owned by his company, RealNetworks, along with AOL Time Warner,
Bertelsmann and the EMI Group. "It's full of tripwires."

... The Warner Music Group, the music division of AOL, and the BMG unit of
Bertelsmann have yet to license their music to Pressplay. Likewise,
Pressplay's owners, the Universal Music Group of Vivendi Universal and
Sony Music Entertainment, have not licensed their recordings to MusicNet.
The EMI Group, the smallest of the five major labels, has licensed to both
MusicNet and Pressplay. And Listen.com, which has no record labels among
its corporate parents, has licenses from all five major labels.

...recording companies have, in fact, begun coming around. Under pressure
from Congress and a federal antitrust investigation - and a growing belief
that a legal alternative to widespread online music swapping could
actually strengthen sales - they are granting more rights. Both Pressplay
and MusicNet say they will feature music from all five major labels by the
end of this year.

....A label may not own the sound recording rights for imported CD's, or
those that they distribute for smaller labels. And a track that uses
"samples" from other songs - as the majority of hip-hop recordings do -
can require renegotiating royalty rates with dozens of copyright holders
before it can be delivered digitally.


"Duets, greatest hits, compilations, soundtracks - they're all disasters,"
said Sean Ryan, the chief executive of Listen.com, which has only about
two-thirds of the tracks approved by the labels on its Rhapsody service
because of other questions of ownership. "Figuring out who can license
what, what label they're on, who the publisher is consumes an inordinate
amount of time here. More than I can ever explain to my investors."

Music services question whether they have to heed the requests of
publishers to keep certain tracks off-line. In what is known as a
"mechanical" license - an irony not lost on the digital services - anyone
can make a reproduction of a music composition so long as he or she
notifies the music publisher and pays a royalty set by the United States
Copyright Office.

...Dating to a 1909 statute designed to balance the rights of composers
and the makers of player piano rolls, that law has been applied to
phonographs, L.P.'s, cassette tapes, CD's and, with a 1995 legislative
amendment, permanent digital downloads.

....But what happens when a download is designed to expire after a month?
What about when consumers pay to listen to music of their choice over the
Internet, but not to make a copy of it? The Copyright Office, unsure how
to stretch old law around new technology, collected public comments on the
subject, but has yet to make a ruling or set a rate. .. Pressplay has
simply decided not to pursue music whose publishing rights are not
represented by Harry Fox because of the time and labor involved in
negotiating with publishers. ... "You try to tell the publishers, `look
what's happening with the pirate services,' and they're oblivious," said a
record executive who insisted on anonymity. "There's no particular
motivation for them to spend money on overhead or learning about the
business. We call them up, they say `put it in writing,' so we put it in
writing and we never hear back."

Publishers in turn say that the chief culprit for holding up the digital
future lies elsewhere.etc...