Napster Tries To Go Legit

WASHINGTON, D.C. -- While developments in the Napster saga unfold at such a rate that observers and analysts can barely keep abreast of them, the longer-term strategies of the industries involved are beginning to take shape on Capitol Hill.

Over the last year, the E-music community has tried to convince lawmakers that the music industry's reluctance to develop and institute streamlined licensing and its penchant to sue infringing services at the drop of a hat are not only stifling small-business growth on the Internet but blocking consumer access to music. That view has gained a lot of support, despite the music industry's much larger lobbying budget.

"There is a deep tension between the two industries," says Peter Jaszi, a prominent copyright law professor at American University and co-founder of the Digital Future Coalition, which includes nonprofit educational, scholarly, library, and consumer groups, as well as trade associations representing the consumer electronics, telecommunications, computer, and network-access industries.

"I can understand where they are," adds Jaszi. "Historically, copyright holders made the decisions where their product will be placed. Rights holders are reluctant to let go of those decisions. The business solution that's visible in the [Napster and] BMG agreement, for example, entails a loss of control. It is shifted to consumers, who get choices—they can choose to buy one song or 12 songs. These are categories of decisions once controlled by the companies. That's gone with file-sharing."

The often stated public-face mantra of all parties is, "Why can't we all get together and make money together?"

The question is purposely ingenuous and illustrates all too well that both sides are trying to minimize their real agendas—which are, in the case of the new online companies, to establish a beachhead at any cost (even if it involves infringement-lawsuit casualties, as with MP3.com and Napster) and, for record companies, to protect the homeland (and their valuable assets) from the mongrel hordes.

Stripped of all artifice and public-relations puffery, the reason the two sides won't "get together" is that neither is willing do so without the assurance that it can succeed—and have the upper hand.

The question for the federal government is, If the private marketplace will not (or refuses to) function equitably, how can one best balance the rights of artists, consumers, copyright owners, and new-technology businesses to achieve fairness? In dealing with this issue, the main driving force for change in Congress may be the E-music companies, but the snap-to response by lawmakers has been a result of the ultimate player on Capitol Hill—the consumer. Or, more precisely, the constituent, the most important citizen to a member of Congress.

"The lasting legacy of Napster when people look back will be as the event that began the mobilization of consumers in music and media," says Jaszi. "That's never going back in the box, and it's also changed congressional views. It's permanent. Lawmakers ultimately respond to their constituents. That's the nature of the sea change."

The overall Capitol Hill game plan of the E-music companies, according to insiders, might take up to two years. Of course, a tactical breakthrough or a more conciliatory position by the music industry toward E-music companies could quickly reshape or drastically change the plan or render it redundant.

As it stands, initially Congress will hold hearings on the problems this session. Then, perhaps next session, the E-music companies will seek legislation, particularly to obtain relief from what they view as slow, inefficient licensing procedures—with some version of a compulsory license, as well as expansion of the Copyright Act's fair-use sections and the rights given to copyright-owner companies in the Digital Millennium Copyright Act (DMCA).

For their part, the record companies and music publishers do not plan to offer any legislation this session (Billboard, Dec. 23, 2000). They will continue to tell lawmakers they believe that the laws that are in place are sufficient, that the marketplace is working, and that it will work better with a new agreement between the parties once a technologically and economically feasible system is created that provides easy consumer access to music at reasonable fees.

It hasn't happened yet. One lobbyist says, "There probably isn't anybody connected with all this that isn't scratching their head daily to try to come up with something. But a system's got to have all these components: security, the ability to handle a high volume of very small transactions, accounting software, tech [protection] controls, and, most importantly, ease of operation. There are very experienced companies out there that could do this—I don't think this is going to come from some kid."

Congress is also expecting a report Feb. 28 by the National Telecommunications and Information Administration and the Copyright Office. The agencies jointly heard testimony from the parties back in November on whether changes to fair-use and first-sale sections of the Copyright Act are needed.

Online officials believe the DMCA's first-sale doctrine, which gives a consumer who purchases a CD the right to sell it, should extend to digital downloads. They also believe that the DMCA's section allowing consumers to copy computer software for archiving or backup should be extended to certain temporary copies in streaming music and video. The online officials argue that consumers shouldn't have to pay an extra royalty for a temporary copy.

Music publishers argue such a change would effectively deny the "reproduction" right claimed by such content providers as music publishers.

More recording artists may decide to weigh in with their views on the post-Napster E-music phenomenon this session, according to sources. Senate lawmakers have made the first announcements about upcoming hearings this session.

After signaling their intent after last year's hearings on the issue near the end of the 106th Congress, Sens. Orrin Hatch, R-Utah, and Patrick Leahy, D-Vt., took to the Senate floor to announce hearings to study changes to the fair-use section of the Copyright Act to determine the Napster ruling's impact on online music markets and consumers (Billboard, Feb. 24). The tone of their remarks showed much more sympathy for the problems of artists, consumers, and E-music companies than for the so-called content-provider industries.

On the House side, sources say that Rep. James Sensenbrenner, R-Wis., the new chairman of the House Judiciary Committee, has met with staff and plans to announce soon a legislative calender that will include hearings on similar issues.

Rep. Rick Boucher, D-Va., has said that he will soon reintroduce a bill that would revise the Copyright Act to make the MP3.com business model legal (Billboard, Feb. 24).

According to several lobbyists, the Boucher bill may serve as a trial balloon for other legislation later in the Congress that is broader in scope.