Music Industry Reflects On 2001: 2001-2 Congress Faces Antitrust, Artists' Issues

The most significant 2001 music industry stories in which the federal government is involved-industry antitrust issues, concerns about artists' rights, the need for streamlined music licensing, and non-discriminatory online music service opportunities-began to develop this year. But they will come to a head in 2002, when Congress returns for its second session to debate and develop legislation addressing these concerns.
Because of the Sept. 11 terrorist attacks, Congress' schedule for hearings regarding many smaller issues unrelated to national security were put on hold. The House Judiciary Committee, which usually takes the lead in copyright issues, was especially burdened with security and terrorism concerns and plans to look at a number of intellectual property issues were shelved for months. But there are indications that the second session that begins in January 2002 will be the season for catch-up ball.
Several Congressmen on the committee confirm that there are plans for the panel to hold an oversight hearing early next year about the ongoing Department of Justice (DOJ) probe of the record industry's online music service and business practices. "It's no secret that the committee has plans [to look into the matter]," says Rep. Chris Cannon (R-Utah), who is a committee member. "So, yes, I think there will be antitrust hearings next year."
Although the DOJ does not comment on ongoing investigations, many sources both on and off Capitol Hill-including many who have been interviewed by DOJ agents-say that the agency's investigation is deep and wide-ranging (Billboard, Aug. 7).
Rep. Rick Boucher (D-Va.) says the committee will also fold into the DOJ hearing a debate on the non-discriminatory licensing provisions of the pending Music Online Competition Act (MOCA), which he and Cannon introduced this summer (Billboard, Aug. 11). "The Justice Department is concerned about precisely what Chris Cannon and I are concerned about," Boucher explains, "and that is the anti-competitive effect of the labels that own 80% of the world's music creating the sites that, by and large, have virtually exclusive licenses to distribute that music."
Boucher says he is aware that several record companies "have licensed a few other [third-party service] sites under somewhat restrictive terms and conditions," but adds that "by and large, it is MusicNet and Pressplay that will have the opportunity to deliver music over the Web, and we want to make sure there is competition in that market." The Justice Department inquiry, he says, is focused on that "problem" and will lead to a hearing "that offers the opportunity to look at what the Justice Department is doing and also to examine the [non-discriminatory licensing] provisions of MOCA."
When the Recording Industry Assn. of America (RIAA) executive VP/general counsel Cary Sherman was reminded of the DOJ probe in a comment Cannon made at a Dec. 12 hearing-on changes to the Digital Millennium Copyright Act (DMCA)-Sherman quipped that it might be the first antitrust probe of an industry that presently "has zero market share" in the online music business.
While a top staffer for committee chairman F. James Sensenbrenner Jr. (R.-Wis.) said a date has not yet been scheduled for a hearing, he affirmed that "the committee plans to administer its oversight jurisdiction on such matters."
Sources also say that the Judiciary Committee plans to look closely at the licensing practices of the performing-rights societies and the DOJ's approval of a modification of the ASCAP consent decree. Sensenbrenner sent a letter of inquiry to the DOJ asking for detailed reasons why the department approved the changes this spring.
Earlier in the year, while speaking before e-commerce members of the Digital Media Assn., Sensenbrenner lashed out at ASCAP and BMI, saying that the government rules they operate under (which mandate a rate court for arbitration and require that the organizations make licenses available for their music) are outdated and unfair (Billboard, April 7).
On the debate over MOCA, which did not pick up the additional co-sponsors needed for subcommittee approval, some sources say that recently announced streamlined licensing improvements may produce alternative proposals next year. Those proposals would remove the bill's licensing regulation provisions, but keep several proposed changes to the DMCA recommended by the Copyright Office that deal with the legality of some "incidental" copies of a digital performance of a musical work.
The change in lawmakers' focus stems from the Oct. 5 marketplace agreement between the RIAA and the National Music Publishers Assn. and its licensing affiliate, the Harry Fox Agency. That agreement, which streamlines music licensing, went far to appease one of the biggest concerns of some lawmakers-that a licensing bottleneck has impeded music available to consumers on the Internet (Billboard, Dec. 22).
Boucher predicts that once a hearing is held next year, MOCA will go to markup and find approval by the Judiciary Committee. "I feel pretty good about it," he says.
Also, in an effort spearheaded by Rep. John Conyers Jr. (D-Mich.), several lawmakers are actively discussing drafting an artists' rights bill for introduction in the next session. Conyers told Billboard this fall, "I have been concerned for many years about the unequal balance of power between artists and the labels. Last year's work-for-hire debate and this year's California Senate hearing on the carve-out for recording contracts in the seven-year law show that there is growing interest in this area. I am now looking at legislative options to help eliminate any inequities and economic imbalances in this regard [Billboard, Sept. 22]."
Conyers now says that while the marketplace has dealt with some Internet music problems, his concerns about the rights of artists remain: "While all of this has been accomplished without Congressional action," he says, "it is clear that Congress' oversight of these discussions has been helpful. To that end, I intend to play an active role in helping remove any further obstacles to copyright negotiations in a manner that fully respects creative rights."
Conyers did not comment on what final issues the bill might address, but according to sources, there are discussions that are weighing such possible provisions as:
- banning the practice of some record labels of having prospective new acts sign "intent" pre-contract agreements, or short, demo-money agreements that effectively block the performers' rights to shop for a contract elsewhere;
- instituting a federal version of California's seven-year personal services contract statute that would include recording artists to ensure that they do not find themselves bound to long-term contracts that often exceed a decade and can impede or destroy their careers;
- requiring direct payment of digital royalties to artists-beyond those offered by the industry's SoundExchange; and
- establishing the right of freelance writers to negotiate payment if their articles are used on magazine Web sites or included in databases.