In Hearings, Cannon Urges Labels To 'serve' Internet Consumers

There were flinty moments in the closing days of the initial session of the 107th Congress, as lawmakers wondered aloud if the Digital Millennium Copyright Act (DMCA) is to blame for unhappy online music consumers or if the fault lies with an excessively control-minded major-label mentality.

With few workdays left in the first session of the Congress, House lawmakers heard testimony Dec. 12-13 from music and Internet industry executives on whether Congress should change sections of the DMCA that deal with the legality of temporary copies of digital performance of a musical work.

In the Congressionally mandated report released last summer, the U.S. Copyright Office found that most sections of the DMCA do not need changes at this time, but recommended that infringement sections dealing with the legality of so-called incidental copies of a digital performance of a musical work—temporary "buffer" copies, multiple server copies, and archival copies—should be rewritten to make them legal. The Digital Media Assn., representing Webcasters, supports the changes.

The Oct. 5 marketplace agreement between the Recording Industry Assn. of America (RIAA), the National Music Publishers Assn., and its licensing affiliate, the Harry Fox Agency, may mean that some lawmakers next session will be more reluctant to change the DMCA or support larger regulatory legislation dealing with first sale and fair use. The groups, supported by ASCAP and BMI, reached agreement for streamlined licensing online music subscription services, long called for by Congress.

Some intense moments occurred in the Dec. 13 hearing before the House Subcommittee on Courts, the Internet, and Intellectual Property. Rep. Chris Cannon, D-Utah—co-sponsor of the pro-Internet Music Online Competition Act—grilled Cary Sherman, the RIAA's senior executive VP and general counsel, on poor press reaction to the long-planned MusicNet service.

Quoting from a recent article in The Washington Post, Cannon said, "The article also notes: 'Each download expires in 30 days. You cannot make a backup copy of a song, write it to a recordable CD, or transfer it to a portable player. The record labels made this choice, electing to sacrifice convenience and choice to copy protection. Those behind PressPlay, a competing subscription system, seem on their way to making the same mistake.' "

Cannon added, "This article and others suggest that the major labels do not intend to fully embrace the Internet, preferring instead to continue to derive their revenues through the more lucrative—and costly to consumers—CD marketplace."

Cannon noted: "Of the top 20 Billboard CDs for this week, only two have tracks available for download on the MusicNet service. And both of those two CDs [Britney Spears and Backstreet Boys] are distributed by Zomba Records—the largest independent label. In short, the major labels have not made a single track available from [their] top-selling CDs even as a rental download on the MusicNet service.

"We're having these hearings to decide whether changes to the present copyright system are necessary to serve consumers better," Cannon said. "Mr. Sherman, is the present copyright system under the DMCA in part to blame for your member companies' inability to offer what consumers want—or is it solely a function of your industry's desire to maximize control over content and profit margins?"

Sherman replied that the industry wants to embrace the Internet in a legitimate marketplace. He said that he was not sure why no top 20 tracks were available for download, but suggested that "maybe the tracks are on labels not on MusicNet, maybe the mechanical licenses are not in place, or maybe the artists hold those rights and don't want their music on the Internet."

Several artists and managers, upset that labels have not contacted them about online subscription services, have recently demanded that their labels withhold their tracks if their contracts give them control over Internet usage. Other artists groups, such as the Recording Artists Coalition (RAC), have not made this an issue, although RAC counsel Jay Rosenthal says RAC "supports artists' right to determine how and when their music is used on the Internet, if contracts allow it."

Register of copyrights Marybeth Peters said the October agreement was "a good first step—but it does not influence our decision for the changes."

The recommendations would remove copyright infringement penalties for Webcasters and others arising from the triggering of a copyright owner's reproduction right—not just of an otherwise licensed digital transmission of a public performance, but the backup computer copies the services employ to facilitate their systems. Changes would eliminate copyright royalty obligations that arise even though the copies have no independent commercial value. Music industry executives oppose any changes.

Several of the recommendations are in the Music Online Competition Act (MOCA), but other more regulatory sections of MOCA may lose steam next session in light of the industrywide October agreement.

Rep. Howard Coble, R-N.C., the panel chairman, agreed with music industry witnesses that a marketplace solution to the licensing problems of online music was "obviously preferable to government regulation." But in his opening remarks, MOCA co-sponsor Rep. Rick Boucher, D-Va., cautioned that he wanted to make sure that "this agreement removes for all parties the need to resolve through legislation the cumbersome [licensing] process."