Narm Backs Proposed Bill

Music retailers, worried that the major labels may be trying to unfairly control the digital-distribution market, are throwing their support behind a proposed congressional bill designed to promote competition among online music companies.

In an Aug. 8 letter to Recording Industry Assn. of America president/CEO Hilary Rosen, National Assn. of Recording Merchandisers (NARM) president Pam Horovitz states, "Music retailers have no choice but to seek legislative remedies when copyright owners refuse to engage in any meaningful discussion with them regarding digital distribution."

RIAA opposition

The NARM letter responded to a recent statement by Rosen condemning the proposed bill, known as the Music Online Competition Act, charging that it is a "solution in search of a problem" and that it "substitutes government regulation for the marketplace."

In her letter, Horovitz says that‚ contrary to a previous Rosen statement about the positive development of the digital music market‚ "the marketplace is emphatically not moving in the right direction.

"The only way consumers will be able to get 80% of America's music content, according to your member companies, will be through a single gatekeeper, either PressPlay or MusicNet," Horovitz states. "This is a flawed idea that ignores both the contribution that thousands of retailing companies have made to the value of intellectual properties year after year and the fact that without competition there will be no incentive for copyright owners to provide low prices or innovative Web sites."

virtual shutout

There is an ongoing concern on the part of a number of music retailers that they are going to be shut out of the digital distribution business. One executive at a leading retailer says, "As these services go forward, they give a lot of lip service to being fair. They say that access is going to be equal and that [retailers] will have as much access to content as anyone."

Some merchants complain that MusicNet and PressPlay are making little or no attempt to discuss distribution and licensing opportunities, while at the same time cutting deals with the likes of AOL, RealNetworks, Yahoo, Microsoft, and MP3.com.

"The fact is that it's not equal," the executive says. "They've locked arms with guys like AOL, which, of course, stinks, because they're owned by the same corporation."

Retailers are also concerned that MusicNet and PressPlay are taking the form of next-generation record clubs and that cross-licensing deals between the two companies are sure to follow. Retailers have long been unhappy with the labels' club businesses, charging that clubs have an unfair advantage because they pay less than half of what retailers pay for CDs. They fear that the labels' subscription services will also be able to acquire content at a discount.

"It looks just like the record clubs," the executive says. "The labels will be the beneficiaries as they deploy the services on their own behalf. And will we be privy to the deal they make with AOL? No."