GRAMMY Magazine - July 25, 2003

1 Creative License
Some analysts are proposing compulsory licenses as the answer to digital piracy

2 GRAMMY.com
Xeni Jardin

3 Pay artists fairly. Give fans convenient and affordable access to online music. Sounds simple enough, but millions of downloads and dollars into the digital music dilemma, these fundamental issues are still unresolved. Despite millions spent in legal fees to combat illicit filesharing, audience demand continue strong, as demonstrated by the rising popularity of P2P networks like Kazaa and BearShare. Early attempts at subscription services like MusicNet and Pressplay have resulted in only limited success. Now an increasing number of technologists and music industry executives are talking about an alternative they believe might be the answer: compulsory-license models.

4 Here's how "compulsories" might work. Music fans would pay a sort of "download tax" on services and devices (computers, Internet access, MP3 players), then download, listen to and share all of the online music they want. The collected funds would form a pool of revenue from which musicians and rights holders are paid.

5 How would the money be divided? Some plans would split revenue, using statistical models of the number of people who listen to a copyrighted piece of music and calculating estimated audience size with random sampling. Other plans involve embedding a watermark (a sort of digital "identification tag") in each work, then following the actual traffic of those marks to tally up real-world use.

6 Compulsory schemes aren't a new idea. Earlier precedents in broadcast-media history include radio licensing, in which standard rates are set with ASCAP, BMI and SESAC. But the buzz around compulsories as a way to generate revenue from downloadable music and movies is sparking a new wave of discussion among policy makers, technology developers, artists and others. Prominent academic voices in the debate over compulsories include law professors such as Lawrence Lessig of Stanford and Neil Netanel of the University of Texas, as well as computer science professor Ed Felten of Princeton.

7 Hundreds of millions of dollars in profits are already being earned each year through digital music distribution, so the pro-compulsories argument goes, but not by artists or labels. Instead, digital music fans pay ISPs, blank-disc manufacturers, and PC- or software-makers: each a necessary component in the digital-music food chain.

8 Instead of criminalizing filesharing, advocates argue, why not introduce compulsory-license schemes that would pay creators for their work while taking into account the inherently uncontrollable nature of digital music files?

9 But the devil is in the details, and no matter which model you choose, there are plenty of details to sort out. How would usage be tallied? How would audience size be estimated? If you apply the compulsory model to music, what about movies or books? What about international territories? Would they participate, and would a compulsory system here in the U.S. work if other countries didn't participate? How would revenue be divided, and who would pay what to whom?

10 Who would oversee the compulsory system? Some propose creating a new division of the federal government to be in charge of Internet communications, and others say the existing copyright office should become responsible. Others argue for a voluntary system that would be managed by private industry, like the licensing models that already exist for cable and satellite television.

11 Jim Griffin, cofounder of the Pho digital entertainment discussion list and CEO of L.A.-based consulting firm Cherry Lane Digital, says the current case for compulsories traces back to the economic and cultural sea change that a then-new technology — electricity — created in the 1920s.

12 "Before that time, artists controlled art with their feet," Griffin comments. "If they entered the room, the art was present, and if they left, the art was gone. Acoustic gave way to electric, and radio and TV broadcasting were the beginning of the end of artists' ability to control their work."

13 As broadcast media evolved, Griffin says, so did early blanket-licensing schemes for radio. The growth of peer-to-peer file distribution represents a similarly important change to artistic control.

14 "It's too late to put the genie back in the bottle, because the anarchy already exists," Griffin states. "Monetizing that anarchy is the problem now. A new system might function like insurance systems do. Everyone pays in, and each of us draws out as needed."

15 Critics fear that compulsories could amount to "taming" the Internet, unnecessarily introducing regulation over a global network of communication and commerce that has so far evolved without standards or a central regulatory body. But advocates in favor of compulsories argue that with rights holders not being paid for work they own and fans effectively being punished for downloading music, it's time to take a fresh look.

16 One prominent California venture capitalist, who asked not to be identified, told GRAMMY.com he believes many VCs are wary of investing in new technological advancements that could potentially run afoul of the Digital Millennium Copyright Act (DMCA) because the boundaries of DMCA legislation remain unclear. Until there is a solution, the logic goes, an important area of potential economic growth is being held back.

17 Speaking in January, 2003 at the Future Of Music Conference in Washington, D.C., General Counsel David Carson of the U.S. Copyright Office said he views compulsory-license models as a last-resort solution for digital entertainment distribution.

18 "[The copyright office] administers the compulsory licenses, but in principle, we don't believe in them," Carson says. "In principle, we believe that the copyright holder ought to exercise exclusive rights.

19 "We've heard people favorably comparing the way that ASCAP, BMI and SESAC administer rights in musical compositions, but why not first try giving exclusive rights to sound-performing copyright owners and seeing what happens?"

20 Fred von Lohmann, senior staff attorney with the Electronic Frontier Foundation, says many on the Net believed Napster was close to perfect, that its accessibility, ease of use and range of available content were great. The only problem was that artists were not getting paid.

21 "Compulsory-license models take this into account," von Lohmann says, "creating a situation where the more people do what they're already inclined to do — download and share music — the more artists and copyright owners benefit. We need to be careful about accepting present-day legal solutions that turn tens of millions of Americans into criminals and use fear as a motivator to change behavior," von Lohmann maintains.

22 "What if the cure is worse than the disease? There's a growing cry for a better solution, and compulsories might just end up being an effective bridge between the downloaders and the rights holders."

23 (Xeni Jardin manages conferences and executive summits exploring technology, media, finance, and culture, and writes for a variety of print and online publications.)

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