Monday, September 17, 2007

State of the Union

For the seventh consecutive Summit, FMC brings together leaders from music, law, technology and policy for a top-level discussion about the state of the music industry. How are copyright holders embracing new technologies? What is the status of the DRM arguments and licensing negotiations? And most importantly, how are artists and creators impacted by these changes?

David Bither
Senior Vice President, Nonesuch Records
Rosemary Carroll Esq.
Partner, Carroll, Guido & Groffman
Jim Griffin
Chief Executive Officer, Onehouse
Mac McCaughan
Musician and Co-owner, Merge Records
Bob Mould
Ralph Simon Chairman Emeritus & Founder, Mobile Entertainment Forum Americas, Mobilium Group & The MEF

09:50AM EST - JG thanks Jenny Toomey and the other FMC founders, introduces the panelists.

09:58AM EST - JG: David, how is business? 30% down is a scary figure. How bad are things, at your label?

10:01AM EST
- DB: When something like Tower Records goes out of business, it affects all of us. At the same time, there's more vitality in the music community than there has been in a long time. As a company, we follow our hearts with the music that we love. Our business has been pretty steady within this dynamic context; that can be attributed by the quality of the artists we work with. The fact that we exist 40 years later, doing the things we do...that's my answer.

10:05AM EST - MM: I don't think that's the industry standard, though. I think Nonesuch could survive without Warner. What do they provide you?

DB: Well, we could probably do what we do without Warner. That's just how we were born and raised.

10:07AM EST - JG: Mac, how does your perspective differ?

MM: Business is great, the last few years have been the best ever. I attribute it to the artists we have and the records they've put out in the last few years. People may be buying less bad records, but I don't see them buying less good records.

10:10AM EST - JG: Rosemary, what's your perspective on the difference between the majors and the independents today?

RC: Five years ago, a buzzed band today would immediately want to go to a major.
I don't think a major label is a good place for an artist to be today. It's a combination of the majors not doing a good job and being engaged in a contractual land-grab for rights and contracts. Now an artist has to cut the label in on his merchandising, touring, and more in addition to his masters

10:15AM EST - JG: Bob, are you able to make a living as a musician?

BM: I'm blessed to say that I can. When I was a kid, buying music was a sacred ritual. Today, somebody downloads a hundred songs in a day, they are icons on a desktop, and maybe five end up in their iTunes folder.

JG: Where do technology and music meet?

10:21AM EST - DB: Obviously we live in a world full of technological change, but our focus is someplace else - the quality of our artists.

MM: It is sad to see the devaluation of art, but Merge sells records to music fans, people who feel sad about the same thing. Nonesuch does as well, regardless of who the parent company is. I have a hard time caring about ringtones. We're more focused on putting out good records.

RS: Ringtones have evolved in a similar way to radio edits. The ringtone has its place in promoting an artist, but it should be seen in a wider landscape of graphics and other tools.

10:26AM EST - JG: Hasn't technology made it voluntary to pay for music? What kind of future does that leave the business?

DB: Wilco is a classic story. When they were dropped by Warner and came to Nonesuch, we had emails from hundreds of fans saying they were glad to purchase Yankee Hotel Foxtrot, though they had already owned it for months.

RS: Isn't a new role of the record label to find that trigger point, and inspire that?

DB: There's a difference between creating a hit and a career. One lasts five minutes, and another hopes to last a lifetime.

10:30AM EST - JG: Rosemary, is there something legislative that can be done?

RC: I don't think you can stuff the genie back in the bottle. Restrictive laws wouldn't work, and they wouldn't be passed.

JG: Bob, how will we listen to music in the future? What do you think of the recent Rick Rubin piece in the Sunday NYT?

BM: New gadgets are fleeting. You can't break a band with a ringtone. Social networking is big right now, but those come and go as well. Five years ago, the music world was full of skyscrapers. Now you can see the horizon.

10:30AM EST - MM: I don't think the ubiquity of music access is especially beautiful. I don't want to listen to music on myspace or a computer. MP3s sound terrible. There is so much music out there, that you still have to work to find the good stuff.

DB: That being said, I think part of the role of a company like Merge is to be a curator of good music.

RC: Major labels are becoming more flexible. Lucinda Williams just did five nights, her manager wanted to record one night, press a few hundred CDs, sell them the next night, then sell the remainder on her website. I never thought they would go for it, but they did.

10:40AM EST - JG: Bob, you DJ in clubs, and the club pays the performers. Is it time for terrestrial radio to start paying a performance right?

BM: I don't think that's going to happen.

JG: David, how do you feel about radio stations taking your music and playing it without paying you?

DB: I wish they were taking it and playing it. Independent and college radio helps, but its never been a big interest for us. We don't have a radio promotions department. We built our business without it.

RC: I've long thought that there should be a performance right for terrestrial radio. I think it's obvious. The performer brings so much to the music; not just the songwriter.

10:40AM EST - Questions from the audience:

Q: What's the ratio between physical and digital sales at Merge?
MM: It's definitely greater today than it was a few years ago. Then, digital sales would start at 30%-40% and then taper off to 10% or so. More recently, it tends to stay around 30%. It's artist by artist, however. Caribou is still around 40%-50% digital, whereas the Arcade Fire is 20% to 25%. But we've seen things settling around 30%.

Q: Going back to the question of people's willingness to pay for music, do you think that's a demographic thing? (Tim Wu)
DB: I think it's definitely different, a case where a lot of older fans have more money than time, and aren't interested in spending hours seeking out free music.

JG: To wrap up, an axiom I've come across is that if some kind of technology happens in the first 13 years of your life, you think its quite normal. If it happens between 13 and 40, it's so interesting it might just become your career. If it happens after you turn 40, it should be illegal. We'd all better move quickly to keep up.

Creative License: how does the sample license clearance process work?

Popularized by the hip-hop movement of the 1980s and 1990s, sampling is the latest manifestation of a rich musical tradition -- one particularly prevalent in jazz, bluegrass, and blues -- where artists have borrowed from, referenced, riffed off of, or ripped off artists of the past. But sampling as we know it today represents a different form of borrowing, a more literal appropriation made easier through digital technologies. This leads to bigger questions about sampling, copyright, compensation, licensing, and creativity. This session will cover the pros and cons of the existing sample license clearance process, and whether it's possible to maximize compensation for artists while also encouraging creativity.

Whitney Broussard
Owner, Whitney Broussard Consulting
E. Michael Harrington
Professor Of Entertainment & Music Business, Belmont University
Peter Jaszi
Professor of Law , Washington College of Law
Lady Miss Kier
singer/songwriter/producer, Dee-lish Publishing/Deee-lite
Kembrew McLeod Assistant Professor, University of Iowa

11:22AM EST - KM: Public Enemy's older work is mixed up with literal hundreds of samples, similar to a more current artist Girl Talk, who released an album last year with over 150 samples. We're here to talk about artists like this and the bigger questions surrounding sample licensing.

WB: It's funny to hear people say that hip-hop died when samples needed to be cleared, because I was right there at Capitol Records in 1981, where I interviewed a bunch of people in the sampling world at the time and published it in my law school entertainment journal. From there I became the licensor at Capitol.

LMK: I got really popular because of Herbie Hancock sample on "Groove is in the Heart." We didn't know anything about the business, we looked at sampling as a new instrument.

PJ: To me, fair use seems to say that certain uses of copyrighted work are defensible, because they add to the greater culture they draw from. Why aren't these defenses always being made? Because of the difficulty that artists have in figuring out the doctrine out. The solution to that is collective self help. I've worked with different groups to help them define collectively their own relevant fair use doctrine.

11:36AM EST - KM: How could the industry legitimize an album like Girl Talk's Night Ripper?

WB: Most major record companies would just throw up their hands and say "we're not going to do it, it's just too much work." Each license can be a few thousand dollars just in transaction costs. Added up, most companies probably wouldn't do it. Majors aren't in it for the art. On an underground level, Dangermouse's Grey Album for example, is successful.

LMK: Look at the break from "funky drummer." That guy never got paid. It's bad creative karma to not clear your sample.

MH: I had this crazy idea in 2001 about a compulsory license to sample sound recordings. I thought that with a recording from the last 10 years, you could take 10 seconds or 10%, whichever is less, and pay 25% to the sampled artist.

11:44AM EST - KM: We often think of Fair Use as applying in an educational or journalistic context. How can we think of it in terms of sampling?

PJ: A somewhat unified theory of Fair Use has emerged. What courts are asking is: was the original material transformed, or significantly re-contextualized? This applies to the full-range of cultural practices, including music-making, for commercial and non-commercial uses.

WB: A forgotten aspect of Fair Use, is that its not the only way you can use copyrighted works, for example using such a small sample of the piece that it doesn't rise to the level of infringement, period.

11:52AM EST - WB: It's important to not that there are different standards for advertising than art, even if the art is being sold. We don't want to see people conflating the problems of advertising and music copyright.

11:58AM EST - KM: There are all these licensing land-mines out there to be aware of. There was a while, on Rhapsody and Napster, where you would only see partial albums, because they couldn't secure full rights.

11:58AM EST - Questions from the audience

Q: At iTunes, we generally don't distribute a record unless we have blanket clearance from the label. Once it has been cleared for commercial distribution, why must it be re-cleared for digital distribution?
WB: It's a contract issue, not a legal issue.

PJ: It's risk-assessment. The copyright owner wants to make sure he is not giving too much away.

Q: Without insurance and indemnities, almost nothing will work. if you are the owner of a right, its incumbent on you to get the splits cleared. The song "Grillz" has 29 different publishing clearances, but congrats to them for doing it.
KM: But can independent artists afford the lawyers to clear these things, or are we excluding the middle and lower tiers of recording artists?

Q: Can someone define de minimis use?
WB: Unfortunately there isn't a clear definition, much as there isn't for Fair Use. A major label isn't going to want to rely on either of these; they will take the position that if you can recognize it, you have to clear it.

Another point is that the tools of production are so accessible. It's one thing to talk about industry practices, but its another thing to tell kids what to do. Part of me thinks we should have less stringent licensing requirements for sampling, but another part of me thinks that there is nothing cooler than listening to a record that shouldn't legally exist.

Q: Does the music from sample clearances ever make it back to the artist?
WB: The sad reality is that it almost never does. At best they will see 50%, but generally they don't see any of it.

Q: Peter, am I inferring correctly from your previous comments that if, say, a local hip-hop coalition were to state its intentions for Fair Use sampling, this might indemnify them against infringement suits?
PJ: Essentially, yes. The larger the community backing such a document, the more credence the courts will lend it if an infringement suit comes along.

The Hill was Alive with the Sound of Music: a policymaker roundtable

Webcasting rates. Copyright clauses. DRM technologies. Broadband policy. Today's policymakers are dealing with everything from farm subsidies to NASA spending, and it's up to their staff to keep them on top of these complicated issues. Join top congressional and FCC staffers for a discussion about the impact of policy decisions confronting the music industry.

Michael Bracy Policy Director/Co-founder, Future of Music Coalition
Rudy Brioche Legal Advisor, Federal Communications Commission
Aaron Cooper Counsel, Senate Judiciary Committee
Kenneth DeGraff Senior Policy Advisor, Vice-Chairman Mike Doyle
Jessica Rosenworcel Senior Communications Counsel, Senate Commerce Committee
J. Michael Schmidt Legislative Assistant, Office of Senator Feingold

On panel from left to right: MS, AC, JR, KD, RB
MB as moderator

11:34 AM EST - MB: Radio, there are a lot of issues, new platforms. The big question is concerning media ownership, where are we in the process of it?

RB: We are trying to move the item up to the end of this year, earlier next year. Studies were released about ownership and they need to look at the questions more deeply. How far are we willing to go and to make sure we have a fair process. If we think about consolidation, what impact is that going to have on the diversity on programs? The public is an important influence in order to help move things along.

11:39 AM EST - MB: They are saying in order to compete, they need more stations. How does that hold at all?

RB: Members of congress support that idea. On one hand, in order to compete they need more stations, on the other hand, it can be seen as a separate market. If we deal with this idea, we necessarily don't have to have that divide. Diversity is a big issue at hand as well.

11:44 AM EST - JR: We're dealing with major changes right now. Things have really changed because of the1996 with the telecommunications law. As a result, the top four corporations own 50% of radio share, of the top ten, they have two-thirds of the market.

Speakers make it a point to emphasize how important the public's voice is.

RB: If it wasn't for organizations such as FMC, with the federal state to get independent stations in the open, however this is only the first step.

11:51 AM EST - MB: Any thoughts on LPFM?

KD: These stations can really help groups such as churchs, schools, targeted to specific audiences that do not compete with the majors. In 2001 Congress chose to limit those stations. The majors thought LPFM would interfere with their station; number of studies that have been done reveal that this is not the case. These stations can also play and support the independent bands.

AC: One thing that doesn't happen enough is the communication between content and audience. There are 2 major issues at this. First, the protection of IP rights. It is valuable and the industry has been very successful. The bigger picture is how it helps the country. Second, there is a need to take a step back and look at the issues at hand: look at who/what gets paid from digital music. Are the rate structures adequate? It's about finding the right balance, having the stations that can serve the audience where traditional radio does not.

12:03 PM EST - On the topic of broadband, net neutrality.
KD: We need to find out where potential abuses are happening. Defining abuses in the future can also get more technical for the future.

12:05 PM EST - Audience questions.

HS (Prometheus radio project): For net neutrality, Congress has started discussing the issues at hand. Department of Justice has denied problems with net neutrality; what can people do to help bring awareness and specifically make sure the issue with D of J doesn't happen again?

AC: There are 2 policy issues they are looking at. One is labels/artists should be compensated and how. Two, they don't want to impede on creative restrictions that following with internet. It needs to be recognized that if rates can't be met, it's everyone's problem (artists, webcasters labels).

WM: What are the copyright issues with orphaned works?

AC: It is still being addressed, it is the senator's top priority for reform. It is taking a lot of time because so many things effect rates and decisions. There is a need to look at the entire playing field.

MB: Any predictions? Specifically before the next election.

AC:Targeted bills such as LPFM is a big issue for senator.

Change that Tune: will the FCC settlement mean radio airplay for independent labels' artists?

This panel will talk about the range of issues facing independent labels and their artists: performance royalties, market share, and the effect of the payola settlement on airplay. Now that the rules are in place, how are they being implemented and enforced? And what does the settlement mean for musicians, citizens, and radio in general?

Richard Bengloff
President, American Association of Independent Music
Michael Bracy
Policy Director/Co-founder, Future of Music Coaltion
Peter Gordon
President, Thirsty Ear
Portia Sabin President, Kill Rock Stars

01:00PM EST - RB: According to SoundExchange, 37% of non-terrestrial radio spins are coming from independent artists. How are you finding it, Portia?

PS: What radio?

RB: There are two issues in radio: access and results. We're going to focus on results first. FMC recently received a grant from Rockefeller Philanthrophies, and that money was turned over to the New York State Music Fund. A2IM is going to be working with FMC to see what the results are over the next few years.

MB: Commercial broadcasters have been given a license to print money, but you have to follow the rules. Part of this is that you should not be able to turn your radio station into a poker game, where you have to ante in to play. A2IM was able to open the dialogue to what the market should look like. Where is the fair balance? This needs to be an on-going evaluation. We need to let the policy-makers now that the current settlement was not enough.

01:18PM EST - Questions from the audience

Q: Where does the settlement money go?

MB: In the NY decision, the money went to the NY State Music Fund, which I thought was great. I mean, that money went to underwriting a performance in Brooklyn of Lou Reed's Berlin. That's great.

RB: We are moving from a consumption-based industry model to a performance or service subscription model. There's got to be a model that monetizes this listening time.

Q: What do you think about SoundExchange asking for census reporting from stations?

RB: It would be great in a perfect world, but we're not there yet.

Q: Michael, Peter, as a call-to-action, what can I tell artists to do?

MB: The first thing is that artists need to feel that they own a piece of the airwaves. Indie artists like those we here represent, are everywhere except terrestrial radio. My easy answer is to write your congressperson.

PG: You can also supports groups like these, FMC and A2IM.

Music License One Stop Shopping: impossible dream or emerging reality?

How are the existing licensing schemes in the EU, Canada and the US affecting the development of digital music stores/subscription services, and which models seem to be emerging as the most mutually beneficial for licensors and licensees?

Eric Baptiste Director General, CISAC
David Basskin President, Canadian Music Reproduction Rights Agency
Sarah Faulder Public Affairs Director, MCPS-PRS Alliance
Jonathan Potter Executive Director, Digital Media Association
Tim Quirk Vice President of Music Programming, Rhapsody

panelists from left to right: DB(moderator), TQ, EB, SF, JP

03:25 PM EST - DB: One stop licensing, is it the impossible dream?

JP: The problem is complex, starting with simple steps such as finding out know who wrote what song and who owns it. This is not so much of a problem for the consumer but for the "investor". It needs to be simplified in order to make progress. There has to be a way to license music that people want to pay for and investors need to follow the legal process.

03:36 PM EST - SF: There was no competition previously in Europe but now musicians are shopping around. It's up to the "societies" to offer all the needs of rights' owners. This is the first step to the idea of "one stop shop".

EB: Most countries have copyright issues one way or another. There are a few points to keep in mind when dealing with the "one stop shop" idea. One is getting the creator/artist to be represented by a collective. The Santiago agreement was the closest to a "one stop shop" which was eventually stopped because of an European Union.

03:50 PM EST - TQ: Issues also become very expensive. Two separate owners (copyright/sound recorder) entities have to be accounted for. Setting up a system to track all uses is very expensive. Licenses do not overlap 100% in different countries. It becomes legal issues on top of legal issues. Laws exist now where no one can be paid for the music.

04:03 PM EST - SF: Blanket licensing has worked in Europe until now, we need to keep in mind we are in a great transitional period now.

DB: It is the known vs. the unknown. We have all this information, yet for the most part, nothing can be done with it. Frustration comes about when parties are expected to instantaneously follow newly established organizations. There are still many policies undecided or in the process of reaching an agreement.

04:15 PM EST - Audience questions

Q: I am composer and want my music on the internet. However, there are a lot of resources small and large. I would like there to be a law from the government to have a service to do that. What do you think of that?

DB: Most labels have thousands of data of unknown song titles with artists. Someone has to do the work somewhere and find these. Canada has rejected giving this responsibility to labels because they have already done a poor job with it. There isn't a single solution to this concept.

Q: Why would a new musician want to license their music anyways?

TQ: The hassle comes from societies and the collectives that are still developing. In the end, it's promotion that pays. There's no cost to being in the system. You reach an audience that you may not have on your own.

04:35 PM EST - DB: If we come back in 5 years, do you think any of these issues will be solved?

JP: Solve no, progress yes.

SF: Five years not a great deal of time, but will be closer to the ideal.

TQ: It will have become a lot easier.

Performance Right: who gets paid when songs are played on the radio?

When you hear a song on the radio, the songwriter and publisher are paid a royalty, but the performer is not. Recently, a coalition of advocacy groups and artists has organized to lobby Congress to enact a public performance right for sound recordings, but broadcasters have put up a strong fight, calling it a "performance tax" on radio. Panelists will discuss the role of radio, performance rights on terrestrial and digital platforms, reporting requirements, and the status of congressional action on the issue.

John P. Kellogg
Assistant Chair Music Business/Management, Berklee College of Music
Walter McDonough
General Counsel, Future of Music Coalition
Sean Murphy
Treasurer, Princeton Broadcasting Service / WPRB-FM
Patricia Polach
AFM Associate General Counsel, Bredhoff & Kaiser, PLLC
John Simson
Executive Director, Sound Exchange
Gigi Sohn President, Public Knowledge

03:35PM EST - WD: The US is pretty unique as the only industrialized country in the world that does not have a performance royalty for terrestrial broadcasts. Why?

JS: It's historical. The copyright precedent was set with the 1909 act; there was no record industry until the 1920s. Also, by our lack of reciprocity with foreign countries, we are losing over 200 million a year that is not being paid to US performers when their recordings are played in foreign countries.

PP: An exciting new coalition we have is called musicFirst, which hopes to have legislation on the board in this congress.

03:42PM EST - WD: Gigi, what do you think is the likelihood of passing such a right in this congress?

GS: There are some people who think the time is NOW, because the broadcasters have their hands full with other issues. My support however comes with three conditions:
1) We must make sure that small webcasters stay in business.
2) Artists must be paid directly, not through their label.
3) If passed, the record industry must not ask congress to limit technological advancements for audio home recording.

JS: I have no stake in the third of your points, however I can speak for the second. I think that's taken care of - 50% of the money that comes into SoundExchange goes directly to artists. As far as small webcasters, we have extended a settlement that extend the rates from the previous period through 2010. This was received very well. There will be an announcement regarding that later this week.

03:52PM EST - WD: Sean, how does this affect non-commercial broadcasting?

SM: We are people who care about music. We're in favor of a performance right for sound recordings, but it must be a reasonable rate with reasonable record-keeping conditions. The party administering those rights must be doing just that. There should be no lobbying or other agendas. I don't want to see this get bogged down the way that the digital rate proceedings have been.

WD: Does anyone have thoughts on what this license should look like?

JS: I don't think you can put a percent of revenue into the legislation. There needs to be consideration for small and non-commercial broadcasters. Senator Berman is already looking to that. I think that when this bill is introduced, we will see something put in place there. There is a real distinction between online and over-the-air, however. Online has no geographic limitations.

03:57PM EST- WD: What would a reasonable rate be?

SM: From a commercial non-profit standpoint, a reasonable rate is on the order of what I'm currently paying with ASCAP, BMI, SESAC and SoundExchange today. We're paying around $2,000 to $3,000 a year. I want to see the kind of transparency that we see with SoundExchange.

GS: John, how many webcasters have accepted your small webcaster proposal? Is there a technological limitation involved?

JS: There is no technological limitation. I don't have numbers with me, but I can tell you there were about 50 with this license last year.

SM: I don't see these negotiations as a good thing. I would hope to avoid the restrictions you are currently imposing, in the future. There should be a separate entity fighting for the new rates, not the same entity that collects them.

JS: In every country in the world, the collecting society is also the body that fights for the rates. I don't think that's going to change. We are representing everyone in the conversation, artists as well as copyright owners.

04:02PM EST - GS: You don't want congress setting every tiny thing, but a little direction would help, perhaps on a percent of revenue.

JK: As far as the artists are concerned, John, how will you break down those royalties? Because different markets have different audiences with terrestrial radio, are you going to weight different plays differently in different markets?

JS: I think we'll try to replicate what we've done in the internet sector, and that's to follow the dollar. If your song is played X number of times, you will get X amount of money. If it's a percentage of revenue, there will have to be certain allocations, which the SoundExchange board will think about very carefully.

WD: In the event that such a right is enacted, who would collect the money?

JS: It's not a done deal that it would be us, but we are certainly set up to do so already, with 28,000 US artists and over 3,000 independent labels.

04:08PM EST - Questions from the audience

Q: How do you pay performers who have already signed away their rights, perhaps decades ago? (Tim Wu)
JS: That's a fundamental principle of SoundExchange. We don't care who has signed away what - we only pay the performer directly. First and foremost, we let the artist tell us how to pay them. As long as they all agree that is. We never pay some non-performer who may have bought the rights.

Q: Where is the honest work being done to determine the social implications of a terrestrial rate? You seem to be protecting the monetary interest very well.
JS: We have extended various offers to non-commercial and public radio. I think we've spent a lot of time looking at those things.

Questioner: I agree, I think you have thought about these issues.

Q: How many artists does SX represent? How do you pay them?
JS: We have 28,000+ in the US, and tens of thousands overseas. We try to find as many people as we can, whether they are a member or not.

Q: I heard that has not paid SX. Is that true?
JS: They paid us under the small webcaster rate last year. Since they were bought by CBS, we no longer will accept them as a small webcaster. $280 million is not small revenues.

04:20PM EST - Q: The webcasting decision did not take into account the financial realities of the webcasting industry. How can the broadcast industry feel safe in having a rate set by the same CRB?
JS: The CRB is three experts. As long as the broadcasters present all the relevant information, they should feel secure in the free-market, willing-buyer/willing-seller rate.

PP: Every performer I know has to pay fair-market rates for their food and their medical bills; their living. They earn their living through their art, and despite the public opinion that performers are rich celebrities, the reality is that they are regular people that need these varied income streams, especially those artists that still need a day job. The core of this conversation must always be the creator, not the other businesses that arise around him.

GS: There is a flip-side though, however. Yeah everything should be about the creator, but if their music is not being played, it helps no-one. You want the small webcasters to survive.

JK: I'm sorry but the distribution systems are built on the backs of the musicians work. People today are reluctant to be involved in music.

WD: In both rate settings, the webcasters cried that they were too high. That's fair, that's valid, that's rational. But in both instances, SoundExchange lowered the rates. We don't want to put anybody out of business. I'd rather have 20% of something than 100% of nothing. We need to learn from what went wrong in the past rate setting procedures.

Leveling the Playing Field: how does broadband policy affect musicians?

Congress and the FCC are currently working a series of initiatives designed to revise the telecommunications regulatory framework, with everything from spectrum reform, to broadband deployment, to network neutrality on the table. How will proposed revisions impact musicians, citizens and technologists? How does broadband policy intersect with concerns about protecting intellectual property? What would a pro-musician Telecom Act look like?

Charles Bissell
Musician, The Wrens
Scott Cleland
Peter Gordon
President, Thirsty Ear
Jason Oxman
Vice President, Communications, Consumer Electronics Association
Ben Scott
Policy Director, Free Press
Tim Wu Professor, Columbia Law School

05:00PM EST - KT: Charles, how has the internet affected the way you interact with fans and the greater music community?

CB: We took a break for a few years in the late 90s. Coming back to the game in the early 2000s has been entirely different. We use all the regular web tools to promote and advance our music, but the interaction now is constant and not limited by geography. It's really cool.

PG: Technology has always led our business. Obsolescence of music media has always worked in our favor - until the internet came around. Now it's a very different conversation. The internet gives us everything and it gives us nothing. We need to find a way to go from Point A to Point B without having to justify what's ours. You hear a lot about the doom and gloom of the music industry, but that's on the physical side. The PRO side is quite a different story. How do harness these positives?

05:07PM EST - KT: Ben, what should the baseline requirements for internet access be?

BS: Obviously the baseline is always moving, but one musician's work should matter just as much as any other's. All users with new and innovative ideas for distributing content should retain their ability to do so.

KT: Whether it's service or price, a lot of people are unhappy with their ISP. Broadband deployment needs to be done better on a large scale. Tim, what do you think?

TW: I'd say the state of broadband in the US is not ideal. The ability of bands to reach their audience is certainly affected. Technology is always getting better, except for broadband. Cable and telephone networks were installed in the 1910s. I think that's a failure of government to install the proper infrastructure. Right now we're relying on private companies to build functions that are the state's responsibility to provide. The private sector has done what its can, but we are not spending enough money on broadband.

SC: Representing the cable industry, you might imagine that I disagree. Six years ago, cable was a monopoly. Congress decided to try competition. There has been more money spent on broadband access in this country than anywhere in the world. The cable industry alone has spent $100 billion. Our best states are better than the best countries in Europe. It's not deplorable. It's all going in the right direction.

05:17PM EST - TW: I'm not saying the cable industry did a bad job, I'm saying there needs to be a public role in this. We have to tell the government we want everyone to have broadband.

SC: The internet took off when it was privatized. We don't want broadband to become a public utility. Nobody knew about the internet until it was was privatized. The internet is the greatest deregulation success story of history.

BS: I know a different history. Broadband penetration is falling in the US. It is more expensive and slower here. In Western Europe, its not unusual to have a dozen choices for broadband. In this country we have two.

05:23PM EST - Let's talk about the recent Pearl Jam/AT&T censorship issue. What can we learn from that incident?

TW: I want to try and bring net neutrality to music, which is hard. A lot of it can be understood by thinking about intermediaries, and the problems of large ones. One of the reasons the music world is so complicated right now is because the largest intermediaries (labels, distributores) are changing, and we wonder who the new intermediaries will be. I'm going to suggest that there is a new crop of intermediaries that are counter-productive to the world of music, and these are the large telecom companies. Their interest is not music, but collecting as much money as they can out of each actor in the business. That's where the danger is.

05:29PM EST - JO: The end of the story with AT&T is that they admitted they were wrong. The gateway issue raises one of the broader concerns about the availability of consumer-used broadband. NBC called on the FCC to adopt, as a matter of broadband policy, an obligation imposed on network owners to monitor their traffic, citing piracy as the justifying demon. The idea that broadband companies should restrict their customers' robust use of their service is absolutely the wrong direction to go in.

PG: The music industry has suffered because of the gate-keepers. We don't want to trade one set of them for another. The record industry is so slow to keep up with technology, that quite frankly you have to infringe first and settle later.

05:35PM EST - KT: We can all recognize that iTunes, among others, brought a lot of clarity to a floundering music industry. New interactive webcasting services such as Pandora and have relied on a level playing field. How can we ensure the introduction of such similar music platforms in the future?

SC: Musicians should be backing us on this. The diversity of the internet will be maintained by free competition. Why would we want a one-size fits all? Different consumers want different things, and they should be able to get them. Some people don't want to pay, so they go to free wi-fi. Some people want huge bandwidth; they should be able to get it.

BS: That is absolutely wrong. Let's not do anything that hands the keys to the kingdom to the people who control the wires. If you want a clear example, look at your wireless device. Try to get some music on it. The wireless broadband industry is case-in-point for everything we are against - gatekeepers controlling the content you can access. They can tell you what artists you can download, what labels, what songs.

SC: There are off-setting benefits here for the loss in content availability, and those are price. We in this country use our handheld devices 4x more than Europe, and for a lower price. It's a trade-off. What would you rather have?

05:42PM EST - KT: Can you sum up in one sentence what you would ask of the government on this issue?
BS: "We want the internet to be free of gate-keepers, as it always has been."
SC: "Don't regulate or tax the internet, let it evolve the way it is right now."

TW: The internet should be non-discriminatory, and should treat everything that passes through their networks the same. The internet should not be like commercial radio, where providers can decide what content the whole country gets.

PG: Most of us here create content, and were under the illusion that content is king. There is a need to on a capitalist front to say we must intercept content. We all have to make a living. Let's imagine a world without content. Without music. Will you be here? [gesturing to Jason Oxman and Scott Cleland] I don't think so.

05:42PM EST - KT: How do you deal with the unauthorized distribution of music? Whether legal or not, file-sharing puts a strain on networks.

JO: Of course, commercial piracy is wrong. However, let's not conflate that with the problem of network neutrality. You wouldn't outlaw the autmobile because some people use it to speed. We should not harm broadband as a result of anti-filesharing measures. This goes back to the Grokster case.

PG: I would disagree. The responsibility lies on all of us to monitor these activities. We have to all work together.

TW: I think it's sort of the challenge of our era. The point of a copyright system is to compensate authors and provide an incentive to create. If that's the point, the question is: are our current means the best way of doing that? We've had a ten-year experiment in copyright law in the age of the internet. It's kind of a mixed picture. Copyright law is obviously not very good at stopping everybody from downloading music illegaly. However it has been effective in keeping commercially pirated CDs and DVDs out of our stores, in this country. Certain people, more and more, will never pay for music. How then, do we compensate authors? The conversation should not revolve around killing the internet. It's here to stay. Suing the customers is also not the solution. The conversation should focus honestly on compensating content creators in a fair way.

05:54PM EST - Questions from the audience

Q: Is there a role for the state legislatures to play in net neutrality?
SC: It's a federal question. Of course the states have a law enforcement role for those committing crimes on the internet.

BS: States can make it clear to their federal representative that they don't like what is happening.

The New Deal: major label contracts revisited

Now that the majors are experiencing a dramatic shift in their business models, what do contracts look like? What clauses have been phased out and what is now standard? What are major labels asking from artists and what are they offering in return?

Bryan Calhoun
Owner and Founder, Label Management Systems
Wayne Halper
Attorney, Law Office of Wayne Halper
John P. Kellogg, Esq.
Assistant Chair Music Business/Management, Berklee College of Music
Marcy Rauer Wagman CEO, MAD Dragon UNLTD, Drexel University

Panelists from left to right: BC(moderator), MW, WH, JK

05:05 PM EST - BC: What are some of the issues you see dealing with the industry today?

MW: There are limitations now, such as a cap on songs you'll get paid for. For example, hidden tracks, or tracks that are less than 2 minutes, artists will not get paid for it.

JK: One good thing under digital reproduction is that a full rate has to be paid. Also, the number of albums labels insist on in the contracts have been reduced, which is seen as a success.

MW: Definitions of terms are critical; they are designed to be confusing.

WH: Looking at the bigger picture, there won't be any records labels anymore. I see them more as entertainment companies or entertainment vehicles. The real issue at hand is what do record labels deserve? There needs to be a balance.

05:22 PM EST - MW: One thing that has truly changed is that artists can have a direct connection with their fans. For example, sites such as myspace. To me, instead of having a traditional adversary relationship, maybe it's time for artists and labels to look at each other as partners.

WH: Lets look at the cycle of things when artists got a small percentage. Who is the evil culprit here? Artists and lawyers are seeing the money and no one really cares because the profits are there for everybody. Today, things aren't working anymore with digital changes. We haven't adjusted/reacted to the issues.

05:25 PM EST - BC: What are the labels doing to help exploit revenue streams with the new technology?

WH: If labels aren't doing enough to help those artists with new technology mediums, shame on them.

MW: They're not doing enough to help. The sources are coming from other groups.

BC: If the label is now becoming the manager, can you create an environment where everyone wins?

JK: Every company is going to have their own priorities. It depends on how the revenue is moving, or to how they see the potential of their artists.

05:32 PM EST - BC: Huge corporations have major departments that don't even know each other. Now that they are asking revenue from everything, are these departments working better together?

JK: The labels I have had experience with are now just starting to speak to their in house publisher. It's amazing it had to get to this point for better communication between the two.

WH: There are still a few major and independents are still prepared to start a new company.

MW: There are more bands I have worked with who are walking away from major label deals. Musicians want their own their publishing rights.