BW Online | April 22, 2003 | Digital Music: Still Scores Left to Settle

BW MAGAZINE Get Four Free Issues Register Subscribe Customer Service

ONLINE FEATURES Book Reviews BW Video Columnists Interactive Gallery Newsletters Past Covers Philanthropy Podcasts Special Reports BLOGS Auto Beat Bangalore Tigers Blogspotting Brand New Day Byte of the Apple Economics Unbound Eye on Asia Fine On Media Green Biz Hot Property Investing Insights Management IQ NEXT: Innovation NussbaumOnDesign Tech Beat Working Parents TECHNOLOGY J.D. Power Ratings Product Reviews Tech Stats Wildstrom: Tech Maven AUTOS Home Page Auto Reviews Classic Cars Car Care & Safety Hybrids INNOVATION
& DESIGN Home Page Architecture Brand Equity Auto Design Game Room SMALLBIZ Smart Answers Success Stories Today's Tip INVESTING Investing: Europe Annual Reports BW 50 S&P Picks & Pans Stock Screeners Free S&P Stock Report SCOREBOARDS Hot Growth 100 Mutual Funds Info Tech 100 S&P 500 B-SCHOOLS Undergrad Programs MBA Blogs MBA Profiles MBA Rankings Who's Hiring Grads

BW EXTRAS BW Digital BW Mobile BW Online Alerts Dashboard Widgets Podcasts RSS

RSS Feeds

Reprints/ Permissions Conferences Research Services

APRIL 22, 2003

NEWS ANALYSIS
By Jane Black

Digital Music: Still Scores Left to Settle
Songwriters think online services want their work for, well, a song, but an ailing recording industry can't afford to play hardball

STORY TOOLS

Printer-Friendly Version

E-Mail This Story

POLL INSTANT SURVEY >>

PEOPLE SEARCH

Search for business contacts:

PREMIUM SEARCH
Search by job title, geography and build a list of executive contacts

Tech White Papers

Most Recent

Most Popular

Randall Wixen represents some of the biggest names in music -- and he's not shy about defending their copyrights. In 2000, he sent a cease-and-desist letter to Presidential candidate George W. Bush, who had been playing Tom Petty's hit I Won't Back Down at campaign rallies. "Any use made by you or your campaign creates, either intentionally or unintentionally, the impression that you and your campaign have been endorsed by Tom Petty, which is not true," wrote the president of Wixen Polin Music Publishing, which negotiates on behalf of its stable of songwriters. The Bush campaign backed down.

Wixen's tactics aren't any softer when it comes to the burgeoning digital music services, such as the label-backed MusicNet and Pressplay. Wixen is no Luddite. But he fears the services are a ruse by the labels to give artists and publishers a smaller piece of the profits: "I'm all in favor of new delivery systems," he begins, "but it shouldn't change the relationship so that we get less and the labels get more."

SONGS FOR RENT. Without the artists that Wixen and other powerful independent music publishers represent -- about 10% to 15% of songwriters, including such big names as Steve Miller, Bob Dylan, Neil Young, and The Doors -- digital music services worry they'll never be able to compete with the underground peer-to-peer services (P2P), which offer unlimited lists of free songs dating back to the dawn of recorded music. Moreover, the gaps in the catalog are particularly important to digital music services' target audience: Well-heeled music fans between the ages of 24 and 55 who want the value-added features that illegal services such as KaZaA don't offer (see BW Online, 4/22/03, "Web Music Gets Its Act Together").

Traditionally, publishers are required by law to grant so-called mechanical licenses to labels and others who want to sell music. It works like this: Songwriters are paid 8 cents for each track that's physically produced -- if the writer has 12 songs on a CD and 1 million disks are produced, the songwriter gets paid $960,000. The new digital services, which charge subscribers $10 a month, allow subscribers basically to "rent" songs. A subscriber can download unlimited tracks to a PC hard drive, but as soon as the subscriber quits the service, the music disappears. Such restricted downloads, also known as "tethered downloads," are the foundation of subscription services because they prevent people from making an infinite number of perfect digital copies on CDs -- or uploading them to the Internet, where they could be shared on illegal P2P services.

Here's the rub: Tethered downloads don't fit the industry's traditional definition of an 8-cents-a-strike copy. And some publishers are asking: If the subscription company earns $10 per month by offering a collection of our songs, why should we get paid only once? Until independent publishers are assured that they'll get the same terms in the digital world as they get otherwise, they're not prepared to budge.

WHO GETS WHAT? The remaining music publishers are willing to negotiate. About 85% of songwriters, represented by the Harry Fox Agency, have agreed that the compulsory "mechanical license" covers tethered downloads, too. In an October, 2001, agreement with the Recording Industry Association of America (RIAA), publishers accepted a $1 million payment up-front in exchange for a promise that the services would account and pay for use of the publishers' work when the Copyright Office ultimately sets a rate. (That won't happen until the market is deemed more mature.) All the music services need to do is file the appropriate legal paper work and the right is granted.

That's easier said than done, respond Pressplay and MusicNet. They say Harry Fox isn't equipped to handle the volume or detailed nature of their requests. On average, executives say, Harry Fox is able to approve only about 50% of requests since, in many cases, it doesn't know who owns the publishing rights to a particular song.

The task is even more onerous with popular hip-hop songs, which often include samples from a variety of different tunes. For example, Christina Aguilera's hit Dirty from last fall featured popular rapper Redman. Aguilera's publisher granted digital rights while Redman's didn't.

Continued on next page>> | 1 | 2