September 6, 2008
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Issue Of The Week: Monday, September 24, 2007
The Ever-Evolving Digital Music World
by Andrew Noyes

     The U.S. music industry is in a state of flux. Recording labels, various distribution services, and singers and songwriters are all grappling with what some believe are still the early days of a digital revolution.
     Issues surrounding the preservation, promotion and protection of one of America's most valuable cultural cornerstones will continue to be the topic of debate in Washington and a range of experts expanded on that message at a music policy summit last week. The seventh annual Future of Music Coalition conference was rife with conversation about copyright law, music-licensing, the state of retail, and high-speed Internet policy, with a focus on how technologies can bring musicians and music fans closer together.
     "Music mindshare has never been higher, and its market share has never been lower," said Onehouse CEO Jim Griffin, who moderated a panel that broadly discussed the state of the music business. His firm focuses on helping clients transition from the analog to the digital world.

Making Money In The E-Music Market
     Griffin, who describes himself as an "agent for constructive change in media and technology," said via e-mail that he believes a civilized society "cannot long tolerate purely voluntary payment for creativity, innovation and the arts," comments that reflect the ongoing debate over how musicians and other artists should be compensated for their work.
     The current approach in the United States is "little more than a tip jar" and is destined to "deprive the world of the genius of so many musicians who might otherwise have made a living focusing on their art," he said.
     Patricia Polach, associate general counsel for the American Federation of Musicians, who also participated in the summit, said she was struck by how "certain things remain the same" amid rapid technological and business change. The rise of sound recordings and radio transformed performers' lives and livelihoods in the past, she said. "What's amazing is how hard it always is to focus the debates on the need of the musicians to earn a living."
     "Without musicians, singers and songwriters, there wouldn't be any of the industries that get built on their music," Polach said. It is important for the economy and our culture that performers benefit when other industries derive value from their work, she said.
     Copyright law should have been amended long ago to require compensation to artists for their recorded performances on over-the-air radio, Polach said. The need for change is even greater today because music consumption is moving from purchases to "listens," she said.
     Historically, musicians have not earned performance royalties for terrestrial radio on the basis that analog transmissions do not constitute duplications. But musicians are compensated when their work is played on satellite, cable and Internet radio.
     A July hearing before the House Judiciary Courts, the Internet and Intellectual Property Subcommittee brought the issue to light for the first time in the 110th Congress. The National Association of Broadcasters has vowed to fight what it calls a "performance tax on local radio."

New Stakeholders, New Consumers
     Register of Copyrights Marybeth Peters told the conference that times have changed since she began working in the field. "There are a lot more people who have a stake in copyright -- from telecom companies to the people who manufacture all types of devices," she said. "That makes it more complicated."
     "The consumer is different now, too," she said. "There used to never be talk of consumer interest and the public being served," but now that is a critical component of doing business in the high-tech age.
     Several attendees observed that the audience was mainly interested in hearing about online music promotion. For example, the room for a panel on Internet social-networks was jam-packed, while attendance for a discussion of physical goods was lighter.
     Web pages, social-networking sites, blogs, podcasts and event-publishing services like upcoming.org help musicians get exposure and cultivate a direct relationship with fans, said Alex Curtis, the director of policy and new media for Public Knowledge.
     On multiple occasions, panelists and audience members expressed concern about how performing-rights organizations like SoundExchange collect and distribute money to artists. Small webcasters were particularly vocal about a recent ruling from a panel of copyright judges that imposed higher fees on all parties that stream music online.
     SoundExchange, a royalty collector for digital music, announced Tuesday that 24 small, commercial Web radio services had signed agreements that will allow them to continue operating through 2010.
     A day later, the grassroots group SaveNetRadio issued a statement noting that the deals apply only to SoundExchange members and that thousands of small webcasters do not agree with the terms proposed by the organization.

Working Toward A 'Shared Vision'
     Future of Music Coalition Policy Director Michael Bracy said it is important to facilitate "honest, open dialogue between" stakeholders to work toward a "shared vision of building a functioning music community that places the role of the artist in the center of the equation."
     Many of the "macro issues" that have come before conferees in years past seem to be settled, Bracy said. But that could be because representatives from the Recording Industry Association of America and NAB had scheduling conflicts or chose not to participate in the conference.
     "We have over 100 panelists and work hard to invite folks with different opinions to make their case," Bracy said. "Sometimes they simply don't want to show up, particularly because they know their arguments do not pass muster in front of an audience of engaged and curious artists."
     There are signs that consensus has been achieved on some of the most contentious policy issues facing the community, Bracy said. "While the wounds of this year's webcast royalty fights are very raw, there is general agreement that we need a tiered structure with appropriate rates that are in line with the size and resources of the particular webcaster," he said.
     In the next year, he said he expects the artist and public-interest communities to move beyond the "critique stage" to tackle more nuanced policy. They will ponder the attributes of a "pro-artist" broadband policy, discuss how copyright law should be reformed to account for the digital age, and debate the role of "public interest" in the age of digital media, according to Bracy.
     "We know that the 'pro-consolidation' and 'pro-free market' philosophies that ruled media policies for a decade had a very damaging effect on the music community," Bracy said. "The opportunity is in front of us to articulate a forward-looking, positive, pro-artist media and technology agenda."

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