[Senate Hearing 109-1021]
[From the U.S. Government Publishing Office]
S. Hrg. 109-1021
MUSIC LICENSING REFORM
=======================================================================
HEARING
before the
SUBCOMMITTEE ON INTELLECTUAL PROPERTY
of the
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
JULY 12, 2005
__________
Serial No. J-109-30
__________
Printed for the use of the Committee on the Judiciary
----------
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Washington, DC 20402-0001
COMMITTEE ON THE JUDICIARY
ARLEN SPECTER, Pennsylvania, Chairman
ORRIN G. HATCH, Utah PATRICK J. LEAHY, Vermont
CHARLES E. GRASSLEY, Iowa EDWARD M. KENNEDY, Massachusetts
JON KYL, Arizona JOSEPH R. BIDEN, Jr., Delaware
MIKE DeWINE, Ohio HERBERT KOHL, Wisconsin
JEFF SESSIONS, Alabama DIANNE FEINSTEIN, California
LINDSEY O. GRAHAM, South Carolina RUSSELL D. FEINGOLD, Wisconsin
JOHN CORNYN, Texas CHARLES E. SCHUMER, New York
SAM BROWNBACK, Kansas RICHARD J. DURBIN, Illinois
TOM COBURN, Oklahoma
David Brog, Staff Director
Michael O'Neill, Chief Counsel
Bruce A. Cohen, Democratic Chief Counsel and Staff Director
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Subcommittee on Intellectual Property
ORRIN G. HATCH, Utah, Chairman
JON KYL, Arizona PATRICK J. LEAHY, Vermont
MIKE DeWINE, Ohio EDWARD M. KENNEDY, Massachusetts
LINDSEY O. GRAHAM, South Carolina JOSEPH R. BIDEN, Jr., Delaware
JOHN CORNYN, Texas DIANNE FEINSTEIN, California
SAM BROWNBACK, Kansas HERBERT KOHL, Wisconsin
TOM COBURN, Oklahoma RICHARD J. DURBIN, Illinois
Bruce Artim, Majority Chief Counsel
Bruce A. Cohen, Democratic Chief Counsel
C O N T E N T S
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STATEMENTS OF COMMITTEE MEMBERS
Page
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah...... 1
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont. 3
prepared statement........................................... 89
WITNESSES
Barros, Glen, President and Chief Executive Officer, Concord
Music Group, Beverly Hills, California......................... 16
Bryant, Del R., President and Chief Executive Officer, Broadcast
Music, Inc., New York, New York................................ 18
Carnes, Rick, President, Songwriters' Guild of America,
Nashville, Tennessee........................................... 13
Cuebas, Ismael, Director of Merchandising Operations, Trans World
Entertainment Corporation, Albany New York, on behalf of the
National Association of Recording Merchandisers................ 14
Glaser, Rob, Chairman and Chief Executive Officer, RealNetworks,
Inc., Seattle, Washington...................................... 11
Israelite, David, President and Chief Executive Officer, National
Music Publishers' Association, Washington, D.C................. 19
Peters, Marybeth, Register of Copyrights, Library of Congress,
U.S. Copyright Office, Washington, D.C......................... 5
SUBMISSIONS FOR THE RECORD
American Society of Composers, Authors, and Publishers, New York,
New York, statement............................................ 31
Barros, Glen, President and Chief Executive Officer, Concord
Music Group, Beverly Hills, California, statement.............. 41
Bryant, Del R., President and Chief Executive Officer, Broadcast
Music, Inc., New York, New York, statement..................... 49
Carnes, Rick, President, Songwriters' Guild of America,
Nashville, Tennessee, statement................................ 58
Cuebas, Ismael, Director of Merchandising Operations, Trans World
Entertainment Corporation, Albany New York, on behalf of the
National Association of Recording Merchandisers, statement..... 63
Glaser, Rob, Chairman and Chief Executive Officer, RealNetworks,
Inc., Seattle, Washington, statement........................... 75
Local Radio Internet Coalition, Washington, D.C., joint statement 90
Peters, Marybeth, Register of Copyrights, Library of Congress,
U.S. Copyright Office, Washington, D.C., statement............. 106
Robinson, Irwin Z., Chairman and Chief Executive Officer, Famous
Music, statement............................................... 145
SESAC, Inc., Nashville, Tennessee, statement..................... 149
MUSIC LICENSING REFORM
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TUESDAY, JULY 12, 2005
United States Senate,
Subcommittee on Intellectual Property,
Committee on the Judiciary,
Washington, D.C.
The Subcommittee met, pursuant to notice, at 2:38 p.m., in
room SD-226, Dirksen Senate Office Building, Hon. Orrin G.
Hatch, Chairman of the Subcommittee, presiding.
Present: Senators Hatch and Leahy.
OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. SENATOR FROM
THE STATE OF UTAH
Chairman Hatch. We will begin this hearing. Senator Leahy
is here. He is on the phone, but he said it is fine if I move
on ahead.
Good afternoon. I welcome you all to today's hearing on
music licensing reform. This is the first of what will likely
be a series of hearings on whether changes to current copyright
law are needed to encourage rapid deployment of legal online
music services, while ensuring the equitable compensation of
creators and copyright holders.
Now that some of the fundamental liability issues involved
in the Grokster case have been resolved, our focus turns in
part to a variety of difficulties that hinder the ability of
legal online services to compete effectively against illegal
download and file-sharing services. At this hearing, I hope we
can begin to identify some of the perceived problems faced by a
number of companies and businesses in the area of music
licensing. Although the discussion will center principally on
Section 115 and the mechanical compulsory license, I hope
today's hearing will also help us gain a better understanding
of some of the emerging business models and any impediments to
their development.
Section 115 of the Copyright Act governs the compulsory
license that allows a licensee to make and distribute a
mechanical reproduction of a non-dramatic musical work without
the consent of the copyright owner. The compulsory license
appears to have been enacted in response to concerns about the
potential for a monopoly in the market for player piano rolls.
In spite of various amendments and occasional suggestions
that it be repealed, Section 115 and the mechanical compulsory
license have survived enormous changes in the music industry
and are still with us almost a century later. And despite
attempts by Congress and the Copyright Office to alter the
terms and application of the license in response to new
business models, it is reported that use of the compulsory
license has steadily declined to the point that it may be the
exception rather than the rule.
Currently, there appears to be near consensus that Section
115 is outdated and, particularly in the online world, does not
adequately serve the purposes for which it was intended. Some
argue that changing the marketplace for music products and the
evolution of online music services has made Section 115
obsolete.
In sum, we appear to be at a point where there is
widespread agreement that the current compulsory license simply
does not work. However, from my perspective, there appears to
be little or no agreement among experts, academics and industry
participants regarding what can or ought to be done about these
problems.
Some of the difficulties identified involve the application
of a system in which two sets of distinct mechanisms,
organizations and practices have evolved for the licensing of
different rights in the same musical work--one for the public
performance rights and the other for the reproduction and
distribution rights.
Especially when dealing with new types of services and uses
that do not fit easily into familiar categories and concepts,
it is often unclear precisely which rights are implicated.
Understandably, some argue that many new uses, especially those
involving digital transmission and storage, implicate both sets
of rights and thus may require separate licensing by two
different entities for the same song on behalf of the same
copyright owner.
It is claimed by some that this scheme of licensing imposes
inefficiencies and burdens that unreasonably delay or prevent
deployment of some new services and limit the potential success
of others. Today, I expect that we will hear different opinions
about both the scope and seriousness of the difficulties caused
by the uncertainty as to which rights are implicated by new
services and online activities, as well as what, if any,
changes to copyright law are necessary to address this set of
problems.
Like the Register of Copyrights and others, I would like to
see a solution that focuses on two goals that are inherent in
copyright policy: ensuring that creators are compensated fairly
and facilitating consumer access to good music.
A second set of concerns involving the burdens and
inefficiency of the specific terms and operation of the
compulsory license itself also appears to figure prominently in
the debate on music licensing reform. Some argue the license is
sufficiently burdensome to severely limit its usefulness both
in the physical and virtual marketplace. Again, I anticipate
that there will be some disagreement as to the nature and scope
of the problems posed by some of the specific provisions of
Section 115, as well as what should be done to address these
provisions.
A wide variety of remedies to problems identified by the
stakeholders and others have been proposed to date. They range
from incremental reforms to wholesale repeal of Section 115. In
addition to helping us identify and define these problems, I
hope that our witnesses today will help the Subcommittee
understand the range of possible solutions that have been
proposed and the implications, both positive and negative, of
such solutions for various segments of the music industry.
On our first panel, we are pleased to have the U.S.
Register of Copyrights, Marybeth Peters. We are always happy to
have you testify and we appreciate your expertise and the work
that you do and the help that you give this Committee from time
to time, you and your dedicated staff.
Our second panel includes a diverse group of industry
participants. First, we will hear from one of the pioneers and
leading voices in the legal distribution of content over the
Internet, Rob Glaser, the founder and CEO of RealNetworks.
After that, we will hear from Rick Carnes, who is a very
talented working songwriter down in Nashville, as well as
President of the Songwriters' Guild of America, and Glen
Barros, President of the Concord Music Group, which is an
independent record label and music publisher.
After that, Ismael Cuebas, the Director of Merchandising
Operations at Trans World Entertainment Corporation, who is
testifying on behalf of the National Association of Recording
Merchandisers, will give us his views on the licensing
difficulties faced by music retailers.
Then we will hear from Del Bryant, the President and CEO of
BMI, Inc., one of the largest and best-known performing rights
organizations in the business which represents more than
300,000 songwriters, composers and music publishers in all
genres of music. I understand that Del was born into the music
business and came up through the ranks at BMI. His views are
informed by more than three decades at BMI, and we are lucky to
have the benefit of his expertise and perspective. I would also
like to thank Del for being willing to testify here on short
notice, despite scheduling difficulties for him and his
organization.
Last not but least, we welcome David Israelite, who is the
President and CEO of the National Music Publishers'
Association, a man who is well known to this Committee and well
respected by all of us.
First, we will turn to Senator Leahy for his opening
remarks. I appreciate the privilege of working with Senator
Leahy on these issues. We work together well on these issues,
and hopefully we can find some ways of solving some of these
problems. But, today, we want to learn all we can about them
and see where we go from there.
Senator Leahy.
STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE
STATE OF VERMONT
Senator Leahy. Well, thank you, Mr. Chairman, and I will be
brief because we want to get on to the witnesses. As some know,
we have had another matter that has been somewhat distracting
today and may take me out of here for a while.
First off, to state the obvious, digital music is here. I
was leaving on a trip to Europe back a few years ago--actually,
Europe and Africa. My daughter explained to me that I probably
couldn't bring the old victrola--that went right over
everybody's head; there is nobody here to remember what a
victrola is--on the plane, and that it was time now to download
some music that you could listen to digitally. I loved the
idea. I ended up with several days' worth of music, ranging
from Puccini to the Grateful Dead and just about everything
else in between.
Chairman Hatch. There is everything else in between.
[Laughter.]
Senator Leahy. You don't like Puccini?
Chairman Hatch. I like them all. You got me to like the
Grateful Dead.
Senator Leahy. You never got to go to a concert with me.
Chairman Hatch. You never invited me.
[Laughter.]
Senator Leahy. Too late now.
[Laughter.]
Senator Leahy. I do recall one time being on stage at one
of the Grateful Dead concerts. Sting was warming up the crowd.
The phone backstage rang and it was the White House and they
were looking for me. I got on the phone and the Secretary of
State started talking and he said, Pat, could you turn that
radio down? Of course, they had no idea where they reached me.
I said, well, that is Sting. Dead silence. I said Sting, the
rock star. Still dead silence.
I said I am on stage--and by now the sweat is pouring down
my face--
Chairman Hatch. Was that the Clinton administration?
[Laughter.]
Senator Leahy. I am not going to tell you.
I am on stage at a Grateful Dead concert and Sting is
warming up the crowd. There was a sigh and he said, well, that
is fine, but do you have time to speak with me and the
President?
[Laughter.]
Senator Leahy. It is exciting for companies that are seeing
business potential in new platforms and formats. I mention my
daughter Alicia because we looked at a number of the different
ways of downloading and I thought if I was going to be doing
this, I would like to find out more about it. It is exciting,
the variety that is out there.
What I find exciting is musicians who see greater avenues
for their artistic expression, not only people like my friends
in U2, but people that might have a niche area that would not
be heard of otherwise, but now have a way of reaching not only
nationwide, but worldwide distribution. What is most exciting
is for consumers. Those who have very eclectic tastes like I do
can pick up the music in various different ways and can listen
to it anywhere.
We are going to hear today about some outdated laws that
were never intended to address digital music. As legislators,
you try to pass laws that stand the test of time. For the most
part, our intellectual property laws have accomplished that
goal. In fact, Section 115 of the Copyright Act at the center
of today's discussion, as Senator Hatch already said, had its
roots in piano rolls at the turn of the last century. So we
have to ask if these laws for piano rolls are ready to go
digital today.
There are problems with the current licensing system. I
would like to thank Marybeth Peters for her hard work and her
patience. Over the years, she has shown both for this Committee
as we try to work through these problems.
Everybody agrees the present system is not working as
efficiently as it might. Potential licensees aren't sure which
licensing rights apply to certain activities. They may have
difficulty even tracking down the appropriate person from whom
to obtain those rights. This means that building a
comprehensive online catalog of music available to consumers
can sometimes be slow or ultimately impossible.
Just as it may be the case that outdated laws have
contributed to this problem, it may well be the case that the
market offers a solution, either by forcing the parties to
adjust to the new environment or by encouraging the
stakeholders to back consensus legislation. It is in the
interest of all of us to reach an agreement, and we don't want
to pass a law that is going to make it more difficult for you.
There is nobody in this room that can tell me what will be the
furthest advance in digital devices five years from now. None
of us can do that.
As Ms. Peters has noted, making legal copies of musical
works available online is essential to combatting online
piracy. It is a simple thing for me. I want technology not to
be hampered and technology to expand however it might. I want
as large markets available as possible and let people compete
at the market. But, thirdly, those who produce the music in
whatever form--the writers, the performers, whoever else--have
a right to be compensated. It should not be stolen.
Now, if we can protect all of that, the marketplace can do
a great deal. So let us protect the interests of the
songwriters and serve the interests of consumers. I think it is
possible to do both.
So, Mr. Chairman, I thank you for having this hearing. I
think it is well worthwhile.
[The prepared statement of Senator Leahy appears as a
submission for the record.]
Chairman Hatch. Well, thank you, Senator. We appreciate it.
We will turn to Ms. Marybeth Peters, who is certainly an
expert in this area, and we look forward to taking your
testimony.
STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, LIBRARY
OF CONGRESS, U.S. COPYRIGHT OFFICE, WASHINGTON, D.C.
Ms. Peters. Mr. Chairman, Senator Leahy, just two weeks ago
in MGM v. Grokster, the Supreme Court gave a boost to copyright
owners in their battle against massive peer-to-peer
infringement on the Internet. Nobody has suffered peer-to-peer
infringement more than copyright owners of music, and the
Grokster decision represents an opportunity for music
publishers, the record industry and authorized online music
services to take action to stop illegal services that assist
and encourage infringement, and to offer attractive
alternatives to consumers who have been tempted by illegal
services in the past.
But as much as we can rejoice in the Grokster decision, it
is too early to declare victory in the battle against the
culture of infringement that has led so many to demonstrate a
lack of respect for copyright law and for the authors who are
supposed to benefit from that law.
While the Grokster decision may make it more difficult for
peer-to-peer services to encourage large-scale infringement, it
does not necessarily mean that all of those users of peer-to-
peer services will flock back to legitimate services.
Mr. Chairman, you and Senator Leahy have long made it clear
to the music industry that it cannot simply rely on strong
copyright laws to stop online infringement. The music industry
has to offer consumers what they want, and what they want is
easy and affordable access to all the music they desire,
preferably through one-stop shopping from a single online music
service such as Rhapsody, iTunes and other legitimate services.
Now, when there is reason to hope that the illegal services
may be stopped or at least slowed down, and before the next
generation of infringement-enabling services captures the
attention of the Grokster generation, now is the time to enable
legitimate services to meet that demand.
In order to give consumers one-stop shopping, digital music
services need something similar to one-stop shopping. Just as
the consumer wants to get all of his or her music in one place,
a digital music service wants and needs an efficient way to
clear all rights to all of the music it wishes to offer.
But, sadly, a digital music service today must seek a
separate license for each musical work it wishes to offer for
downloading. And for each musical work, it is faced with the
demands for payment from two different middlemen who represent
the same copyright owner and the same songwriters.
Much of the blame for our unworkable system can be laid at
the feet of the antiquated Section 115 compulsory license. But
much of the blame is due to the division of the world of music
into two separate realms--one for public performance and one
for reproduction and distribution. In the age of the Internet,
that division makes no sense, when so many digital
transmissions of music can be said to involve both public
performance and reproduction.
These two sets of rights are licensed in very different
ways. Songwriters and music publishers license music
performance through three performing rights organizations, or
PROs, and virtually every song anyone could wish to license is
in the repertoire in one of these three PROs, which offer
blanket licenses for public performances of all the songs in
their repertoires.
In contrast, a record company or digital music service that
wishes to license to reproduce and distribute phonorecords of a
musical work must obtain a separate license for each musical
work it wishes to license, must track down the music publisher
for each song it wishes to license. And while Harry Fox
represents a large number of music publishers, he can license
only a fraction of the works that are, in fact, licensed by the
PROs.
Unlike the public performance right, reproduction and
distribution rights are subject to Section 115's compulsory
license. But as a practical matter, that license simply sets a
ceiling on the rates that can be charged for the making and
distribution of phonorecords and for licenses that are actually
obtained through the music publisher or the Harry Fox Agency.
The second major hindrance to music licensing for digital
transmission is that almost any kind of digital transmission of
music, when it occurs today, the PROs will assert a right to
license and receive royalties for the performance right and
Harry Fox and the music publishers will assert a right to
license and receive royalties for reproduction and
distribution, even though in many cases the justification for
requiring both licenses is tenuous.
But it seems inefficient and unfair to require a licensee
to seek out two separate licenses from two separate sources in
order to compensate the same copyright owner and the same
songwriters for the right to engage in a single transmission of
a single work.
In my written testimony, I outline some of the possible
solutions to these problems. One solution is to convert the
Section 115 license to a blanket license along the lines of
Section 114 for digital public performances of sound
recordings. Such a reformed statutory license ideally would
include all reproduction, distribution and performance rights
necessary for digital transmissions. Another solution would be
to repeal Section 115 and establish a system of collective
licensing that builds on the strengths of the existing PROs. My
written testimony elaborates on these and other possible
solutions.
I and my staff stand ready to work with you and the
affected industries to find effective and efficient solutions
to improve the licensing of musical works for the benefit of
our songwriters and composers, as well as consumers.
Thank you.
[The prepared statement of Ms. Peters appears as a
submission for the record.]
Chairman Hatch. Thank you. Now, let me just ask one simple
question. What types of music licensing systems are used in
other countries of the world? How do they work and, in your
opinion, how efficient are they?
Ms. Peters. I think that with respect to performing rights,
our performing rights societies are as good as any in the
world. One of the differences is that, of course, they are
limited to performance rights, and in a number of countries of
the world a single PRO does, in fact, license both the public
performance right and the reproduction and distribution right.
That is very prevalent in Europe and in Eastern Europe.
While you get the one-stop shopping for the rights, there
are some issues with the fact that there are many societies and
their reporting rights are different. So, actually, I am not
sure one is better than the other. But at least with regard to
obtaining the rights, there is one-stop shopping in other
countries.
Chairman Hatch. So do collective licensing systems in other
countries tend to provide for blanket licensing of all musical
works on a percentage royalty?
Ms. Peters. That is a prevalent model.
Chairman Hatch. Well, what are some of the tradeoffs
involved in this type of an approach?
Ms. Peters. We have heard in the Copyright Office that with
respect to digital transmissions many people who participate in
the process would prefer a percentage royalty rather than a
penny rate. I don't think there is anything inherent in our
existing license to restrict that, but we have never had a
percentage rate.
Certainly, we know today that with respect to the
mechanical reproduction right, people do not use the compulsory
license and it is impossible to clear the bulk of the rights in
the vast number of works that music services want. So in our
case, there is an inability to clear the rights. At least with
respect to some of the foreign societies, you can get the
right. There are, as I said, some other efficiency issues with
those societies.
Chairman Hatch. Someone recently described music licensing
negotiations as being similar to blind men playing poker. Not
only do the players not see everyone else's cards, they don't
even know what cards are in their own hand. They don't see
their cards and they don't know what is in their own hand, and
as a result each of them keeps upping the ante hoping that
others will fold. Perhaps this is also a question for the
second panel, but is this something where Congress has
sufficient sight to referee the game?
Ms. Peters. If you believe that something should be done
right now and that the situation needs to be improved right
now, I originally had suggested a different model that actually
would take a longer time to put into place. You actually could
use the Section 114 compulsory license as a model, which
provides a blanket license for the right to use all sound
recordings. You could put that model in place, and if you
enacted it this year, almost overnight you could, in fact,
enable the licensing of all musical compositions that have been
distributed to the public in the form of phonorecords.
Chairman Hatch. If a blanket statutory license system were
adopted, how do you think the online marketplace would change
from what we currently see today?
Ms. Peters. Well, I think the second panel will tell you,
but I think that to the extent that they are unable to license
certain musical compositions and either they use them without
permission from the music publisher or they don't use them at
all, I think you create a much more secure environment for
those businessmen and I think you create the availability of a
much larger repertoire that can, in fact, compete much more
effectively with the illegitimate services.
Chairman Hatch. Thank you.
Senator Leahy.
Senator Leahy. Thank you.
Ms. Peters, if I understand both from your testimony and
what you have said before, it is often unclear which licensing
rights apply to a particular technology. I am wondering, are
there lines that can be drawn? When is a download a performance
distribution, some sort of hybrid? What about the different
varieties of streaming? Can you make those distinctions clearer
or do we need legislation to do that?
Ms. Peters. We are struggling with the issue of limited
downloads and on-demand streams at the moment. I would say that
for a vast number of the services that are made available,
whether it is on-demand streaming or limited downloads or a
different combination, there is, in fact, a public performance
right that is implicated and there are reproduction and
distribution rights that are implicated. So for the bulk of the
online services, whether or not there should be compensation is
a separate question, but the rights are, in fact, implicated.
Senator Leahy. You and a whole lot of others have told me
that we have got to make improvements to the way music is
currently licensed if we are going to fight illegal
downloading. Of course, there are hundreds of millions of
dollars at stake here, but we can't seem to get consensus
legislation.
Why can't the parties get together, when there is so much
at stake? We all know that we are going to have online music.
In effect, you open a store in everybody's home all over the
world, and if you are going to sell music, you want to have
that store. Why can't we get some kind of consensus agreement?
I say that as one who would sing the Alleluia Chorus if we did
because it would make our job a lot easier up here.
Ms. Peters. There are some areas where there is some
agreement. It is not broad enough to craft a complete solution,
so actually what I am going to say to you and to Senator Hatch
is you need to take some leadership to try to get it
accomplished.
I think that when we held negotiations with most of the
parties last summer, there was agreement on a blanket licensing
approach. Maybe that was as far as there was total agreement.
There are huge issues with regard to what the rate would be,
how the rate would be set, who would oversee the rate.
I actually think that if the parties were told that we need
to do it and we need to do it now and it has to be broad enough
so that it doesn't only answer the issues of today which seem
to focus on subscription services, but I think would be much
broader in a year or two, I actually would be hopeful that it
could be accomplished this year. Nobody has held people's feet
to the fire and said we are going to change this law; it
doesn't work. I would like to assist in trying to get that
done.
Senator Leahy. What do you do to reach the next point? You
might have comparable services, but entirely different
technologies. Mr. Glaser's written testimony, if I read it
correctly, expresses concern that satellite radio is able to
offer services RealNetworks cannot, such as the capacity to
record content and play it back later on. Is this appropriate?
How do you figure out how to treat different technologies that
are offering similar products?
Ms. Peters. Mr. Glaser has a point. He says that the
Internet now is actually competing with radio, cable,
satellite, and that they should be looked at similarly. I think
each one seems to have its own niche and have its own rules
that grew up around it. Certainly, cable has a statutory
license that is different than the satellite compulsory
license, and now we are talking about a music Internet license.
I am not sure at this point in time that you really could
from a policy perspective put it all together so that you were
comfortable that the policies went across the board. But I do
think that with respect to Internet music, you could start
there and maybe when some agreement was reached with that, you
could look at other models and see if, in fact, maybe there was
consensus on how to get them closer together.
Certainly, Mr. Glaser and others are correct in saying that
they pay royalties for webcasting and that broadcasters are not
going to pay royalties for digital broadcasting, and they say
that is not fair.
Senator Leahy. If I might, Mr. Chairman, just one more
question.
Chairman Hatch. Sure.
Senator Leahy. You offer two approaches to legislative
reform of Section 115. One is to take 115 and change it
something along the lines of Section 114, the blanket license.
The second approach--and that was in the Copyright Office's
draft legislation--would replace Section 115 with a system of
collective licensing. Many refer to it as the ASCAP-BMI system.
But you state that, in principle, you support just a simple
repeal of Section 115. What if we just simply repealed it? What
is going to happen in terms of cost of online services and
availability?
Ms. Peters. In my idealistic view, we basically oppose
compulsory licenses. We believe in exclusive rights and in
people controlling those exclusive rights. So I would, in
principle, always support eliminating a compulsory license, and
I would still suggest doing that, though you may have to put it
off if you want to solve the problem very quickly.
The problem with eliminating it right now is we have a
dysfunctional way of licensing the reproduction and
distribution of the mechanical right, and I don't know how you
fix that overnight if you just eliminate it. So although I
favor it in principle, if our goal is to have efficient
licensing of the broadest musical repertoire possible for
online services, I think we have to go another route in the
interim.
Senator Leahy. Thank you, Mr. Chairman.
Chairman Hatch. Thank you, Senator.
Well, thank you, Ms. Peters.
Ms. Peters. Thank you.
Chairman Hatch. We appreciate having your advice. We hope
you will continue to think about these matters and let us have
the best advice you can give us.
Ms. Peters. Thank you very much.
Chairman Hatch. We will move to panel two, with Rob Glaser.
We are honored to have you here, Rob. We appreciate all that
you have been able to do in your business.
Rick Carnes is an old friend who is a great songwriter, the
President of the Songwriters' Guild of America. We will turn to
you next, Rick, afterwards. And then we have Ish Cuebas,
Director of Merchandising Operations for Trans World
Entertainment and Co-Chairman of the Media On Demand Task Force
Corporate Circle, National Association of Recording
Merchandisers, from Albany, and then Glen Barros, President and
CEO of Concord Music Group, from Beverly Hills, California; Del
Bryant, President and CEO of BMI, in New York; and David
Israelite, who is President and CEO of the National Music
Publishers' Association right here in Washington, D.C.
So we will start with you, Mr. Glaser. We welcome you back
to the Committee. You are no stranger to this Committee and we
appreciate you taking the time and putting forth the effort to
be here with us. We look forward to what you have to say.
STATEMENT OF ROB GLASER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER,
REALNETWORKS, INC., SEATTLE, WASHINGTON
Mr. Glaser. Well, thank you, Mr. Chairman. Senator Leahy,
thank you as well. It is a privilege to testify here today on
behalf of RealNetworks and the Digital Media Association, which
represents all of the leading companies in our industry.
Rhapsody, our award-winning music subscription service,
enables consumers to play over a million songs on demand and to
download the music to their PC or portable device for unlimited
listening. Today, we have over 1 million music subscribers, and
in each case we pay a piece of our revenue to rights-holders,
both the performers and composers.
All along, our biggest competitor has not been another
legitimate service, but piracy. Frankly, outdated and broken
laws have made it much harder than it should have been to build
compelling legitimate services such as Rhapsody. In the
process, the global recorded music industry shrank from about
$40 billion to about $30 billion in annual revenue.
Today, I urge the Subcommittee to modernize archaic music
licensing laws and stabilize the foundation for lawful online
services. Updating our laws will enable the industry to channel
resources into building great legal music services that can win
consumers away from the pirate networks.
Specifically, I urge the Congress to take the following
four steps: first, modernize Section 115 to provide a one-stop-
shop blanket license for mechanical rights; second, clarify
that no mechanical license is necessary for streaming services,
including the incidental and server copies required to deliver
a performance; third, end the statutory bias that provides
satellite and cable radio providers with a more favorable
royalty standard and more flexible technology requirements than
Internet radio providers like us; and, fourth, enable us to
innovate with compelling radio features so our royalty-paying
radio creates more paying customers and generates more
royalties for artists. These are our simple steps, but let me
take a few minutes to elaborate.
First, the blanket license. As recognized by the Copyright
Office, and I believe everyone sitting here today, the song-by-
song, pencil-and-paper compulsory mechanical licensing process
that dates back to 1909 in some cases just doesn't work and
must be updated to help Rhapsody and other Internet services
compete more effectively against piracy.
While we have spent millions of dollars setting up our
licensing systems, we simply don't have the resources to
procure the millions of individual song licenses the current
system requires. Meanwhile, illegal services like Grokster give
away all the music for free, don't pay artists anything and
have millions of songs.
A recent article stated that illegal P2P networks have up
to 25 million unique song files. We have about 1 million.
Online services, music publishers, songwriters, recording
artists, recording companies and retailers all support a single
statutory blanket license that provides online music services,
all necessary publishing rights, without legal confusion or
administrative delay. There are solvable disagreements about
how broad the scope of the blanket license should be and
whether the royalty rates should be set by Congress or by
industry negotiation. We strongly favor negotiated royalties,
with arbitration as a last resort.
Second, we face the significant uncertainty of not knowing
when online music triggers the performance right, when it
triggers the mechanical reproduction right, or when it triggers
both. We agree with the Copyright Office that a stream is a
performance that should only require a public performance
license and a song that is downloaded for on-demand access
should only require a mechanical license.
Like in the physical world, we don't believe there is any
case in which both a mechanical and a performance royalty
should be paid for the same digital distribution. To be clear,
we absolutely want to pay creators for using their music, but
they should be paid fairly and fully, and only once. A double-
dip royalty simply isn't fair.
Third, we ask the Subcommittee to address the basic
unfairness caused by application of more favorable royalty
ratings to satellite and cable providers who compete directly
with online companies such as RealNetworks. The result is that
Internet services are subject to sound recording performance
rates that are 50 percent higher than our competitors in
satellite and cable radio.
The Copyright Office has said on several occasions that
competitive services such as satellite and cable television
should be governed by equivalent royalty standards and royalty
rates. Today, we ask the Subcommittee to pick one standard for
all digital radio competitors and let the market, rather than
Congress, determine the winners in the business.
Fourth and finally, to re-ignite Internet radio innovation
and promote renewed growth in sound recording performance
royalties, RealNetworks and DiMA, joined today by the Recording
Artists Coalition, urge a broader, clarified and objective
definition of non-interactive services.
Today, it is often difficult to ascertain whether an online
radio service is a, quote, ``non-interactive service'' and
therefore eligible for the statutory sound recording
performance rights or a, quote, ``interactive service'' that is
ineligible for the statutory license. We would much rather
innovate than litigate, and there have already been several
lawsuits on this topic. Consumer-influenced radio specifically
should be deemed non-interactive as long as the songs are not
played on demand and the radio station complies with the
existing rules governing the frequency with which a radio
station can play a given artist or album.
In closing, let me emphasize the current system is broken,
but you can fix it. Give us a chance to compete fairly and both
consumers and content owners will benefit from the
technological innovations we will unleash.
Thank you very much.
[The prepared statement of Mr. Glaser appears as a
submission for the record.]
Chairman Hatch. Well, thank you, Mr. Glaser.
Mr. Carnes, we will turn to you.
STATEMENT OF RICK CARNES, PRESIDENT, SONGWRITERS' GUILD OF
AMERICA, NASHVILLE, TENNESSEE
Mr. Carnes. Chairman Hatch, Senator Leahy and members of
the Subcommittee, thank you for allowing the Songwriters' Guild
of America the opportunity to testify today on proposals for
reform of the music licensing system.
My name is Rick Carnes and I am President of the SGA, the
Nation's oldest and largest organization run exclusively by and
for songwriters. I have been a professional songwriter for 27
years. It is a job that pays practically nothing, has no
benefits, no health insurance, no pension and no job security
at all. In a way, it is a crazy way to make a living, but I
love it anyway because, you see, songwriters don't write songs
just to make money. We make money just so we can keep writing
songs.
In the last decade, over half of America's professional
songwriters have been forced to abandon their careers.
Songwriters are not in a recess; we are in a deep, deep
depression. Between deregulation of radio, corporate mergers
throughout the music industry and rampant Internet piracy, we
are being wiped out. So how can the reform of Section 115
improve the lot of songwriters?
To start with, please give us a raise. For 69 years--
Chairman Hatch. Marybeth, you had better pay attention to
this.
[Laughter.]
Mr. Carnes. For 69 years, from 1909 to 1978, royalty rates
were fixed at two cents. From 1978 on, we have only gotten cost
of living increases on our 1909-level wages. So today's
songwriters are literally being paid piano roll rates for
digital downloads.
The compulsory license isn't even a minimum wage for us; it
is a maximum wage. At the eight-and-a-half-cent penny rate,
that means that the most I can make on a million-selling album
is $85,000. I have to split that with my music publisher, so I
get $42,500. Then I split that with my co-writer, the recording
artist, and that leaves me only $21,250.
And then there is that catch-22, the controlled
compositions clause. This is a clause placed in every new
recording artist's contract that basically forces the artist to
have to write or co-write all the songs they record so the
record labels can get away with paying a three-quarters royalty
rate. That cut rate leaves me with less than $16,000 for a
million sales. For a platinum album, the very pinnacle of
success in the music business, all I get is $16,000, while the
middlemen make millions. Register of Copyrights Marybeth Peters
recently stated that in determining public policy and
legislative change, it is the author, not the middleman, whose
interests should be protected.
Section 115 needs to be streamlined to make music licensing
much easier for all, especially the music subscription services
that have a legitimate complaint that they don't know who to
pay, nor how much. But if the subscription services insist on
making 50 percent of the revenues and the record labels demand
50 percent of the revenues for their master recordings, then
there is nothing left on the table for the songwriters. And in
these negotiations so far, they have been demanding up to 95
percent of the money. There is nothing left for the
songwriters.
A form that makes the licensing process fast and efficient
would be a good thing. But if it starves the songwriters in the
process, the whole enterprise is going to fail. These Internet
companies are new to the music business, but they need to
understand something. We are not manufacturing widgets here.
The best way to make great music is not by driving the cost of
production down. The way is to pay great songwriters a livable
wage and make great music, which will drive the profits up for
everybody.
To that end, the SGA and our colleagues in the National
Songwriters' Association, the NMPA, ASCAP and BMI have all put
forward a unilicense proposal that we believe best achieves
music licensing reform while simultaneously providing essential
marketplace protection for songwriters. Our proposal seeks a
reasonable rate of 16 2/3 percent of Internet subscription
service revenues, with a minimum flat dollar fee as a floor. A
single designated super agency will collect the blended
mechanical and performance royalties under a blanket license,
thereby creating one-stop music licensing.
America's first professional songwriter, Stephen Foster,
died in poverty with 38 cents in his pocket at the age of 37.
He left behind a legacy of songs that have moved the entire
Nation and enriched a horde of middlemen, but he never earned
enough money to sustain him or his family. The story of
American songwriters is far too often a rags-to-rags tale. It
is my sincere hope that in reform of the music licensing
process, we will begin and end with a focus on helping today's
American songwriters and artists survive in a very difficult
present and thrive in a much better future.
Thank you.
[The prepared statement of Mr. Carnes appears as a
submission for the record.]
Chairman Hatch. Well, thank you.
Mr. Cuebas, we will take your testimony.
STATEMENT OF ISMAEL CUEBAS, DIRECTOR OF MERCHANDISING
OPERATIONS, TRANS WORLD ENTERTAINMENT CORPORATION, ALBANY, NEW
YORK, ON BEHALF OF THE NATIONAL ASSOCIATION OF RECORDING
MERCHANDISERS
Mr. Cuebas. Good afternoon, Chairman Hatch, Ranking Member
Leahy. Thank you for inviting me to testify about the state of
the music industry and the challenges in music licensing. We
hope Congress can help our industry to remain healthy and
vibrant.
I am Ish Cuebas, Director of Merchandising Operations at
Trans World Entertainment in Albany, New York. Trans World is a
member of the National Association of Recording Merchandisers,
an industry trade group that serves the music retailing
community. Trans World is one of the largest entertainment
retailers in the United States, with 800 stores in 46 States,
the District of Columbia, Puerto Rico and the U.S. Virgin
Islands.
Trans World operates four e-commerce sites and the FYE
Download Zone, a digital music subscription and download
service. Trans World is currently designing and developing the
next generation of our listening and viewing stations, called
LVS 3. These stations will allow our customers to search, find
and explore music. These stations are designed and built to
support the growing business of digital media distribution,
allowing consumers to burn full albums onto a CD or create
their own compilations. It will allow them to download a full
album or compilation or a song they have just heard on the
radio onto a portable device. It will allow them to buy
download at the store and send them to a home or office PC.
Music retailers continue to face significant business
challenges. Sales of digital tracks continue to post big
increases year over year, but has not slowed illegal
downloading on peer-to-peer networks. We know one of the best
ways to prevent pirated downloads is to provide consumers with
legal alternatives. This is no small challenge and time is
definitely not on our side.
A lot of music is still unlicensed largely because of the
extremely burdensome process that is required. Our record label
partners are trying to ramp up to handle the licensing process,
but that takes time we simply do not have. In order to support
these initiatives, we need to modernize the Section 115
mechanical license. The license is outdated and doesn't fit
with today's new digital technologies.
In March 2004, NARM formed a Media On Demand Task Force
comprised of various member segments to seek solutions to the
challenges of the new business models. NARM, RIAA and the
Recording Artists Coalition have strongly advocated a broad
blanket license that would cover all products in the
marketplace and speed up the process.
The current unilicense proposal is too narrow in its scope,
applying only to subscription services which account for less
than 1 percent of all music sales. The Copyright Office's
proposal would offer broader blanket licensing for the
distribution of music, but the administrative process resulting
from eliminating the compulsory license would likely make
things worse instead of better for music retailers.
These proposals do not address dual discs. The music
industry needs a vehicle to attract consumers by offering an
exciting value proposition. We believe that the dual disc
serves this purpose. Under the current system, for example, it
would take more than 100 separate licenses to clear one dual
disc, which is hindering a more robust release schedule.
What our retailer members have told us loud and clear is
that they need an opportunity to experiment with various
digital distribution models over the next few years. Legal
digital download services represent a significant anti-piracy
initiative. It is a great opportunity for songwriters,
publishers, record labels, retailers and digital service
providers to sell more music and generate excitement and
enthusiasm among consumers. This opportunity will be missed if
retailers can't easily experiment with the whole range of
models for providing music on demand.
We are committed to moving forward with both one-to-one and
group negotiations and look forward to working with you and
your staff to help resolve these important issues.
Thank you.
[The prepared statement of Mr. Cuebas appears as a
submission for the record.]
Chairman Hatch. Thank you so much.
Mr. Barros, we will take your testimony.
STATEMENT OF GLEN BARROS, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, CONCORD MUSIC GROUP, BEVERLY HILLS, CALIFORNIA
Mr. Barros. Thank you, Chairman Hatch, Ranking Member Leahy
and all the other members of the Subcommittee for inviting me
today to participate in this hearing. I am grateful for the
opportunity to share some practical thoughts on how the
inefficient system of licensing musical compositions is
contributing to the contraction of the music industry by
preventing companies from offering consumers exciting and
competitive products that I think are necessary if we are to
thrive and maybe even survive as an industry.
A little background on the Concord Music Group. Concord
Records is a 32-year-old independent record label that focused
on jazz and traditional pop for most of its history, expanding
into adult contemporary pop recently. Last year, we acquired a
company called Fantasy, Inc., which is a treasure chest and one
of the greatest catalogs on the planet of recordings and also
musical compositions, focusing on jazz, R&B, blues and rock.
Our catalog encompasses artists such as Miles David, John
Coltrane, Rosemary Clooney, Ella Fitzgerald, all the way to
Little Richard, Isaac Hayes and Credence Clearwater Revival.
We also invest millions of dollars each year in new
recordings and in trying to develop new artists. Current
recordings are Chick Corea, Sonny Rollins, Carole King, Michael
Feinstein, Peter Cincotti. And most recently we have enjoyed
great success this past year with the final recording of Ray
Charles. In all, we are one of the largest independent record
companies in the world, with over 10,000 recordings ranging
from 1940 until today. Also, an important distinction is that
we own music publishing rights. So we are here today really as
a music publisher and a record company, and have a broad
perspective on the issue being discussed here in this hearing.
Our position is that the current system for licensing
musical compositions is not serving anyone as it really should.
This is a challenging time in the music business. Piracy, radio
consolidation and exciting entertainment options have caused
the market to contract. At the same time, we have new
technologies that can help add value and bring exciting new
products to the consumer.
We have talked a lot about digital alternatives which are
very important, but also there are physical alternatives which
bring value--dual disc, SACD. All of these things add
significant value and can help expand the market.
Unfortunately, we have struggled with music licensing issues
raised by these new technologies, and I would like to focus on
one example of a physical product where the licensing system
impedes our ability to make it work.
There is a product called Super Audio CD where there are
two layers on a disc. The first layer is a standard two-channel
CD where the consumer has the normal experience. The other is a
surround sound product where the consumer can hear it like you
would a video where you can sit in the center of a six-channel
mix. Because it is multi-layer, many publishers have taken the
position that, in fact, there are two music files on that disc
and that you should be compensated twice. Yet, the disc sells
at exactly the same price and is really designed to offer the
consumer an alternative.
Intuitively, I know this shouldn't be the case, and legally
I am told it probably isn't. But there really is no way to
solve this dispute. It costs thousands of dollars to issue
every single SACD and it is a speculative proposition. We don't
know if the market will take hold. Yet, here we are investing,
and at the same time having to face the possibility of arguing
with our colleagues in the music publishing community. That
just doesn't make practical business sense.
The same applies when we want to add video content to a CD.
Again, we have to approach dozens of publishers. The response
time is difficult. Often, it involves duplicate costs, and once
again it is just not practical. The end result is we usually
just don't do it. We can't devote scarce human resources to a
process that has low probability and usually ends up in us
paying more for it. What this means is that everybody is hurt
by a system that is an impediment to giving consumers more
value and getting them to buy more music.
I would like to be clear that I believe writers and
publishers should absolutely receive their fair share of music
industry revenues, especially since we are publishers, too. But
this mechanical licensing process that we have today is a true
impediment to seeing that happen.
My suggestions for reform are as follows: Adopt an
efficient blanket licensing system like every other compulsory
license. Two, provide a percentage royalty. Writers and
publishers should share in the upside when consumers are
willing to pay a premium price. When it is necessary to provide
extra value to win back business from the pirates or economic
realities of new technologies and business models demand, the
mechanical royalties should reflect that.
Three, avoid potential for disputes. A simplified
percentage royalty would be a big step. We should also give
consideration to process changes, such as the possibility of an
expedited proceeding in the Copyright Office to put to rest
questions like whether or not we have to pay twice on an SACD.
Four, consider whether licensing for uses not currently
covered by Section 115 can be facilitated. There are uses like
lyrics or bonus audio-visual material where the transaction
costs of work-by-work clearance are very high relative to the
returns that the market will bear.
I want to reiterate this is not an issue of trying to
undercut royalties or shift divisions in how the pie is cut up.
It is really an effort to grow that pie for all of us, and I
believe if we do that and create the flexibility that we need
to compete, it will make a huge difference in enhancing the
availability of music, the investment in new artists and new
songs, and will grow the music industry for everyone.
Thank you.
[The prepared statement of Mr. Barros appears as a
submission for the record.]
Chairman Hatch. Thank you, Mr. Barros.
Mr. Bryant.
STATEMENT OF DEL R. BRYANT, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, BROADCAST MUSIC, INC., NEW YORK, NEW YORK
Mr. Bryant. Chairman Hatch, thank you for the opportunity
to testify today. My name is Del Bryant and I am the President
and CEO of BMI. BMI is proud to represent the public performing
rights of over, as you mentioned, 300,000 songwriters,
composers and music publishers. With a catalog of more than 6.5
million works, and growing, the BMI family includes icons of
American music today and yesterday--the icons Hank Williams,
Sr., Billie Holiday, Charles Ives, Miles Mingus Monk, Chuck
Berry and the Eagles, to Toby Keith, Mariah Carey, Three Doors
Down, Norah Jones and John Williams, and that simply scratches
the surface.
My background gives me special insight on the issues that
we are discussing today. My late parents, Boudleaux and Felice
Bryant, were the first full-time professional songwriters in
Nashville, Tennessee. And like most songwriters, you wouldn't
know their names, but you would know some of their works--
``Bye, Bye Love,'' ``Wake Up Little Susie,'' ``All I Have to Do
Is Dream,'' and the Tennessee State song, ``Rocky Top.''
As a son of songwriters, I know firsthand what it means to
rely on the income that comes from performing rights through
BMI and the money which comes to the publisher in the form of
mechanicals. I know how precious these royalties are to the
creators, and especially to their families. In more than three
decades at BMI, I have learned how precious dollars going out
as licensing fees are to the broadcasters and the other users
who use America's music.
Because we were founded by leaders of the broadcast
industry to create competition in licensing, BMI has always had
a special appreciation for the business models and programming
needs of the hundreds of thousands of enterprises which bring
our music to the public. Many groups with whom we negotiate,
including DiMA members, have acknowledged that BMI does a good
job in establishing a fair market value for music. Our
operations are efficient, fair, transparent, and our royalty
distributions are accurate, timely and competitive.
American performing rights organizations operate in a
healthy competitive atmosphere which provides benefits to the
creators and music users alike. It is a win-win for the
American free enterprise system. BMI has been recognized as a
global leader in digital initiatives for more than a decade. We
are among the absolute very first in the music industry with a
website, the first to license music for performance on the Web,
and the first to post our entire catalog on the Internet.
In calendar year 2004, BMI tracked more than 2.4 billion
performances of music on over 3,500 licensed digital services.
As those numbers grow exponentially, we have developed a robust
infrastructure to handle the volume. Over the past several
months, BMI has had participation in industry discussions in an
attempt to facilitate the licensing of digital music services.
We are not part of the problem, but we are willing to be part
of the solution.
BMI, along with the NMPA, FHA and ASCAP, has made a
proposal to provide one-stop shopping for both the mechanical
and the performing right for digital subscription music
services described in more detail in my written statement.
The two key components, in BMI's view, for the Committee to
consider are, first, an antitrust exemption; second, a
statutory rate set by Congress. I also address the recent
proposal by Register of Copyrights Marybeth Peters and what BMI
feels are its benefits and probable shortcomings.
The current conversations among creators, music providers,
licensees and members of Congress will, we believe and hope,
deliver an equitable marketplace solution to the issues being
examined by this Committee today. Whether it be our proposal or
another, we believe Congress should not lose sight of the more
modest attempts to address digital music services problems. We
look forward to being a supportive and, if necessary, proactive
participant in these ongoing discussions under the Chairman's
leadership.
Mr. Chairman, we are grateful to the Committee and Congress
for the effectiveness of the Copyright Act, which has permitted
BMI to develop a highly successful business, allowing
songwriters, composers and publishers to be fairly compensated
for their creative endeavors.
Thank you, and I would be glad to answer any questions.
[The prepared statement of Mr. Bryant appears as a
submission for the record.]
Chairman Hatch. Well, thank you, Mr. Bryant.
Mr. Israelite, we will turn to you.
STATEMENT OF DAVID ISRAELITE, PRESIDENT AND CHIEF EXECUTIVE
OFFICER, NATIONAL MUSIC PUBLISHERS' ASSOCIATION, WASHINGTON,
D.C.
Mr. Israelite. Thank you, Chairman Hatch, Senator Leahy. I
am David Israelite, the President and CEO of the National Music
Publishers' Association. I thank you for allowing me to testify
today about music licensing reform, and I thank you for
allowing Irwin Robinson, the Chairman and CEO of Famous Music
and the chairman of my board, to submit written testimony for
the record.
For more than 80 years, NMPA has been the principal trade
association representing the interests of music publishers and
their songwriter partners in the United States. A music
publisher is a company or individual that represents
songwriters by promoting songs, licensing the use of songs and
protecting the property rights of the songwriter. Put simply,
the role of the music publisher is to represent the interests
of the songwriter and the song.
While this is a hearing about music licensing, I must thank
you, Mr. Chairman, and you, Senator Leahy, and the members of
this Committee for all that you have done to help music through
your efforts to protect intellectual property. You have long
recognized that the property rights in intellectual property
deserve no less protection than physical property. It is an
important value and one that is relevant to this hearing.
Mr. Chairman, I know that you and several other members of
Congress are concerned about the recent Supreme Court decision
in Kelo v. The City of New London regarding the rights of
private property owners. A taking of property for the public
good must be balanced very carefully against the importance of
private property rights, which are the cornerstone of our
constitutional freedoms. While we can all agree that it is in
everyone's best interest to develop the digital music industry
and make it successful, it must not be done in a way that is
disrespectful of the private property rights of creators.
Many people would be surprised to learn that in every
recorded song there exist two separate and distinct copyrights.
When a songwriter writes the words and notes of a song, that
musical composition contains a copyright. When an artist
records that song, that particular version of the songwriter's
song or that sound recording also has a copyright. Both
copyrights contain property rights, and the songwriter and the
artist both deserve compensation for the use and sale of that
property. What would surprise people even more is to learn that
while the value of an artist's sound recording is governed by a
free market, the value of a songwriter's musical composition is
controlled and regulated by the Government.
Further complicating the music business is the emergence of
digital technology. While digital technology provides an
exciting new medium for distribution of music, it also presents
new challenges to the licensing of music. A digital media
company wishing to sell music must obtain both copyrights. It
must obtain the sound recording copyright from the recording
industry at a price negotiated in a free market and it must
obtain the musical composition copyright from the publishing
industry at a price largely controlled by the Government
through Section 115 of the Copyright Act.
Songwriters and music publishers are excited about the
emergence of digital technologies, but it always must be
remembered that the purpose of a digital music company is to
sell the private property of others. With that in mind, we
recognize that there are challenges to the licensing of this
private property.
NMPA, through its wholly-owned subsidiary, the Harry Fox
Agency and its publisher clients, have issued nearly 3 million
licenses to at least 385 different licensees for digital
delivery of musical works. There are several digital media
companies offering millions of songs to the public today. The
system has allowed these companies to launch successfully, but
the system can work better.
NMPA, along with ASCAP, BMI, the Songwriters' Guild and the
National Songwriters' Association, have proposed a solution
which respects property rights, protects creators and addresses
the needs of licensing reform for the digital age. Our
proposal, called the unilicense, would create a one-stop shop
where online subscription services could obtain a blanket
license covering both performance and mechanical rights through
a licensing agent.
Our proposal would minimize disruption of the industry by
maintaining existing licensing structures, thus eliminating any
additional administrative expenses. It is a proposal that has
been embraced by both songwriters and publishers, and is the
subject of continuing negotiation with the Digital Media
Association.
There are other proposals that suggest more radical changes
to the music business. While songwriters and music publishers
are ready and willing to help facilitate the efficient
licensing of musical compositions of their property, we would
be opposed to any proposal that will impose more Government
control, be less respectful of private property rights, or
create an even more unlevel playing field in the music business
for the songwriter.
I thank you again for this opportunity to testify and I
look forward to answering any questions you may have.
[The prepared statement of Mr. Robinson appears as a
submission for the record.]
Chairman Hatch. Well, thank you so much. This has been an
interesting panel to me. Of course, you are citing the various
interests and the various problems that exist.
Let me start with you, Mr. Israelite. I am intrigued by the
unilicense concept that you have mentioned in your remarks and
that has been advanced by some folks. Now, how would such a
system work, if implemented? Let me just a couple follow-on
questions on that.
Would the license cover all rights to all musical works,
and if so, would it be implemented by adding performance rights
to Section 115? Also, what mechanism would allow for
adjustments to the royalty rate over time?
Mr. Israelite. We have offered the unilicense proposal
because we have identified these digital subscription services
as the area most in need of reform. There are several problems
today. Number one, it is a unique type of service that blends
both a performance right and a mechanical right. Yet, the
digital company is troubled by the fact that it must pay both
or doesn't know exactly what it should pay. Secondly, there
isn't a rate today for a mechanical license in a subscription
service.
What our proposal would do is create a one-stop agency that
would license all music. It would license both the performance
and mechanical rights for one price. That agency would then
distribute the money through existing distribution mechanisms,
so that the user or the license would never have to choose
between a performance or a mechanical, would not have to pay
twice, and would get blanket licensing for all works, for all
rights. But yet it would leave the current system in place so
that the current mechanisms to use for performance and
mechanical licensing could continue to exist and work as they
work today.
We think it is a proposal that solves the problem today. It
is one that has been embraced by, I think, most, if not all of
the songwriting and publishing organizations, and it has been
the subject of intense negotiation. We continue to negotiate.
Obviously, money has been a large part of that negotiation, but
in terms of implementation I think that we have worked out most
of the issues about how it would work.
Chairman Hatch. Would there be any way for publishers to
opt out? If so, wouldn't that raise the same concern that has
been voiced by many about both the current system and the
proposals to move to a system of multiple collective rights
organizations or music rights organizations, MROs, if you will,
namely the inefficiency of having to license from numerous
rights-holders, agents or MROs?
Mr. Israelite. One of the advantages of the unilicense is
the concept of being able to go a single place to get all of
the rights. The issue of the opt-out is one that we continue to
negotiate in our private negotiations. Obviously, there are
some that would prefer to be able to license directly, as they
do today in the current marketplace.
Some of the other proposals that have been put on the table
potentially could create even more places to have to go for
licenses. For example, the idea of creating MROs, or multiple
rights organizations, that have both, but yet not limiting the
number of them could create a situation where you would have
thousands and thousands.
I think we can work that out. I think we can make it so
that--I am not sure that one-stop shopping is necessarily what
is required, but as long as it is manageable. And I don't think
that the digital media companies would mind as long as they
have a manageable number of places to go to get the rights,
much like they do in the performance rights area today where
they go to three different ones to get their rights for
performances.
Chairman Hatch. I am not against having any of you who care
to make any comments about these things interrupt and make
them.
Mr. Glaser. What I would say, Senator Hatch, on that point
is since Mr. Israelite mentioned the services, from our
company's perspective and DiMA, we have a significant
preference for Register of Copyright's proposal. It may be that
if there is further clarification on the unilicense, some of
the issues would be addressed. But, specifically, of the ones
we know about, the notion of opt-outs defeats the purpose of a
blanket license and would be probably worse than the status
quo.
In terms of the royalty rate, we have a process that has
worked most recently in our arbitration with the Copyright
Office over the rate for radio stations. Like all of these
things, it was a negotiation. The negotiation didn't conclude
successfully, and then there was an arbitration that resulted
in an outcome that we as an industry can live with. I think
that process is far superior to the Congress trying to set a
price or a price mechanism.
One other element is having prices where you have to have a
fixed minimum per subscriber would limit innovation in a very
specific way. For instance, we have a service called Rhapsody
25 that we introduced in April. It is one of the best
mechanisms that we think we have come up with in the industry
to combat piracy where a consumer can listen to up to 25 on-
demand streams a month without being a paying subscriber. And
on the 26th, they say, hey, you are done.
We got all of the major record companies to agree to that,
which was a fair amount of work, but they were all ultimately
interested in combatting piracy. And having a free on-ramp to
legitimacy seemed like a good way to go. If we had had a per-
subscriber minimum rate, we could have never have done that. So
you have got to be very careful when setting prices to avoid
doing it in a way that limits innovation.
Chairman Hatch. I have some other questions, but I will
turn to Senator Leahy and then I will ask my other questions.
Senator Leahy. Well, I was just curious. The NMPA and the
Songwriters' Guild have put forth a proposal that would provide
them with 16 2/3 percent of gross Internet subscription service
revenues. Am I correct on that?
Mr. Glaser. Yes, Senator.
Senator Leahy. I understand that other countries use some
different formulations.
I will start with Mr. Glaser and ask each one of you the
same question. What is the appropriate amount of compensation
for songwriters, and do you favor an approach that guarantees a
percentage of revenues or some other kind of determination?
Mr. Glaser. Well, I would say that it is a little bit hard
to answer the question in the absolute because from our
standpoint we care about the cumulative cost; in other words,
what we are paying all of the rights-holders, in general.
Today, it has been widely reported that that rate is about 50
percent, plus or minus, and if it ended up going from 50
percent to 67 percent, that would have a significantly
deleterious effect.
Senator Leahy. I am talking about the amount to
songwriters.
Mr. Glaser. Well, that is what I am saying. It is a little
bit hard to answer in the abstract. I will tell you that
internationally where there have been negotiations, like in the
UK, France and Australia, the online services are paying 8
percent or less of revenue. So that has been marketplace
negotiations. Now, certainly, some of the rights-holders have
gone in looking for more, but that is kind of what we are
seeing in the marketplace today, which is principally
internationally what is going on.
Senator Leahy. Mr. Carnes.
Mr. Carnes. Well, to add to that, first of all we don't
know exactly what they are paying for. Their subscription
services may be covering who knows what. I know the one 8-
percent rate that I know of was a start-up rate. It was a rate
in the UK, where they gave them the opportunity to start at 8,
but it is supposed to go to 12, and then I don't know where it
goes from there.
I can tell you this: If you ask somebody on the street, how
much do you think the songwriter is getting for this one-dollar
song, they will tell you probably 50 cents.
Mr. Glaser. And how much are you getting on the pirate
networks, Mr. Carnes?
Mr. Carnes. Well, now, you know, if we are going to try to
compete with free, then we are going to have to drop the rate
all the way down to what they are talking about--nothing. I
think this is a property rights thing, just like David was
saying. It is about what my property is worth and how I can
make a living creating it.
Senator Leahy. Mr. Cuebas.
Mr. Cuebas. Well, our interest primarily is in retail and
getting this to the consumer. We do want the songwriters to get
paid. We want everybody to get paid here. We just want it to be
easy to get these licenses so we can offer it to our consumers.
If we are going to compete with these online services who are
offering 4 million-or-so tracks and the best I can offer them
is 1 million, then I can't compete.
Senator Leahy. But you don't have a feeling on the 16 2/3
percent of gross Internet subscription service revenues?
Mr. Cuebas. Not on the percentage, no.
Senator Leahy. Thank you.
Mr. Barros.
Mr. Barros. On the subscription service, I think the matter
needs to be studied. I don't know if 16 2/3 is right or not,
but I would certainly be willing to roll up my sleeves and
figure it out and help figure it out. But I do think that the
16 2/3 concept is too specific. We are only talking about
subscription services here and I think the issue is really
broader than this.
For example, when we get to the physical world, I think the
same issue applies. A percentage royalty has to be brought to
bear, and what is that correct percentage royalty? My proposal
would be that we look at it in such a way that right now we try
to create that right economic division without disrupting the
economics of the business.
One thing you have to clearly remember is that somebody is
also investing a lot of money. Record companies spend millions
of dollars trying to promote artists, and therein promote
songs, too. So there is a significant investment that goes into
it and there is the right division of the profits from that and
payment for costs and supplies, and I think we would need to
just study that and come up with the right number.
Senator Leahy. Mr. Bryant and Mr. Israelite, you believe in
the 16 2/3?
Mr. Bryant. Well, I think there are several benchmarks you
can look at for the 16 2/3. Ring tones in the last few years
have sold over a quarter of a billion units that have been paid
for, and the approximate share for a publisher is 10 percent.
And between BMI, ASCAP and SESAC, it is somewhere between 5 and
6 cents. So you have in the marketplace that has been
negotiated freely approximately 16 cents that is working in the
digital area.
Also, in the home recording digital situation with DART,
there was a two-to-one ratio--the artist, record company twice
that of the underlying work, the writer and the publisher
share. What is being suggested here is a three-to-one, which is
certainly far more reasonable.
I would suspect, in light of what Rick said, that it is
very reasonable, and that indeed when you are measuring it up
to what the record company is getting for their share and what
someone may have to pay for the record company share, it may
not work into the model that Mr. Glaser is speaking of. But
that really shouldn't be cut out of the hides of songwriters
and publishers. That is an examination of the model, I would
suspect, but there are several very good examples in the
marketplace that work.
Senator Leahy. Mr. Israelite.
Mr. Israelite. Thank you, Senator. Two things. First of
all, I think it is important to recognize that since 2001 we
have not had a rate for these subscription services and that
publishers and songwriters have voluntarily licensed the entire
catalog that we represent without knowing what our rate is. And
we haven't distributed one penny in those last four years to
allow these new services to get off the ground. It is something
that we have done to help them.
Secondly, the reason why the market doesn't work today is
because if you are a DiMA company and you have to go out and
get both copyrights, one of the copyrights represented by the
record labels has a complete free market. They can charge
whatever they want and if you don't like it, they can say no.
On our side of the equation, with our copyright, we are
controlled, and as a result the DiMA companies know that they
can get our copyright without having to pay a rate that is
negotiated in the free market. What has happened as a result of
that is that these subscription services today have cut deals
with the record companies where I think they are paying roughly
50 percent of revenue and they haven not been able to cut a
deal with us because they know ultimately they can get our
licenses and we don't have a free market to say no. That has
created quite a problem.
We have put the number of 16 2/3 on the table. We
anticipated that as part of a negotiation, we could work all
this out. We haven't gotten there yet, but we are still
hopeful. We still think that we can work the economics out to
make this work.
Senator Leahy. Well, Mr. Chairman, not only is my time up,
but I have to go to another matter. These are very good things.
We have a number of technical questions, including one very
real one here: What do I have to do if I want to get the
necessary licenses if we set up the Hatch-Leahy Music Store,
either bricks and mortar or online? I wasn't quite sure how you
get through that thicket. It would be an eclectic problem.
If I might, I would like to submit some of these questions
for the record, but I do want to thank the Chairman for holding
this hearing.
Chairman Hatch. Well, thank you, Senator Leahy.
If I could just ask a couple more questions, because this
is an extremely interesting hearing to me. I want the system to
work, I want everybody to come out of it whole.
I know, Rob, if we don't compensate writers, we are not
going to have the creativity. If we compensate them too much so
you can't be in business, we won't have the dissemination, just
to cite the two of you. We have also been confronted with
piracy that has been robbing us blind in this industry, and a
belief by our young people, at least, in many respects that
anything that is on the Internet is free and therefore they can
take whatever they want to, regardless of whether they are
robbing Mr. Carnes or not, which, of course, they are, and you
and all of you.
Let me just say, according to the NMPA testimony, the Harry
Fox Agency has, quote, ``issued almost 3 million licenses to at
least 385 different licensees for digital delivery of musical
works,'' unquote, that, quote, ``represent the vast majority of
musical works for which there is any meaningful level of
consumer demand,'' unquote. But you indicate that RealNetworks
still, quote, ``cannot obtain licenses for the broad category
of songs it needs to compete with pirate services,'' and that
you ``do not know the final licensing royalty costs,'' unquote.
Now, can you comment for the benefit of the Committee on
this difference in perspective and explain what type of works
you cannot license and why, so that we will understand that?
Mr. Glaser. Well, there are two issues. One has to do with
whether we can get a license at all, and the second has to do
with whether or not we can get a license for all of the modes
of use of a service, and I will explain by way of example.
One of our new capabilities is something called portable
subscriptions. That means you pay a larger fee--$15 a month is
our general fee for that--and you download music onto an MP3
player, kind of like an iPod, and you move that around. And as
long as you every month check back in and we get a reporting of
what songs were played so we can pay the artists, and we verify
that you have a subscription that is active, you can keep doing
that for paying $15. It is sort of a rental model for music.
We have a lot of songs that we have the right to stream
directly, but we don't have the right either for publishing
reasons or for performance reasons or for recording reasons to
play. So it makes these portable subscription services much
more confusing for a consumer, because we have a catalog of 1
million, but we may only have 600,000 where you can take them
on the go. So do we sort of have to explain to consumers, hey,
we have got this footnote out here for a third of our library?
It is a difficult thing and it is one of the things that has
impeded that kind of service.
In turn, if you compare it to something like the illegal
services like Grokster, they let you download and move it onto
a portable device with no limitation at all. So that is a very
specific thing where we have invented a lot of technology to
make a better competitor against the pirate services and this
specific licensing issue is getting in the way.
I could go on, but I hope that that gives you a flavor of
how this undercuts our ability to compete, not in a black-and-
white way, but in a cumulative way that is quite significant.
Chairman Hatch. Well, some claim that online music services
will pay, as you have said, about half their revenues in music
royalties, but that current arrangements funnel most of these
royalties to the recording companies, leaving almost nothing
for the songwriters.
Do you agree with that, Mr. Carnes?
Mr. Carnes. Well, as the negotiations stand right now, I
mean I think that I am going to go back to the 16 2/3 percent.
I thought that was entirely reasonable because the songwriter's
share of that is only 8 1/3, which leaves more than 90 percent
for everybody else. I mean, I feel like that is reasonable. We
are taking a real leap of faith here by going with a percentage
rate instead of a penny rate.
Chairman Hatch. Well, let me ask you this, Mr. Glaser. What
proportion of the overall royalty payment goes to the record
labels for the sound recording and what proportion is expected
to go to songwriters and publishers, if you know?
Mr. Glaser. Well, in terms of expected, it is very hard to
say. We are reserving money; in fact, we have already booked it
as expenses and every quarter our accountants and our lawyers
write down what they think is the rate to reserve. I don't
actually know what the rate is. I know, cumulatively, we have
set aside probably millions of dollars at this point, and we
would love to pay Mr. Carnes and his colleagues through the
agencies here as soon as we have a rate established.
So this isn't a case where we are going to have to change
our economics if there is a fair rate. We have set that money
aside. So when we say 50 percent, that is based on including
what we pay the recording companies today, both the majors and
the independents, and what we expect we will pay.
Now, just to be clear, that is only for on-demand services.
For things like radio services, there already are rates
established either through the licensing regimes or through
negotiations that we have done directly with ASCAP and BMI. And
those rates, I believe--and I will get corrected--are in sort
of the 3- to 5-percent range for radio play.
And that is a final point. We are the only kind of service
that is paying both performers and songwriters for radio play.
So our industry offers a better deal, and I believe a fairer
deal to artists than traditional radio, because traditional
radio only pays publishing and it doesn't pay recording. So I
think our service, if you looked it sort of thoroughly, is the
most artist-friendly kind of service out there. And we are
willing to pay fair rates; we just don't want the rates to
accumulate up to where it makes the economics of our business
unsustainable or where we are disadvantaged relative to other
broadcast methods, be it either radio-style or full sort of on-
demand services.
Chairman Hatch. Well, as you know, I admire you and the
pioneer work that you have done in this industry and how you
have tried to at least help us move along the lines of winning
over the pirates out there. I have a lot of respect for that.
Mr. Glaser. Thank you, Mr. Chairman.
Chairman Hatch. We still have a lot of questions, but we
appreciate what you are trying to do.
Mr. Bryant, let me turn to you for a second. What are the
potential concerns for creating an exemption for incidental
reproductions or incidental performances so online services,
depending on the type of service, would have to get a
mechanical license or a performance license, but not both? Is
there a practical solution of making our current system of
exclusive rights which developed in a world of sheet music and
live public performances fit in the online world a little bit
better? Can you help me with that?
Mr. Bryant. I am not sure, Mr. Chairman, of the scope of
your question. I heard it, but I am not sure I understood that.
Chairman Hatch. Well, basically, what I am saying is if we
create an exemption for incidental reproductions or incidental
performances so online services, depending on the type of
service, would have to get a mechanical license or a
performance license, but not both--
Mr. Bryant. You are talking about ephemeral rights, I
believe.
Chairman Hatch. Yes, I think so.
Mr. Bryant. I am sure that the Copyright Act as it stands
now implicates, certainly, a performing right with each
transmission.
Chairman Hatch. Right.
Mr. Bryant. And I believe that creators are certainly
entitled in this new space to every opportunity to make income,
and I believe it was stipulated in the Copyright Act; I am sure
it was.
Are all of the situations that we have discussed here today
at each end of the spectrum the best way to fairly handle this?
I am not sure, but as David said, there seems to be at this
point a little bit of reluctance to start talking about some of
these issues when there are propositions on the table. We have
writers and publishers who are literally waiting for some
decisions and we are in the process of trying to come up with
some of those solutions on a real workable scale.
Of course, BMI, of itself, licenses every situation. You
can get a BMI license, as I am sure Mr. Glaser knows, by simply
asking for one. It is an automatic situation. It certainly
doesn't take anybody out of a going into business model because
you can take us to rate court and come with a fair rate at some
point if we can't agree to one.
In some of the other situations which don't have the rate
proceedings, I think it comes down to negotiating and working
in the marketplace. Even though BMI has a rate proceeding, we
have rarely used it because we certainly negotiate and we work
out situations. So I think once again, as David said, there are
some solutions out there on the table and we are ready to
negotiate.
Chairman Hatch. Mr. Cuebas, let me ask you a question. How
important is it to music retailers to get a more robust stream
of releases in new physical formats like your dual disc format,
and how much of a difference would that make to purchasing
behavior?
Mr. Cuebas. Well, recently with dual discs, we have seen
increased sales. We are offering the customer additional value.
The value of CDs has been decreased tremendously and dual disc
gives the consumer the value they are looking for.
Chairman Hatch. Let me just say this. You are all
interrelated. The problem is the system isn't working well, and
part of it is because of piracy, but part of it is the way the
system has built upon bygone years. We are in a digital world
now, we are in an online world now.
Naturally, every one of you has to make money, starting
with the music writers. I have known Mr. Carnes for a long time
and he is a marvelous songwriter, no question about it, one of
the best in the business. And he is good-natured about it, too,
but not when it comes to representing his group. He feels like
they are getting screwed.
I think that is a fair comment. Don't you?
Mr. Carnes. Yes.
Chairman Hatch. Yes, okay, and I can personally testify to
that in the sense that I know some wonderful writers who are as
good as anybody in the business who just can't make it anymore
and have had to get out of the business and work in fast-food
restaurants, and so forth. Generally, they have to anyway just
to be able to sustain themselves while they are writing.
What percentage of writers would be able to live off what
they make from writing music?
Mr. Carnes. I hesitate to make a guess. You know, it has
got to be less than 1 percent, though.
Chairman Hatch. I can't help but remember about seven or
eight years ago I spoke to one of the national groups, and I
had just received my first royalty check for writing songs and
it was, I think, $57 or something like that, which is a big,
big check for me. There were about 1,000 people there, all
music writers, and I got up and I said I just got my first
royalty check, and the place went crazy. They stood on chairs
and yelled and screamed, and so forth.
One of the leaders of the industry leaned over to me and
she said, Senator, the reason they are so excited is, as good
as everybody is in this room, very few of them will ever
receive a royalty check at all. So, naturally, I have tried to
help the creators because, Mr. Glaser, without them--of course,
there have been enough creators in the past and maybe we can
just live off that, but I don't think so. We have got to
continue to innovate and continue to come up with ways of
solving these problems.
Mr. Glaser. Absolutely.
Chairman Hatch. But I generally try to help the creators
because they are at the bottom of this totem pole, and unless
they are performers who write their own music, there is very
little chance for them to really be able to self-sustain
themselves. I know some of the best in the business who can't
do it. As Rick said, we try to earn money so that we can
continue doing what we love, and that is what these songwriters
tell me.
One of the reasons why I started writing music was so I
could understand this. And, boy, have I gotten so that I
understand it. It is just terrible, and I empathize greatly
with Mr. Carnes. Now, I also empathize with Rob Glaser. I have
seen what he has had to do to create Rhapsody and to create
this business. He has had to take on a lot of big-time people
and go through an awful lot of fighting and screaming and
litigation and everything else to create what really is a
remarkably efficient and good system for delivering music.
Knowing him, I know that he wants to pay what the market will
bear, and I hope that continues to be true.
You retailers, if you don't have the music, you can't sell
it, and we all know that. What BMI and ASCAP and SESAC do is
extremely important. The question is should we go to one
single, unitary system whereby all of these special deliverers
of services are kind of pushed out into just one great big
agency that does it.
I see a lot of different problems here that have to be
solved, and I don't know that we in the Congress are capable of
solving them. Maybe we are, with your help, but this hearing is
really a beginning hearing for trying to understand and sort
this out to see if there is some way that we can be fair to
everybody concerned. But I would like to start with the
songwriters because without them, all of this is a house of
cards. So I am very concerned about it. And as you know, we are
going to just turn to Marybeth here and she is going to solve
all these problems for us. It is only fair that you have to
live up to your earth-shaking reputation.
Let me leave just a final thought here and that is that we
are open here, Senator Leahy and I and the other members of
this Committee, too good ideas. We don't have any desire to
hurt anybody. We don't have any desire to pick one side over
the other. When I say that I naturally have a lot of affinity
for songwriters, I do because they create this stuff, and
without them everything else falls.
A few years ago, worrying about piracy, I tongue-in-cheek
said that there is technology that could destroy individual
PCs. My gosh, you would have thought the whole world was coming
to an end. I was just kidding, just kidding, but trying to make
the point that this is a terrible problem and that we have to
do something about it. And I challenged the industry to help
us. Mr. Glaser is doing something about that, and so are all of
you.
I guess I am so serious most of the time, they don't catch
my humor when I actually tell--and they are still complaining
about that. I had so many vicious e-mails that you would have
thought--it was actually a lot of fun, between you and me.
But I want some help here, and I know Senator Leahy does.
If you guys can help us to know how to do this system better,
we want to do it better. I am not sure that legislation is the
answer, but we are certainly willing to look at if we could
help everybody in the process. I do believe that ASCAP, BMI and
SESAC--I didn't mean to put them in any particular order, but I
believe they do a tremendous service. I also believe that the
publishers can do a tremendous service, too. Naturally, without
retail we can't do it. Without delivery systems, we can't do
it, and the wholesalers. I mean, it all is a system that has
worked to a degree in the past, but it is not working well
today and we need to come up with some ideas that will work
here.
The whole purpose of this Subcommittee is to try to help
resolve some of these issues. And we don't want to pick any
sides. We want to get these resolved as best we can, and we
would appreciate the best ideas you have.
Does anybody have any other comments they would care to
make?
Rick, I am amazed that you are not willing to make some
more comments. I have been around you enough that you have
never lacked a comment.
Mr. Carnes. I have always just been an opening act. I am
not a closer.
[Laughter.]
Chairman Hatch. That is great, that is great.
Well, I am grateful to all of you. This has been helpful to
us. We are going to continue to hold these hearings and
hopefully we can get to the bottom of this in the future.
Thanks so much.
[Whereupon, at 4:12 p.m., the Subcommittee was adjourned.]
[Submissions for the record follow.]
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