[Senate Hearing 109-864]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 109-864

PARITY, PLATFORMS, AND PROTECTION: THE FUTURE OF THE MUSIC INDUSTRY IN 
                      THE DIGITAL RADIO REVOLUTION

=======================================================================

                                HEARING

                               before the

                       COMMITTEE ON THE JUDICIARY
                          UNITED STATES SENATE

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             APRIL 26, 2006

                               __________

                          Serial No. J-109-71

                               __________

         Printed for the use of the Committee on the Judiciary













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                       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                    HERB 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
                            C O N T E N T S

                              ----------                              

                    STATEMENTS OF COMMITTEE MEMBERS

                                                                   Page

Cornyn, Hon. John, a U.S. Senator from the State of Texas, 
  prepared statement.............................................    87
Feinstein, Hon. Dianne, a U.S. Senator from the State of 
  California.....................................................     1
Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont.     3
    prepared statement...........................................    98
Schumer, Hon. Charles E., a U.S. Senator from the State of New 
  York...........................................................    25
Specter, Hon. Arlen, a U.S. Senator from the State of 
  Pennsylvania...................................................     1

                               WITNESSES

Baker, Anita, Performing Artist, Grosse Point, Michigan..........     4
Bronfman, Edgar, Jr., Chairman and Chief Executive Officer, 
  Warner Music Group, New York, New York.........................     9
Lam, N. Mark, Chairman, Executive Committee, and Chief Operating 
  Officer, Live365, Foster City, California......................    14
Parsons, Gary, Chairman of the Board of Directors, XM Satellite 
  Radio, Inc., Washington, D.C...................................    11
Reese, Bruce R., President and Chief Executive Officer, 
  Bonneville International Corporation, Salt Lake City, Utah, on 
  behald of the National Association of Broadcasters.............    13
Rundgren, Todd, Lead Singer, the New Cars, Darby, Pennsylvania...     6
Shaw, Victoria, Songwriter, Nashville, Tennessee.................     7

                         QUESTIONS AND ANSWERS

Responses of Edgar Bronfman to questions submitted by Senators 
  Specter and Feinstein..........................................    29
Responses of Gary Parsons to questions submitted by Senators 
  Specter and Feinstein..........................................    35
Responses of Bruce Reese to questions submitted by Senator 
  Specter........................................................    43
Responses of Victoria Shaw to questions submitted by Senator 
  Specter........................................................    50
Responses of N. Mark Lam to questions submitted by Senator 
  Specter........................................................    52

                       SUBMISSIONS FOR THE RECORD

American Federation of Musicians, Office of the President, Thomas 
  F. Lee, New York, New York, prepared statement and letter......    61
American Federation of Television and Radio Artists, Kim Roberts 
  Hedgpeth, National Executive Director, New York, New York, 
  prepared statement and letter..................................    73
Baker, Anita, Performing Artist, Grosse Point, Michigan, prepared 
  statement......................................................    81
Bronfman, Edgar, Jr., Chairman and Chief Executive Officer, 
  Warner Music Group, New York, New York, prepared statement.....    82
Greenberg, Rebecca, National Director, Recording Artists' 
  Coalition, Beverly Hills, California, letter...................    89
Lam, N. Mark, Chairman, Executive Committee, and Chief Operating 
  Officer, Live365, Foster City, California, on behalf of the 
  Digital Media Association, prepared statement..................    90
National Music Publishers Association, Anna Marie Persky, 
  Washington, D.C., letter.......................................    99
Parsons, Gary, Chairman of the Board of Directors, XM Satellite 
  Radio, Inc., Washington, D.C., statement and attachment........   100
Recording Academy, Daryl Friedman, Vice President, Advocacy & 
  Government Relations, Wahsington, D.C., letter.................   116
Recording Artists' Coalition, Jay Rosenthal, Esq, Berliner, 
  Corcoran & Rowe, LLP, Washington, D.C., statement..............   117
Recording artists organizations, joint news release..............   123
Recording Industry Association of America, Washington, D.C., news 
  article........................................................   126
Reese, Bruce R., President and Chief Executive Officer, 
  Bonneville International Corporation, Salt Lake City, Utah, on 
  behald of the National Association of Broadcasters, statement..   128
Rundgren, Todd, Lead Singer, the New Cars, Darby, Pennsylvania, 
  statement and attachment.......................................   138
Shapiro, Gary J., Consumer Electronics Association and the Home 
  Recording Rights Coalition, joint statement....................   142
Shaw, Victoria, Songwriter, Nashville, Tennessee, prepared 
  statement......................................................   148
Sirius Satellite Radio, Inc., Ruth Ziegler, Deputy General 
  Counsel, statement.............................................   151
United States Copyright Office, Marybeth Peters, Register of 
  Copyrights, Washington, D.C., statement........................   159






























 
PARITY, PLATFORMS, AND PROTECTION: THE FUTURE OF THE MUSIC INDUSTRY IN 
                      THE DIGITAL RADIO REVOLUTION

                              ----------                              


                       WEDNESDAY, APRIL 26, 2006

                                       U.S. Senate,
                                Committee on the Judiciary,
                                                   Washington, D.C.
    The Committee met, pursuant to notice, at 9:33 a.m., in 
room SD-226, Dirksen Senate Office Building, Hon. Arlen 
Specter, Chairman of the Committee, presiding.
    Present: Senators Specter, Hatch, Cornyn, Leahy, Biden, 
Feinstein, and Schumer.

 OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. SENATOR FROM 
                   THE STATE OF PENNSYLVANIA

    Chairman Specter. Good morning, ladies and gentlemen. The 
Judiciary Committee will now proceed with our hearing titled 
``Parity, Platforms, and Protection: The Future of the Music 
Industry in the Digital Radio Revolution.''
    This morning, we revisit a topic involving the tension 
between protecting artistic works and encouraging technological 
innovation. Specifically, our hearing today will examine 
whether current applicable copyright law is keeping pace with 
emerging digital radio technologies. Whereas at one time we had 
radio on AM and FM, now we have the Internet, satellite, high-
definition, and the question is whether our laws are adequately 
compensating artistic work.
    In 1995, there was a major revision of the copyright law. 
Satellite radio producers are charged different royalty rates 
than Internet service providers, while traditional broadcasters 
are almost totally exempt from paying a royalty unless the same 
programming is retransmitted over the Internet. So it is again 
a clash between technology and artistic effort, and we are 
going to try to move into the field on the Judiciary Committee, 
understand the complex issues involved and see if we can 
provide a fairer, level playing field.
    Before turning to our witnesses, let me recognize Senator 
Feinstein and ask if she has an opening statement.

  STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR FROM THE 
                      STATE OF CALIFORNIA

    Senator Feinstein. I do, if I may, Mr. Chairman, and let me 
thank you very much for holding this hearing.
    Yesterday, I, along with Senators Graham and Frist, 
introduced the Platform Equality and Remedies for Rights-
Holders of Music Act, called in the ubiquitous acronym the 
PERFORM Act. This bill is designed to address two problems that 
have recently been brought to my attention.
    First, although we have a statute creating a compulsory 
license for new forms of radio, this license actually treats 
Internet, cable and satellite service providers differently, 
even though as technology advances their services they have 
become increasingly similar.
    Second, some businesses that are granted a performance 
right under this compulsory license are exploring new 
technologies that effectively turn a performance into a 
distribution, thereby not paying separate royalty rates.
    While I support advancements in technology and believe it 
is important that these new service providers succeed and grow, 
I believe our law must strike the proper balance between 
fostering new businesses and technology and protecting the 
property rights of the artists whose music is being played. As 
the modes of distribution change and the technologies change, 
so must our laws.
    This bill does two things. First, it creates rate parity 
for all service providers under the compulsory license. Any 
company covered by this compulsory license will be treated the 
same. This means that Internet, cable and satellite will all be 
subject to the same rate standards.
    Second, it requires that Internet, cable and satellite 
providers employ technology that will prevent downloading, 
manipulation and sorting of the music that they play to prevent 
individuals from creating their own personalized play lists.
    I also want to be clear about what this bill does not do. 
It does not deal with traditional, over-the-air radio 
broadcasting. I understand that the Commerce Committee is 
examining this issue and that private negotiations are underway 
at the same time.
    Finally, let me say I believe this is the beginning of the 
legislative process. There may be disagreements over how to 
strike the proper balance on these difficult issues and we are 
certainly open to a robust dialog. We have tried over a 6-month 
period now to negotiate between the parties. These were the two 
points about which there were the clearest agreement. I know 
there were people that did not want me to introduce this bill 
at this time, but I believe I should introduce it.
    I believe that the two points that are made in the bill are 
essentially unassailable, but I also agree that there are other 
things that can be added to the bill if there is agreement. I 
would like to say, though, that it is very difficult to achieve 
that agreement, and we have done the best we possibly could 
over the past 6 months and at least have reached these two 
points.
    So thank you, Mr. Chairman.
    Chairman Specter. Thank you very much, Senator Feinstein.
    We now turn to our first witness. Ms. Anita Baker has 
gained critical acclaim as a soul, rhythm and blues singer with 
such chart-topping hits as ``Sweet Love'' and ``I Just Want to 
Be Your Girl.'' She has performed duets with Frank Sinatra and 
Joel Davis, and won Grammy awards in 1987, 1988, 1989, 1990, 
1991 and 1996.
    That is quite a record, Ms. Baker. You are part of history 
all by yourself, but especially having sung with Frank Sinatra.
    Our Senate rules provide for 5-minute opening statements 
and then we will come to the panel for questions.
    Ms. Baker, you are recognized. If you would care to do it 
in song, we would be pleased to hear it in any way you--would 
you withhold for just a moment? We have been joined by our 
distinguished ranking member, and before he can catch his 
breath I would like to call on Senator Leahy, with whom I work 
very closely on progress and productivity of this Committee.
    Senator Leahy.

  STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR FROM THE 
                        STATE OF VERMONT

    Senator Leahy. Thank you very much, Mr. Chairman, and I 
apologize for being late. Unfortunately, we got into a number 
of conflicts. I see several people here I know, and I 
appreciate being here.
    The issue raised is an important one, and I know Senator 
Feinstein has worked so hard on this. The principles that guide 
us here are simple. We should be supporting and promoting the 
artists who write and perform the music that enriches all of 
our lives. We should be helping everybody else to hear and 
enjoy that music.
    The copyright laws exist in this arena to define how 
creators can control and profit from the use of their works. 
Then we have all the technological advances of recent years and 
all the improvements in quality and quantity of music that the 
digital age has brought us. It ought to mean that more people 
can hear more music more easily, while everyone gets paid their 
due.
    I recognize and appreciate the fact that many other people 
and businesses are involved in getting music from the artists 
to the listeners. The record companies, from the smallest 
independents to the largest of the majors; the broadcasters, 
whether they own one station or thousands; digital music 
providers, including cable and satellite and Internet--all of 
these play crucial roles in turning the copyrights of artists 
into the listening pleasure of the consumer. But they are not 
ends in themselves. They are best when they are helping to 
develop new artistic talent to nurture creative endeavors and 
to facilitate ever-better ways of getting people, wherever they 
may be, the music they love.
    The statutory license in Section 114 is complicated. Nobody 
denies that. Maybe it is too complicated. Maybe it is outdated. 
Maybe in Congress should take a whole new approach to this 
situation. We have legislated in a piecemeal fashion partly 
because the technology has moved so much faster than a 
legislative body can work. We have tried to make reasonable and 
effective changes to the licensing scheme when new technologies 
have changed the music marketplace.
    Maybe it is time for us, both those up here on the dais and 
those at the witness table, to step back and try to consider 
music licensing from its first principles. Maybe we should 
primarily focus not so much on the technologies, but on the 
rights that are at stake. Maybe then we could produce a 
licensing scheme that has a real foundation on the rights of 
creators and the interests of consumers. Maybe then the 
purposes of the Copyright Act, and of this Committee, will be 
better realized in the marketplace for music.
    I love music. I was coming back from a long trip the other 
day and I was listening to music on the plane. The music was 
eclectic, ranging from Puccini to the Grateful Dead and a whole 
lot in between. I am glad that we have the ability to do that. 
Just a few years ago, I couldn't carry a 7- or 800-song library 
with me.
    So I thank my colleagues, Senators Feinstein, Graham, 
Cornyn, and Frist, for taking up the formidable task of 
beginning this inquiry. And, of course, I especially thank the 
Chairman, my good friend from Pennsylvania, who has just been 
nationally recognized as one of the best Senators in the 
country of either party, and I agree with that.
    So let's see where we can go. This is not an easy subject, 
and when we listen to the people all across the spectrum who 
are involved, it gets less easy. But I have an enormous amount 
of respect for the people who are here. Some of you are close 
personal friends and I am anxious to hear the testimony.
    So thank you, Mr. Chairman.
    [The prepared statement of Senator Leahy appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Senator Leahy.
    I had introduced Ms. Baker, and we look forward to your 
testimony.

  STATEMENT OF ANITA BAKER, PERFORMING ARTIST, GROSSE POINT, 
                            MICHIGAN

    Ms. Baker. Thank you, sir, and thank you to Mr. Rundgren 
for engaging my microphone. Thank you.
    Mr. Chairman and members of the Senate Judiciary Committee, 
thank you for inviting me to testify before you today. I will 
be brief. I have something really simple to say, and that is 
that artists should be compensated in a fair and standardized 
way by businesses that distribute their music. It is essential 
that this compensation reflect a fair market value.
    Satellite radio is planning on selling devices that allow 
their listeners to find and record individual songs and then 
create permanent libraries and play lists of these songs. So as 
an advertisement for XM Satellite Radio says, their radio is 
not a pod, per se, but it the mother ship, a distribution 
outlet. Traditional radio may be about to do something similar 
soon as well.
    The technology is here, the cat is out of the bag, the 
genie is out of the bottle. There is no going back, so let's 
move forward to negotiate a standardized fair market value for 
this amazing commodity. As the digital revolution has arrived, 
it brings with it exciting new ways of listening to and using 
radio. As someone who listens to radio, I think it would be 
great to be able to record big blocks of music from the radio 
and then pick individual songs out of them so that I can keep 
them and listen to them later at my discretion.
    I think it would be great to 1 day be able to tell my 
computer radio to beep me and tell me the minute that the next 
new Bonnie Raitt single comes over the airwaves. And I would 
love to be driving in my car listening to a song and have the 
option to hit a button and immediately save that whole song. 
All of these technologies are exciting and tremendous ways for 
connecting music with the fans.
    However, I hope this Committee considers and supports 
legislation that recognizes that the folks who create music, an 
amazing commodity, need some consistency. We need to know, as 
these technologies develop with mind-blowing speed, that we 
will be able to look forward to a standardized fair market rate 
of compensation. This idea doesn't just affect me. It affects 
my entire family and colleagues that I work with--the 
songwriters, the musicians, the engineers, all of whom make 
great music.
    So I hope this Committee understands that I support radio 
and listeners being able to do this. I have spoken with EMI and 
Blue Note, two of the companies that work with me, and they 
have promised me that they support this, too. I just happen to 
think that when a radio station is acting as a download 
service/distribution outlet, the artists should be paid 
appropriately.
    I am also glad to be able to say that many of my fellow 
music groups like the National Academy of Recording Arts and 
Sciences, the Rhythm and Blues Foundation, AFM, AFTRA and a 
variety of other coalitions and organizations support this 
view.
    I truly appreciate the time that you have given me, and I 
would like to say also personally that I respect each artist 
represented here and their right to express their opinions 
about the commodity that they create. I would also like to say 
that as an artist and as someone who has been in the business 
for over 20 years, I have come to a place where I have been in 
the artist's shoes, I have been in the producer's shoes, and on 
occasion I have even been in the engineer's shoes. And as I sit 
before you today, I am somewhat of an independent myself in the 
sense that I have come from an artist signed to a label, as an 
artist who is owner of their property represented by a joint 
venture with my record label. So, essentially, we are partners 
and I come to you not as just an artist, but as somewhat of an 
independent, and this is my view and I appreciate the time that 
you have given me.
    Unfortunately, I do have another engagement and I will be 
saying good morning.
    Chairman Specter. Thank you very much for coming in, Ms. 
Baker, and for your testimony. We understand you are busy and 
we wish you well.
    Ms. Baker. Thank you, sir.
    [The prepared statement of Ms. Baker appears as a 
submission for the record.]
    Chairman Specter. Our next witness is Mr. Todd Rundgren, 
recording artist, songwriter, producer, and current lead singer 
for The New Cars. I am pleased to tell you that he hails from 
Darby, Pennsylvania, right around the corner, and began his 
musical career in Philadelphia with the Philadelphia-based band 
Woody's Truckstop.
    Throughout his career, he has written and recorded notable 
hits such as ``Hello, It's Me'' and ``Bang the Drum All Day,'' 
and is acknowledged by Rolling Stone magazine as having one of 
the 500 greatest rock albums of all time. He has produced 
albums by Cheap Trick, Meatloaf, XTC and All the Notes.
    Thank you for coming in today, Mr. Rundgren, and we look 
forward to your testimony.

 STATEMENT OF TODD RUNDGREN, LEAD SINGER, THE NEW CARS, DARBY, 
                          PENNSYLVANIA

    Mr. Rundgren. Thank you, Chairman Specter, Senator Leahy 
and members of the Committee. My name is Todd Rundgren. I am 58 
and I am a professional musician. I have also been employed as 
a record producer, composer for film and television, technology 
spokesman and computer programmer. I am the designed and 
developer of PatroNet, an Internet-based subscription service 
that allows audiences to provide direct underwriting of artists 
in exchange for insider information, direct communication, 
discounted merchandise and first-look experiences of the 
artist's work, all within a community structure.
    This is my 40th year as a musician and 18th year as an 
independent. I left Warner Brothers in 1998 with the conviction 
that the major labels were unprepared for, and were indeed 
hostile to the inevitable changes that digital technology would 
effect in the way that music would be created, marketed and 
experienced. I wasn't so prescient that I foresaw the rise of 
the Internet, but I was convinced that I would be hindered in 
any attempt to use new developments to alter the ground rules.
    One of the first cutting-edge projects I was involved in 
concerned digital rights management, a concept that did not yet 
exist. I was hired by, ironically enough, the Warner Full 
Service Network, an interactive television pilot project that 
sought to merge video computers and high-bandwidth home 
delivery. The plan was to create on-demand music services that 
could be navigated on one's home TV, kind of like an iTunes for 
the early 1990s.
    When it came time to plug the music in, everything I had 
suspected about the savvyness of the industry was crystallized. 
To a label, every one of the majors refused to consider the 
possibility of putting music they controlled onto a server. 
Ironically, even the Music Division of Warner Brothers would 
not cooperate, even though this was only a demonstration 
project.
    Ever since then, the behavior of the majors has been that 
of a mindless parasite contributing nothing, yet trying to get 
its snout into the bloodstream of any new development. The 
knee-jerk justification is the protection of artists, which 
would more accurately be represented as the interests of highly 
bankable artists still under contract. For every one of those, 
there are a hundred with a lifelong bad taste in their mouths 
over the way they were treated when sales began to lag.
    I have striven to tie together the replacement parts an 
independent musician would need to build enough audience for a 
sustainable living. Amongst these is, of course, the Internet 
and a raft of contractors who can press and distribute disks 
for you, if you can afford it, and take on the promotion and 
production and marketing normally provided by a label. The only 
problem is getting heard. Terrestrial radio, especially of the 
syndicated flavor, is not available to most artists even if 
they do have a traditional label deal.
    I am opposed to any measures that would insinuate the major 
labels into an area they have failed to husband and to 
capitalize off of artists they have abandoned or never had any 
interest in. The myth that you could survive very long on 
record company advances has long been debunked. Players need to 
play to get paid and need audiences to play to. All the majors 
have ever done is try to claim the audience as theirs alone and 
to lower expectations by exposing them only to the generally 
sub-standard product the majors begrudgingly underwrite.
    Worse yet, across-the-board fee structures like those 
proposed discourage the exposure of new talent in deference to 
audience favorites as broadcasters try to recover those fees. 
And worst of all, syndicated radio, the majors' partner in 
neglect, does not deserve exemption for the abysmal quality of 
product they deliver. The fantasy that this type of legislation 
helps music or musicians should be summarily exposed for what 
it is--yet another futile attempt to turn back the clock to the 
days when they were the sole gatekeepers to an artist's future.
    Thank you for inviting me here to testify and I would be 
pleased to respond to your questions.
    [The prepared statement of Mr. Rundgren appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Mr. Rundgren.
    Our next witness is Ms. Victoria Shaw, a songwriter based 
in Nashville, Tennessee. Her songs have been performed by a 
variety of recording artists, including Garth Brooks, Ricky 
Martin and Christina Aguillera. She has won two Emmys for her 
work, the first in 1999 for the song ``In This Moment,'' 
featured on the daytime drama ``As the World Turns,'' and the 
second in 2000 for the song ``When I Think of You,'' featured 
on the daytime drama ``One Life to Live.''
    Thank you for joining us today, Ms. Shaw, and the floor is 
yours for 5 minutes.

  STATEMENT OF VICTORIA SHAW, SONGWRITER, NASHVILLE, TENNESSEE

    Ms. Shaw. I am happy to be here. Thank you, Chairman 
Specter and members of the Committee. Thank you very much for 
having me here today to speak on the issue of parity among the 
different platforms offering digital music.
    These are exciting technologies in an exciting time, and we 
are all here today not to keep them from taking root, but to 
ensure an environment in which they all can thrive. That 
environment is only possible when everyone plays fairly.
    As a composer, musician, and owner of my own label, 
Taffetta Records, I get to experience the thrills of the music 
business on many different levels. I have been lucky enough to 
have my songs recorded by some of the biggest artists, and even 
got to open for Garth Brooks in Central Park. And trust me, 
this is a lot scarier, but I consider among my honors this 
opportunity to come before you to speak on behalf of the many, 
many artists and composers who will be greatly harmed if they 
are denied appropriate compensation for their work.
    We want to help usher in the digital radio revolution, but 
to continue to be a part of it we need your help. Undoubtedly, 
you are aware of the extremely difficult times the music 
industry has faced these past few years due to online theft of 
music. Nashville, in particular, where I live, home to one of 
the greatest songwriting communities in the world, has seen a 
massive reduction of those able to make a living from their 
craft.
    This is why we have been so excited by the many new digital 
services offering our work. For those who want our songs in 
digital form, the choices now range beyond unauthorized and 
free. From cable and satellite, to Internet radio, to download 
services, licensed services offer music fans the music they 
want in the way they want, all for the prices that are 
appropriate to consumers and fair to those of us who create it. 
This is the bright future of the music industry.
    But whether we are operating in the physical world or in 
that bright digital future, one truism remains: Artists, 
composers, record labels and everyone involved in making music 
depend on sales to survive. In the digital world, those sales 
are made through download services like iTunes and Napster. The 
licenses required by these services to allow people to purchase 
our music is what will sustain us as we move further away from 
the physical world of tapes and CDs.
    Yet, it is precisely those licenses and those sales that 
are being threatened by the new offerings of radio platforms. 
By allowing listeners to record broadcasts and buildup entire 
jukeboxes of music on portable devices, radio services are 
becoming download services, but without paying the down 
license.
    I am not talking about casual recording off the radio. 
Certainly, we have all done that, and I have no interest in 
seeing that disappear. Just imagine how proud I am when I see 
someone race to the radio to record one of my songs that came 
on. But now imagine my frustration if I saw someone with an 
entire collection of my work automatically recorded, labeled, 
sorted and transferred to them in pristine, permanent and 
portable digital copies without seeing a cent from a sale in 
return. This is not radio. This is iTunes, this is Napster or 
Yahoo!, or any of a number of other download services that pay 
the appropriate license for this type of distribution. Those 
are the services that make the sales we need to survive, but 
those services can't compete with others that offer the exact 
same functionality without paying the same license.
    This is a matter of fairness to other broadcasters, to 
download services, and to all of us making the music for those 
services. This is a matter of treating platforms that offer the 
same services equally. This is a matter of parity.
    The PERFORM Act, recently introduced by Senators Feinstein 
and Graham, accomplishes this parity by ensuring that all 
services follow the same rules in how they offer music. By 
giving everyone equal footing, we give everyone an equal 
opportunity to grow. This is important legislation that places 
value on the music we work so hard to create.
    As I look back on my career, I am grateful for all the 
opportunities I have had to share my music with others and to 
experience the works of all those who have chosen to share with 
me. My own songs come from stories of love and loss and fear 
and faith, but the story of digital radio should be simply one 
of hope. On behalf of everyone in the music community, and my 
kids, I hope you will support this bill and secure for all of 
us that bright digital future.
    Thank you so much for your time.
    [The prepared statement of Ms. Shaw appears as a submission 
for the record.]
    Chairman Specter. Thank you very much, Ms. Shaw.
    Our next witness is Mr. Edgar Bronfman, Chairman and CEO of 
Warner Music Group, and general partner of the venture capital 
firm Creative Technology Partners. Warner Music Group is one of 
the leading music companies in the world, consisting of both a 
record label and a music publishing arm.
    Thank you for joining us today, Mr. Bronfman, and we look 
forward to your testimony.

STATEMENT OF EDGAR BRONFMAN, JR., CHAIRMAN AND CHIEF EXECUTIVE 
        OFFICER, WARNER MUSIC GROUP, NEW YORK, NEW YORK

    Mr. Bronfman. Thank you, Mr. Chairman. Thank you for having 
me here. I come here today not just as the CEO of a major 
American music company, but as a representative of the 
intellectual property industry. IP is the backbone of the U.S. 
economy today and in the future. The U.S. Government rightly 
seeks to protect American IP around the world, and we must 
ensure that it receives appropriate protection here at home as 
well.
    Although piracy remains a plague on the IP industry, Warner 
Music operates now on the premise that as a result of the 
digital revolution, there will be more music delivered to more 
consumers in ways that we never before imagined possible. No 
one at this table has a greater incentive to embrace digital 
distribution than we have. Digital distribution allows us to 
offer more music to more people in more ways than ever before, 
and I would like to underscore three points.
    First, if there is going to be a compulsory license for 
performances of recordings, then at least the royalties should 
be set at market rates. XM has paid market rates for everything 
from electricity to satellites. It has paid market rates for 
content like ``Oprah Winfrey'' and Major League Baseball. It is 
only fair that XM pay market rates for the music on which it 
has built its business.
    Second, a performance is distinct from a distribution. A 
performance allows someone to listen, while a distribution 
allows someone to keep a copy. They are different consumer 
experiences, require different licenses, and command different 
royalty rates. It is not fair for satellite services or anyone 
else to turn performances into distributions without obtaining 
and paying for a distribution license. It is unfair to the 
creators who lose royalties when satellite services give away 
their music for satellite's own business purposes without 
paying for it. It is unfair to satellite's competitors, who 
actually pay for the right to distribute our music under a 
license negotiated in the marketplace.
    We already license a large number of distribution services 
across all platforms, everything from the Internet to mobile 
phones, and we are excited about licensing new distribution 
services like XM. Indeed, we already have market rate licenses 
with companies like Napster to Go and Rhapsody for the very 
functionality that XM desires to offer without compensation to 
artists and labels.
    Third, and more broadly, the same rules should apply to 
services competing across all digital platforms. Whether we are 
talking about rate-setting standards or the obligation to 
protect our content, the law should treat all digital music 
services the same. No category of services should enjoy 
advantages over its competitors because of arbitrary 
differences in the law.
    Music is licensed along a continuum, with royalty payments 
depending on how much control the user has over the music. At 
one extreme is the purely passive listening experience provided 
by traditional radio. At the other extreme is ownership of copy 
which is provided by services like iTunes and Yahoo! and 
Rhapsody.
    Unlike a passive listening experience, distribution 
services offer consumers varying degrees of control to 
determine what music they hear and how and when they hear it. 
Cable, satellite and Internet performance services are 
regulated by the Government and by this Committee through a 
compulsory license. I am generally not a fan of compulsory 
licenses and feel they are only appropriate when ordinary 
market mechanisms cannot work.
    Unlike contractual arrangements negotiated in the 
marketplace, compulsory licenses are more difficult to fix if 
the passage of time or technological innovation makes them 
outdated, and there is no better example of this than the 
treatment of satellite services under Section 114 of the 
Copyright Act. These services are obtaining their content 
through compulsory licenses that were designed only for 
listening.
    Now, satellite services are going even further, offering 
new devices that transform a performance service into a 
distribution service. The device permits consumers to record 
satellite programming, see a list of songs recorded, 
disaggregate the specific tracks they want and library them for 
future and permanent use. This device is not only similar to an 
iPod, but it is like an iPod linked to a supply of free iTunes 
music.
    The law already prevents an Internet webcaster from 
engaging in similar attempts to transform their listening 
services into distribution services. Why shouldn't satellite 
services be subject to the same rules?
    The PERFORM Act that Senators Feinstein, Graham and Frist 
have introduced requires just that. It would ensure that 
competition is based on the marketplace, not on arbitrary legal 
advantages. It would ensure parity across all platforms, parity 
in the way a fair price is derived, parity in the ways that 
content is protected, parity plain and simple. At the same 
time, it protects consumers' expectations when it comes to 
being able to record music off of these services, as consumers 
have traditionally done while listening to the radio.
    Mr. Chairman, no one appreciates the promise of the digital 
era more than Warner Music. We believe that the integrity of 
the digital marketplace represents the very future of music. I 
urge you to support this legislation and move it to enactment 
in order that all of the parties here today and all others who 
seek to legitimately bring content to consumers can make 
beautiful music together.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Bronfman appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Mr. Bronfman.
    Our next witness is Mr. Gary Parsons, Chairman of the Board 
of XM Satellite Radio and Chairman of Mobile Satellite 
Ventures. XM Satellite Radio is America's leading satellite 
radio company, providing consumers access to digital radio in 
the home, car, or on portable devices.
    We appreciate your coming in, Mr. Parsons, and you have the 
floor for 5 minutes.

STATEMENT OF GARY PARSONS, CHAIRMAN OF THE BOARD OF DIRECTORS, 
           XM SATELLITE RADIO, INC., WASHINGTON, D.C.

    Mr. Parsons. Thank you very much, Mr. Chairman, Senator 
Leahy, members of the Committee, and thank you for inviting me 
to testify this morning.
    XM Radio is America's first and largest satellite radio 
service. Although our industry is in its infancy, over 6.5 
million subscribers pay an average of $10 per month to receive 
170 channels of programming, including Major League Baseball, 
Fox News, CNN, C-SPAN, and even Spanish-language broadcasts.
    While most of our channels are non-music, our 69 
commercial-free music channels give every music fan something 
to enjoy, whether they are discovering a new artist or 
reconnecting with favorites like Todd Rundgren, Anita Baker or 
Victoria Shaw. And at XM, we are passionate about music. I fell 
in love with music and radio 40 years ago when I was a disc 
jockey and attending high school in South Carolina.
    Unfortunately, during the ensuing decades, radio play lists 
became dominated by narrow, canned formats that excluded the 
lesser-known artists and, in fact, entire genres of music. XM 
play lists feature thousands of artists from a library of more 
than two million tracks. Our radios display the artist and song 
names, and our announcers educate listeners about music that 
they heard for the first time on XM. And it is working. Our 
research shows that XM subscribers buy more music than the 
average consumer. In fact, the longer a person subscribes to 
XM, the greater variety of music they buy and the more concerts 
they attend.
    In addition to exposing customers to new music, XM also 
pays tens of millions of dollars to performing artists, 
songwriters, record labels and music publishers. While the 
terrestrial radio giants are exempt from paying performance 
rights, XM Radio is the largest single payer of sound recording 
performance royalties.
    In spite of this disparity in treatment, we are not here 
asking for a change in copyright law. We launched our service 
in late 2001. We invested more than $3 billion, we launched our 
satellites, and we negotiated and paid performance royalties on 
music to the record labels and the artists. We pay these 
royalties under the structure set in place by Congress in 1998, 
and supported by the major record labels at that time.
    Now, the record industry is back asking you to rewrite the 
established rules of performance rights just a few years after 
they were created by Congress and, interestingly, just as we 
began the renegotiation of those rates for the next 5 years. 
Based on our current rates alone, satellite radio will pay 
hundreds of millions of dollars over this period.
    The labels also unfortunately seek to eliminate long-held 
consumer rights. For decades, a consumer's right to record 
material for their personal use off the radio has been upheld 
by the courts. It has been honored by Congress and reinforced 
by the Audio Home Recording Act.
    Not only does XM Radio pay for performance rights under the 
Copyright Act, but our manufacturing partners pay millions of 
dollars in additional payments under the Audio Home Recording 
Act for the portable radios that we distribute. These radios 
should be viewed as a boon, not a bane.
    Consumers do want more choice about where and when they 
hear and see entertainment, and we have introduced a new 
generation of innovative devices to let subscribers hear live 
XM Radio on the go. Like a TiVo for the radio, subscribers can 
save XM programming for later listening at their convenience of 
for when they are in places where the satellite signal cannot 
reach, like in this hearing room.
    We made the process simple and we made it convenient. But 
just because it is convenient, it doesn't make it illegal. XM 
and its manufacturing partners designed these devices to fully 
comply with copyright law. And despite the record companies' 
claims, recording from the radio is not a download service. You 
can't choose to record any song that you want right when you 
want it. Anything recorded from the radio is locked to the 
device. It cannot be transferred to computers or out to the 
Internet, ensuring it is only for personal use. And you can 
only hear the recorded material as long as you remain an XM 
subscriber.
    Satellite radio is an American success story and we have 
played by the rules. We pay for the right to play the music and 
our manufacturing partners pay again for our subscribers' right 
to record what was played. The PERFORM Act is not about piracy, 
and given that it changes the rules for XM but not for 
broadcast radio, it is really not about parity either. Congress 
created very balanced copyright laws to protect the rights of 
users, as well as the rights of the rights-holders. XM pays and 
protects the interests of the content owners, but we also will 
strongly fight to defend consumers' rights to record as well.
    Thank you for the opportunity to share my views here today 
and I am pleased to answer your questions.
    [The prepared statement of Mr. Parsons appears as a 
submission for the record.]
    Chairman Specter. Thank you very much, Mr. Parsons.
    We now turn to Mr. Bruce Reese, President and Chief 
Executive Officer of Bonneville International Corporation, 
based in Salt Lake City. Bonneville operates 35 radio stations 
throughout the country. He serves on the board of directors and 
is Chairman of the Radio Board of the National Association of 
Broadcasters.
    Thank you for appearing here today, Mr. Reese, and we look 
forward to your testimony.

  STATEMENT OF BRUCE T. REESE, PRESIDENT AND CHIEF EXECUTIVE 
OFFICER, BONNEVILLE INTERNATIONAL CORPORATION, SALT LAKE CITY, 
  UTAH, ON BEHALF OF THE NATIONAL ASSOCIATION OF BROADCASTERS

    Mr. Reese. Thank you, Chairman Specter and members of the 
Committee. We appreciate the opportunity to be here. As was 
noted, I am here in my capacity as joint board Chairman of the 
National Association of Broadcasters. The NAB advocates on 
behalf of more than 8,300 free local radio and television 
stations, as well as broadcast networks, before Congress, the 
FCC and the courts.
    I have two simple points here today. First, Congress should 
not take any actions that would delay the continued role out of 
the new digital radio service for terrestrial radio stations. 
Second, Congress should improve current copyright law so that 
it does not inhibit Internet radio streaming.
    As to the first point, local broadcasters are engaged in an 
exciting transition to digital. Currently, 765 AM and FM 
stations are on the air in digital, with many more that will 
roll out in the near future. HD radio will enable us to better 
serve our local communities and remain competitive in the 
evolving digital media marketplace.
    Digital radio not only offers crystal-clear audio. It also 
permits the broadcasting of multiple, free over-the-air program 
streams. Radio stations will be able to bring additional local 
content to the public within their current spectrum, as well as 
providing expanded opportunities to promote more and varied 
artists and music.
    But we face many challenges as we work toward a successful 
and timely transition to digital radio. The HD radio revolution 
involves not just radio stations, but the consumer electronics 
industry, the auto industry and, most importantly, consumers. 
2006 and 2007 promise to be pivotal years for this revolution 
in radio. Automakers are signing up for factory-installed 
radios. Retail outlets are featuring many new digital radio 
products, and many major radio groups are engaged in a 
marketing campaign to make consumers aware of digital radio.
    We must not add to these challenges by a premature adoption 
of a quick-fix technical system to jury-rig some copy 
protection device into digital radio. To that end, NAB is 
working with the recording industry to develop options for 
content protection, so long as those options don't slow down 
radio's digital transition. These discussions have been very 
productive so far and the NAB strongly believes that the 
broadcast industry, the recording industry and other 
stakeholders can work toward a consensus on a digital radio 
copy protection system. While those discussions continue, 
Congress should refrain from adopting an unnecessary 
legislative mandate at this time.
    As to my second point--the changes needed in copyright law 
to promote Internet radio streaming--first, Congress should 
exempt from sound recording fees streams to a station's local 
over-the-air audience. This Committee has recognized on several 
previous occasions that the mutually beneficial relationship 
between the radio industry and the recording industry is a more 
than appropriate offset for a performance fee.
    It simply makes no sense to impose a tax on a model that 
has worked well for decades simply because the same audience 
hears a radio station through a computer rather than over the 
air. The same local public service benefits are provided, as 
well as the same promotional benefits to the recording artists.
    Second, the sound recording performance fee and the 
standard by which it is set must be reformed. The willing 
buyer, willing seller standard set in 1998 has been a recipe 
for abuse. It has inflated royalty rates to levels that have 
inhibited radio streaming services. Instead, Congress should 
establish a fee comparable to what is paid to BMI, ASCAP and 
SESAC.
    Third, Congress should reform the statutory license 
conditions to make them consistent with broadcast practices. By 
way of example, some of these conditions prohibit DJs from pre-
announcing songs and prohibit the playing of any three tracks 
from the same album within a 3-hour period. Radio stations 
should not be forced to choose between either radically 
altering their programming practices or risking uncertain and 
costly copyright infringement litigation.
    Fourth, Congress should eliminate additional copyright 
liability for ephemeral recordings that simply exist to 
facilitate a licensed or exempt performance. And, fifth, 
Congress should ensure that the reporting and recording 
recordkeeping requirements do not discourage broadcasters from 
streaming.
    NAB believes that these changes in copyright law are 
necessary so that Internet radio streaming can reach its full 
potential both for the benefit of broadcasters and for the 
listening public.
    Mr. Chairman, the radio industry is indeed at the beginning 
of a revolution. The successful deployment of digital radio and 
the growth of Internet radio streaming will significantly 
improve services for our listeners and your constituents. The 
future of digital radio also holds much promise for the very 
industries and groups represented here at this table.
    Thank you.
    [The prepared statement of Mr. Reese appears as a 
submission for the record.]
    Chairman Specter. Thank you, Mr. Reese.
    We now turn to Mr. Mark Lam, Chairman and Chief Executive 
Officer of Live365, which is one of the world's largest 
Internet radio providers, with over 10,000 broadcasts and 
2,600,000 listeners a month.
    Thank you for coming in today, Mr. Lam, and you may 
proceed.

 STATEMENT OF N. MARK LAM, CHAIRMAN, EXECUTIVE COMMITTEE, AND 
 CHIEF EXECUTIVE OFFICER, LIVE365, FOSTER CITY, CALIFORNIA, ON 
            BEHALF OF THE DIGITAL MEDIA ASSOCIATION

    Mr. Lam. Yes, thank you. On behalf of Live365 and the 
Digital Media Association, thank you, Chairman Specter and 
Senators Hatch, Biden and Feinstein, for the opportunity to 
speak today about how the Copyright Act discriminates against 
Internet radio.
    I am Mark Lam, CEO of Live365. In a world of giants such as 
RIAA, Clear Channel, XM and Yahoo!, we are the Internet radio 
service which is most at risk. I often analogize us to the 
little mouse amongst all the elephants in this field.
    Today, I ask the Committee to build on the PERFORM Act 
introduced by Senators Feinstein and Graham to, one, legislate 
royalty and programming parity among all digital radio 
services; two, protect recording artists and copyright owners 
from radio services that promote and profit from substitution 
of consumer recording; and, three, resolve the dispute over the 
definition of interactive service so that consumers, radio 
services and creators can maximize the benefits of Internet 
technology and radio.
    On the issue of royalty parity, consider two comparisons. 
Live365's audience compares to a good-sized radio station in 
Harrisburg, Pennsylvania. The radio station pays about 3.5 
percent of revenues to songwriters and music publishers. 
Live365 pays 6.5 percent. The radio stations pay nothing to 
record labels and artists, but in 2005 Live365 paid $1.2 
million to labels and artists, more than one-third of our radio 
revenue. Most outrageously, in the current royalty arbitration, 
the RIAA is demanding that we pay two-and-a-half times more 
royalties. This will put us out of business.
    Satellite radio is similar. I have heard that XM and Sirius 
pay 5 to 7 percent of their subscription revenue to record 
labels and artists, substantially less than the 10.9 percent 
paid by subscription Internet radio. Even worse, royalties for 
advertisers' support of free Internet radio are based on music 
usage only, so the royalties have no relationship to revenue. 
As a result, advertiser-supported Internet radio pays an 
extremely percentage of revenue to record labels and artists, 
and some companies' royalties exceed their total revenue.
    The issue of programming parity is simple. Congress should 
eliminate restrictions that were intended to ensure that 
digital radio does not offer music on demand, but which instead 
have prevented us from engaging in common broadcast practices 
that promote labels' and artists' interests. If royalty-paying 
Internet radio is to compete against royalty-free broadcasters, 
we should be allowed to announce songs and events to keep 
listeners tuned in and to play more than two songs by an artist 
consecutively, just as radio stations do.
    Regarding the issue of content protection, today's law 
requires Internet radio services to reasonably protect sound 
recording creators from substitution of consumer recording, but 
the existing requirement is not balanced like the reasonable 
recording definition in the PERFORM Act, introduced by Senator 
Feinstein. Therefore, DiMA agrees that the reasonable recording 
limitations should extend to all digital radio platforms, but 
only when a service is promoting and profiting from consumer 
recording.
    Live365 and other services that are mainly broadcasting 
music in digital form should not be obligated to police or 
technologically inhibit independent consumer conduct. Services 
such as XM that are promoting and profiting from consumer 
conduct should act reasonably.
    Third, I turn to interactivity and how much consumers may 
influence radio programming before service is deemed 
interactive and ineligible for the statutory license. Congress 
enacted a statutory license to promote Internet radio as an 
innovative, competitive medium. Unfortunately, the interactive 
service definition is so unclear that it has not been resolved 
by Copyright Office proceedings or 5 years of litigation.
    Internet radio innovation has been stymied, harming 
services and recording artists who had joined DiMA in seeking a 
legislative resolution. The problem is simple. If Internet 
radio programming is less interesting than broadcast or we are 
mired in complex negotiations about royalties that our 
competitors do not pay at all, we cannot compete, succeed, or 
generate even more royalties. DiMA companies want to focus on 
developing exciting royalty-paying products and services that 
combat piracy and pay the creators rather than on lawyers and 
litigation.
    Thank you, Mr. Chairman. DiMA members and the sponsors of 
the PERFORM Act agree that the Copyright Act treats Internet 
radio inequitably, but that platform parity, content protection 
and continued innovation are all achievable. Thank you for the 
opportunity to testify today about a legislative solution that 
would benefit consumers, promote competition and increase 
royalties to creators. This is the balance that the Copyright 
Act is intended to accomplish. We look forward to working with 
you to make sure that it succeeds.
    Thank you.
    [The prepared statement of Mr. Lam appears as a submission 
for the record.]
    Chairman Specter. Thank you, Mr. Lam.
    We now will proceed with questions from the panel of 
Senators with 5 minutes each.
    Mr. Parsons, satellite had a tremendous publicity surge 
when there was the announcement of the contract of Mr. Howard 
Stern for $600 million. That is from a competitor of yours, 
Sirius. That created a very substantial public awareness of 
satellite.
    What is there in the operation of satellite and its profit-
making potential which would bear on the subjects we are 
talking about here which would warrant such a phenomenal 
contract for Mr. Stern?
    Mr. Parsons. Well, Senator, since that deal was struck by 
my competitor and not myself, I certainly did not see the 
economics of that amount of a paycheck. However, that being 
said, the one element that I would put in there that is----
    Chairman Specter. Well, I am interested to know the import, 
the scope, the profit-making potential. When we call upon you 
or may call upon you to pay parity, as Mr. Bronfman, Mr. Shaw 
and Mr. Rundgren have urged, it is a complex subject to grapple 
with, and when I saw the Stern contract, it gave some insight. 
They are still a competitor of yours even after paying the 
money. They are not bankrupt, they are not out of business.
    Mr. Parsons. That is true, Mr. Chairman, and the element 
that I would put there that I think is critical to 
understanding that is the exclusivity nature of it. I mean, 
that certainly does bring an enormous difference in the price 
that is paid for the different content. Clearly, we have long 
said that----
    Chairman Specter. Well, Sirius obviously calculates that by 
having Mr. Stern on their program, they are going to get 
listeners and they are going to make money. So what is there 
about satellite which has such great profit-making potential?
    Mr. Parsons. I think in this particular case, the 
exclusivity of that nature is the answer because obviously Mr. 
Stern was making enormous amounts when he was exclusive on 
terrestrial radio as well. And we have said relative to music 
rights that the minute that the top new star that Warner Music 
wants to bring out will be taken off of the air anywhere else 
and put exclusively on satellite, then we would be very happy 
to start talking about fairly significant additional amounts of 
compensation beyond the amount, when it is certainly available 
through many different mediums. And I will speak for my 
competitor in this sense: They have indicated they would never 
have paid fees of that enormity as long as it was available in 
other formats, as well, too.
    Chairman Specter. I see you want recognition, Mr. Bronfman, 
and I will come to you in just a minute.
    But, Mr. Parsons, why shouldn't satellite pay the same 
royalties as others? Parity has a ring of equality and 
justification. Why not have satellite pay the same royalties?
    Mr. Parsons. Senator, I believe the Congress acted 
appropriately in establishing the rules that were there. And by 
the way, those rules don't necessarily say there is a different 
rate for the Internet streamers versus XM Satellite Radio.
    Chairman Specter. Wasn't the action of Congress really at a 
time when satellite radio was in its infancy and it is a 
different commercial situation today?
    Mr. Parsons. I think those laws were placed to look at all 
different digital mediums and, in fact, looked at all different 
digital mediums from what were the investments they put in. And 
if you look at the fairness of the rates, I think many of the 
Internet suppliers have also indicated they would be reasonably 
handled under the same 802(b) provision that, in fact, 
satellite radio is because it takes into account a fair return 
for the artist, a fair return for the record labels, as well as 
a fair return for the investment that the distributors have put 
in place.
    Chairman Specter. Mr. Reese, why shouldn't satellite pay 
the same as other payers of royalties?
    Mr. Reese. I guess I am not sure that I have a position on 
that one, Mr. Chairman. I think that they have a very----
    Chairman Specter. Well, if you don't have a position on it, 
how do you expect us to have a position on it?
    Mr. Reese. I am not here speaking on behalf of the 
satellite folks here.
    Chairman Specter. But you are an expert in the field. OK, 
we will pass on you and go to----
    Mr. Reese. Thank you.
    Mr. Lam. May I have----
    Chairman Specter. Well, all right. Before my time expires, 
you may comment, Mr. Lam, and then Mr. Bronfman may comment. I 
will ask no further questions. I have only 4 seconds left.
    Mr. Lam. Thank you, Senator Specter. Well, we do have a 
position because on the issue of performance royalties, 
terrestrial radio pays nothing, zero, whereas satellite radio 
pays much less than what we pay. We are really, really unfairly 
discriminated against. We pay many more times than they do.
    In the case of regular radio and terrestrial radio, it is 
infinity; you know, they pay nothing. We pay performance 
royalties for songs that we stream over the Internet for 
essentially the same thing, for essentially the same 
functionality. People listen to us just like radio, except 
through Internet streaming. That is all.
    Chairman Specter. Mr. Bronfman.
    Mr. Bronfman. Yes, Mr. Chairman, thank you. Mr. Parsons's 
answer, I think, really gets to the heart of the matter because 
satellite is trying very hard to have it both ways, and it is 
really a disingenuous position to take. To suggest that he 
would pay a great deal of money for an exclusive right, knowing 
that music is subject to compulsory license, and therefore has 
no ability to offer music exclusively to XM or Sirius. We are 
subject to a compulsory license, so to suggest that he would 
pay money in a circumstance which he knows is not possible, I 
think, is disingenuous on its face.
    And then on the other side, to suggest that the laws that 
exist are perfectly appropriately, which, of course, include 
that compulsory license--so, you know, it is one thing or the 
other, and that is why we have argued, frankly, for recognizing 
that if we are going to be subject to a compulsory license, 
which we think is probably inappropriate, at least let that be 
a standard because it is our content that is providing such 
great momentum for satellite. And we want satellite to succeed. 
We just want our artists and our creators to get a fair shake 
and they are not getting that.
    And the other thing is, just to be clear, a distribution 
service and a performance service are two different things, and 
the fact that XM refuses to see that and hides behind the Audio 
Home Recording Act in order to become a distribution service 
without paying our artists is just an untenable position. And 
we are here to say that as the march of technology goes 
forward, the best way to resolve differences between parties is 
to allow the free market to operate. But to the extent that 
compulsory licenses are the order of the day, we must make a 
clear distinction between a distribution service and a 
performance service.
    Chairman Specter. Thank you, Mr. Bronfman.
    Senator Leahy.
    Senator Leahy. I was interested in these last couple of 
answers when we go back through all the definitions, of course, 
in the Copyright Act. But just to kind of followup on that, the 
Act doesn't define distribution, which is probably one of the 
reasons why we are here. We have these new satellite devices, 
XM To Go and the like. You can hang on to a song that has been 
played Mr. Parsons on something like your radio prescription 
service.
    So let me ask each one of you this question: Is this a 
distribution or not? As you can imagine, a lot hangs on the 
answer to that question.
    Mr. Rundgren?
    Mr. Rundgren. Well, my feeling is that, first of all, the 
record industry has depended on a commoditized view of music 
that makes all artists equivalent. In the case of the iTunes 
store, we are all worth exactly $.99. As I understand the 
device, it is incapable of decontextualizing any music that is 
played over the radio. It can certainly label it, but that is 
not a unique feature. I have seen prototypical devices where 
you can hold up a cell phone to a piece of music that is 
playing in the air and have it be identified by a data base 
that is on a remote server.
    So my feelings are that even while they are making 
something a little more convenient, they are not doing anything 
unique and the likelihood is that some hacker somewhere will 
find a way to do this anyway.
    Senator Leahy. But is it a distribution?
    Mr. Rundgren. What is that?
    Senator Leahy. Is it a distribution?
    Mr. Rundgren. Internet distribution, in general? As I say, 
I believe that artists make the most income when they go out 
and play somewhere and need to have things like radio for the 
purposes of promotion. The fact that people may make an 
illegitimate copy of one of your songs has never bothered me at 
all because I feel it increases my audience.
    Senator Leahy. Let me ask Ms. Shaw, if you have something 
like XM To Go and you could hang on to a song that has been 
played on satellite radio, a subscription service, is that a 
distribution?
    Ms. Shaw.. I think it is a simple answer of yes, I mean 
absolutely. I used to do things off of radio, too, as a kid. It 
was bad quality and I went and bought the record. This is 
pristine, perfect quality.
    And I have to say in respect of Mr. Rundgren, I think it is 
great if you want to get one of your songs out there for free 
and you don't mind that and it helps to increase your touring. 
I don't tour. I make 9.2 cents per song that is sold. That is 
how I feed my children. I am the parent that works out of the 
house, so it is a distribution.
    Senator Leahy. I got you.
    Mr. Bronfman.
    Mr. Bronfman. The services allow you to record 10, 20, 30 
hours of music, see exactly what you have recorded by song 
title, disaggregate and delete those that you don't want and 
keep the ones that you do want permanently so long as you are a 
subscriber, which benefits XM. So, Senator, with respect, if it 
swims like a duck and it quacks like a duck, it is a duck.
    Senator Leahy. Mr. Parsons.
    Mr. Parsons. Well, Senator, when I was a high school disc 
jockey 40 years ago, I made eight reel-to-reel recordings off 
the radio. I still have some, I guess, permanently archived or 
something in my basement. I can do it on a cassette tape. This 
device does it off the FM radio, separates it by song directly 
off the air, stores it not only in memory but on a----
    Senator Leahy. Distribution or not?
    Mr. Parsons. No, no different distribution than the 
distribution that has gone on for 50 years.
    Senator Leahy. Mr. Reese, distribution or not?
    Mr. Reese. If, as this Committee has recognized, the 
consumer has a right to--and I think this Committee has 
recognized the consumer's right to make a personal copy, and if 
you want to redefine that, I guess that is appropriate.
    Senator Leahy. Without redefining it, is it distribution?
    Mr. Reese. I think if that is not a distribution, I am not 
sure why this is.
    Senator Leahy. Mr. Lam?
    Mr. Lam. I agree completely.
    Senator Leahy. A consumer asks for a specific piece of 
music, receives it, pays for it. Is that the definition of 
distribution? Or the music service transmits a piece of music 
and the consumer can keep it or not, as he chooses. Is that a 
distribution or is it something else?
    Mr. Parsons?
    Mr. Parsons. That is a very close analogy between it. I 
think the only other element of it that I would add is, yes, it 
clearly is distribution. If it goes out, you can find it, you 
can bring it down, and then you can use it as you want, which 
is a critical differential. If a radio station is playing a 
collection of songs that you did not request, but you hear one 
that you like and you record it, you have done that for 50 
years.
    The critical additional differential that has always been 
put into the law is, yes, every consumer has the right to make 
that one copy, and you are pleased when they run to the radio 
and they put down that one copy. They do not have the right to 
then distribute it, turn it digitally, put it on the computer 
and distribute it. We forbid that and keep our devices from 
being able to allow that to occur.
    Senator Leahy. Mr. Bronfman?
    Mr. Bronfman. Sir, I think a performance is the right to 
listen. A distribution is the right to keep a copy. The point 
for consumers is not to get their music off of their device 
onto their computer. The trick for consumers is to get the 
music off of the services, onto a mobile device, so that you 
can travel wherever you are traveling, sir, and can have a 700 
or 800-song library. Mr. Parsons proposes that his consumers 
should have that library for free.
    Senator Leahy. I want to add I bought and paid for 
everything. I even have the record. I am buying and paying for 
every single song.
    Mr. Bronfman. We are delighted, Senator.
    Senator Leahy. A lot of them were from your company.
    Chairman Specter. Thank you, Senator Leahy.
    Senator Hatch.
    Senator Hatch. Mr. Reese, welcome back to the Committee. I 
always enjoy having you here from our home State of Utah. Could 
you please explain for us what differences exist between 
satellite radio and over-the-air radio?
    While you are explaining that, please address whether these 
differences warrant different treatment with respect to paying 
for performance rights. And after Mr. Reese gives his answer, I 
would be happy to have any of the rest of you on the panel 
respond.
    Mr. Reese. I think the terrestrial radio business is now in 
its 86th year, starting in the Chairman's home State, and it is 
a local service. It is in that respect largely unique in the 
world. It is based on 15,000 radio stations who serve a finite 
area, depending upon the power they operate and their tower 
locations. But it is a local service with public service 
obligations imposed by this Congress in the 1920 Act and again 
in the 1934 Act.
    The satellite business, on the other hand, is licensed as a 
national distribution service and it is a subscription service. 
It is not free over-the-air; it is by and large not advertiser-
supported. This Committee has recognized numerous times, and 
specifically in the 1995 copyright legislation and the 1998 
copyright legislation, the differentiation between--or the 
value that the record industry gets from promotion of its 
recordings on our radio stations and has identified that as an 
adequate basis for not imposing that performance right.
    But I would add that to the extent radio stations use their 
programming expertise and become webcasters, as the kinds of 
folks Mr. Lam's organization represents, we do pay those fees 
when we distribute over the Internet. And at this point, one of 
the recommendations we would strongly make again is that when 
we simply redistribute our radio stations over the Internet, 
within the service areas of those stations we ought not to have 
to pay those performance rights. When we create new products 
over the air, we are webcasters and we pay a fee.
    Senator Hatch. Anybody else? Mr. Lam?
    Mr. Lam. Yes, I would like to address that point. I think 
if we look around the world, almost all countries require 
terrestrial radio to pay performance rights royalties, if I am 
not mistaken. I think it is a fact that we have very antiquated 
legislation that needs to be looked at and addressed.
    I think terrestrial radio is enjoying an incredibly unfair 
advantage over Internet radio. I think if we were to grant the 
exemption that Mr. Reese is asking for, we would forever be 
disadvantaged and we wouldn't have a business because there is 
no parity.
    Senator Hatch. Anybody else? Mr. Parsons?
    Mr. Parsons. Senator, I would say, yes, a good 
characterization of some of the differences between the 
subscription services versus the free over-the-air. I think 
there are differences there, predominantly local, predominantly 
national, and room for both. I think we both have that.
    When it comes to the issues before this Committee--can you 
record music played and should the artist be compensated for 
that music that is played--there is not that great 
dissimilarity, and particularly as digital radio emerges each 
of those should pay. We pay twice. We pay for the performance 
rights. Our manufacturers pay for the right to record.
    The only difference I will have in the characterization of 
whether it is a distribution versus a listening--the 
characterization is not just simply listening or making a 
recording. If so, once again, every cassette tape and every 
TiVo and every reel-to-reel recorder would be considered a 
distribution and paying royalties.
    Senator Hatch. Ms. Shaw.
    Ms. Shaw. I have sat here and listened to Mr. Parsons and 
written down how many times you have said ``performance 
rights,'' ``performance rights,'' or ``we pay for the right to 
play the music,'' and never once said ``to download,'' ``to 
distribute.''
    You are paying for playing and I appreciate that, but you 
are not paying for the sale, for the download, for the person 
taking it on the plane with them. And you have used these 
words, and I don't know if it is purposely phrased perfectly, 
but you have used the word ``play,'' ``play,'' ``play,'' and 
never ``download,'' and I think there is a significant 
difference to that.
    Senator Hatch. Mr. Parsons?
    Mr. Parsons. Yes, sir. I mean, there is definitely a 
difference, and that is the reason I say we pay twice. We pay 
both for the performance and through the manufacturers under 
the Audio Home Recording Act that did say if you create a 
digital device to record a digital transmission over the radio 
or over the air, then, in fact, there is an additional payment 
that then goes to the artist and to the record labels.
    Ms. Shaw. I am not an artist or a record label. I am a 
songwriter, so I am not getting anything here. I am getting 
something stolen from me.
    Senator Hatch. Mr. Bronfman, you have the final comment.
    Mr. Bronfman. Yes, Senator Hatch, thank you. Again, Mr. 
Parsons, when he says he is paying twice--first of all, he is 
paying for a performance and he is paying significantly below 
market rates for that performance, No. 1. No. 2, he seeks to 
have a distribution service and not pay for it at all.
    And No. 3, when he talks about how the manufacturers are 
paying under the Audio Home Recording Act, the manufacturers 
pay approximately $1 to $2 million a year to the industry. By 
contrast, the digital music service, the business will be a $1 
billion-a-year business this year, growing dramatically. The 
industry gets $2 million a day. So the Audio Home Recording Act 
and the manufacturer's royalty does nothing to address artists' 
concerns. Mr. Parsons knows that full and well.
    Senator Hatch. Thank you, Mr. Chairman.
    Chairman Specter. Thank you very much, Senator Hatch.
    Senator Feinstein.
    Senator Feinstein. Thank you very much. Mr. Chairman, as 
you can see, it has been somewhat difficult to put this 
together, but I do think we have a good bill. I would like to 
put in the record, if I can, letters from the American 
Federation of Musicians, the American Federation of Television 
and Radio Artists, the Recording Academy, the Recording Artists 
Coalition, the National Music Publishers Association, and the 
Recording Industry Association of America.
    Chairman Specter. Without objection, they will all be made 
a part of the record.
    Senator Feinstein. Thank you very much.
    Let me thank you, Ms. Shaw, for your presentation because I 
really think you illustrated what the problem is. America's 
greatness is our pioneering soft products, the talent that we 
have, and the expression of that talent. As technology improves 
and takes over, we have to change our laws so that the talent 
is protected, and that is what we are trying to do in this 
legislation.
    I think Mr. Bronfman put his finger on it when he said 
performance is listening, distribution is keeping. You have 
something you keep forever, and when digital radio comes about, 
you will be able to do it right off the radio. So the Commerce 
Committee is looking at that because you lose your rights as 
the technology increases, no question about that. So what we 
are trying to do is change that.
    Now, let me ask Mr. Parsons a question. In your testimony, 
you talk about this new device that will allow a subscriber to 
store up to 50 hours of programming and how XM wants to provide 
a device that would be supportable so a subscriber could listen 
to your service at the gym or on an airplane. I think you even 
showed it. The manufacturers pay for it, but nobody pays for 
the distribution of it.
    Both of these characteristics would be allowed under my 
bill, as would some modifications, including sorting by 
programs, channels or time periods. What would not be allowed 
is the disaggregating of songs and the ability to allow 
consumers to create personalized play lists. This seems to me 
like a fair balance. Consumers get a lot of flexibility and 
functionality, but it does not allow for a complete 
substitution of sales.
    So how can you argue that to give this functionality to 
consumers is not a distribution? This puzzles me. I just can't 
understand your logic.
    Mr. Parsons. Senator, I appreciate the question, and 
certainly we appreciate the artists' concerns as well. That is 
why we say we pay for the performance; we also from the 
manufacturing end through the Audio Home Recording Act pay for 
the devices that do the recording. If that is not the right 
rate, then great, we will revisit the rate. We have discussions 
ongoing relative to what those rates should be. We are in the 
process of that renegotiation to find what is the right 
economic balance for that on a fair value type of a basis.
    But we also need to understand that all of those items that 
you just mentioned--the ability for a consumer to record one 
song versus two songs, or erase one song if they want to--are 
all rights that have been long in place. Whether it was tape, 
whether it was digital or not, those are all functions that 
have been there for years. They have served essentially as a 
marketing venue in many cases for getting exposure to new 
products.
    But there is nothing that is new. This one does it off the 
FM radio and this one does it off the XM radio. Both can create 
individual copies and rearrange them. I make a jogging tape off 
of my cassette tape off of the radio, and they are all the 
same.
    Senator Feinstein. But let me just argue this with you for 
second.
    Mr. Parsons. Certainly.
    Senator Feinstein. So you are giving everybody individual 
CDs, effectively, but there is no royalty paid on them by the 
individual or by you.
    Mr. Parsons. The ongoing royalties that continue to be 
paid--and we can debate whether they are the right amount or 
the wrong amount, but they are the up-front costs that Congress 
decided needed to be paid by every manufacturer to have a 
recording device in the first place. Then, second, at least 
with our service, not with regular radio, but with our service, 
we continue to share a portion of our revenue on an ongoing 
basis for that right to continue to hear and have that 
information available.
    Senator Feinstein. Mr. Lam, you wanted to comment.
    Mr. Lam. Yes. I think I disagree with Mr. Parsons on his 
analogy. I think in our case, when people listen to us, every 
song stream that we stream we have to pay for. In your case, 
when you get your listeners downloading or recording on XM, 
that is the end of paying for that stream. So, basically, you 
are benefiting unfairly from that.
    If we are talking about parity here, that means should we 
be entitled to the same kind of conditions or legislation? I 
think one thing that we do appreciate and that we want to do as 
Internet radio is that we have been paying lots of royalties. 
In fact, every month I sign a big check, paying ASCAP, BMI, 
SESAC and the artists. I am very happy to do that because we 
fully support them, we fully support them.
    On the other hand, we have to be careful not to over-
legislate or to over-assert intellectual property rights 
because in our particular case we are bearing the brunt of it, 
and as a business we cannot continue to operate under this 
unfair circumstance.
    Senator Feinstein. Yes?
    Mr. Rundgren. I would be interested to know if this random 
bunch of songs that you have recorded is considered a 
distribution, would not XM be entitled to a refund when 
somebody erases one off the device?
    Senator Feinstein. No more than if you break your CD.
    Mr. Rundgren. Well, the whole point is it is an arbitrary 
bunch of songs and the likelihood is you might not keep any of 
them.
    Senator Feinstein. But the point is you have them, just as 
you have your record library or----
    Mr. Rundgren. Well, you are making the assumption that it 
is kept just because it is recorded. It may be immediately 
discarded afterwards.
    Senator Feinstein. No, because it is distributed.
    Mr. Bronfman?
    Mr. Bronfman. Yes, I think that is a fundamental 
misunderstanding of the legislation and the proposal. The 
legislation actually allows people to record blocks of 
programming. When it becomes a distribution is when those 
recordings are disaggregated and libraried, and that is a 
distribution.
    What Mr. Parsons is arguing for is that the compulsory 
license covers a distribution as well as a performance, and 
that will result in his not having to pay a fair market rate. 
We want consumers to disaggregate, we want consumers to store 
music, we want consumers to buy, we want songwriters like Ms. 
Shaw to be compensated. What we don't want is a situation where 
the misuse of copyright law is used to allow a distribution to 
be delivered under a compulsory license.
    Then why would iTunes ever exist? It shouldn't exist 
because this service substitutes for iTunes. And as Mr. Parsons 
advertises, his device is not a pod; it is the mother ship. In 
other words, it is better than an iPod because it is a 
distribution service and you don't have to pay for it. It is 
absolutely free.
    Mr. Rundgren. You cannot get a song on demand from XM 
radio. You cannot get a single piece of music on demand.
    Mr. Bronfman. Mr. Rundgren, you can record 50 hours of 
music. You can identify the five songs that you wanted.
    Mr. Rundgren. But you can do that off of terrestrial radio.
    Mr. Bronfman. No, you really cannot do that off of 
terrestrial radio. And I think the other distinction that is 
clear here is that this is a single service. Terrestrial radio 
is a broadcast service and some third-party device manufacturer 
that Mr. Parsons is holding up consistently is not part of a 
single service, which is what XM is doing.
    Chairman Specter. Mr. Rundgren, do you care to respond?
    Mr. Rundgren. I mean, just insisting something is different 
doesn't make it different. As I say, there may be some 
convenient elements that are built into this device. It doesn't 
mean that everybody is going to use them. We are making the 
assumption that just because that capability exists, people 
will use it to the extent that justifies additional fees.
    On top of that, this is not the record industry's problem. 
The record industry's problem is peer-to-peer networks, where 
people do get the songs they want and they get them without 
paying royalties and they are fully decontextualized direct 
from the record.
    Chairman Specter. Thank you.
    Senator Schumer.

 STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR FROM THE 
                       STATE OF NEW YORK

    Senator Schumer. Well, thank you, Mr. Chairman. I want to 
thank you for having this hearing and thank all of our 
witnesses for a lively discussion. It is a very important 
discussion because many of the issues our Committee deals with 
come when technology bumps up against intellectual property. 
And we want to see both furthered, so you have difficult 
situations all the time.
    I told my kids the other day I had that record and they 
didn't know what I was talking about, and they are 21 and 16. 
Like most people, I guess, we have this big collection of 
records that we don't want to get rid of because I remember 
buying them all when I was a teenager and in college and later. 
They are sentimental, but they take up all this space and they 
are so heavy and we don't know what to do with them, but they 
are still in our house.
    Digital music technology is allowing more people to enjoy 
music in more places than ever before. That is great. The 
advance is a huge step forward for everyone involved in music, 
from the artists who want to see as wide a distribution of 
their work as possible, and producers, to broadcast companies 
and listeners.
    But as I said, while we support the advance of music and 
technology and all the new possibilities it brings, we have to 
make sure it is done in a way that treats all parties involved 
fairly. And to me at least, that means making sure intellectual 
property is protected because average people would say, hey, I 
don't want to--in China, there is a whole different mentality 
and they don't even believe in protecting intellectual property 
right now. They don't think there is anything wrong with taking 
somebody else's work and not paying for it.
    So to me at least, this argument here is Napster all over 
again, except it is radio. I remember when Napster first 
appeared on the scene. It was great. Everyone loved it, and 
then people realized as it became more and more prominent that 
it wouldn't lead to more music, but it would lead to less music 
because people weren't being rewarded for the work that they 
put in.
    I think what happened with Napster was very good. We have a 
whole new view that it was wrong, and people now, because all 
the companies got together, don't mind paying the $.99. I 
don't. I give my kids $20 a month so I can have 20 new songs on 
my iPod. It is great for everybody. So Napster taught us we 
need balance, that we should support the progress being made in 
new technology for music listeners, but we need to do it in a 
way that treats parties fairly, promotes healthy competition, 
and rewards intellectual property.
    That is why I am glad you are holding this hearing and that 
is why I am glad Senators Feinstein and Graham have introduced 
their legislation which I intend to support. I think it does 
strike that fair balance. The best new ideas should be allowed 
to compete in the marketplace, but to truly promote healthy 
competition, everyone needs to be competing on a level playing 
field that makes sense.
    The standards that apply to one provider of digital music 
should apply to others providing the same kind of services. 
That is basically my view. As we learned from Napster, even 
when exciting new ways of getting music to listeners are 
created, it shouldn't be simply at the expense of people who 
make that music possible in the first place. Our laws, simply 
put, need to keep pace with rapid technology.
    The basic framework of rewarding people for the efforts of 
their labors has to keep pace with technology. Just because a 
new technology comes in doesn't mean you throw that away, even 
if it makes it a little easier and more convenient for the 
listener, because in the long run the range and the depth of 
entertainment, music, joy, whatever you want to call it, will 
decrease if we do that, not increase. So that is why I support 
this legislation.
    I just have one quick question, Mr. Chairman. I only have a 
minute left, so I am only going to ask it of Mr. Parsons. Let 
me just ask you, at what point do we draw the line? At what 
point does recording a radio show turn into creating your own 
personal music library? The devices you are holding up are made 
for the purpose of providing music for listeners to record and 
keep, not just listen to once. Where is the line? You would 
draw it in a different place than I would or Senator Feinstein 
would.
    Mr. Parsons. Senator, probably so, and I agree with you a 
hundred percent, by the way, on all of the Napster comments. 
The primary difference between the Napster issues and these 
issues are the in the Napsters issues there were no payments; 
it was for free. In these issues, we are the single largest 
payer of performance rights existing of anyone at this table.
    The large companies pay nothing. We pay more than all other 
distribution mechanisms combined, and so that element of paying 
for performance, and particularly on a compulsory license 
where, in fact, the little artist as well as--Madonna doesn't 
need much help; Warner watches after her well. But the smaller 
artist--when it is compulsory, the little guys get played and 
the little buys get paid, and that has been the elegance behind 
this system.
    Where, in fact, it becomes a difference and where across 
the line does it, in fact, go when you record is a question 
that I think has been seminal to the question of whether it is 
a cassette, whether it is a reel-to-reel tape, whether it is 
recorded off of FM radio, whether it is recorded off of ours. 
Certainly, where this Committee has come out in the past and 
where Congress has come out in the past is it is permissible to 
make one copy for your personal use, not for distribution, not 
for sending it out across the Internet, at which point it 
becomes illegal.
    So what we have done is we have looked at the laws and we 
have designed the products consistent with the laws. We have 
paid for the manufacturing of them and we have paid again for 
the performance of them. But we have made the things that are 
legal easy to do. We have made the things that are illegal 
almost impossible to do.
    On this device, you can pull out a card, slide it into your 
computer and, boom, it is out on the Internet. Your music is 
compromised forever. We actually had a service that tried to 
abuse a product of ours 2 years ago by, in fact, putting it on 
to the computers, being able to tag it and get it off of the 
Internet. We worked very quietly and very cooperatively with 
the recording industry who, by the way, have been our partners 
in this process, I mean, really for a while in developing this 
business.
    We shut that down. How did we shut it down? Well, actually, 
we removed our product from the market. No one even noticed it. 
We terminated that product completely because someone had found 
a way to abuse it and get it out on the Internet and distribute 
it beyond their own personal use.
    But when this Committee or this industry decides that it is 
time to deny the American public the right to make a single 
copy over the air for their own use, then there are far larger 
issues at play than XM radio. There is TiVo and HBO and the 
Internet and tape. So those are the issues that the laws are in 
place. We pay under the laws. We pay for recording, we pay for 
performance, and we are willing to continue to do that, but not 
to be isolated and picked out as a single industry to enforce.
    Senator Schumer. Thank you, Mr. Chairman.
    Chairman Specter. Thank you, Senator Schumer.
    Mr. Bronfman, do you have another comment?
    Mr. Bronfman. Yes. I just want to say Mr. Parsons 
continually hides behind the consumer and this notion that they 
have the right to record one song off the radio. Certainly, 
they do, and there is nothing about this bill or nothing about 
our arguments that suggests that we want to stop consumers from 
recording off of the radio.
    This is not a radio. This is an iPod, this is a 
distribution. This is clearly what XM calls their devices. It 
is in no way an iPod, and to suggest that librarying thousands 
of songs is somehow the same thing as a consumer with a reel-
to-reel tape recording off of a radio is just, as I said 
before, completely, utterly and without question disingenuous. 
It is not the case, and we must insist that a distribution is a 
distribution, not a performance.
    My only other point to Mr. Parsons, who continually says 
that he is the largest payer of performance royalties, is that 
is true. It just shows how under-compensated our artists are in 
relation to the rest of the industry.
    Chairman Specter. Thank you very much, Mr. Bronfman. Thank 
you all. Senator Cornyn was here earlier, but had other 
commitments and had to leave. Without objection, his statement 
will be made a part of the record.
    This has been a very illuminating hearing, and it is 
obvious that it is very complicated, very technical and very 
controversial. We make an effort, as Senator Feinstein alluded 
to earlier, to try to bring the parties together to see if we 
can't find some accommodation. I am prepared to undertake that 
further as Chairman of the Committee to invite you in for a 
roundtable discussion on a less formal basis, more informal 
basis. Senator Feinstein, I hope, will join us to see if we can 
work it out.
    Very frequently, all of your interests are best served by 
coming to an agreement rather than leaving it up to the 
Congress because you know the issues much better than we do. We 
will try to become familiar with them, but our expertise is not 
going to match yours. Ultimately, we have the responsibility 
for making a public policy judgment as to what is fair and what 
is equitable, but we have found that a better path on many, 
many similar controversies is to try to bring the parties 
together. You are better off in working it out than in relying 
on our judgment very frequently.
    Senator Feinstein.
    Senator Feinstein. I would thank you for that, Mr. 
Chairman. These are the two least controversial areas. Wait 
until you get to interactivity. These are the two areas where I 
thought there was considerable consensus, I guess, outside of 
XM, and so I am rather puzzled how anybody could have a problem 
with just allowing everyone to do the same thing, which is 
parity, under the compulsory license. To me, it is the fairest 
thing that could be out there. In any event, we will see.
    Chairman Specter. Well, beauty is, as we know, in the eye 
of the beholder. I heard a fair amount of controversy here 
today. Perhaps it is contagious when you come to a hearing room 
occupied by Democrats and Republicans. We sometimes have 
disagreements between the two parties.
    That concludes the hearing. Thank you all very much.
    [Whereupon, at 11:06 a.m., the Committee was adjourned.]
    [Questions and answers and submissions for the record 
follow.]


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