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BPI sues MCPS in music biz blue-on-blue

Mechanical reproduction charge punch-up

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Another day, another lawsuit from the record labels. Except this time - what's this? They're suing a different part of the music business. Yes, the BPI on Thursday announced that it is taking the MCPS (the Mechanical Copyright Protection Society) to the Copyright Tribunal, complaining that the MCPS is charging too much for online downloads and subscriptions.

The BPI has been joined in the action by the big music download organisations, including Apple's iTunes, AOL, MusicNet, Napster, Real, Sony Connect and Yahoo!. They're annoyed because the charge set by the MCPS for creating a digital, online copy of a song - the so-called "mechanical reproduction" - is between 50 and 100 per cent greater than that for making a physical copy of a song (such as a CD).

What! The music business, overcharging? Yes, you can stop laughing now. But there's an important principle here, which serves - once again - to show that the industry has problems Getting It.

BPI general counsel Geoff Taylor said: "The licence that the Alliance is trying to impose for online music is unreasonable and unsustainable. It is charging a royalty rate on a download that is double the rate it charges for a song on a CD. It applies this excessive rate to a whole range of online music services, without taking into account their different characteristics. The Alliance's tariff threatens to seriously harm the development of the legal online and mobile music markets."

The BPI says publishing royalties on physical products, such as CDs, are set at 6.5 per cent of retail or 8.5 per cent of published wholesale prices. For broadcast radio, the rates range from three to 5.25 per cent of net advertising revenues. (The BBC has its own arrangement.)

This contrasts with the Alliance's online tariff proposals which allegedly impose a rate of 12 per cent of gross retail revenues on nearly all online music offerings, though (sweet things that they are) they've given it a temporary discount to eight per cent.

But that's not the only way the MCPS stands accused. The Association of Independent Music, which represents the many independent labels in the UK (who represent about one-quarter of music revenues in the UK, and had a fierce row over prices with the iTunes Music Store in Europe at its launch), notes that the MCPS fee structure doesn't help artists who want to roll their own music download service.

If you, Mr Small-Time Artist, want to sell via your site music (perhaps your own) that is under the MCPS agreement, you have to pay the Society a non-refundable charge of £500, to be set against MCPS payments, per quarter. For songs selling at £1 each, on the eight per cent royalty you have to sell 6,250 per quarter to make it worthwhile, 25,000 annually, else your money's gone for nothing. And for a small artist, £2,000 annually isn't trivial.

"It's enough to put off the serious niche people," said Sam Shemtob, PR for the AIM. "The whole idea of the Net though was meant to be that you could have all these nooks and crannies, to benefit from the Long Tail ©. This makes niche activity more difficult." (The BPI agrees with this in its complaint against the MCPS.)

What makes the whole argument so much more bizarre is that it's an argument over a process that doesn't really happen any more. Mechanical copyright was originally introduced when player pianos threatened to wipe out the publishers of printed sheet music, because they bypassed the need for everyone to buy sheet music; one person bought a copy and made rolls to work the piano. You bought the roll and pumped the pedals of the piano and heard the music.

Intense lobbying led to a new royalty for making player piano rolls, which was then extended to any physical manifestation of a song. And that's continued in a line through to CDs.

But once you get online, what's the equivalent of the piano roll? Digital copies must be created somewhere - but where? Not to worry; lawyers can argue that one must be created somewhere if you download a song, and that attracts mechanical copyright. And the price doesn't have to relate in any way to the real cost of producing the object; else music CDs would cost £2 and the blokes down at the car boot sales would have to look for something else to pirate. Mechanical copyright has the benefit that artists get money from their sales. The other problem is that they only get about 20 per cent of that eight per cent, once the MCPS and record labels have had their way.

Adam Singer, the new group chief executive of the MCPS-PRS Alliance, said, "This is a disappointing Tribunal reference by the BPI and the digital service providers, and one that could have been avoided. Industry observers must be baffled by record companies taking the publishing divisions of their own companies through a Tribunal procedure - spending millions that neither side can afford. This Tribunal reference does tremendous damage to the Industry as a whole, not least in the eyes of Government. For a creative industry this demonstrates a complete lack of imagination."

We'd say that we agree - though we're not entirely surprised. We should also point out that there's some animus between the record labels and the MCPS in general going back to the original file-sharing Napster days: the mechanical copyright societies in Europe and the US thought the original Napster was a great idea which they could use to get money, and were more than a little annoyed that the record companies sued it out of existence. Clearly they've decided to extract the money they didn't get there in another way.

The timescale for the Tribunal to decide isn't set; nor is it clear that any victory by the BPI would lower prices to consumers (us). We can but hope. ®

Related stories

BPI won't let up on downloaders
BPI nails 'music pirates'
UK music biz set to sue file-sharers

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