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Collective rights

The right would be implemented through a combination of free market transactions between individual right holders and service providers and voluntary collective rights administration. The best results for all would flow from a marketplace in which collective licensing is the norm and direct licensing the exception.

Collective licensing has been standard practice in the music industry since 1851, when the Societe des Auteurs, Compositeurs et Editores de Musique (SACEM), the French musical works rights society, was established. Of the rights that the digital transmission right would replace, only the record labels' right to sell recordings (the distribution right, which would no longer have separate or independent existence for purposes of digital transmissions) is not already administered to one degree or another by a collective. Collectives represent songwriters and music publishers for public performance and mechanical rights (or communication rights) licensing of their musical works. Collectives also represent record labels for webcasting and, in those territories where it applies, public performance rights licensing of their sound recordings. Each collective serves as a clearinghouse, making markets between the rights holders it represents and the multitude of those whose various uses of music or recordings require the owner's authorization.

In my view, success for the music industry will depend on the presence in each territory of at least one collective organization whose catalogue encompasses all or nearly all recordings and which is authorized to grant worldwide rights at its local rates for all digital transmissions of recorded music that originate from its territory.

In this regard, I also suggest in the White Paper solutions to the complementary issues of how to license cross-border transmissions and on what basis to distribute royalties earned from those transmissions.

Wherever possible, license fees should be based on a percentage of revenue attributable to digital transmissions of recordings covered by the license in question. A revenue-based fee would allow music industry rights holders to share proportionately in the growing dollar value of the bounty created by digital transmissions of their works. In this regard, it will be necessary to establish criteria by which to determine which revenue earned by a licensed web site or other audio service will be deemed attributable to its transmissions of licensed recordings and which will be deemed too indirectly connected to those transmissions to be fairly included in the base against which the license fee is calculated. And, of course, it will also be necessary to settle upon a rate to be applied to the base in order to calculate the license fee in each instance.

Many music enabled sites and services will operate without revenue of any kind, let alone any revenue fairly attributable to licensed transmissions of recorded music. In these instances, an alternate means of calculating license fees will be needed.

Who pays?

One such alternative would be to base license fees either on the number of transmissions of licensed recordings, or on the aggregate tuning hours occupied by transmissions of music through the service during the reporting period in question. This approach is straight forward and easily applied. It also reflects the notion that one should only use as much of a thing as one can afford. However, it is regressive. It discriminates against smaller service providers and individuals. It also discourages the use of music. Moreover, if license fees are driven by music usage, service providers would have a strong disincentive to accurately report which works they transmit, and how often. This, in turn, would undermine royalty distribution.

A second alternative would be to establish criteria by which to measure the economic value to a business (or to an individual, for that matter) of the self-promotion it obtains through operation of a music-enabled site or service. To be sure, establishing such a measure would be more difficult than simply applying either a pay-per-play or similar usage-based model, but it would avoid interference with royalty distribution.

Provision must also be made for determining how much will be paid in license fees by individuals who operate music-enabled personal web sites for non-commercial purposes, and by those who, without the benefit of a through-to-the-user license, either upload recordings to services operated by others or offer recordings through P2P file-sharing networks. I suggest that a flat dollar license fee should be paid by such individuals, although the amount of the fee may vary depending on the activities involved. The fee should be paid directly to the collective or to the individual rights holders who issued the license in question. Again, however, I do not have a specific proposal regarding the amount of the license fee that should be charged in any of these instances.

Through the digital transmission right implemented as I suggest in the White Paper, digital transmissions of recorded music could be made available from the largest number and widest array of licensed sources, anytime, anywhere, to anyone with network access. Consumers would be free to enjoy music when, where and how they themselves decide.

Technology firms and consumer electronics makers would be free to offer greater interoperability between the many recording, playback and communications devices that are available, and to meet consumer demand for new products with next generation capabilities. And music industry rights holders would do at least as well financially under my proposal as they do now under the system that my proposal would replace. ®

Bennett Lincoff is an intellectual property law attorney, consultant and writer with more than twenty years experience in music licensing. He is the former Director of Legal Affairs for New Media at ASCAP where, in 1995, he developed and authored ASCAP's Internet License Agreement. He also represented ASCAP before the Copyright Royalty Tribunal (a predecessor to the CRB) in license fee setting and royalty distribution proceedings under various statutory licensing schemes under US law.

He can be reached at BennettLincoff(at)aol.com or through his web site at BennettLincoff.com.

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