On June 24, the Third Circuit Court of Appeals released its decision on the case Prometheus v FCC. This was a lawsuit that was filed in August 2003 to stop the Federal Communications Commission’s June 2 rulemaking on media ownership from taking effect.

In a 218-page decision, the court told the FCC that its attempts to further deregulate the American media were unjustified. The court determined that the FCC employed "irrational assumptions and inconsistencies" when drafting the looser cross-ownership rules, and ordered the FCC to return to the drawing board to craft regulations that truly reflect the Commission’s stated goals of promoting localism, competition and diversity.

The Future of Music Coalition was just one of the many groups that fought hard to urge the FCC to maintain ownership rules to protect the public interest. Here’s a recap of some of our efforts:

In November 2002, the FMC released “Radio Deregulation: Has It Served Citizens and Musicians?” In this report, the FMC thoroughly examined the effect of the Telecommunications Act of 1996 on radio industry, concluding that radio has become less diverse, less local, and less competitive. The report urged policymakers to see the negative consequences of the deregulation of the radio industry as a “cautionary tale” before proceeding with this broader media ownership rulemaking.

In January 2003, FMC’s executive director Jenny Toomey joined rocker Don Henley, NAB’s president Eddie Fritts, and Clear Channel’s Lowry Mays in front of the Senate Commerce Committee to testify about the impact of radio consolidation on the radio industry, musicians and citizens.

In April 2003, the FMC sent a letter co-signed by over thirty top-tier musicians to FCC’s chairman Michael Powell. The letter urged the FCC to grant Congress and the public a full opportunity to review any proposed changes of media ownership rules before they are enacted. Over 4100 artists added their signatures to this letter, which was re-delivered to the FCC on May 28.

In May 2003, the FMC released an analysis of the FCC’s public comments on this rulemaking finding overwhelming public opposition to relaxing ownership caps.

In September 2003, the FMC filed a “Petition for Reconsideration” at the FCC, pointing out the flaws and inconsistencies in the June 2 order and urging the FCC to reconsider their decision.

The Third Circuit court’s ruling clearly demonstrates that it rejects the notion of allowing large media companies dominate and grow even larger. We congratulate and thank Media Access Project for arguing so ably on behalf of all citizens in this landmark case. FMC will continue to work in coalition with Free Press, Consumers Union, Common Cause, Media Access Project, Prometheus Radio Project, and other organizations to ensure that the FCC remains true to its mission of acting in the public interest.

Read our press release here:

Wrap Up from Policy Summit 04

On May 2 and 3, the Future of Music Coalition hosted its fourth annual FMC Policy Summit in Washington, DC. Once again, this event was a place where diverse voices came together to debate critical issues at the intersection of music, law, technology and policy. We were thrilled with the level and scope of discussion this year, both onstage and off, and we appreciate the contributions made by so many attendees to various ongoing debates.
We’ve compiled lots of follow-up materials, especially useful for those who weren’t able to attend, accessible from the Summit’s homepage.

Detailed Blog of Entire Summit
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http://www.cdbaby.net/fom
Thanks to the nimble fingers of Derek Sivers from CD Baby, we have an amazing record of the entire Summit, typed in live during the event. Not only a great document of each panel, but also a place to post comments and continue the discussions. Additional blogs are linked through the trackback.feature.

List of Attendees
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A complete list of folks who actually attended is here or downloadable as a more readable PDF here

Press clips
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Here’s a sample of press accounts, both before and after the Summit:

Musicians Score a Date With Lobbyists
Evidence of the "rock-star effect" was on display earlier this week as lawmakers, think-tank experts, professors and scads of musicians gathered at The George Washington University to debate the politics of media consolidation, music royalties and peer-to-peer file swapping at the fourth annual Future of Music Coalition Policy Summit.
By David McGuire
washingtonpost.com, May 6, 2004

Record Industry Wants Still More
It’s not enough for the music industry that legal music downloads are gaining popularity. Company honchos want to raise song prices, gain more control of distribution and collect higher royalties. Michael Grebb reports from the Future of Music conference in Washington, D.C.
Wired, May 5, 2004

Harmony Rules in the Future of Music
Future of Music Summit Offers an Interlude in the Online Piracy Cacophony
By David McGuire
washingtonpost.com, April 30, 2004

Future of Music Coalition conference
Coming up on May 2 - the Future of Music Coalition policy summit in Washington, DC. And it’s going to be a truly amazing event.
p2pnet.net April 9, 2004

Next year!
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Assuming all goes as planned, we’ll host our fifth Summit in Washington, DC, but we may be moving the time of the event to September 2005 in an effort to avoid a conflict with Jazzfest, Coachella and college finals. So mark your calendars now for mid-September 2005 and we’ll be sure to shoot you details as the event develops.

From March 15 – April 15, 2004, FMC and the Pew Internet & American Life Project hosted a comprehensive online survey designed to gauge musicians’ opinions about the internet and how it affects the way they create, promote and distribute music. The online survey asked musicians a variety of questions about music, technology, copyright, peer-to-peer filesharing, emerging best practices, and the public domain. Over the 30-day period, over 2700 musicians participated.

On April 30, Pew Internet released some of the preliminary findings from the survey in a data memo. The survey shows that musicians are quite divided in their opinions about the impact of music file sharing by Internet users. There is no clear consensus regarding the effects of online file-sharing on artists - about a third of artists say that file-sharing is simultaneously good for promotional purposes, but also bad because file-sharing circumvents payments to artists.

The data memo is available on Pew Internet’s website here

We have also posted the key findings included in the data memo here

How do musicians feel about Internet file-sharing?
With all of the hullabaloo about music file sharing on the Internet, perhaps it’s time to ask the musicians themselves about how they feel. The Pew Internet & American Life Project has done just that, surveying 2,755 musicians and songwriters between March 15 and April 15. Interestingly, the responses are far from uniform.
By Eric Sinrod
USA Today, May 12, 2004

Currently, Pew and FMC are working diligently on a comprehensive report based on the survey’s data. We look forward to sharing the results with our project partners — CD Baby, Just Plain Folks, Nashville Songwriters Association, AFTRA, AFM, ASCAP and Garageband.com – and with the music community as a whole. We hope that the survey provides us all with a realistic perspective of how musicians use and value the internet.

Stay tuned for a full report in late-August 2004.

On June 16, the FMC, AFTRA and AFM jointly filed comments at the FCC on Docket 99-325, Digital Audio Broadcasting Systems And Their Impact on the Terrestrial Radio Broadcast Service.

The FCC has opened this proceeding to collect feedback from various stakeholders about the transition from an analog transmission of radio to a digital transmission. With digital signals, radio frequencies that are currently spread apart on the dial can be placed closer together since digital transmissions are more precise. The more precise transmissions would also mean that, theoretically, existing broadcasters would be able to use the channels adjacent to their current license for other uses. In other words, a station licensed at 90.1 would theoretically be able to use the frequencies 90.0 and 90.2 to send data or offer subscription services.

In our comments, we emphasize that the transformation of the terrestrial broadcast from an analog to a digital service must be viewed in the context of the well-documented environment of extreme consolidation. Localism, Competition and Diversity are essential policy goals that must be at the forefront of any migration to digital broadcasting. At a minimum, the FCC must address and reconcile the incumbent broadcasters’ questionable record in fulfilling these traditional regulatory goals before granting them expanded rights to multicast or integrate data or subscription services. Fair technology standards can only develop with active participation from all of the various stakeholder communities who have legitimate interests in the future of this valuable public resource.

As recording artists, musicians and fans, we requested a role that goes beyond our right to submit comments into the record. We urged the FCC to include musicians, songwriters and performers in this proceeding to ensure that the transition to digital is beneficial for the creative community as well, and not just the incumbent broadcasters.

Over the next month we will be reviewing the comments filed by other organizations and preparing reply comments, which are due in mid-July.

Read our filing here

You can access other organizations’ comments on the docket here:
http://gullfoss2.fcc.gov/prod/ecfs/comsrch_v2.cgi
type in 99-325 in the “proceeding” box.

On May 5, the New York State Attorney General’s office, under the leadership of Eliot Spitzer, announced that the Office had reached an agreement with key major labels and music publishers regarding $50 million in unclaimed recording and publishing royalties.

The settlement was the result of a two-year investigation that found many artists and writers were not being paid royalties. Spitzer said that the payment failures were not related to disagreements over the terms of recording contracts or the amount of royalty payments, but that the accounting departments had simply failed to maintain accurate contact information with the artists or their estates and had stopped making required payments. The list of artists that had been difficult to contact included obscure musicians with just one hit, as well as such wallflowers as David Bowie, Dolly Parton and Sean “P Diddy” Combs.

FMC applauds Eliot Spitzer and his staff for highlighting this issue that has beleaguered major label recording artists for decades, and has only gotten worse with industry-wide consolidation. As labels merge, accounting departments merge, which makes it all the more difficult for the labels keep track of which artists are owed what. Of course, it’s the same problem for musicians signed to labels that are, subsequently, bought out or fold – who do you contact at the new label to check on your royalties? As part of the settlement, the companies have been tasked to make a greater effort to locate and stay in touch with artists who are owed payments, and we hope that Spitzer’s office continues to play a watchdog role on behalf of all artists.

Press release from the Attorney General’s Office

Labels Agree To $50 Million Royalty Payout
By Brian Garrity
Billboard, May 5, 2004

While Eliot Spitzer has had some success on the East Coast, the recording industry seems to be getting their way on the West Coast. On June 10, the California Assembly held hearings on SB 1034 – the bill introduced by Senator Kevin Murray in 2003 that was crafted to establish that a record company’s duty to account accurately for royalties earned under a recording contract was a fiduciary duty.

The FMC had supported the intent of this bill in its earlier form — see our testimony filed during earlier hearings here.

But thanks to recording industry lobbying in the California Assembly, the bill it its compromise form is now not much more than a re-statement of the language that already exists in most major label contracts regarding the artist’s right to audit, though it does make the right to audit a statutory right.

According to AFTRA, which lobbied hard for reform and was heavily involved in the negotiations, “the amended compromise bill would provide recording artists under royalty contracts the statutory right to confirm, through audits, proper payment for their work, and conduct such audits - or have such audits conducted by their chosen representatives - individually or in groups. The bill would also codify the ability to hire auditors on a contingency fee basis, which, combined with the ability to audit in groups, should increase the probability that artists will actually pursue audits.”

Elements sought during negotiations but not in the final bill included:

1. an auditor’s right to see “all records that relate to the audit, including the manufacturing records, unaccounted for sales, non-royalty units, and physical and perpetual inventory records.”
2. If the audit showed that more than 10 percent due to the artist in royalties had not been paid by the record company, the record company would pay the auditor fees, legal fees, and interest accrued on the royalties.
3. The record company would pay treble damages for any amounts of royalties due
4. If the audit shows that more than 20 percent due to the artist in royalties had not been paid by the record company, the artist would be entitled to rescind the contract.

A copy of the amended bill is here (including strikethroughs of what was removed):

An analysis of the amended bill is here

While the bill does make the right to audit a statutory right, the lack of remedies and removal of an auditor’s right to review manufacturing records seriously weakens the bill. We find it difficult to fathom how an auditor can confidently assess the artists’ royalty situation without having access to this information, although access to such materials must be assumed in order to make this statute meaningful.

FMC is disappointed with this outcome since it does little more than affirm the rights and rules regarding audits that are found in most current major label contracts. On a positive note, the process by which this bill was drafted and amended– the hearings held, the testimony filed, the negotiations themselves – shed some much-needed public light on major label accounting practices. We hope that this bill puts us another step closer to ensuring that artists’ royalties are accounted fairly and properly.

In early June, Senators McCain and Leahy introduced S 2025, legislation that would reauthorize the Federal Communications Commission to modernize their outmoded interference protection standards, allowing for expansion of the FCC’s insanely popular LPFM service to urban markets. Over the past five years, the FCC has overseen the implementation of hundreds of new LPFM stations in rural parts of the country. Without this legislation, however, commercial broadcasters will succeed in their attempts to keep these tiny stations off the air. FMC is working closely with groups like Media Access Project, Prometheus Radio Project, Free Press, United Church of Christ and many others to support this bill. We encourage you to drop us a line if you are interested in learning how you can convince Congress to allow LPFM in your community.

Senators Back Low-Power Radio
Senators John McCain and Patrick Leahy introduce a bill that would allow low-power radio stations to get licenses to broadcast in big markets. But commercial radio interests probably won’t give up the spectrum without a fight.
By Ryan Singel
Wired, June 5, 2004

As usual, there’s loads of reading in the newsstream.

Welcome!

The FMC would like to welcome Wendy Harman on board as our first and only employee! Wendy is a recent graduate of Northeastern University School of Law and is serving as the FMC’s executive assistant. Wendy will be working out of Jenny Toomey’s house/office in Washington, DC and can be reached at 202.518.4117 or wendyATfutureofmusic.org

We are also pleased to welcome two summer interns. Juliet Han is a student at UC San Diego and radio DJ who has come out to Washington, DC to spend her summer working on FMC projects. Brett Keller, a student in Drexel University’s music industry program, is working with Kristin Thomson in Philadelphia on various projects including health insurance and copyright issues for musicians.

Jenny Toomey
Post summit, Jenny has been working on issues relating to FMC’s capacity. She has brought on our newest FMC staffer Wendy Harmon and she is anticipating a brisk summer of interns and institution building. At the end of June she will take a short leave of absence from FMC to coordinate musicians in the election.

Walter McDonough
Walter McDonough has been preparing for his trip to Edmonton, Alberta where he will be speaking at the National Campus & Community Radio Conference 2004.

Kristin Thomson
Kristin recently traveled to Vienna, Austria to participate in the Free Bitflows conference on a panel about “Alternative Compensation Systems”; in other words, ideas about how musicians will be compensated in the digital future. After a quick touchdown in Philadelphia, she picked up her toddler Riley and headed out to Denver for a week of work and a weekend of rock shows (just as a spectator). She looks forward to working with her intern Brett over the summer and diving into various FMC research projects.

Michael Bracy
It’s been a busy couple of months for Michael, who emerged from his post-Policy Summit haze to find a barrel of great issues to focus on. While this is a singularly odd summer in Washington, with so much energy focused on the upcoming elections, a good deal of work is happening behind the scenes that may have a significant impact for years to come. This includes the FCC’s proceeding on digital radio, Congressional debate on the proposed expansion of Low Power FM radio, CARP reform and others. Michael also promises that when everyone in DC goes away for the August recess he will clean up his office.

Brian Zisk

Peter DiCola
Peter DiCola is finishing up a couple of projects on radio consolidation, and is working on developing a new project related to the media industries.

How are we doing?

If you have any feedback, questions, or suggestions please send an email to suggestions [at] futureofmusic [dot] org, and let us know how we’re doing.

Thanks for your support and see you next time.

Jenny Toomey
Michael Bracy
Brian Zisk
Walter McDonough
Kristin Thomson
Peter DiCola