That’s the question some in the music industry are pondering after the Copyright Royalty Board denied a motion by webcasters’ yesterday to rehear the new, higher royalty rates the board set for webcasting in March. The three judge panel denied the rehearing on procedural grounds saying the webcasters didn’t present any new evidence that would warrant a new hearing.
Small webcasters have bitterly objected to the new rates saying they would put them out of business. Small webcasters will now have to look to the courts or Congress for relief. In an e-mail message yesterday, Tim Westergren, the founder of Pandora, summed up the situation this way: read more
Future of Music Coalition fully supports the digital performance royalty but we reiterate the position that we’ve held since the first round of webcast rate-setting in 2002: we will not support "one size fits all" rates and processes that will not let small and noncommercial webcasters survive. read more
My name is Michael Bracy. I am a founder and the Policy Director
of the Future of Music Coalition, and I appreciate the opportunity to
speak with you today. The Future of Music Coalition is a nonprofit
that identifies, examines, interprets and translates the challenging
issues at the intersection of music, law, technology and policy.
Today, I would like to add our perspective, and place the discussions
of peer-to-peer technologies in a broader context. I also will
speak about the results of a study that FMC worked on with the Pew Internet
and American Life Project concerning artists’ and citizens’ attitudes
toward the Internet, copyright and peer-to-peer technologies. I
have a lot of ground to cover in a short amount of time, so I would encourage
you to visit our website
to learn more about our work and to read the complete Pew study.
The music community is in the midst of a necessary and welcome transition
to a digital business model. Historically, musicians have aligned themselves
with major labels for a variety of reasons, three of which are:
Access to resources, including recording budgets, staff, tour support
Access to distribution – to retail chains, promotion, infrastructure
Access to promotion – commercial radio, TV, print, Internet
This model has worked very well for certain members of the music community,
and very poorly for others. It has been the basis of many solid careers.
It has also been fraught with challenges, including accusations of unfair
contracts and accounting practices, and questions about business tactics
and priorities. FMC has worked in coalition with many other organizations
to address these concerns.
Two significant developments forever altered the music landscape in
the 1990s: Market Consolidation and Digital Music. FMC and members
of the music community have been outspoken with our concerns about the
impact of concentrated control in the music, radio, retail and concert
industries. I won’t take up time on specifics, other than
to state that many in the music community believe these changes have
had significant negative implications for both musicians and music fans.
At the same time that the music landscape was consolidating, technological
innovation was reshaping the way that music was recorded, manufactured,
promoted and distributed. Digital studios and software dramatically reduced
production costs. The Internet vastly increased promotional and
sales opportunities. The marketplace for independent music exploded,
as indie labels proliferated to serve the expanding artist community.
While much of this music was simply not aimed at the kinds of mass audiences
of interest to major labels or radio, there clearly was a market for
this music, and alternate and Internet-based economies began to take shape.
As these digital models took flight, some companies and labels offered
more equitable business relationships. Some allowed the artists to keep
their copyrights, some offered creative control, others provided higher
royalty rates. Musicians have embraced those that allow greater independence,
direct contact with their fans and more control over their careers. Take,
for example, CD Baby, which is an online store akin to Amazon.com, where
musicians can sell their CDs. As of yesterday, nearly 80,000 independent
artists have their work available on the store, and CD Baby has paid
out over $11 million directly to musicians. 
For artists and independent labels, the Internet allows for streamlined
promotion and distribution via digital music stores, Internet radio,
and websites, and gives musicians the tools to easily and inexpensively
connect directly with music fans. In this context, the results of the
Pew study released December 5 should not be surprising, or controversial. The
report found that artists have a broad range of opinions when asked their
views about digital music technologies. The report indicated:
Musicians use the Internet to promote and sell their work.
87% of the 2700 musician respondents said they promote, advertise
or display their music online
83% provide free samples or previews of their music on the Internet.
69% of the respondents said they sell their music online, either
on their own website or via stores like Amazon.com or CDBaby.
However, musicians are divided over file-sharing.
There is no clear consensus among musicians regarding the effects of
online file-sharing on artists. The Pew report found that:
35% of the musician respondents agreed with the statement that file-sharing
services are not bad for artists because they help promote and
distribute an artist’s work
23% agreed with the statement that file-sharing services are bad for
artists because they allow people to copy an artist’s work without
permission or payment
35% of those surveyed agreed with both statements.
However, when Pew broke the results of this question down by the musicians’ income
and time, emerging artists were more likely to agree that file sharing
services are not bad for artists because they allow them to promote
and distribute their works. On the other hand, artists who make
the majority of their income from being a musician or songwriter were
more likely to agree that file sharing services are bad for artists
(35% as opposed to 23% of all musicians). 
Given these various factors – an emerging broadband marketplace,
extensive consumer demand for digital music distribution models, and
an explosion of the amount of music released – the fundamental
opportunity, and challenge, is to facilitate the development of a legitimate
digital music marketplace. This marketplace is already emerging, as SoundScan
reported that in the first four months of 2004, consumers bought 35.3
million music downloads, and it projects that at least 100 million will
be sold in 2004 overall, making up about 1% of the recorded music market.
The core question, then, is how to manage this transition to a legitimate
digital marketplace in a way that benefits musicians and music fans. From
our standpoint, there have been some significant developments to date
that cannot be overlooked. In 1995, Congress passed Digital Performance
Right in Sound Recordings Act. This law granted a performance right
for the digital transmission of sound recordings, and led to the creation
of SoundExchange, which has emerged as a respected, functioning collection
and distribution agency that exists as a compliment to ASCAP and BMI.
SoundExchange recently paid $6.5 million in royalties, making their total
payouts since 2001 over $22 million.  We
also must recognize music fans’ excitement over new technology-enabled
models, including satellite radio, digital subscription services like
Rhapsody, Emusic and Napster, music blogs and ezines, the growth of Internet
radio and webcasting, and digital download stores like iTunes. This
trend is a critical precursor that demonstrates consumers’ willingness
to use legitimate digital services. If we build it, they will come.
The point is not that this industry is now perfect, or that we even
can see the “solution”. Rather, we all should acknowledge
that the digital transition is complicated. In reality, it includes
multiple competing markets, dependent on evolving technological innovation
and regulatory policy decisions. The future music marketplace will
be driven by consumer adoption of broadband to the home, an area full
of regulatory and technological uncertainty of its own. Spectrum
policy and the transition to digital terrestrial radio will play a significant
role in determining how consumers are able to access digital content,
and how performers will be compensated in the future. Ideally,
musicians and music fans will be central to determining the success of
new business models, consumer products and software applications.
Future of Music Coalition has been fortunate to work with well over
a dozen different organizations, representing hundreds of thousands of
musicians, songwriters, retailers, promoters, community broadcasters
and fans. The transition to a digital economy represents real threats
and real opportunities to these communities. That being said, there
are core themes that cut across all aspects of the music community. These
shared values can serve us going forward.
Whenever possible, artists must maintain control over copyright
and career decisions.
Artists must be able to compete fairly in the marketplace,
meaning they must be able to receive compensation for
their work and have access to consumers.
Artists must be seen by the policymaking community as valued
stakeholders in policy debates. As I mentioned there
are many, many organizations with well reasoned, articulate
positions on both the macro concerns and specific micro
issues. You’ve heard from one or two of them
over the last two days. Our hope is that policymakers
across the board will grant at least as much weight to
the viewpoints of artists, songwriters and the music
community than to those of the affected industries.
In the summer of 2000, FMC said the only antidote to an illegal
Napster is a legal Napster. We meant it then and we mean
it today. In
a world of breathtaking technological innovation, the focus cannot
be on restricting information, but rather on building new consumer
business models. We also said that these technology debates
are not black and white, but rather rest mostly in the grey. The
role of the music community is not to pick sides, or even perceive
that there are sides to pick. Rather, this is an
opportunity for the music community to identify what
is right with the historical models and attempt to place
that in a digital context where artists can control their
work and receive fair compensation for their efforts,
and music fans can have unprecedented access to music
at a variety of price points, using a variety of products.
According to the Pew Internet report, there are 32 million Americans
who consider themselves artists and more than
three times as many who pursue some sort of artistic endeavors in their
lives. The report also suggests that up to 10 million Americans
earn at least some money from their performances, songs, paintings,
videos, sculptures, photos or creative writing. Clearly, artists are
economic actors in these policy debates, both as the creators and as
urge you to engage with the music community and
its advocates in upcoming discussions.
Again, I want to thank you for the opportunity to participate
in this discussion, and I look forward to answering any questions
you may have.
1. About CD Baby, http://www.cdbaby.com/about
2. “Artists, Musicians and
the Internet”, Pew Internet & American Life Project, December
5, 2004, p. 31 http://www.pewinternet.org/PPF/r/142/report_display.asp
3. Ibid., pp. 34-35.
4. Ibid., p. 35.
5. “US recorded music market
maintains its recovery; online cos achieve sales of 35m downloads in
2004”, Phil Hardy, Music & Copyright, May 26, 2004.
6. “SoundExchange Announces
Its Fall 2004 Allocation of Over $6.5 million in Performance Royalties
to Artists and Labels”, November 2004 http://www.soundexchange.com/news/news.html
download as a PDF Link
to FTC Forum page
Please donate to the cause — PayPal donations welcome at paypal [at] futureofmusic [dot] org.read more
A presentation delivered to the Federal Trade Commission in December 2004 that placed the discussions of peer-to-peer technologies in a broader context. Michael Bracy referenced the results of a study that FMC worked on with the Pew Internet and American Life Project concerning artists? and citizens? attitudes toward the Internet, copyright and peer-to-peer technologies. read more