Tension grows between labels and digital radio

Music industry wants new rules on how consumers make copies from satellite radio and digital broadcasts.

The entry of satellite and digital radio into the technological mainstream is increasing tension with the record industry, which wants new rules governing how consumers can make digital copies of songs from the airwaves.

At issue are new devices that can record and save high-quality digital copies of tunes as they're being broadcast by these new networks. Recording executives are worried that consumers might increasingly opt to make such copies instead of purchasing the music on a commercial CD or from a download store like Apple Computer's iTunes.

For now, the Recording Industry Association of America is in negotiations with satellite radio companies and is opening discussions with radio broadcasters over specific products. But over the long term, the music industry says, Congress should find a way to regulate these new digital radio networks so labels can get paid when consumers keep copies of songs, as is the case with iTunes.

"We've got to find a way to harmonize this so it's rational," said Mitch Bainwol, the RIAA's chief executive officer. "There are going to be new technologies that are great for fans, and great for the entire music world, but they're all operating on different platforms, and all operating on different rule sets."

In some sense, the new digital technologies are simply rekindling one of the music industry's oldest debates, over how record labels should be compensated when their music is played over the air.

Congress has historically come down on the side of the broadcasters in this debate, saying that radio stations can play whatever music they want while paying only a relatively small amount of money to songwriters and publishers for the right to "perform" the song on-air--and not paying record companies at all.

Similarly, the right of consumers to tape songs off the radio has generally been held to be fair use.

However, when Congress set the rules for Internet and other digital broadcasts in 1998, it gave record companies the right to royalties from Internet and satellite radio broadcasts. That's set up a patchwork of different rules for different new media companies, even as technology has brought the way consumers use their services more closely together.

For now, the most pressing issues focus on whether digital broadcasts can be legally recorded and archived. For instance, a new device from Sirius radio called the S50 lets people save individual songs. Sirius and the RIAA are in negotiations over this device.

XM Satellite Radio pulled a PC-based radio receiver from the market last year over music-copying concerns, and the company says none of its devices can now be used to transfer and store content on a computer. XM says it is happy to continue talking to the record industry about its products.

"The year 2006 will be one of negotiation between satellite radio and the music industry," said XM spokesman Nathaniel Brown. "Music is an important partner for XM, and we look forward to continuing our discussions with them in hopes of arriving at a business solution that fits everyone."

Similarly, radio broadcasters are worried about RIAA proposals to change the way digital radio is sent over the air. Labels have proposed several ideas, ranging from a "broadcast flag"-like marker in digital broadcasts, which would prevent recordings from being traded online, to wholesale encryption of radio streams to prevent recording.

This week saw an exchange of letters between the RIAA and the National Association of Broadcasters proposing negotiations over the digital radio issue, rather than an immediate trip to Congress.

"We hope to continue dialogue with you as the radio and recording industries keep working towards mutually acceptable resolution of this issue," NAB Chief Executive Officer David Rehr wrote to Bainwol. "Such formal discussions could move the industries forward aggressively, rather than relying on a congressional mandate."

These ongoing discussions have helped keep tensions in check. But Bainwol said the RIAA is still set on a long-term goal of changing the digital rules so there's "parity" between the different kinds of services that let consumers wind up with a digital copy of a song.

The upcoming year, with congressional elections, war and other big issues distracting legislators, is unlikely to see much action on copyright topics. But early bills, and discussions with legislators, exploring the issue are likely, Bainwol said.

That prospect has prompted continued attention from consumer electronics companies and the broadcasters.

"Our concern remains that this is an effort to stifle technology before it has a chance to grow," said Consumer Electronics Association spokesman Jeff Joseph. "It has never been illegal to record a song off the radio in the context of fair use."

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