Warner Music's tune of folly

In a guest post, entertainment lawyer Chris Castle says the record label's notion of bundling monthly fees into ISP bills is a head scratcher.

Guest post: Editor's note: Music attorney Chris Castle is all for finding a way to boost the music industry out of its current nosedive. But bundling music charges into ISP bills is not the way to go, he says.

Castle, a former executive at A&M Records and Sony Entertainment as well as a former attorney at Wilson Sonsini, one of Silicon Valley's most prestigious law firms, takes issue with a proposal making big headlines after it was outlined on Portfolio.com. Jim Griffin, a former executive at Geffen Records is working with Warner Music Group to come up with a plan whereby consumers would pay their ISP a monthly fee for unlimited access to music. Similar plans have been around for a long time, and plenty of music industry executives have floated similar ideas in the past. But Castle says few of them have been able to overcome the litany of legal issues involved. This one, he says in a guest column, doesn't either.

Jim Griffin's idea sounds very much like the Lawrence Lessig-William Fisher "alternative compensation scheme" that has been around for a long time. Griffin's proposal is voluntary, like the version proposed by the Electronic Frontier Foundation, (which advocates for Internet rights).

There are many problems with the system, but here are three:

First, Griffin's plan produces a disaggregated chunk of money that is collected based on headcount, not based on music usage. One way to divide up that money that advocates often raise is based on some kind of sampling of usage (I think I've heard the Electronic Frontier Foundation talk about the sampling method used by the American Society of Composers, Authors and Publishers as a proxy. If you are going to sample peer-to-peer or BitTorrent files, you need to identify tracks. That can be done with fingerprint technology, and there are several companies out there that do that.

However, if you can identify the tracks on P2P systems enough to sample, you can identify the tracks enough to block and filter. So why not give copyright owners that right? The Portfolio.com story seems to say that Warner Music Group intends the system to cover all the world's music, but that must be a typo, for Warner Music obviously can only speak for its masters and the compositions they administer (even that is subject to artist and writer consent in many instances).

If you are going to divide up the disaggregated sum collected the Griffin's system on a method not based on sampling, then what exactly would that be? I call this the "Carl Sagan Scheme" because it promises "billions and billions" of dollars to the creative community. It also ignores what I think will be billions in the transaction costs of implementing the scheme--ISPs won't do this for free, and will want protection from copyright infringement claims of any stripe.

It's also important, for obvious reasons, that the company holding the data be "Swiss." I doubt that the labels would allow one of their number to control it, and a joint ownership scheme would face an inevitable antitrust challenge if the others were involved.

In order to be effective, Griffin's plan would require amending the Copyright Act. A voluntary plan is unlikely to attract a sufficient number of copyright owners. But without all copyright owners, ISPs and their users would still be exposed to claims of copyright infringement. If you think that gaining relief from prosecution is an incentive for ISPs to adopt this complicated plan, then you would, I think, assume that ISPs would want to protect their users from all claims for copyright infringement.

Which leads to the second problem. In order to get that global protection for users requires amending the Copyright Act. Without amending the Copyright Act, you will always have the "lone gunman" problem, or the copyright owner you missed getting permission from. It's tough enough to amend the Copyright Act on things that people agree on, and you'll never get anyone to agree to amend the Copyright Act on things that people are bitterly opposed to, such as Griffin's system.

In addition to these problems, if you go down the route of amending the Copyright Act, which seems to be the only realistic way to accomplish what Griffin desires, there are people who say such an amendment would violate the U.S. government's treaty obligations, such as the Berne Convention, the TRIPS Agreement, and NAFTA.

Also, it's likely the rest of the world may have a problem with Griffin's system, even if it's a voluntary system. A similar system was resoundingly defeated in the French Parliament, and President Nicholas Sarkozy has clearly come out against any such ideas. One reason is that it is hard to put a border on the plan, but this is really a worldwide solution that Griffin seems to be proposing.

We have only been focused on issues affecting artists and songwriters, but ISPs and P2P operators will likely have many other negative reactions to the plan. I can't imagine the Pirate Bay signing up for this.

It's a head scratcher, that's for sure. I'm sure there's a lot more to it than has come out in the exclusive interview.

There must be.

There are a lot of smart people at Warner Music, and I'm sympathetic to their desire to keep an open mind about possible new business models. But this one is old news and has not been well received in the past, so seems unlikely to bear fruit.

 

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