MP3 firm gets license from Harry Fox

Internet record company GoodNoise has been issued what it says is the first Digital Phonorecord Delivery License for delivering songs in the MP3 (MPEG-1, Audio Layer 3) format. The license was issued by the Harry Fox Agency, the licensing arm of the National Music Publishers' Association.

The Harry Fox Agency has received a lot of attention lately for its shutdown last month of the popular International Lyrics Server, a Web site hosted in Switzerland that published the words to 100,000 songs. The agency, which also shuttered the Online Guitar Archive in June, has been seen as a Big Brother-type enemy of sorts to the often free-wheeling online music community, which has been enthusiastic in its spirit of sharing, but often at the expense of copyright holders who are due licensing fees for the distribution of their property.

Today's announcement "bridges the gap" between the two interests, said Bob Kohn, chairman of GoodNoise.

The agreement involves the Digital Phonorecord Delivery License, which covers the mechanical license for songs. Whenever a company wants to make a copy of a sound recording onto a CD or cassette, for example, it has to pay a fee to the songwriter and music publisher for the mechanical license. That differs from the fee paid to licensing organizations such as ASCAP and BMI, which collect a fee to the publishers and songwriters for the performance of a song, such as by a radio station, restaurant, or hotel.

The copyright law was amended a few years ago to include online music delivery, said Kohn, who authored industry tome Kohn on Music Licensing. GoodNoise, which up until now had to approach the roughly 15,000 music publishers individually to pay the necessary fees, now can pay the Harry Fox Agency the standard 7.1-cent fee for each of the songs it provides for download via the MP3 format. The agency, which represents all the music publishers, distributes the fee and takes a small cut.

Under the agreement, GoodNoise will report the number of downloads of each title from its site or affiliated sites and pay the agency the appropriate fees, the companies said. GoodNoise also will also embed a licensing number, dubbed the "Multimedia Identifier," into every track downloaded from its site, to let customers know that the songs they bought and downloaded hold a license from the publisher. The agency will use the GoodNoise agreement as a model for other companies that want to distribute music online, Kohn said.

MP3 compresses high-quality sound files so they can be downloaded quickly onto a PC hard drive. Its popularity online has made it a de facto standard for downloading music, observers say, although it has faced roadblocks to date by many in the mainstream recording industry because it is favored by music pirates and often is used to post unauthorized copies of copyright-protected music online.

Kohn noted that the agreement is "clearly a step forward for MP3," which has taken great strides in recent weeks toward becoming more legitimized. MP3 download, news, and community site MP3.com joined the ranks of tech giants Yahoo and Cisco last month with an investment from Sequoia Capital, for example. At the time, Forrester Research senior analyst Mark Hardie said the investment was a smart one for Sequoia, because it is "funding the prospect of a shift in the music business" toward widespread, authorized use of MP3.

He said today that the GoodNoise agreement "shows that the [music] industry is taking the necessary steps to make legitimate a format that everyone was saying a few months ago was only used by pirates,

Hardie noted that it also "pokes more holes in SDMI," or the Secure Digital Music Initiative, announced late last year by the Recording Industry Association of America, a powerful industry trade group. The initiative aims to create a standard to be embedded in any music delivery technology to ensure that musical works are copyright protected when downloaded from the Net. But critics have said the initiative lacks leadership, has not been clearly drawn, and will be outdated even if it meets it goal of launching by the fall.

Today's agreement shows that "no one is waiting for this supposed standard to come about," Hardie added. "The fact that GoodNoise--a pure Internet play--was able to secure a deal with an entity like Harry Fox means that the industry is not only cognizant but is not going to stick its head in the sand until next fall."

Along with GoodNoise, which has had the delivery format as part of its business model from the beginning, other companies have been finding ways to incorporate MP3 into their businesses. Portal Lycos on Monday launched an MP3 resource on its site; and music delivery technology veteran Liquid Audio last month said it would incorporate technology from Diamond Multimedia into its Liquid Music Player, which would allow users of Diamond's portable Rio MP3 player to download and play Liquid's more than 100,000 tracks from major artists after purchasing them.

The agreement "not only legitimizes [MP3], it is saying to songwriters and music publishers that they will get fair and accurate compensation for their intellectual property when their music is distributed in the MP3 format," Kohn said. The fear of losing control of their intellectual property through the easy sharing of MP3 files has caused many artists and record companies to shy away from using the format.

"We are extremely pleased to establish this license agreement with GoodNoise, which we believe will serve as a model for licensing musical compositions in downloadable formats," Edward P. Murphy, president and CEO of the Harry Fox Agency, said in a statement. "As customer demand for music distributed in downloadable formats continues to expand, music publishers need to feel comfortable that they will be appropriately compensated. We applaud GoodNoise's efforts, and the efforts of other law abiding sites, to ensure that the rights of songwriters are protected."