The music industry has reaped many benefits from the Net as a medium for distribution, sales, and marketing--but the explosive growth of the Net music business also has opened up a copyright and licensing can of worms.
Two organizations that deal with licensing music, the American Society of Composers, Authors, and Publishers (ASCAP) and BMI, have stepped up efforts to see that royalties are paid to copyright holders for music performances over the Net. The license fees go to the songwriters, composers, and publishers who create the music, minus the nonprofit organizations' operating expenses.
It has proven to be a challenge, however--especially because Net music performances that warrant royalty fees aren't always tied directly to music sales.
Both organizations charge royalties based on public performance, not the sale of music online. For example, if a retail store on the Net plays music as background for its shoppers, it owes the copyright holder a royalty fee, even if the retailer is selling clothes and not CDs, according to ASCAP and BMI.
Plus, most Net music sites are not yet profitable, so many resist paying license fees. Moreover, Net firms that are new to the music industry often are not aware of their legal obligation to the copyright holders. The proliferation of MP3 (MPEG 1 layer 3) sites, where users can download often pirated CD-quality music tracks, also has not helped ASCAP or BMI's cause.
To augment the licensing structure it updated late last year, ASCAP today announced an alliance with music delivery technology company Liquid Audio.
"We're going to make the licensing process much easier for our clients," Bill Woods, director of marketing communications for Liquid Audio, said today. "[ASCAP's] documentation will come with our documentation when the client receives our product."
The documentation for ASCAP will include information about the organization's three rate schedules, which are designed to help each company comply given its specific online business model and use of music.
"We're making it easier for our clients to sign on the dotted line and get themselves compliant to avoid legal action," Woods said.
He noted that many of Liquid Audio's executives are musicians, which makes them sympathetic to the needs of copyright holders.
"Most of us here have some musical background," he said. "That gives us some level of perspective that other companies that are purely technology-driven don't have."
Woods also noted that cooperation with the regulatory agencies could help boost industry support for Liquid Audio's ultimate goal: to become a delivery standard. He said the company's mantra for its technology is "legally responsible, commercially viable."
BMI also has increased its efforts of late. It announced today that it expanded the capability of its MusicBot technology, which automatically tracks the use of music on the Net. The technology now can identify individual titles available on the Net, according to BMI.
MusicBot now can read and store the names of music files played on the Web with RealAudio and Microsoft's NetShow as well as .avi, .mpeg, and .wav files, allowing BMI to automatically identify individual titles. It is developing a database of the most popular musical titles on the Web.
BMI also said the Australasian Performing Rights Association (APRA) has become the first foreign entity to license MusicBot to identify Net music performances that come from its territories. The APRA administers royalties to artists and composers in Australia and New Zealand, and helps other agencies collect royalties for their members within its territories.