This article from NYTimes.com
has been sent to you by mentalchatter@sympatico.ca.
hey list,
gee, what a surprise.
I thought many of you would be interested in the ongoing issue.
-db-
Record Labels' Answer to Napster Still Has Artists Feeling Bypassed
February 18, 2002
By NEIL STRAUSS
In their bitter battles against Napster and other free
music downloading services, record company executives have
wielded one moral argument that has placed their position
beyond self-interest: the fans take the music without
proper permission and don't pay the artists a dime.
Last December, the major record labels responded with two
Internet services of their own where fans pay monthly fees
to download songs. Under this arrangement, however, the
performers still don't get a dime: for each song
downloaded, they stand to get only a fraction of a cent,
according to the calculations of disgruntled managers and
lawyers.
And, artists and their managers say, the labels, like
Napster, aren't putting the music online with proper
permission either.
"I'm not an opponent of artists' music being included in
these services," said Gary Stiffelman, who represents
Eminem, Aerosmith and TLC. "I'm just an opponent of their
revenue not being shared."
Because the sites are new, no payments have been made yet,
but the payment plan has so infuriated scores of
best-selling pop acts, including No Doubt, the Dixie Chicks
and Dr. Dre, that their lawyers have demanded their
clients' music be removed from the sites, with some even
sending cease-and-desist orders. Only in some cases have
the major record companies complied.
Since Napster was born on college campuses in the late
1990's, peer-to- peer file sharing services have become the
bane of the established music business, with, at their
peak, some 60 million Napster users sharing nearly 40
million songs illicitly. Even after a federal district
court shut Napster down, other free services proliferated,
with Kazaa and Morpheus attracting an ever-growing base of
users sharing not just music but movies and software as
well.
In December, the music business responded with Pressplay
and MusicNet, both pay-to-use subscription services where
users can listen to or download a specified number of songs
each month. Pressplay is a joint venture between Universal
and Sony Music, and MusicNet teams BMG, EMI and AOL Time
Warner (news/quote) with Real Networks.
"All of my clients had their attorneys advise the labels
that if they did use my clients' music on Pressplay or
MusicNet, they would be in breach of contract," said Simon
Renshaw, who manages the Dixie Chicks, Mary J. Blige and
others. "Some artists they took off, but some they didn't.
It's becoming very obvious to me and my peers that we're
becoming victims of what is a huge conspiracy."
Representatives of the five major record labels would not
talk on the record about the payment system or their rights
to use the music. But in comments not for attribution,
several executives at labels and their subscription
services did not dispute the accusations regarding the
payment plan. They said their first priority was to make
the services attractive to consumers and that the details
of compensation could be worked out afterward.
In a letter responding to a lawyer who is trying to remove
an artist from Pressplay, the head of business affairs for
several Universal labels, Rand Hoffman, set out a company
position. It is a view shared by other record executives,
who say they are investing heavily to fight piracy and
develop a fair compensation system for artists who are
ungrateful.
"We are now spending tens of millions of dollars to help
launch Pressplay in the hope that a legitimate response to
the illegitimate services will provide an attractive
alternative to consumers," Mr. Hoffman wrote in the letter.
"Pressplay is committed to making music available on the
Internet in a manner that is legal and that ensures that
artists and publishers will be paid. This is truly a time
for artists and record companies to be working together."
He added that it was "beyond logic" that artists would
choose to leave their music off Pressplay and "effectively
encourage the use of illegal services."
Though the two new services don't appear to be widely used,
what worries artists and managers is that a precedent is
being set, so that if the labels finally come up with a
viable online music subscription service, they won't have
to share a significant portion of the proceeds with artists
and can claim that this is the way business has always been
done.
The crux of the debate over artists' compensation involves
whether they should get a licensing fee or a royalty
payment.
When their music is used in movies, in commercials and on
Internet sites, artists are paid a licensing fee, which,
after payments to the producer and the publisher, is split
50-50 between artist and label. Although Pressplay and
MusicNet license the music, the bands are not paid a
licensing fee. Instead, the labels pay their artists a
standard royalty for each song accessed by a fan, as they
would for a CD sold.
This means that the artist gets on average less than 15
percent instead of 50 percent. But, out of that, 35 to 45
percent is deducted for standard CD expenses like packaging
and promotional copies - expenses that obviously don't
exist in the online world.
As one rock manager computes it, if a consumer buys the
standard Gold Plan on Pressplay, paying $19.95 for 75 songs
downloaded to a hard drive and 750 streamed so that they
can be heard only once, an artist, after these deductions,
gets $.0023 per song downloaded. To earn a penny, more than
four songs must be downloaded.
"I did the math with several other managers and lawyers,
and the labels and Pressplay get just under 91 percent
after they've paid all the artists for all the downloads,"
said Jim Guerinot, who manages No Doubt, Offspring, Beck
and Chris Cornell. Other managers come up with other
figures that they say are even worse for the artists.
The artists' managers and lawyers say the record companies
have not committed their payment system to writing.
Representatives for Pressplay and MusicNet said that the
payment schedule was a decision made by the labels.
"Pressplay licenses its content from record labels and in
turn packages the music on our service," said Seth Oster, a
spokesman for the company. "The compensation of artists
takes place at the label level."
"Pressplay was developed as a legitimate service to make
sure artists' rights were respected and artists were
compensated," he added.
A spokeswoman for MusicNet said, "We are deeply committed
to artists' rights and to ensuring that copyright holders
are compensated."
Another irritant for the artists, several lawyers and
managers say, is the distribution of the $170 million
settlement from MP3.com, an Internet company that offered a
music storage service in violation of copyright law.
The labels were to share that money with artists whose
music was put online without authorization, but several
artists' representatives said nothing had been distributed.
Spokesmen for Sony (news/quote) and BMG said those
companies were arranging to distribute the money. According
to Warner Brothers and Universal Music, the money has been
distributed, although it may not have been spelled out
exactly in the accounting statements artists received. EMI
did not call with a comment.
For many acts, suddenly there appears to be little
difference between the illicit file-sharing system and
record-label services.
The arguments the labels are using, said Jill Berliner, a
leading music lawyer, are exactly the ones Napster made.
"And, from our perspective, if the technology is going to
be out there and the artist isn't really going to make
money, we'd prefer that our fans just get it for free," she
said.
Another complaint is that the labels are licensing music to
the subscription services without seeking permission from
the musicians.
"All of a sudden this thing launches," Mr. Guerinot said,
"and myself and a lot of other managers and lawyers had
never even been asked about it. We have coupling rights in
our contract, which means they can't just take our music
and put it wherever they please. When I try to talk to
them, they say that they don't have to discuss this."
Mr. Guerinot said he sent cease- and-desist letters on
behalf of Offspring, Beck and No Doubt. As a result, he
said, music from No Doubt and Offspring was removed from
Pressplay, but not the music of Beck.
One manager of million-selling acts, speaking on condition
of anonymity, said: "We've written them letters and put
them on notice up front, as did most managers and lawyers,
saying, `Don't put our artists' music up.' But they'll do
it anyway. They're so arrogant. They're taking the position
of: `We don't care. Let's just do it without asking.'
They're ignoring their contracts. It's ridiculous.
Obviously it will be litigated."
Some managers, however, said that they felt bullied into
including their music on the services and were powerless to
do anything about it. "Of course we're upset about it,"
said the manager of one male artist. "But he hasn't even
turned in his record yet, so what leg do we really have to
stand on?"
To try to avoid future protests, most major labels have
added a clause to their standard recording contracts
allowing the label to sell an act's songs on the Internet,
including all subscription and pay-per-use services. It is
very difficult, said Mr. Stiffelman, for a new band to have
enough leverage to remove this clause from its contract.
http://www.nytimes.com/2002/02/18/technology/18SONG.html?ex=1015042491&ei=1&en=88f446894f023bb5
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