Music Licensing, Satellite Radio, and Perform Act Debated

June 2, 2006. The Progress and Freedom Foundation (PFF) hosted a panel discussion titled "The Role of Music Licensing in the Digital Age" on Capitol Hill.  The speakers were Michael Petricone (Consumer Electronics Association), Mitch Glazier (Recording Industry Association of America), Christian Castle, and Lee Knife (Digital Media Association). Patrick Ross (PFF) moderated. The audience included Congressional staffers and many of the senior attorneys from the Copyright Office (CO).

Much of the discussion focused on satellite broadcasting, the lawsuit brought last month by the members of the RIAA against XM Satellite Radio, and pending bills known as the Perform Act.

See also, related stories in this issue titled "Summary of the Sen. Feinstein's Perform Act" and "Summary of the RIAA Lawsuit Against XM Satellite Radio".

The RIAA's Glazier argued that satellite radio is not merely a broadcast service that performs music, like traditional terrestrial radio. He argued that it also enables users to substitute the service for purchases of music. He argued that it is a digital music distribution technology. In short, while satellite radio now pays a statutory performance license under Section 114 of the Copyright Act, it must also pay to license the distribution of copyrighted music, as do Apple's iTunes and other distribution services.

He also argued generally that the Copyright Act should be harmonized to provide that all digital music distribution technologies are treated in a technology neutral manner.

The panel included no one from XM. However, the CEA's Petricone argued the case of satellite services companies. He argued that satellite is like radio, and not like iTunes. He argued that satellite services enable subscribers to time shift. He said that subscribers can use the service to save recordings, but emphasized that these subscribers lose these recordings when they stop subscribing.

He also argued that creators are being compensated by satellite companies pursuant to the Audio Home Recording Act (AHRA).

In short, he said that satellite companies perform music, and do not distribute music. And, since they pay performance fees and AHRA fees, they are within the law.

Most of the discussion was carried on by Glazier and Perticone. In addition, Knife, who spoke on behalf of the DiMA, said that "we largely support" the Perform Act. He said that it will level the playing field for different technologies, and will also deal with services that are a substitute for sales.

Castle made many points. He said that it is the songwriters who are being hurt the most by file sharing and other leakage. He also said that the major music labels are only a part of the music industry.

He compared the current lawsuit against XM to the lawsuit against (On January 21, 2000, five recording companies filed a complaint [10 pages in PDF] in the District Court. The Court granted the plaintiffs' partial summary judgment on April 28, 2000. It issued its opinion [PDF] on May 4, 2000. This opinion is also reported at 92 F. Supp. 2d 349.)

Castle also said that XM's Lee Abrams should be made Chairman of the Federal Communications Commission (FCC).

Glazier and Petricone engaged in a frank, spirited, and confrontational, but good natured, debate throughout the program.

Petricone argued that the music industry wants to single out a new service for punishment. Glazier argued satellite companies who pay performance but not distribution fees are like a restaurant owner who will pay rent, but not for food.

Petricone argued that the music companies are already "getting compensated very well" by satellite companies via performance and AHRA fees. Glazier argued that the AHRA was not written to deal with satellite radio. It merely dealt with equipment manufacturers and serial copying technologies. Petricone argued that it is broader than that, addresses satellite radio, and is working as intended by the Congress.

Glazier argued that the AHRA only provides for miniscule royalties. Petricone argued that the royalties will grow over time. The CO's Mary Beth Peters, a member of the audience who was much amused by the whole exchange, interjected, "It's capped."

Petricone said the RIAA wants to impose "technology mandates on these products". Glazier denied this.

Petricone said "Your business is an oligopoly and you are trying to extract maximum rents." Glazier asked Petricone if satellite radio is a duopoly.

Petricone said that since John Philip Souza first complained about player pianos, the music industry has been running to the Congress to complain about the dire threat to the music industry posed by every new technology. Petricone argued that the music industry has been wrong.

He also argued that surveys show that satellite radio subscribers buy more CDs and go to more concerts. They learn about new music through satellite radio. He said to Glazier that "Our numbers show that those subscribers are your best customers. And, you know, to the extent that you are saying that these are sales displacement ... I would love to see some proof before we run around imposing technology mandates ..."

Glazier said that "You have to let people who have exclusive rights run their own businesses, make their own mistakes."

Glazier added, "I have a terrific idea. We know that technology buyers usually go out and buy even more technology. So, we ought to have a mandated government licensing system, that says that the government will set the price for every consumer electronics device that comes out. And, we will only allow people to pay what is fair and equitable according to what the government thinks for that particular device. And don't worry, because consumers love them so much that they are going to go out and buy even more. Because it is really great for your business, and you just don't know it. I mean, it is so ridiculous to sit there and say to creators of products in business that they just don't know what is good for them, and to protect their rights, they are just idiots."