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Plan Unveiled To Quell Music Industry-P2P Hostilities

By John P. Mello Jr.
Feb 26, 2004 7:54 AM PT

In what could be a blueprint for the future of sharing commercial music on the Internet, the San Francisco-based Electronic Frontier Foundation (EFF) Wednesday released a white paper outlining a scheme to squelch squabbles between the music industry and online peer-to-peer networks over music file-sharing in cyberspace.

Plan Unveiled To Quell Music Industry-P2P Hostilities

"There are some logistical hurdles with this EFF proposal, and there are some very big questions that remain to be answered, but I think this idea is a way for Internet file sharing to still work and the recording industry to still make money and artists' rights to still be protected," Joseph Bernstein, an intellectual property attorney with Wallenstein Wagner & Rockey in Chicago, told TechNewsWorld.

"In that sense," he continued, "ultimately, some form of this idea is how this is going to play out. If we could travel to the future by 15 to 20 years, we would see this in some form."

Voluntary Collective Licensing

In its white paper, the EFF proposes that a scheme of "voluntary collective licensing" be set up to compensate artists and rights-holders for online music file-sharing.

It recommends that the music industry form a nonprofit organization -- along the lines of ASCAP, which collects royalties for artists when their work is aired or performed -- to collect compensation for copyrighted music shared on the Internet.

That compensation could be a flat fee paid on a monthly basis by users of file-sharing software, it could be collected by ISPs as a premium service, or file-sharing software makers could bundle it into a subscription model for their applications.

Scheme Aligns Interests

Fees collected by the nonprofit organization would go into a pool and be distributed to artists and rights-holders on the basis of the popularity of their music.

"Voluntary collective licensing aligns the interests of the music industry with music fans," EFF senior intellectual property attorney Fred von Lohmann said in a statement. "The more people share music, the more artists and copyright holders should receive compensation for their creations."

This kind of licensing is nothing new, according to Jarad Carleton, an IT industry analyst with Frost & Sullivan in Palo Alto, California, but the Recording Industry Association of America (RIAA) has shown little interest in it. "They have their eyes on what at the moment appears to be the bigger and more profitable target -- selling songs for around a buck a piece," he told TechNewsWorld via e-mail.

Head in Sand

"If the EFF thinks that a voluntary system at this point will satisfy the RIAA and record labels it represents, then they have their heads buried in the sand -- right up to their ankles," Carleton said. "Volunteering to pay a copyright holder is not an option. Per international law, copyright holders are legally entitled to compensation, thus there must be a mandatory system put into place."

He maintained that at the moment the RIAA has no incentive to embrace the EFF scheme. "I'd be shocked if the RIAA and record labels gave the EFF proposal serious thought," he said.

"The RIAA has proven that their current plan of attack is working," he continued. "Record label revenues are up. P2P users are afraid of breaking the law. In fact, the RIAA method of dealing with illegal file traders has been so effective that it is being copied in Canada now, and I would expect it to spread to other countries as well."

Pessimism Shared

Carleton's pessimism is shared by some in the P2P community.

"This is terrific output, as it shows the world that there are plenty of workable solutions that any reasonable man could understand and accept," Wayne Rosso, CEO of Optisoft in Madrid, Spain, told TechNewsWorld via e-mail. "The problem is that we're not dealing with very reasonable men."

"I think the EFF proposal is interesting, but I don't expect it will be met with any enthusiasm from the entertainment industry based on my past experience," added Derek Broes, executive vice president for worldwide operations at Brilliant Digital Entertainment and Altnet in Woodland Hills, California.

Hangup Over Money

According to Adam Eisgrau, executive director of P2P United in Washington, D.C., which represents a number of peer-to-peer providers, licensing schemes have been rejected by the music industry for monetary reasons. "These kinds of proposals have been strenuously objected to by Big Music because under any kind of reasoned analysis of what kind of value they bring to a new artist's world, they're likely to make less money than they're making now," he contended.

The EFF model could work if the record companies buy into it, Anthony Lupo, an intellectual property attorney with Arent Fox in Washington, D.C., told TechNewsWorld.

"But I don't think the music industry is even close to coming to this because they lose control," he added. "They don't want to get into another collection agency like ASCAP or BSI because they haven't been thrilled for a long time with how those companies have been distributing royalties."


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