"The Use of Copyright Programming over the Internet"

Mr. Chairman and Members of the Subcommittee, I am Charlie Moore, Vice President for Business Development of Radioactive Media Partners, a small company in Cambridge, Massachusetts that provides innovative audio solutions to Internet portals, online retailers and media companies. RadioAMP, as we are known, was founded in mid-1999, and I am proud to say that in the ensuing year we have established significant partnerships with such well-regarded companies as Alta Vista, barnesandnoble.com, NBCi, and CDNow.

I am pleased to speak with you today on behalf of the Digital Media Association (DiMA). DiMA’s 54 member companies develop and deploy digital technologies to perform, market, sell and protect audio and audiovisual content over the Internet and other digital networks. DiMA’s members include prominent public companies such as RealNetworks, EMusic, Liquid Audio, CMGI and LAUNCH Media, as well as startups and well-funded private companies, including Listen.com, TuneTo.com, iGroove.com, and RadioWave.com. As leaders in the performance and delivery of Internet music, DiMA members affirm our commitment to engage in legitimate businesses that create a compelling experience for the public while compensating artists and producers for the use of their creative works.

In today’s testimony I have been asked to report to the subcommittee on progress in Internet music since the 1998 enactment of the Digital Millenium Copyright Act ("DMCA "). In particular, I would like to share with the subcommittee the benefits realized by webcasters as a result of the sound recording performance license that was included in the DMCA, as well as the broader benefits of music-related compulsory licenses to consumers and creators.

To summarize, the existing music-related compulsory and statutory licenses generally work. Notwithstanding DiMA members’ concerns regarding certain aspects of the licenses and the relevant antitrust consent decrees, and regarding specific provisions of the Copyright Act that apply to webcasters and competing entertainment program services, compulsory licenses benefit all participants in the music industry value chain by enabling companies like RadioAMP to create and bring to the marketplace innovative legal ways of delivering and selling music to consumers.

Background. As members of the subcommittee know, the right to publicly perform musical works has generally been subject to compulsory – or required – licensing for decades. The original compulsory licenses resulted from antitrust consent decrees entered into by the U.S. Department of Justice and, respectively, the American Society of Composers, Authors and Publishers ("ASCAP") and Broadcast Music, Inc. ("BMI"). More recently, Congress granted to sound recording producers the right to be paid for public performances of sound recordings by digital means, but also subjected that right to compulsory licensing with regard to traditional broadcast-like Internet radio services.

We at RadioAMP, along with many DiMA member webcasters, have relied on these compulsory licenses to publicly perform music and sound recordings. Pursuant to the respective consent decrees and the relevant provisions of the Digital Millennium Copyright Act, RadioAMP lawfully performs musical works and sound recordings through the Internet radio services that we develop and provide to our partners. We have leveraged these licenses into web radio solutions that have the potential to reach over 30 million unique visitors to our client sties, each month. We have created dozens of jobs in Massachusetts (with many more to come), developed exciting new technologies that we are only beginning to deploy, and – perhaps most importantly for my recording industry friends – stimulated sales of recorded music that generate royalty payments to songwriters, music publishers, record producers and performing artists.

As this subcommittee reviews the music marketplace that Congress and the courts have helped create, and whether the appropriate balance has been struck between consumers and creators, my small business from Massachusetts offers the following points for your consideration:

Without the existing compulsory licenses RadioAMP and most other webcasting services might not exist.

Without compulsory licenses Americans’ exposure to and love of music would, over time, be muted and suppressed

Without compulsory licenses the alternative poorly-financed artists and musical genres that are occasionally heard in the broadcast spectrum, but available broadly over Internet radio services, might never be heard from.

Without compulsory licenses consumers worldwide would have very limited legal opportunity to satisfy their music demand using the Internet, and would instead satisfy their music curiosity and ultimately their purchasing with illegal music services.

Absent compulsory licenses RadioAMP would not exist. When RadioAMP meets with prospective investors and clients, they ask the same two questions: do we have lawful access to the sound recordings that comprise our programming; and if the answer is "yes", do we know how much that access to music costs, or otherwise how to price our products and services.

Because of the compulsory licenses discussed previously the answer to the first question is an unambiguous "yes." RadioAMP is fully licensed to utilize sound recordings to build webcasting services within the confines of the DMCA strictures. Without the existing compulsory licenses RadioAMP and other webcasters would spend months or perhaps years negotiating content licenses with record labels and music publishers. The administration and transaction costs alone would absorb much of our financing and creative energy, and the delay and uncertainty of whether the licenses would be renewed would inhibit our ability to succeed at all.

Unfortunately the answer to the second question – how much do our music licenses cost – remains uncertain. As you may know, the DMCA contemplates binding arbitration to set a royalty rate if the parties or industries cannot negotiate an agreement. At this time RadioAMP and most of the webcasting industry are awaiting the beginning of that arbitration, and we are anxiously awaiting the final result that will provide some definition as to our operating costs into the future. Similarly the antitrust consent decrees that affect ASCAP and BMI licenses are difficult to negotiate and often lead to rate litigation, but these uncertainties are acceptable to our company and our investors.

Compulsory Licenses Benefit Consumers. As members of this subcommittee know, broadcast radio – for rational economic reasons – has for many years been abandoning programming formats that do not reach the broadest audiences with the most economically favorable demographics. An unfortunate result has been a diminution in the amount of non-mainstream music programming on broadcast radio, such as jazz, classical, blues, bluegrass and folk music.

For webcasters and music lovers, however, radio's limitations create our opportunity. Internet radio reaches a nationwide niche audience for virtually any genre of music. But this opportunity would be severely inhibited without the compulsory licenses referenced above. How would a start-up webcaster with minimal financial capital negotiate licenses with hundreds of jazz labels whose music is necessary to satisfy jazz-lovers’ eclectic tastes? With compulsory licenses those administrative hassles are not necessary.

Compulsory Licenses Benefit Creators and Copyright Owners. As I noted previously, Internet radio exposes many more artists and musical genres to the public than broadcast radio. In addition, and in contrast to traditional radio which has limited capacity to inform consumers, virtually every music webcaster includes artist and album information as a song is performed, provides hyperlinks to at least one site with information about the artist and album, and includes a "buy" button on the screen that leads directly to a legitimate purchase opportunity for the listener. These capabilities of Internet webcasting provide obvious benefits to the recording industry and performing artists. By enabling the public to conveniently learn about the music and buy it with a click of the mouse, Internet music services are turning Internet users into music consumers.

Although the conclusion is intuitive and the statement axiomatic, permit me to share with this subcommittee the results of empirical consumer research – a poll of more than 4,000 online consumers: Internet webcasts drive sales of recorded music, and thereby put money in the pockets of creators and copyright owners even absent the payment of performance licenses. As DiMA research released this morning documents:

48% of online music consumers seek out music they cannot hear regularly on traditional radio;

More than 40% of online music consumers have purchased music online that they first heard online; and almost 60% of online music consumers have purchased music offline that they first heard online;

Nearly 80% of consumers would purchase more music if they could get artist and album information as the song is performed, which is always the case with Internet radio.

One Request for Assistance. Perhaps the Congress can, directly or indirectly, assist small businesses in this industry in one vexing part of compulsory licenses. While the DMCA sets forth reasonable timetables, e.g., 180 days, for ratemaking proceedings to conclude once underway, the ASCAP and BMI consent decrees offer no such deadlines. The ASCAP rate court has been known to require many years of process before reaching trial courtjudgments, and this is the very uncertainty that undermines the otherwise reasonable certainty offered by compulsory licenses. If the Congress can see fit to impose a reasonable time deadline on the proceedings of the ASCAP or BMI rate court (and I am not a lawyer so I do not have a specific suggestion), this would enhance both the music industry and our industry even more.

Compulsory Licenses Enable Legitimate Entities. As we know, the broad scale of the Internet presents challenges for enforcement of copyright. In many nations the copyright laws or their enforcement are less rigorous than in the United States. Even within the United States, absent compulsory licensing our strong laws and effective legal systems would be like a finger in the dike against a flood of unlicensed music. Without legitimate Internet music supported by compulsory licenses, there would be a massive opportunity for unlicensed music programmers to grab consumers’ attention and permanently capture significant market share. This would harm creators, and also legitimate programmers and retailers such as RadioAMP and our DiMA colleagues.

Our goal is to bring the music to the people – how they want it, when they want it, and where they want it – and to couple it with song and artist information and community and the opportunity to buy or lease or license so that creators are compensated fairly and incentivized to continue their creative efforts. Compulsory licensing has enabled us to achieve all of these goals, bringing enjoyment to the public and new sources of revenue to the creative community.