WRITTEN TESTIMONY OF
ROBIN RICHARDS
PRESIDENT, MP3.COM, INC.
BEFORE THE
HOUSE JUDICIARY COMMITTEE
SUBCOMMITTEE ON COURTS, INTERNET AND INTELLECTUAL PROPERTY
MAY 17, 2001
Thank you for the opportunity to testify at this important hearing on Online Music and the Internet.
I am here representing not only MP3.com, but also the millions of people who wish to store their CD collections on the Internet for their own personal use, but currently are unable to do so. The reason that they are unable to take advantage of this technology is that it was never anticipated by Congress and is currently forced to operate under a patchwork quilt of arcane laws that not only are cumbersome, but are broken in many respects.
Last year, MP3.com introduced an innovative music storage and playback service that enables consumers to use the Internet to store and listen to the CDs that they buy from their local record stores or from online retail establishments. Although our service is not a file sharing service like Napster and poses no threat to the sale of recorded music, we were sued for copyright infringement by the major record labels and music publishers. Those lawsuits forced us to shut down our service and to pay over 150 million dollars to copyright owners and their representatives; yet, even after paying out all of that money, we not only are unable to get our service fully up and running, but we also continue to face new lawsuits!
The fundamental problem is that the Congress never anticipated many of the services that online technology is now making possible. The My.MP3.com technology allows people to take advantage of the Internet in order to get added value from their music purchases. The service that we provide – and similar services being developed by other innovators – can make it possible for your children to leave their CD collections safely at home when they go off to college or for you to listen any of your CDs in your car or on a hand-held device without toting around suitcases full of silver discs. But to do these things, we are going to need Congress’ help.
In order to fully address the problems faced by MP3.com and other online music providers, Congress will have to act to bring rationality back into the Copyright Act. As illustrated by Exhibit A, different types of music transmission services are subject to a hodge-podge of licensing and payment obligations that are unrelated to their relative economic impact on the record labels and music publishers. Some services only have to make one payment; others, including ours, have to make FIVE separate payments. This isn’t right.
Congress also will need to clarify what consumers can do with their digital music purchases, not just what they can’t do. Consumers who buy CDs shouldn’t be subject to additional fees when they store and playback their purchases on-line. If you buy a Ford, you expect to drive it anywhere without having to pay Ford more money. And if you buy a paperback book, you would be shocked to be charged different amounts depending on where you chose to read it. Yet, this seems to be where we are heading with CDs if Congress doesn’t step in.
MP3.com looks forward to working with Congress to develop a legislative proposal that rationally balances the interests of copyright users, copyright owners, and – most importantly – consumers. However, we recognize that enacting copyright reform could take time. And time is one thing that Internet-based technologies don’t have in unlimited quantity. For example, MP3.com has a loyal following of music lovers who have purchased CDs and who want to use our service as a convenient way of listening to the songs on those CDs. We have millions and millions of dollars worth of licensing agreements with the record labels. But we still can’t give consumers access to all of their music – and this is a problem that will be faced by every Internet music provider – because right now there is no practical way to contact all of the music publishers with copyright ownership claims in the more than 900,000 songs in our digital library.
The Harry Fox Agency, which represents over 25,000 music publishers says that they want to work with us to overcome the practical problems in clearing the hundreds of thousands of songs in their inventory and that they won’t participate in legal action against MP3.com for using those songs. We don’t dispute their sincerity. But the fact is that HFAdoesn’t represent all of the publishers of all of the songs for which we need clearance and that means that we remain vulnerable to lawsuits, even with respect to songs that HFA claims to have given us a license.
Indeed, just last week Randy Newman, Tom Waits and Ann and Nancy Wilson of the band “Heart” sued MP3.com for 40 million dollars. This suit makes real many of the issues that MP3.com has been discussing over the last several months. The complaint in this lawsuit cites song titles that we haven’t been able to clear because the publishers aren’t represented by HFA as well as song titles that were previously settled and licensed to MP3.com via HFA-represented publishers.
The good news is that the reproduction and distribution rights that the publishers insist that we need already are subject to a statutory compulsory license under Section 115 of the Copyright Act. The bad news is that this statutory licensing mechanism, which dates back nearly 100 years, is badly out of date.
Although Section 115 was amended in 1995 to extend it to certain on-line activities, the Copyright Office has “deferred” establishing the rates and terms for the “incidental” reproduction of songs that occurs as a necessary part of technologies such as ours. Moreover, the procedures that traditionally have been imposed on statutory licensees under Section 115 are cumbersome, time-consuming and expensive. For example, those procedures not only would require MP3.com to manually search the Copyright Office’s records for the names and addresses of the copyright owners of each of the hundreds of thousands of song titles on the CDs that our consumers have purchased and stored on-line, but also would require us to submit a separate application to the Copyright Office for each song whose current owners couldn’t be located. Using this antiquated system for obtaining licenses in the digital era would completely overwhelm the Copyright Office, which typically handles only a few hundred statutory license applications in a single year.
In short, the problem that MP3.com faces in getting the licenses that the publishers insist we get isn’t contractual in nature. The problem is that the marketplace and statutory licensing mechanisms that were developed in the pre-digital era simply cannot handle the demands of the Internet-fueled, digital music environment. People don’t want to use the Internet to store and listen to some of their music purchases – they want all of the music they own to be available to them on-line.
Fortunately, there is a way that the practical obstacles to licensing can be addressed quickly and, hopefully, without Congressional action. The Copyright Office, at the request of the recording industry and with MP3.com’s support, currently is considering whether to conduct a rulemaking to clarify the application of Section 115 to streaming audio services such as MP3.com. In our comments in that proceeding, we have urged the Office to look to the model of the satellite and cable compulsory licenses, which permit copyright users to submit periodic royalty payments into a pool that is then distributed among copyright owner claimants. This model gives the users of copyrighted works assurance that they have the protection of a compulsory license even if they cannot identify in advance every person who might claim an ownership interest in the works being used.
Even more importantly, the Copyright Office can and should immediately act to establish “interim” Section 115 licensing procedures for online services that engage in “incidental” copying. Adoption of such “interim” licensing procedures will create a “safe harbor” against infringement actions while the Office and, if necessary, a CARP, decide on the appropriate substantive and procedural rules governing application of the Section 115 license to “incidental” copying. Both RIAA and MP3.com have endorsed the interim licensing procedures concept and we hope that the members of this Committee will join us in urging the Copyright Office to take this clarifying action as a means of dealing with the untenable situation that now exists.
In sum, MP3.com has agreed to pay one fee after another in an effort to get our service back up and running. But the new technology we have developed is still being held hostage and millions of consumers are still blocked from storing their CD collections on the Internet for their own personal use. The reason is that Congress never anticipated a service like My.MP3.com and we are forced to operate under a patchwork quilt of arcane laws that not only are cumbersome, but that are broken in many respects.
Time is running out. We believe that the Copyright Act needs to be amended to rationalize on-line music's licensing obligations and to clarify the rights of the music lovers who seek to use our service to enjoy the music that they buy. Moreover, we need Congress' immediate assistance in overcoming the inadequacies of the existing marketplace and statutory mechanisms for obtaining licenses so that American consumers are not denied the opportunity to take advantage of the technological innovations that the Internet is making possible.
Who is
MP3.com? MP3.com, Inc. has created a unique and
robust technology infrastructure designed to facilitate the storage,
management, promotion and delivery of digital music. As the Internet's premier
Music Service Provider (MSP), the company is dedicated to providing consumers
with access to music when they want it, where they want it, using any
web-enabled device. The company's web site hosts what MP3.com believes is the
largest collection of digital music available on the Internet, with more than
967,000 songs and audio files posted from over 150,000 digital artists and
record labels. Dedicated to growing the digital music space, the company's
products and services include on-demand Subscription Music Channels, an
innovative Business Music Services program, a Syndicated Radio program and
others. Additionally, through the company's MSP technology initiative and its
music InterOperating System, MP3.com is partnering with a variety of
forward-looking businesses to expand its digital music strategy. MP3.com's
common stock is listed for trading on the Nasdaq National Market under the
ticker symbol MPPP. The company is based in San Diego, California. For more
information on MP3.com, visit www.mp3.com.
My.MP3.com – An Online Tool For Storing and Listening To Purchased Music. In January 2000, MP3.com launched a new service called My.MP3.com. My.MP3.com is a digital music storage “locker” service that uses MP3 compression technology to enable people to use Internet connected devices to listen to the CDs that they purchase at their local record store or from on-line retailers such as junglejeff.com and, in the near future, towerrecords.com. Today, the primary playback device for My.MP3.com users is their personal computer. But in the not too distant future, consumers will be able to use My.MP3.com to access their purchased CD collections using hand-held Internet-enabled devices and Internet-connected devices installed in their cars.
The way the My.MP3.com service works is as follows: with respect to a CD that a consumer already has purchased, the consumer takes the CD and places it in the CD-ROM tray of his or her computer; our “Beam-It” software then “reads” the CD and, having established that it is a real, legitimate CD release, adds the CD to a secure, personalized “locker” which can be accessed by that consumer – and only by that consumer. With respect to CDs purchased on-line from one of our retail partners, the consumer can use our “Instant Listening” software to add a CD in MP3 format to his or her personal locker at the same time the consumer pays one of our on-line retail partners for the CD, thereby allowing access to the songs on the CD even before the disc is physically delivered.
I want to emphasize that My.MP3.com differs from music file-sharing or “swapping” services that allow users to download, save, and trade music that they have not purchased. CDs can be accessed on My.MP3.com only for a real-time listening experience, not for downloading and copying. And before any CD can be accessed on our service that CD will have been purchased twice: once by the listener and, as discussed below, once by us.
Because Congress never foresaw the development of a personal purchased music “locker” service like My.MP3.com, the door was left open for record labels and music publishers to argue that My.MP3.com was infringing their copyrights by allowing consumers to access their purchased CDs in MP3 format. In particular, the copyright owners cited the fact that instead of developing a system that requires consumers to convert their own CDs into the MP3 format, My.MP3.com went out into the marketplace and bought those same CDs and converted them for the consumer. According to the record labels and music publishers, the act of converting these CDs to MP3 format, so that consumers who had separately purchased those same CDs could listen them to in that format, constituted an act of infringement. In addition, the music publishers took note of the fact that when a consumer listens to a song from his or her My.MP3.com locker, that song is delivered to the consumer by means of a “streaming” audio technology that automatically makes a temporary or “buffer” copy of a portion of the song as a necessary and integral part of the transmission process. Although this buffer copy lasts only a few seconds and is eliminated once the playback of the song begins, the music publishers asserted that, in order to use this technology to playback a CD to a consumer who has purchased that CD, My.MP3.com needed a separate license to make and distribute copies of the song.
In response to these lawsuits, we “shut down” the My.MP3.com service and entered into settlement negotiations with various copyright owners and their representatives. Shutting down our service deprived consumers of the ability to access the music that they had purchased and stored in their on-line lockers. There is a certain irony in the fact that when our site was shut down, many of our customers were driven to services such as Napster, where they not only could find and play the CDs that they already had bought, but also could (and probably did) obtain access to a vast array of music selections without ever having to purchase them.
In any event, although we disagreed with the interpretation of the copyright law put forward by the record labels and publishers, our desire to get our service back up and running led us to enter into very costly agreements covering all of their claims. We have agreed to pay for converting the CDs that we purchase into MP3 format. We have agreed to pay for performing both the sound recordings and the songs contained on those CDs. And we even have agreed to pay the publishers for the temporary, momentary “buffer” copy that automatically is made (and deleted) each time someone listens to their own music out of their My.MP3.com locker. Yet, today, nearly six months after signing the last of these agreements, we haven’t been able to effectively process any of the licenses that the copyright owners insist we must have before we can fully relaunch the My.MP3.com service because of the overly-burdensome process required to locate and get agreement from every rights-holder.
Why My.MP3.com Still Can’t Fully Relaunch. Despite what you may hear from some of the copyright owners, our inability to obtain the necessary licenses is not merely a contractual problem that can and will be solved by the marketplace. Rather, it is a reflection of the fact that the existing marketplace and statutory music licensing mechanisms – mechanisms that developed nearly 100 years ago – simply do not work in the digital environment. As a matter of public policy, it is incumbent on government to address the failure of these marketplace and statutory mechanisms, both through immediate remedial action and through a comprehensive reassessment of the application of the copyright law to digital music technologies.
The particular marketplace and statutory failure that is currently frustrating our ability to provide the My.MP3.com service to consumers involves the licensing of the right to reproduce and distribute musical compositions, by means of streaming MP3 transmissions, to consumers who have bought the CDs on which those compositions appear. As I have indicated, we do not agree that the essentially “private” performances facilitated by our technology should trigger any additional copyright payments (over and above the compensation received by copyright owners as a result of the purchase of their works by us and by users of our service).
Nonetheless, faced with a threatened onslaught of litigation, we agreed to pay the music publishers for making an “incidental digital phonorecord delivery” each time someone uses the My.MP3.com service to listen to one of their own CDs.
Incidental digital phonorecord deliveries – IDPDs for short – are a type of “mechanical” reproduction and distribution requiring licenses from the owners of the publishing rights in the songs contained on a CD. Our licensing agreement was made with the Harry Fox Agency (“HFA”), an arm of the National Music Publishers Association that, for nearly 75 years, has served as the music publishing industry’s principal clearinghouse for the administration of mechanical rights licenses. According to its website, HFA issues licenses, collects and distributes royalty payments, and audits the books and records of licensees on behalf of more than 25,000 music publishers who, in turn, represent the interests of over 150,000 songwriters.
When MP3.com and HFA announced their licensing agreement last October, the joint press release proclaimed that the deal was intended to give us licenses for over a million songs. And, in fact, we immediately provided HFA with a list of over 900,000 song titles, along with information identifying the CD on which each song appeared and the name of the artist performing the song. More than six months later, however, HFA still has not been able to issue licenses to us for over two-thirds of these songs.
We are not suggesting that HFA hasn’t tried to clear the rights to more songs. Rather, the problem appears to be that HFA’s system for issuing mechanical rights licenses for its publisher members simply cannot handle the demands of the digital marketplace. In order for us to obtain a license for a particular song from HFA, we not only have to provide them with the song title, CD and artist, but we also have to know who owns the publishing rights for the song. This information, which may change several times over the life of a song, is not readily available to the public.
An Example of the Problem: Licensing and New Releases. Nor are the problems that we have encountered in trying to obtain the licenses that the music publishers demand limited to songs on “older” CDs. Making newly released CDs available to consumers through the “Instant Listening” option is one of the key attractions of the My.MP3.com service – and is something that helps promote the sale of music. (For example, before we shut down the My.MP3.com service, participating retailers who offered their customers our Instant Listening option saw their sales of new releases as much as double.) But even after settling with the labels and publishers, we have been stymied in obtaining licenses for the songs on newly issued CDs.
A good illustration (reflected in the attached Exhibit B) is our experience with the new Jennifer Lopez CD, “J-Lo.” Shortly after Epic/Sony records released this CD, we attempted to make it available on My.MP3.com. We had obtained the necessary rights from the record labels with respect to the sound recording copyright and we had agreements with the appropriate Performance Rights Organizations (i.e. ASCAP and BMI) giving us the right to “publicly perform” the songs on the CD. However, we couldn’t get HFA to give us the required (by them) license for any of the songs. When we asked HFA why the songs on this new CD were not in their database and, thus, licensable, we were told that HFA would be able to issue licenses covering some – but not necessarily all – of the songs, but that it would take 6-8 weeks after receipt of a license request for HFA to locate the publishers associated with each song and get clearance. That’s 6 to 8 weeks for just one CD. Consequently, we have been unable to offer consumers who buy the J-Lo CD the ability to add this CD to their locker.
Finding “Non-HFA” Publishers. Apart from the problem of obtaining information matching up the songs we want to play with the songs owned by the publishers represented by HFA, the difficulties we face in getting the My.MP3.com service back up and running are exacerbated by the fact that HFA does not represent every publisher and by the fact that the publishing rights in many, if not most song titles are held by multiple owners in varying percentages. For example, if you look at the liner notes of a “rap” CD – one of the most popular genres of music on-line, you will see as many as ten publishers on any given song. Many of these publishers may be impossible to locate or are otherwise unreachable.
Thus, even if HFA granted us licenses to the song catalogs of all of the publishers that they represent, there will be songs in My.MP3.com lockers for which we do not have clearance, or for which we have only a partial clearance. For example, we have repeatedly encountered the situation where, after activating a song in reliance on an HFA-issued license, we received notice from a non-HFA affiliated publisher claiming a partial ownership interest in the song and objecting to its being made available on our service. While HFA claims that we don’t have to worry about these joint owners, that’s easy for them to say. They aren’t the ones facing infringement actions.
In short, there is no marketplace mechanism that will allow us to fully relaunch My.MP3.com – thereby giving consumers access to all of the songs on all of the CDs that they have purchased and stored on their My.MP3.com lockers – without running a significant risk that we will be sued by publishers or songwriters claiming ownership rights in some of those songs. And this is exactly what has recently happened with the new suits from Randy Newman, Tom Waits, and Ann and Nancy Wilson of the band “Heart.”
Solving the Licensing Dilemma
Making Section 115 Work in the Digital Environment. Given the potential unavailability of marketplace licenses for any number of songs, the obvious solution is the establishment of a statutory licensing mechanism. And, in fact, nearly a hundred years ago, Congress addressed concerns that the withholding of music licenses could lead to the emergence of “a great music monopoly” by establishing a statutory compulsory copyright license for anyone who wants to reproduce and distribute copies of a previously published song. Unfortunately, however, while Congress has updated this compulsory license – which originally applied to the reproduction and distribution of songs in mechanical formats such as piano rolls – to cover the digital delivery of reproductions of songs (including IDPDs), neither the statutory procedures for invoking the compulsory license, nor the Copyright Office’s implementing regulations, have been adapted to meet the demands of the on-line music environment.
A more detailed synopsis of the workings of the statutory mechanical copyright license (currently codified in Section 115 of the Copyright Act) is attached as Exhibit C to this testimony. Suffice it to say here that before MP3.com could claim protection under the statutory license, we would have to manually search the Copyright Office’s records for the names and addresses of the copyright owners of every one of the nearly one million songs on the My.MP3.com service – a task that in and of itself is economically and practically infeasible. Moreover, for any song that does not have current ownership information on file, MP3.com (or any other on-line music provider seeking a compulsory license to a wide spectrum of musical works) would have to file a separate compulsory license application. This means that if current information is not available for merely a third of the million songs searched – a not improbable result given that songwriters and publishers are not required to notify the Copyright Office about changes in the ownership of a song’s publishing rights, or even to register the copyright in the song in the first place – over 300,000 separate filings would have to be made at the Copyright Office. To put the burden that this would create in some perspective, last year the Copyright Office processed roughly 350 Section 115 license applications.
One mechanism for reforming the Section 115 procedures to account for the realities of the digital marketplace is for the Copyright Office to adopt revised substantive and procedural rules governing the application of Section 115 to streaming audio services. The Office, in response to petitions submitted by RIAA and MP3.com, is considering whether to undertake such a rulemaking proceeding. Assuming that the Office goes forward, we believe that it can and should consider the adoption of rules implementing revised procedures modeled on the satellite and cable compulsory licenses, which permit copyright users to submit periodic royalty payments into a pool that is then distributed amongst copyright owning claimants. This model gives the users of copyrighted works assurance that they have the protection of a compulsory license even if they cannot identify and locate every person who might claim a copyright interest in the works being used.
Interim Copyright Office Rules Creating a “Safe Harbor.” While we believe that it may be possible for the Copyright Office to bring Section 115 into the digital age without waiting for Congress to act, an even more immediate (albeit temporary) solution is needed in order to protect My.MP3.com and other similar on-line digital music providers from infringement claims during the pendency of the Office’s Section 115 rulemaking. The Office’s rules currently state that the establishment of rates and terms for “incidental” copying covered by Section 115 are “deferred.” However, it simply is not right for the benefits of Congress’ 1995 amendment extending the Section 115 licenses to incidental copying to be denied to on-line music services because rules implementing that amendment have not yet been adopted.
Both RIAA and MPAA have proposed that the Office immediately issue interim licensing procedures whereby on-line music services can, by filing informational statements at the Copyright Office, obtain the protection from liability that compulsory licensing is intended to give. These statements would include the names of the songs for which protection is sought, together with information regarding the name of the CD on which the song appears, the artist performing the song, and the number of times that the song has been “delivered” to consumers. Once rates and terms have been established, royalty payments covering the activities described can be made.
This “safe harbor” approach, if implemented, will immediately solve the problem faced by My.MP3.com and other on-line music providers: the risk of being sued for using songs owned by publishers who cannot be identified through the existing marketplace and statutory licensing mechanisms. More importantly, it will allow consumers to take advantage of innovative technologies that increase the value of their purchased CDs through on-line storage and playback. Put simply, as soon as this safe harbor approach is implemented, we will provide the required information and by the next day we will be in a position to “unlock” all of the purchased music that users of the My.MP3.com service have stored on-line.
Legislative Reform of the Copyright Act. Modernizing Section 115 and adopting interim licensing procedures are important and necessary actions. However, in the long run, Congress must reform the underlying statutory provisions that have led to the current licensing dilemma. In particular, Congress must address the rights of music purchasers. The public, quite frankly, is confused. At every turn the courts, applying statutory provisions that never contemplated the services to which they are being addressed, are telling consumers what they cannot do. It is time for government to step in and clarify what someone who purchases a CD can do. Specifically, Congress needs to address the following questions:
1) Can and should consumers be able to listen to their own purchased CDs on any digital device? In 1992, Congress enacted the Audio Home Recording Act, which gave consumers the right to copy CDs to tapes. Now questions abound about consumers’ use of the next generation of technology, such as personal computers and MP3 players. Each new device or format raises anew the issue of what the law allows consumers to do with the music that they purchase.
It shouldn’t take a separate act of Congress to permit consumers to use a new gadget to listen to their music. Let’s clarify copyright law once and for all and give consumers the explicit right to convert their music CDs into other digital formats for the purpose of enjoying their purchases on any Internet-enabled device.
2) Can and should music buyers be allowed to store their music in places where they can most easily access it? One of the benefits offered by digital technology is that it can make music fully portable. No more lugging around CDs in order to have your music collection at your fingertips. Imagine being able to access all of your music purchases from your PDA, phone, car or wherever you happen to be. This is becoming more of a reality every day as the world around us goes on-line.
Unfortunately, the drafters of the Copyright Act never contemplated this situation so it’s subject to extensive legal debate. Music buyers should be rewarded with the maximum use of the music that they purchase with their hard-earned dollars. Let’s ensure that they have the rights to house their music purchases in places where they can best access it. And let’s encourage companies that build technologies to help them to do this faster or better.
3) Should CD buyers be subject to additional fees when they store and playback their purchased music collections? If you buy a Ford, do you expect you can drive it anywhere without having to pay Ford more money? If you buy a paperback best seller, would you be surprised to be billed more money based on where you read it? Can you think of any product you purchase outright, only to be surprised with additional charges in the future? In some instances, there could be fraud charges for selling something and then hitting the unsuspecting purchaser with more charges.
Yet this seems to be where we are headed with music CDs. Consumers believe they are buying CDs, but copyright owners argue that, under current law, payments can be imposed on a consumer’s use of on-line technologies that allow them to store and playback the music that they have already bought. Is a consumer truly buying a CD or is it just a lease they’ll have to continue paying on forever? Music buyers have the right to demand clarity in this area. Either CDs should be properly labeled as a lease and future payments defined in advance, or consumers should be only charged once no matter how or where they listen to their music. This is essential for them to make informed buying choices.
Last year, MP3.com supported a bill, the Music Owners’ Listening Rights Act, which addressed many of the questions posed above. We believe that the approach taken in that legislation offered an appropriate resolution of the rights of consumers with respect to the on-line storage and playback of their purchased CDs. However, we are not wedded to a single approach and look forward to working with Congress, the Copyright Office, and the music industry to clarify and confirm the rights of music consumers in the digital environment.
Congress cannot stand idly by and simply hope that the gridlock currently frustrating the relaunch of My.MP3.com (which will frustrate the introduction of other services as well) will resolve itself. Many of you probably have seen the ad on television in which a weary traveler stops at a remote establishment and is offered a choice of every song ever recorded in every format. We are supposed to be shocked at this unimaginable concept. But, given the advances in digital technology, the idea that every piece of recorded music could be available at the click of a mouse is not unimaginable at all. What does remain unimaginable, however, is that anyone could ever track down all of the copyright owners in every single song and get them to agree to license terms. If the “science fiction” depicted in that ad is to become “science fact,” government must deal decisively – and quickly – with the fundamental questions regarding the on-line use of music addressed in this testimony.
If these fundamental questions are not addressed in the very near future, the real losers will be the American public, who will be denied competitive choices they have every right to expect. Also lost to them will be the spirit of innovation, invention and entrepreneurship that brought them this new technology and new services in the first place.
As I have outlined in this testimony, there are several steps that must be taken to put digital music back on track:
· The failure of existing marketplace and statutory licensing mechanisms in the context of on-line streaming audio services can and should be addressed by the Copyright Office through the adoption of updated Section 115 procedures that apply the cable and satellite compulsory license model to the “incidental” copying that is integral to Internet transmissions.
· The Copyright Office should immediately establish interim licensing procedures that allow digital music services to operate under the protection of the Section 115 license while the Office and, if necessary, a CARP, work on new Section 115 procedures and rates.
· Most importantly, Congress must begin the process of reforming the Copyright Act to bring a measure of rationality to the licensing obligations imposed on the different services that engage in transmissions of recorded music and to recognize and clarify the rights of consumers to use the Internet to store the music that they have purchased and to receive transmissions of “private performances” of that music.
I am grateful to the Committee for scheduling this hearing and offering me the opportunity to describe the difficulties that we face in bringing the benefits and value of on-line digital music storage and playback to the purchasers of recorded music. We stand ready to work with you to find the necessary balance between the rights of copyright owners and the rights of consumers.
Thank you.