RIAA GOES FISHING FOR CARP

Asserting that uncertainty related to copyright law and royalty requirements is impeding the establishment of legitimate music subscription services, the RIAA has filed a petition asking the U.S. Copyright Office to step in.

The industry association has asked the U.S. Copyright Office to set rulemaking talks in motion and, if necessary, convene a Copyright Arbitration Royalty Panel (CARP) to determine royalty rates for music delivered digitally on a subscription basis.

The move arises out of a perceived stalemate in discussions between the record-industry organization and the National Music Publishers Association (NMPA); though the RIAA insists talks are ongoing, it's clear that hopes are not high for a negotiated settlement without government involvement.

"We will proceed to a regulatory process to establish the mechanical royalty obligations of record companies if a business solution for new online subscription services cannot be negotiated in the near future," declared RIAA head Hilary Rosen. "Our highest priority is enabling these new services to launch as soon as practicable."

The RIAA's petition reflects widespread frustration with publishers' demands regarding online music. Internet music companies have expressed the belief that unless reasonable royalty rates are set up for digital delivery, publishers' percentages alone—even under ideal market conditions—could sink their businesses.

At the heart of the conflict is the definition of the streamed song as a performance or a mechanical in terms of payment. Publishers want a 7.55-cent mechanical rate for streamed music because the streamed song momentarily resides on a user's hard drive before being played. Labels and netcos are dismayed by this attempt to equate a temporary copy of a transient music file with a hard-good music product.

Internet music providers see streamed music—except under very special circumstances—as equivalent to radio and therefore reasonably subject to a similar compulsory blanket license. The RIAA asserts in its petition that either a compulsory license or a license equivalent to a "rental, lease or lending" agreement would be appropriate.

Have certain publishers been holding out for an unreasonably large piece of the action? Would a rate of 7.55 cents per song—just for publishing royalties, not including money to labels and performers—make it impossible for a sub service to survive on a monthly flat-fee? Will notoriously pro-technology politicos like industry-bashing songwriter and Napster fan Orrin Hatch weigh in? Will the RIAA find itself asking the aid of figures it recently opposed? Are more lawsuits in store? Stay tuned.