The document discusses the history and evolution of the music industry from analog to digital formats. It describes how digital recording stores audio as binary numbers, offering benefits like durability, easy editing and duplication. The digital age began in the 1970s with computers and the ability to transfer information freely. In the 1990s, the CD became dominant but was later challenged by digital formats like MP3 files and online music sharing through platforms like Napster and iTunes. The document outlines key events and technologies that transformed the industry as it adapted to the digital world.

1. 1
Music Business in the Digital Age
The digital age started in the 1970s with the introduction of the
personal computer and other technology that provides the ability
to transfer information freely and quickly. It is a period in human
history characterized by the shift from traditional industry that the
Industrial Age brought through industrialization, to an economy
based on information.
In regards to music itself, the digital age refers to the use of digital
recording rather than analog recording.
Acoustic analog recording is achieved by recording a graphic
representation of the sound waves on a medium such as a
phonograph or as electric current and magnetic fields if recording
to tape.
Digital recording stores audio as a series of binary numbers.

2. 2
Music Business in the Digital Age
Some Benefits of Digital Recording:
Durability - quality does not decline over time
Easy to Edit and manipulate
Easy transfer and duplication
Non linear operation and editing
Generally much lower costs

3. 3
Fundamentals
Music Business in the Digital Age
-History-
MUSC 3700 The Music Business in the Digital Age
• In 1887 the phonograph
• In 1948 and 1949, 45-rpm disc for singles and the Long Playing record
• The early 1950’s brought the reel-to-reel tape recorder. Bringing high fidelity but low
convenience
• 1960’s brought the widespread use of stereo recording and playback.
• “Portable” phonographs available from the very beginning, and small portable radios were
common from the 1940s on.
• Small, efficient transistor radios appeared around 1955 and became top sellers. Transistor tape
recorders became a big hit with teenagers in the U.S. and Europe. People typically used them to re-
record music from the radio or from records (their own or their friends').
• The 8-track-tape system came along in the late 1960’s and was meant to be heard in the
automobile. By the early 1970s it took nearly 1/3 of the market for recorded music.

4. 4
Fundamentals
Music Business in the Digital Age
-History-
MUSC 3700 The Music Business in the Digital Age
• The Phillips Company had introduced the Compact Cassette in 1962 but was relatively expensive.
Eventually battery operated portables were to become far the best selling form of the tape recorder.
• "Boom box" type of radio/tape player combinations and the portable Walkman helped the
cassette displace the LP as the dominant form of home music technology by about 1990.

5. 5
Fundamentals
Enter: The Digital Age
THE CD
In the 1990’s, both the LP and the cassette were pushed aside by the Compact Disc.
The CD was introduced to the public in 1982. As prices came down, the public got on
board.
Many consumers resented being pressured to abandon the collections of LP records
they had accumulated over the years. But the advantages of the CD won out
STUDIO SUCCESS
In the studio, digital technology was making an important impact. Where the role of
digital recorders was initially quite limited, soon it became easy and relatively inexpensive
to use digital devices to compose, perform, record, edit, and mix songs using multiple
digital tracks.

6. 6
Fundamentals
Enter: The Digital Age
CONSUMER RECORDERS FAIL
Digital recording was a success in the studio, but was initially a failure as a consumer
technology. The first consumer digital recorders were introduced in the late 1970s and
failed. Digital recording re-appeared in 1990 with the introduction of Digital Audio Tape
(DAT), and later with the Digital Compact Cassette & the Sony Minidisc. These formats
failed to appeal widely to consumers.
CDR SUCCESS – TOO LATE?
Through the end of the 1990s, it appeared that the next home recording medium would
undoubtedly be a recordable form of CD. It took many years for these to be introduced,
and many more years for them to come down in price. Only in the early years of the 21st
century did the price of a CD burner and the blank discs become accessible.
…ON TO MP3?
By that time, however, the whole idea of storing sound on physical "records" was being
called into question. Home computer users began sharing digitized music in a number of
different formats in the late 1990s. The MP3 standard began…
(Source: PP 1-4- RecordingHistory.org)

7. 7
Fundamentals

8. 8
Fundamentals
The MP3 Era ?Let’s look at the MP3 and portable digital files:
December 1991 - The MP3 file is invented
November 1997 - MP3.com is founded, enabling users to access their music online, if they have a genuine
version
February 1998 - eMusic launches, becoming the first website to offer MP3 files for download as well as a
subscription
April 1998 - Saehan, a Korean electronic manufacturer, the world's first MP3 player
June 1999 - Napster, the first large-scale P2P network, is founded by Boston student Shawn Fanning
December 1999 - Shazam, the mobile music recognition service, is established
April 2000 - A US judge rules that MP3.com is liable for $41M for copyright infringement
July 2001 - Napster is ordered to shut down by the US Circuit Court of Appeal for infringement
October 2001 - Apple sells its first iPod.

9. 9
Fundamentals
The MP3 Era ?
January 2002 - Last.fm is the first ad-funded Internet radio platform offering personalized music
April 2003- Apple launches the iTunes Music Store.
January 2005 - Downloaded tracks outsell physical singles for the first time
July 2005 - Apple sells 500 million tracks through iTunes after just over two years
June 2007 - Apple unveils the iPhone, joint experience of communication and music
October 2007 - Radiohead releases its single In Rainbows online, inviting people to 'pay what they like' to
download it

10. 10
Fundamentals
Music Business in the Digital Age
Fundamentals of the Digital Age

11. 11
Copyright Review
Copyright law automatically protects a work that is created
and fixed in a tangible medium of expression on or after
January 1, 1978, from the moment of its creation and gives it a
term lasting for the author’s life plus an additional 70 years.
For a “joint work prepared by two or more authors who did
not work for hire,” the term lasts for 70 years after the last
surviving author’s death. For works made for hire and
anonymous and pseudonymous works, the duration of
copyright is 95 years from first publication or 120 years from
creation, whichever is shorter (unless the author’s identity is
later revealed in Copyright Office records, in which case the
term becomes the author’s life plus 70 years).
*Special provisions for Works in Existence but Not Published or
Copyrighted on January 1, 1978

12. 12
Copyright Review
Article 1, Sec 8. Clause 8 of the U.S. Constitution:
“To promote the Progress of Science and useful Arts, by
securing for limited Times to Authors and Inventors the
exclusive Right to their respective Writings and Discoveries.”
Copyright Law exists in order to promote the
advancement of useful arts and sciences.
• How does it “promote” the advancement of useful arts and
sciences? Provides structure for compensation and legal rights
to creators.
• Copyright Law sends a message that creators of arts and
sciences add value and enrichment to the lives of the public.
• Sometimes this is “intellectual” (a song composition) and
sometimes it is tangible (a sculpture).

13. 13
Copyright Review
Copyright Law give the author the right to:
1) Make Copies
2) Distribute Copies
3) Perform publicly (recorded or live)
4) Create Derivative works
5) Display publicly
Ways author/owner is compensated for use of
Copyrighted works:
1) Performance Royalty
2) Mechanical Royalty
3) Synch Royalty (synchronization with other media)
4) Print (sheet music, etc.)

14. 14
What About Fair Use?
14
“The fair use of a copyrighted work…for
purposes such as criticism, comment, news
reporting, teaching (including multiple
copies for classroom use), scholarship, or
research, is not an infringement of
copyright.”
Fair Use is determined by:
1. The purpose and character of the
use, including whether such use is of
a commercial nature or is for
nonprofit educational purposes;
2. The nature of the copyrighted work;
3. The amount and substantiality of the
portion used in relation to the
copyrighted work as a whole; and
4. The effect of the use upon the
potential market for or value of the
copyrighted work.

15. 15
What About Fair Use?
15
Society can often benefit from the unauthorized use of copyrighted materials
when the purpose of the use serves the ends of scholarship, education or an
informed public.
Criticism and comment, news reporting, research and scholarship, and non-
profit educational uses are most likely to be judged fair uses. Uses motivated
primarily by a desire for a commercial gain are less likely to be fair use.

16. 16
BETAMAX CASE
16
Sony Corp. of America v. Universal City Studios, Inc., 464 U.S. 417 (1984), also
known as the “Betamax case”, is a decision by the Supreme Court of the United States.
The making of individual copies of complete television shows for
purposes of time shifting does not constitute copyright
infringement, but is fair use.
ALSO… key to the Copyright Industries… “The question is [thus] whether the
Betamax is capable of commercially significant non-infringing uses...” This is the
argument still used today to justify file sharing technology and many others.
In 2004, in the case of MGM Studios, Inc. v. Grokster, Ltd., The Supreme Court
unanimously concurred that Grokster could be liable for inducing copyright infringement.
In the opinion, Justice Souter stated that "[t]he rule on inducement of infringement as
developed in the early cases is no different today. [A]dvertising an infringing use or
instructing how to engage in an infringing use, show an affirmative intent that the
product be used to infringe, and a showing that infringement was encouraged
overcomes the law's reluctance to find liability when a defendant merely sells a
commercial product suitable for some lawful use…"

17. 17
Other Important Copyright Stuff
The Digital Millennium Copyright Act of 1998 (DMCA)
- Perhaps the single biggest “legal”
cause of detriment to the
entertainment and creative industries
in the digital/internet world is the
DCMA via its “Safe Harbor Provision”.
Basically this says ISP’s, Google,
YouTube, etc are not responsible for
their users uploaded illegal content
except in very certain circumstances.
Forces an unnecessary burden on
creators and copyright owners to
provide “take down”notices. For most
copyright owners this is incredibly
burdensome. (Think SONY, DISNEY..)
“Yarrrr,shiver-me
Safe Harbor, yarrrr…”

18. 18
Attempts to Modernize: SOPA, PIPA, Net Neutrality…
• Recent attempts to modernize copyright in light of
digital technology have failed miserably. Most
notable are SOPA, PIPA and SIRA.
• SOPA: Stop Online Piracy Act. 2012 bill originating
from the U.S. House written to increase gov’t
regulation of the internet. The public cried internet
censorship + blackout.
• PIPA: Protect Intellectual Property Act. 2012 bill
originating from the U.S. Senate. Same purpose,
same public outcry.
• Net Neutrality. Net Neutrality is the very
controversial idea that ISPs and other parties cannot
somehow limit (some say censor) the content
accessed or shared by their users. The principle is
that Internet service providers should enable access
to all content and applications regardless of the
source, and without favoring or blocking particular
products or websites. (Discuss later in detail.)

19. 19
Copyright & the Music Marketplace
The U.S. Copyright Office’s “Copyright and the Music Marketplace,”
released February 2015, outlines various recommendations to update U.S.
law for the digital age, including:
•Greater parity in the treatment of musical works and sound recordings to
greatly reduce the influence of government in determining royalty rates
across a wide variety of services and bring musical compositions and
sound recordings onto a more level playing field.
•Full federal protection for sound recordings made prior to Feb. 15, 1972,
closing an unjustifiable loophole in copyright legislation.
•A full performance right for sound recordings, to match the rest of the
world.
•Revising or eliminating decades-old consent decrees governing ASCAP
and BMI.

20. 20
Copyright & the Music Marketplace
• Eliminating restrictions on sound-recording rates from being
considered in musical works rate-setting.
• Allowing for the bundling of rights, turning PROs into more broad
music-rights organizations, such as those existing in Europe and
elsewhere.
• Changing the mechanical licensing system.
• Expanding licensing to cover terrestrial radio licensing, assuming
Congress grants a full performance right to sound recordings.
• Encouraging the private sector to create a comprehensive database
of music-rights ownership information with unique universal
identifiers and messaging standards.
• Adoption of greater transparency in royalty calculations and
payment disbursements.

21. 21
The Major Players: Publishers + Songwriters
WHO ARE THEY? Those with an interest in
the composition (the lyrics and underlying
melody).
The music publishers and songwriters want
to see things like the compulsory
mechanical rate and DMCA disappear.
. Want to create permanent collection
societies or private administrators for the
publisher’s mechanical rights and
synchronization rights - in order to
“streamline” and make for more efficient
music licensing to consumers and licensees.

22. 22
The Major Players: Publishers + Songwriters
SESAC buys Harry Fox (HFA). HFA was formerly owned
by NMPA. (Still facing approval.)
Would allow SESAC to overrall deals covering
mechanical licenses alongside broadcast, digital and
performance royalty collection.
SESAC to have access to digital music data that ASCAP
& BMI don’t have.

23. 23
The Major Players: The PRO’s
• Performance royalties are paid by radio
stations, venues, and TV networks to
Performing Rights Organizations like
ASCAP, BMI, SESAC, and SOCAN (in
Canada) who then distribute the money
to their affiliated songwriters, composers
and publishers
• What’s their position?
The PRO’s are very active defending the
interests of publisher and songwriter
members. They’ve always played a key
role in music industry/technology issues
and are a strong asset in national
legislation movements for the
publishing/songwriting community.

24. 24
The Major Players: The PRO’s
• Anticipate more legal battles between the PRO’s
and digital licensees. Until a genuine debate on
Capitol Hill takes place for the Next Great
Copyright Act, the PRO’s will continue to slug it
out with digital licensees one by one.
• SOUND EXCHANGE – Collects the digital
performance royalty for Featured Artist and
Owner of Sound Recording from non-interactive
digital sources. (satellite radio providers, cable
tv music, and webcasters) Admin fee of 4.9%

25. 25
The Major Players: Record Labels + Recording Artists
• The record industry started off on the wrong foot in
light of digital technology and the explosion of the
internet. They clearly failed to see and act on the
change that was coming. What happened???
• What’s their position? The record companies want
to see more harmonization of U.S. sound recording
copyrights with those nations who are signatory to
the Rome Convention Treaty. This includes most of
the developed world throughout Europe and Asia.
This means sound recording owners and recording
artists would receive royalties for their recordings
performed over terrestrial radio, audio/visual public
broadcasts and future devices of technology
throughout the U.S. and the world. Currently there
is no performance royalty for the sound recording in
the US… so it’s not paid by those outside the US
either. If the US changes this is estimated to bring in
+/- $100 million a year

26. 26
The Major Players: Record Labels + Recording Artists
• Recent action? Presently, record company
consolidation, infringement suits (mainly larger
infringers) and lobbying fiercely for the sound
recording performance right.
• WHO? The RIAA have the loudest voice in
Washington on behalf of the music industry.
The RIAA says its current mission includes the
following:[1] to protect intellectual property
rights and the First Amendment rights of
artists; [2]to perform research about the music
industry; [3] to monitor and review relevant
laws, regulations and policies.

27. 27
The Major Players: Record Labels + Recording Artists
• Since 2001, the RIAA has spent $2 to $6 million
each year on lobbying in the United States.
• The RIAA also participates in the collective
rights management of sound recordings, and is
responsible for certifying Gold and Platinum
albums and singles in the United States.
The RIAA represents over 1,600 member labels,
who collectively create and distribute about
90% of recorded music sold in the United
States. The largest and most influential of the
members are the "Big Three":
Sony Music Entertainment, Universal Music Group
& Warner Music Group

28. 28
The Major Players: Radio + Streaming Services
What’s their position? The radio industry
has a very clear message and purpose - no
sound recording performance royalty - or
“performance tax” as they call it.

29. 29
The Major Players: Radio + Streaming Services
Recent action? Much of their efforts are concentrated
to keeping a sound recording performance right from
becoming a reality, as well as supporting legislation
such as the Internet Radio Fairness Act to lower and
standardize royalty rates for internet radio. In addition,
the radio industry successfully negotiated lower
performance payments with ASCAP/BMI. The direct
licensing deals between Clear Channel and Big
Machine Records was a game changer and has gone
on to include other labels. As part of its deal with Big
Machine, Clear Channel pays an undisclosed
percentage of music advertising revenue for
broadcasts whether they are heard digitally or
terrestrially, instead of the legislatively mandated
sound-recording royalty for only digital. Some argue
that this is an attempt by CC to avoid legislation which
will result in a worse result for them. It obviously only
takes care of those with influence. Only a legislative
answer will benefit everyone and establish ongoing
practice.

30. 30
The Major Players: Tech Giants
• What’s their position? DiMA leads the
charge for the techies. According to the
DiMA website, their stated goals in the
realm of Copyright & Royalties are
1. “defending against songwriters’ efforts to
legislate double-dip royalties”,
2. “modernizing music licensing to promote
innovative business models”, and
3. “promoting royalty parity amount all radio
technologies” to name a few.
• They picture a system where promotion
of technology has priority over music
rights owners.

31. 31
The Major Players: Tech Giants
• Recent action?
• DiMA Applauds FCC Approval of Pandora's
Purchase of KXMZ
• Declare Fair Play, Fair Pay Act is short on
Creativity & Legislation Simply Re-Packages Old
Ideas
• Concerned that the "Songwriter Equity Act" Will
Likely Hike Music Prices
• The tech giants power and influence on the
music business in the digital realm cannot be
taken lightly. They are the new “gatekeepers” in
many respects and they plan to throw as little
peanuts as possible at the music industry to keep
their “content costs” low.

32. 32
The Major Players: The ISP’s
• What’s their position?: The ISP’s have
strong influence and lobbying power
(and deep pockets). They want a system
that keeps the burden of policing and
action on the content owners.

33. 33
The Major Players: The ISP’s
• Recent action?: ISP’s created a Copyright
Alert System, also known as the “6
strikes” system.
• ISP’s have leverage because they provide
internet service to us all. Their voice will
be heard in a final resolution and no cost
will spared to ensure their interests in
the Next Great Copyright Act. Whatever
that looks like, the ISP’s along with the
Tech Giants, will make a splash on all the
issues.

34. 34
The Major Players: Digital Distributors

35. 35
The Major Players: Digital Distributors
Digital Downloads (1/3 of US still buys downloads):
§ iTunes
§ Amazon MP3
§ Google Play
2012 2013 2014
iTunes 64% 67% 52%
Amazon MP3 16% 17% 19%
Google Play 6% 7% 11%

36. 36
The Major Players: Digital Distributors

37. 37
The Major Players: Digital Distributors
Streaming Services
(2 types Interactive and Non-Interactive or Passive):
§ YouTube
§ Spotify
§ Apple Music
§ Tidal
§ Rhapsody
§ Rdio
§ Pandora
§ iHeart Radio
§ Itunes Radio
§ Beatport (frozen Payments- SFX)
Other options:
§ Torrents
§ Direct Digital Download
§ Soundcloud
§ Bandcamp
Owners of Sound
Recording paid at
far more favorable
rates than owners
of Composition (
50%+ vs 6%+/- )

38. 38
The Major Players: Aggregators
Openly available:
§Tunecore
§CDBaby
§Reverbnation
§DistroKid
§DI++O
§Etc…
Curated:
§InGrooves
§The Orchard
§DashGo
§Etc…

39. 39
The Major Players: Aggregators

40. 40
Know: The Electronic Frontier Foundation
• What’s their position?: The EFF is a non-profit lobbying and legal group
made up of technologists, entrepreneurs, policy makers, lawyers and
computer science professionals.
• Aim defend the public interest for innovation, free
speech, privacy and consumer rights.
• They litigate often in court and have defended individuals being sued by
the RIAA for illegal file sharing, P2P cases, etc. They advocate for legal file
sharing, through “voluntary collective licensing” - copyright owners creating
their own collection society for file sharing revenue…through a blanket
licensing system.

41. 41
LEGISLATION – Songwriter’s Equity Act
In March of 2015 a bipartisan group reintroduced the Songwriter Equity
Act (H.R. 1283 and S. 662) in the 114th Congress.
This legislation, which was first introduced early 2014, is important to
music creators because it addresses two outdated sections of the US
Copyright Act that currently limit your ability to get paid fairly when
your music is streamed.
Section 115 of the law sets conditions by which mechanical
royalties are set, but doesn't include not allowing a rate
court to consider other royalty rates as evidence.
Section 114 of the Copyright Act prohibited rate courts for
considering rates paid to recording artist when setting
songwriter royalty rates.

42. 42
LEGISLATION – Songwriter’s Equity Act
Impact of a rate disparity is that the value of the
performance of a sound recordings is at a level
approximately 12 times greater than the actual musical
compositions from which they are created.
Simply put: The rate courts should be able to look at
evidence of other rates when setting the rates that
songwriters are to be paid.
i

43. 43
LEGISLATION – DOJ Consent Decrees
ASCAP and BMI are governed by “consent decrees” originally
issued by the US Department of Justice (DOJ) to curb the
anticompetitive tendencies of the publishing sector.
(Monopoly) Intended to promote competition in the
marketplace for musical works,
Music publishers, PROs and some songwriters have asked the
DOJ to eliminate or modify the existing consent decrees due
to concerns over rate-setting and other perceived limitations.
Government regulators have solicited public comment and are
currently deciding what approach—if any—to take.
PRO Income comes from Public performance of the
Composition. BMI reported distributing a record $977
million in revenue in 2014. Who collects public
performance of the Sound Recording?

44. 44
LEGISLATION – DOJ Consent Decrees
Why do the consent decrees exist in the first place?
Consent decrees are limitations agreed upon by parties in response
to regulatory concern over potential or actual market abuses. It
was a trade off to allow them to be monopoly-like without having
to face further regulation or break up.
The consent decrees encourage ASCAP and BMI to compete with
one another to attract licensees and recruit new
songwriter/publisher members.

45. 45
LEGISLATION – DOJ Consent Decrees
What do the consent degrees do?
1. Only Performance Rights: ASCAP and BMI can
only administer performance rights, not any other, often
related, rights.
2. Non-Exclusive Licenses: PROs must have non-
exclusive licenses, meaning that publishers retain the
ability to directly license their catalogues.
3. Required to Grant License: ASCAP and BMI are
required to grant a license to any party that requests
one. This license is then valid while the two parties
attempt to negotiate a rate.
4. Rate Courts: If the two sides are unable to reach
an agreement on a rate, the dispute is settled by a
special rate court, which was created under the
consent decree.

46. 46
LEGISLATION – DOJ Consent Decrees
2012 - Pandora filed a lawsuit against ASCAP in rate court.
Pandora said that ASCAP was failing to set “reasonable”
license fees for them and sought relief in the courts.
However, the issue changed from royalty rates to a different
question, whether publishers could pull their digital rights
from ASCAP and other PROs while staying with the PROs for
other licensing, such as to bars and restaurants. The court
ruled they do that, that they were “all or nothing” if they
chose to partner with a PRO.
However, shortly after the ruling, the DOJ, at the request of
ASCAP and BMI, began to look at reviewing the terms of the
consent decrees, which coincided with a hearing by the
House Judiciary committee on the subject of music licensing.
The reasons for the reforms and the proposals are important
to understand.

47. 47
LEGISLATION – DOJ Consent Decrees
Changes being considered:
1. Whether content owners should be able to pull out of
PROs for certain types of rights, such as digital rights.
2. Whether to replace the rate court, which is a federal
court with all of the expense of a federal lawsuit, with
mandatory arbitration.
3. Whether PROs should be able to grant rights beyond
performance rights.
4. In general, whether the consent decrees are helping or
harming competition.

48. 48
LEGISLATION – DOJ Consent Decrees
Benefits for songwriters:
•More level playing field in which all composers, from
emerging young writers to veteran hitmakers, are
treated the same
•Writer’s share goes to writer without going to
publisher first.
•Prevent ASCAP and BMI (or their members) from
playing favorites with one service over another, which
allows for new radio stations and music platforms to
more easily enter the marketplace.

49. 49
LEGISLATION – DOJ Consent Decrees
Benefits for independent publishers:
• A performance of a song published by a small
independent publisher is worth the same as any other.
• Allow for efficiencies that are responsible for the
tremendous growth of AM/FM and digital radio, which
has expanded the pie for publisher compensation.
• The current system also means that smaller,
independent publishers can make their catalog
available to potential users just as easily as their
multinational peers.

50. 50
LEGISLATION – DOJ Consent Decrees
Benefits of Consent Decrees for Licensees
• New services that may not have the capital or clout
to cut direct deals at the rates demanded by the big
publishers.
• Reduce concerns of copyright infringement for
licensees using a blanket license: if the agreed
upon fee is paid, they have access to the entire
repertoire of works in covered by a PRO,
secure in the knowledge that the PRO will pay
songwriters and publishers directly.

51. 51
LEGISLATION – DOJ Consent Decrees
Criticisms of the consent decrees
•Publishers and PROs often criticize the consent
decrees for being “outdated.”
•Rate setting procedures established by the decrees
have resulted in unreasonably low royalty rates.
•Publishers wish to directly license their catalog and
use the PROs simply as a royalty collection and
distribution agency allowing them to secure far higher
rates for their catalog
•The process through which rates are determined can
lead to expensive litigation that can reduce the capital
available to ASCAP and BMI to provide better service
to members

52. 52
LEGISLATION – DOJ Consent Decrees
What the major publishers and PROs want
•ASCAP and BMI have stated that the consent decrees should
be eliminated or gradually phased out. OR they should be
allowed to bundle other rights under their services offered to
members, including mechanical royalties and synch licenses.
•Arbitration.
•Use “interim rates” to cover periods being negotiated.
•The major publishers have threatened to remove their entire
catalogs from the PROs if the consent decrees aren’t either
gotten rid of or heavily modified to serve their interests. To avoid
this outcome—which would surely weaken the relevance of the
PROs—ASCAP and BMI advocate for partial catalog of digital
rights by the publishers in exchange for the ability to bundle
other rights.

53. 53
LEGISLATION – DOJ Consent Decrees
Early July 2015 – Sony /ATV presented the “nuclear option.”
If there was not a resolution acceptable to the publishers,
they would consider withdrawing 100% from the PROS.
What might happen?
u Independents would lose benefit of collective bargaining likely
leading rates to plummet.
u Independents would have to take over the significant operating
costs no longer being paid by the majors.
u Perhaps a disastrous effect on innovation in the streaming
marketplace. Streaming services would be forced to negotiate
licenses with the three major publishers, and possibly some of the
top independent publishers, in addition to obtaining licenses from
ASCAP, BMI, and the third PRO, SESAC. The combined cost of these
licenses would likely prove too great for any new startup to bear.

54. 54
NET NEUTRALITY
New York Times Intro Video: http://nyti.ms/1F54J8u
John Oliver video: https://youtu.be/fpbOEoRrHyU
White House Statement: https://youtu.be/uKcjQPVwfDk
5 Part Case Against NN: https://youtu.be/0KSkfRv9pQg
Reason.tv Against NN: https://youtu.be/LwOtMnricVo

55. 55
NET NEUTRALITY
Net Neutrality: the principle that Internet
service providers should enable access to all
content and applications regardless of the source,
and without favoring or blocking particular
products or websites.
ALL Internet data should be equal. The ISPs can
provide the pipes, but should have no say in what
passes through them. The Internet providers
shouldn't be allowed to charge different
companies more or less for their data or to slow
down, or block, access to Web sites, data, and
services they don't like.

56. 56
NET NEUTRALITY
WHO IS FOR?
u Creatives (Apple, Google, etc.)
u Creators of Internet
u Protectors of Free Speech (EFF, etc)
u Those benefiting from lack of regulation.
WHO IS AGAINST?
u ISPs – Verizon, Comcast, Time Warner, Etc.
u Some creators seeking better protections (Songwriter’s Guild – Rick Carnes)
u Those fearing government regulation

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NET NEUTRALITY
FOR:
u Free Speech / Censorship
u No restrictions is the status quo. “Always been that way.”
u Competition: Prevents anti-competitive activity by ISPs.
u Protects innovation so little guy / new guy isn’t squeezed out
Examples of anti-competitive activity:
In 2004, North Carolina ISP Madison River blocked their DSL customers from using any rival web-
based phone service (like Vonage, Skype, etc.).
In 2005, Canada's telephone giant Telus blocked customers from visiting a website sympathetic to the
Telecommunications Workers Union during a labor dispute.
In April, Time Warner's AOL blocked all emails that mentioned www.dearaol.com - an advocacy
campaign opposing the company's pay-to-send email plan.

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NET NEUTRALITY
AGAINST:
u Small number of users are clogging up the pipes. (Skype, YouTube, Netflix)
u Piracy is using an inordinate amount of bandwidth.
(70% traffic = 5% users = 90% unlawful)
u Prohibits development of better piracy protections (Songwriter’s Guild)
u Many would stop piracy if warned by ISP (70% U.K. Study)
u Anti-Competitive:Prevents innovation: If users pay fair share, advanced
fiber networks could be created that permit all kinds of new Internet services

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NET NEUTRALITY
FCC Regulations – FEB 2015
Key point - Recategorized the role of internet service providers as regulated
public utility.
Goals:
No Blocking: broadband providers may not block access to legal content,
applications, services, or non-harmful devices.
No Throttling: broadband providers may not impair or degrade lawful Internet
traffic on the basis of content, applications, services, or non-harmful devices.
No Paid Prioritization: broadband providers may not favor some lawful Internet
traffic over other lawful traffic in exchange for consideration – in other words, no
“fast lanes” – including fast lanes for affiliates.
Currently held up in court by USTelecom, trade body of US broadband industry.
Will hear arguments December 4th.

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REVISIT - Copyright & the Music Marketplace
The U.S. Copyright Office’s “Copyright and the Music Marketplace,”
released February 2015, outlines various recommendations to update U.S.
law for the digital age, including:
•Greater parity in the treatment of musical works and sound recordings to
greatly reduce the influence of government in determining royalty rates
across a wide variety of services and bring musical compositions and
sound recordings onto a more level playing field.
•Full federal protection for sound recordings made prior to Feb. 15, 1972,
closing an unjustifiable loophole in copyright legislation.
•A full performance right for sound recordings, to match the rest of the
world.
•Revising or eliminating decades-old consent decrees governing ASCAP
and BMI.

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Copyright & the Music Marketplace
• Eliminating restrictions on sound-recording rates from being
considered in musical works rate-setting.
• Allowing for the bundling of rights, turning PROs into more broad
music-rights organizations, such as those existing in Europe and
elsewhere.
• Changing the mechanical licensing system.
• Expanding licensing to cover terrestrial radio licensing, assuming
Congress grants a full performance right to sound recordings.
• Encouraging the private sector to create a comprehensive database
of music-rights ownership information with unique universal
identifiers and messaging standards.
• Adoption of greater transparency in royalty calculations and
payment disbursements.