June 15, 2000
Criminy, music biz finances make

Criminy, music biz finances make my head hurt:

IN THE PHYSICAL WORLD, when a CD is purchased, the mechanical license fee is set by law -- hence it is known as the statutory rate -- at 7.55 cents per song. When your kid sister picked up a copy of the 12-song Christina Aguilera album, approximately 90 cents is going to the songwriters through their publishing companies. For its services, the Harry Fox Agency takes approximately 4.5 percent of the gross monies collected.

Now say your sister wants to make a digital copy of the CD through the My.MP3.com service. Because it can normally take upwards of an hour to digitize a 12-song compact disc, MP3.com decided to save a user's time by having already copied Christina's CD onto its own server; thus, when you pop the CD into your hard-drive, you're flashing it as you would a proof-of-ownership card, and once ownership is verified, you're now entitled to access MP3.com's Christina album as your own via the site. Once you have proved you possess the CD, their Christina music is your Christina music. It's instantaneous fake-uploading, as opposed to drip-drip-drip real-uploading.

However, since MP3.com ripped that CD itself, the company has created what a 1995 addendum to the Copyright Act calls a "digital phonorecord delivery" and English speakers call a "copy." This means that the company owes the publishers its mechanical license, at 7.55 cents per song, every time a user stores that song, while the majors collect their 1.5-cent payment. Although only one copy of Christina Aguilera was bought, Harry Fox and music publishers -- as well as the majors -- will collect their money twice, a practice caustically referred to in the music business as double-dipping. (Rival storage service MyPlay requires you to spend the hour and physically upload the CD to your locker, thereby avoiding the payment in question).


Once that Christina Aguilera album is stored in a locker, your sister will, it stands to reason, want to listen to it. According to reports, MP3.com will pay the labels roughly a third of a cent each time a track is streamed. If your sister listens to the melismatic overload of Christina's "I Turn to You" 20 times, MP3.com must pay RCA roughly 7 cents. Because a stream, like a terrestrial radio broadcast of a song, is considered a public performance, MP3.com will also pay a fee to performing-rights societies Ascap and BMI, which eventually gets distributed to the publishing companies and their songwriters. To make matters worse for MP3.com and its ilk, Harry Fox contends that they too should receive remuneration every time a song is streamed.

Amazing. (And by the way, inside.com is proving to be worthwhile reading. I'm not likely to pay though. :-)

Posted by Bill Stilwell at June 15, 2000 12:00 AM
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