For those who thought online music sharing companies would thrive once they “went legit” with paid subscription plans, the U.S. Department of Justice investigation into the industry has got to be a disappointment.
While struggles over copyright issues and licensing grow even more contentious among all the players — including government agencies, big record labels and the online services — the core issue at the moment is increasing scrutiny from the DOJ as to whether the big record labels engage in unfair monopolization of the industry.
The independent online services are on virtual standby until the bigger fish come to terms over these possible violations.
Will Justice Prevail?
The DOJ has had one eye on the big record companies for some time now. If, for example, a recording company declines to release content to an online service, even when that service agrees to pay proper usage fees, the Justice Department wants an explanation.
That appears to be happening with Napster. After a year of legal wrangling that might have killed a company with less fortitude, Napster was reportedly ready to relaunch its service weeks ago.
The launch has now been delayed until early next year, supposedly because of technical problems. The more likely scenario is that Napster has not been able to amass enough content from the record labels.
Independently owned online music file-sharing services find themselves in a precarious position. While it is in their favor to have the DOJ’s working on their behalf, these services must also woo the record labels, the very entities that would like to see them disappear.
At a Webnoize digital music conference held in Los Angeles weeks ago, representatives from the Recording Industry Association of America (the trade organization representing record labels), online services such as Napster, and the Justice Department got together to compare notes.
Once the government is satisfied that potential antitrust violations are neutralized, the DOJ will step back, but online music services and record labels will still have to make music together.
Negative relationships that emerge during the investigation could affect the future of the online services.
What has not changed in the ongoing struggle is ownership of the copyrights in the music. The record companies own the copyright to the recordings, while the publishers control the songwriters’ rights. Together, the labels and the publishers control who distributes the music — and via what channels.
That control extends itself to digital music services. The law, according to some legal experts, does not require record labels to automatically grant online services permission to use copyrighted material.
The government, however, almost always steps in if one entity is somehow discouraging fair competition in the marketplace. So, when the record labels unleashed their own online services, MusicNet and Pressplay, red flags went up at Justice.
While the DOJ is taking a look at those record industry-backed services, others are arguing their case based on the “fair use” element of copyright law.
Fair use allows for limited copying or distribution of published works without the author’s permission. Record companies argue that Napster and its clones are using the fair use doctrine to justify digital piracy.
File-sharing services say that fair use is their legal right. This argument, however, failed to find a sympathetic ear from Judge Marilyn Patel in the Napster case. The court did not believe that wholesale distribution of another company’s music fell within the fair use exception.
For the Record
While all this is going on, consumer demand for online music sharing is growing.
Despite the potential in the marketplace digital downloads, most of the big-name services, including among others, Pressplay, MusicNet, MusicCity and especially the “old” standby, Napster, have yet to cash in.
Will the record companies and the Internet find mutually acceptable means to accommodate this demand, or will traditional music powerhouses prevail?
Note: The opinions expressed by our columnists are their own and do not necessarily reflect the views of the E-Commerce Times or its management.