A dispute over royalty rights on copy-protected CDs and other types of
music discs is helping to stall the release of some new music technology, and
could result in record labels owing tens of millions of dollars in back payments
to music publishers.
At issue are “double session” CDs that include two versions of each song on a
disc, formatted for playback on different kinds of devices. The most widely
distributed type are copy-protected discs that prevent CD tracks from being
copied to a hard drive, but that also include a digital version of the songs,
often in Microsoft’s Windows Media format, that can be transferred to a computer
or portable digital music player.
Music publishers and songwriters, who are entitled to payments of a few cents
for every copy of a song sold, contend that since these double-format discs hold
two copies of songs, they should be paid for both copies. They’ve been
negotiating with record labels for months, but already hundreds of millions of
discs have been released around the world, raising the possibility of huge back
payments.
“From a legal standpoint, the position of the music publishers is that these
discs contain two separate (copies of each song),” said Cary Ramos, an attorney
representing the National Music Publishers’ Association (NMPA). “The fact that
they are the same recording doesn’t mean that we should treat it as one.”
Innovation versus piracy
The licensing dispute highlights the new power of music publishers as the
recording industry seeks to shift gears from selling songs on discs meant solely
for traditional stereo systems to formats optimized for use on computers and
computer peripherals–a change with profound implications for artists, consumers
and everyone in between.
Music publishers see the shift as an opportunity to recast decades-old
contracts with record labels that have left them with a relatively small
fraction of the sale price of a CD. Copy-protected discs offer a big chance to
do so, since the lion’s share of unauthorized files traded on file-swapping
networks comes from unprotected CDs.
The labels are bent on reducing piracy by preventing consumers from making
unlimited copies of tracks on future CD releases, much as they have required
digital download services such as Apple Computer’s iTunes Music Store to include
locks on the tracks they sell.
Still, labels don’t want to see their already beleaguered profit margins
shaved further, and they are seeking ways to avoid doubling the amount they pay
publishers for what most consumers perceive as the same product.
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