At yesterday's Internet Caucus State of the Net Conference session on Innovation Disrupting Copy Rights: What is the Appropriate Role of Government?, Jeff Eisenach of the CapAnalysis Group spoke on the Digital Radio issue. His talk was extemporaneous, but at my request, since I missed it, he emailed his main points.

BTW - the Internet Caucus usually gets its programs up on the Web very quickly, so the actual program should be available soon, and we will link this and other presentations. But if other participants want to email me synopses, I will post those, too.

Digital radio allows consumers to program their receivers to search, select and catalogue music on a song by song basis. Thus, someone wanting to acquire a complete library of Frank Sinatra (or U2) tunes would program their radio to search for those tunes and record them as they are played over the air. After a few days, and without touching the machine again, they would have a complete library. This is different from what people have done in the past -- recording songs as they listen, or programming the receiver to record a block of music at a particular time. Unlike what has been done in the past, the functionality of digital radio is essentially equivalent (if not superior) to P2P, and practically equivalent to iTunes and other legitimate digital music services.

The difference between P2P and digital radio is that the people distributing music through P2P services were clearly violating the copyright laws. There were practical obstacles to enforcing the law -- which was what the DMCA and subsequent battles were about -- but no question that the law was being broken. With digital radio, it is not nearly so clear -- in fact, the copyright laws provide no performance right for either artists or labels for over the air radio. In other words, the copyright laws provide no property rights for artists and labels with respect to digital radio.

The optimal solution would be to extend the performance right to broadcast radio. That would put artists and labels in a position to negotiate arrangements with digital radio broadcasters -- just as Apple negotiated the arrangements, including Fairplay, that made iTunes so popular. I was delighted Gigi Sohn expressed support for this approach during the IEF conference yesterday. In the real world, though, the NAB is adamantly opposed (for obvious reasons) to extending the performance right to over the air radio, and thus it's not likely to happen any time soon.

The alternative is to create what is in effect a pseudo-property right -- a law that mimics as closely as possible what a property right would be if there was one. That's what the audio flag would do, in effect prohibiting digital radio from turning into a government-sanctioned replacement for P2P. The flag would not prohibit things people can do already -- push the record button when a song comes on, or even set a timer to record all the songs off a particular station at a particular time. What it would do is prohibit the automated "search, select and catalogue" functionality that would allow digital radio users to automatically acquire unlimited amounts of catalogued music without anyone paying a penny for the rights.

The argument is made that government should "just stay out of it and let the parties work it out." But establishing and enforcing property rights is one of government's most fundamental roles, and is essential to the function of a market economy. Abrogating that responsibility is not "limited government" -- it's socialism by default.

Disclosure: As Jeff noted at the session, the RIAA is a CapAnalysis client.

Jeff is also former head and a current director of PFF, and people have asked if he speaks for PFF. The answer is "no." Actually, though, no one speaks for PFF, which does not have organizational positions. All positions are those of the individual fellows. If we had official positions, we would have to have agree on things, and everyone is so ornery that the chance of that happening are non-existent. Besides, it would involve staff meetings, and we all hate those.

posted by James DeLong @ 2:30 PM | Radio

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