In his blog on satellite radio and devices that can anticipate specific tracks, record them and permit reuse later, Jim has hit it on the head -- there is a difference between a radio service and a download service. They are licensed differently, and while I can see why XM would want to avoid negotiating a download license as Sirius has, I don't see how it could be avoided. As artist Anita Baker and songwriter Victoria Shaw said at a hearing last week, they just want to be paid for their work, whether it's downloaded to keep on iTunes or XM. It's also not clear to me why we need legislation to accomplish what seems self-evident, but I suppose legislation can be seen as preferable to litigation.

Of course the legislation in question, the PERFORM Act by Senators Feinstein, Graham and Frist, contains more than this provision.

It also addresses knottier issues such as DRM and rate calculations. Both problems wouldn't be so knotty if the government weren't forced into the mix here. (Okay, all you folks who think that supporting property rights, which are backed by the government, makes one a big government backer, watch this.)

Both issues stem from the fact that the music industry has imposed on it compulsory licenses. If a writer pens a play, no government agency can force her to allow that play to be performed even if she doesn't wish it to be, and there's no government agency telling her what the rate will be for "allowing" that play to be performed. But we have that odd world in music, and we've had it for almost 100 years.

I've not tried to hide my disdain for compulsory licenses. A market is based on exchange -- goods, labor, etc. -- but with a compulsory license the only thing exchanged is legal arguments.

Take the rate restructuring proposed in the bill. It would require under Sec. 114 of the Copyright Act that all cable, satellite and Internet companies would pay the same rate for reproduction and copying of music, and the rate would be based on "fair market value." Hard to argue with that. It would replace for some a rate standard of "willing buyer/willing seller," which also sounds reasonable. Which is truer to the market? Neither. Only the market can truly determine what the fair market value is. That's not to say the bill's approach isn't an improvement over the existing one. The "willing buyer/willing seller" approach was used during the webcasting CARP, and was a complete disaster, spawning lawsuits and emergency legislation.

The CARP is no more, thanks to Lamar Smith and others in Congress, but are we really to believe that three administrative law judges can outthink market forces in setting rates? I'm sure not even those judges believe that.

Now as to DRM. I'm on record as having been most discomforted by the Hollings bill of years ago. I'm a believer in DRM but get nervous when it appears government will mandate it, even if it's not mandating a specific technology. But again, without compulsory licenses we wouldn't be looking at this legislation. DRM is being adopted daily by providers and consumers in the free market; it's being defended in France by Apple. Feinstein et. al. are trying to ensure that what would happen in the market -- some compromise on DRM that protects content but permits flexible use -- will occur when there aren't market forces acting, but instead simply the mechanics of a compulsory license.

I admire the efforts of the bill's sponsors here, but this is what happens when you start down the compulsory license road. No matter how much we might try to tweak the Copyright Act compulsory licenses to mirror the market, it will always be superior to actuallly trust the market. That's why it's so dismaying when groups claim the solution to online piracy is compulsory licenses, even as a "last resort." If Anita Baker and Victoria Shaw are to truly have a shot at proper compensation for their works, they'll be able to participate in the market. If the market is competitive and complete with IP enforcement, no one will have grounds to question whether they're getting fair market value then.

posted by Patrick Ross @ 10:25 AM | Access: Commons, Fair Use, Orphan Works, Public Domain, DRM & Watermarks, etc., Internet: P2P, Search Engines..., Legislation and Legislators, Liberty and IP

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