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While record labels and songwriters have joined forces to fight Napster, they stood on opposite sides of the room Thursday on the question of how much in royalties should be paid to composers and publishers when music is legally distributed over the Internet. At a three-hour congressional hearing on digital music, both the recording industry and songwriters, including country musician Lyle Lovett, aired their growing dispute over the complicated web of music licenses needed to make music available online via legal alternatives to Napster by this summer. Indeed, Napster was noticeably absent for the panel’s list of invited guests, though the Redwood City, Calif., startup did urge its users to remind Congress that it should “take action to prevent the record companies from shutting Napster down.” Despite a court injunction against its free service, Napster has managed in the past to convince members of Congress that it is fulfilling consumers’ appetite for online music while record companies have left those consumers starving. To prove that the recording industry was finally on track to fill the void, RealNetworks CEO Rob Glaser demonstrated MusicNet — a subscription service created by RealNetworks and backed by three major record labels — to the members of a House subcommittee on intellectual property. MusicNet will offer legal music searches, downloads and peer-to-peer sharing similar to Napster’s system, but for a fee. Glaser, however, said one major hurdle remains before such services can be offered to consumers: Record companies still have to enter into licensing agreements with the myriad groups that represent songwriters and composers who hold copyrights in addition to those held by record labels. “Even an unnecessary delay of just a couple of months would be unfortunate and could hurt the industry,” Glaser said. Any delay, he explained, would provide more time for Napster fans to shift to decentralized peer-to-peer services such as Gnutella — services that are difficult to sue — as Napster blocks more songs to comply with a court injunction. Currently, he said, MusicNet — which will offer music from Warner, BMG and EMI record labels — is set to launch by late August or early September on RealNetworks and America Online. Edgar Bronfman Jr., vice chairman of Vivendi Universal, added that the industry already has been hurt by Napster offering free downloads for more than a year through its wildly popular peer-to-peer system. If that happened again, “I’m not sure the strength of this industry would ever be the same again,” he told the congressional panel. Songwriters and music publishers, meanwhile, charged that the record labels are trying to skirt their rights as copyright holders as they launch MusicNet and Duet, a rival service being created by Vivendi-Universal and Sony Music. Mike Stoller, a songwriter who co-wrote such hits as “Love Potion #9″ and “Jailhouse Rock,” testified that music publishers want the same ability to come to negotiated terms for licensing their music to Internet companies as the record companies have. He argued against any congressional action that would subject their rights to “compulsory licensing” — automatic licensing to any music service at fee levels established by the U.S. Copyright Office. “Only a month ago, the Recording Industry Association of America asked me to testify on their behalf” against Napster, Stoller said. “Now the record labels would like Congress to dictate how much — or should I say how little — to compensate songwriters and composers.” If a compulsory license is applied, Stoller said, it should be the 7.5-cent fee set by previous law for other means of duplication, such as copying CDs. Stoller charges that the record labels are trying to pay a lower fee. In addition to debating compensation, the music industry also is embroiled in a battle over the process for paying royalties, revealing further stumbling blocks to paid digital music services. MP3.com President Robin Richards called on the House Judiciary Committee’s subcommittee on the courts, the Internet community and intellectual property experts to update antiquated century-old copyright laws that he partially blamed for a recent lawsuit against the company by music artists. He argued that a central clearinghouse is needed to get licenses from publishers because it’s virtually impossible to find everyone with rights to a song. Richards noted that MP3.com was sued recently by artists such as Randy Newman and Tom Waits for distributing their songs. He indicated he thought his company had acquired such rights through the Harry Fox Agency, which represents roughly 25,000 music publishers — a number he acknowledges accounts for only 70 percent of the total number of publishers. “That leaves 6, 7, 8,000 [publishers] to find to negotiate with,” he said. “I think this is virtually impossible.” Related Articles from The Industry Standard: Nintendo to Launch GameCube in U.S. on Nov. 5 VeriSign May Ditch Domain Deal A Bloody 1st Quarter for 24/7 Media Copyright � 2001 The Industry Standard

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