Online Music Competition Act Introduced In House

Bill seeks to prevent majors from monopolizing legal flow of tunes over the Internet.

As record companies gear up to launch their own online music subscription services, two congressmen introduced a bill aimed at preventing the majors from monopolizing the legal flow of tunes over the Web.

The Online Music Competition Act, introduced Friday (August 3) by Democratic Rep. Rick Boucher of Virginia and Republican Rep. Christopher Cannon of Utah, would require music companies to offer the same licensing deals to independent distribution services as they do to label-run ventures such as MusicNet and Pressplay.

According to Boucher, MusicNet (which BMG, EMI and Warner Music Group formed in April) and Pressplay (Sony and Universal's joint venture) are expected to offer each other licenses giving them access to approximately 80 percent of all recorded music.

Edgar Bronfman Jr., Vivendi Universal executive vice chairman, recently predicted that eventually both MusicNet and Pressplay would hold licenses for music from the five majors, adding that it won't happen soon.

"If the major record companies do not also license independent unaffiliated distribution services, this could create a competitive imbalance that could threaten the establishment and survival of independent online music services," Boucher said in a statement.

The bill would help ensure that services proposed by companies such as Liquid Audio and Uplister, which aren't connected to major labels, would still have a fair shot at offering major-label music to consumers.

Hilary Rosen, head of the Recording Industry Association of America, lambasted the proposed legislation, calling it a "solution — a very bad solution — in search of a problem" and claiming it will cause a "protracted legislative fight."

The bill would also require that performance royalties for artists be paid directly to the artists or an organization representing them, rather than to the labels, and it calls for the U.S. Copyright Office to establish an electronic accounting system for publishing royalties.

Neither MusicNet nor Pressplay has struck a deal with publishers, who control the rights to the songs but not the recordings. Zomba Records' Jive imprint, home to 'NSYNC and Britney Spears, recently signed on with MusicNet (see "Britney, 'NSYNC, Tool Music To Be Legally Available Online").

Noah Stone, president of the Recording Artists Coalition, a group that includes Don Henley, Sheryl Crow and Bruce Springsteen, praised Boucher and Cannon's proposal to pay royalties directly to artists. "We're pleased that direct payment is on the table, and we look forward to working with them to determine the best approach," Stone said.

Finally, the bill includes a provision that would allow consumers to make backup copies of music they pay for over the Internet, "so as to protect their collections against hard drive crashes, accidental damage or viruses."

In related news, the U.S. District Court for the Eastern District of Pennsylvania upheld a lower court's decision that broadcasters must pay royalties for music streamed on the Internet.

"It has always been a real shame that broadcasters don't pay artists for what they play," Stone said. "We're happy this doesn't extend to the Internet. It would make no logical sense for exempt broadcasters when all other Webcasters are required to pay royalties."