Napster CEO: Act of Congress Needed to Remedy Complicated Licensing Morass That Threatens Internet Music

April 3, 2001, Washington DC- Today, in testimony before the U.S. Senate Judiciary Committee, Napster Interim CEO Hank Barry called on Congress to enact an industry wide license analogous to radio for the delivery of music over the Internet. He urged that such a license should include direct payment to artists similar to the "writer's share" of public performance payments that are collected by ASCAP and BMI. Barry stated, "Licensed music should now be available over the Internet as it is over the radio. I strongly believe such a change is necessary, an important step for the internet and that it will be good for artists, listeners and businesses."

Barry noted cogent arguments made by the RIAA in their own quest to obtain an industry wide license from the music publishers with regard to Web streaming. In a petition to the Copyright Office, the RIAA, with regard to industry wide music publishing licenses, contended that an industry wide license would "avoid the need for individual negotiations on a scale that is unprecedented in the industry and thus facilitate the launch" of new Internet services.

Barry's statement as prepared for delivery follows.

Thank you for inviting me to appear before you today. I am glad to be here representing the more than 60 million members of the Napster community. As I did last time I was here, I would like to take a moment to acknowledge Shawn Fanning. He was 19 then -- he is 20 now. Despite his advanced years, he is not yet over the hill.

The question before us today is what does it take to make music on the Internet a fair and profitable business. I believe it will take an Act of Congress - a change to the laws to provide an industry wide license for the transmission of music over the Internet. The Internet needs a simple and comprehensive solution, similar to the one that allowed radio to succeed - not another decade of litigation.

I have tried for the last 9 months to make a market based solution. We were able to reach agreement with Bertelsmann on a business model and license terms for the sound recordings and the musical compositions they control. Yet I cannot today report that any other such agreement has been reached with a major label or publisher.

One obstacle may have been a lack of will -- but all of the record and publishing companies represented on this panel now say they want to move forward in this area, and I take them at their word. What, then, is the problem? Licensed music should now be available over the Internet as it is over the radio.

A large part of it is complexity. Take this CD by the Holmes Brothers. It is no simple object. There are two separate and distinct copyrighted works embodied in each track on this gospel CD.

For each track there is an owner of the sound recording. There is also a separate work, the musical composition - the song the artist sings. By law, each track of the CD is also considered a reproduction of the musical composition. On this single CD, for example, there are 13 sound recordings and 8 separate music publishers. And that's pretty typical. Now multiply that times 3,000 record companies in the US, and 25,000 music publishers, times 27,000 new CDs per year. Separate individual negotiations for all these rights are simply not a viable option.

This has led to endless private negotiations and litigation. Let me show you a John Madden style diagram of the state of litigation among just those of us on the panel here today.

How can this mess be cleaned up?

Well, this is the center of this matter - and here I find myself in surprising agreement with a perceptive recent analysis by the RIAA.

Vivendi-Universal recently made musical compositions available online without getting the publishers' permission. The RIAA has gone to the Copyright Office, after the fact, arguing for an industry wide license for situations such as this. I quote from their petition:

"The music industry is unique among owners and users of copyrighted works in that reproduction and distribution of musical works has been subject to an industry wide license since 1909.

"…[x] the availability of an industry wide license has ensured that necessary rights can be obtained, when needed, at a known price, and pursuant to established procedures."

The RIAA then argues that extending the industry wide license to their new digital offers would - and I now quote again -- "avoid the need for individual negotiations on a scale that is unprecedented in the industry and thus facilitate the launch" [end quote] of those new services…

That is the official position of the RIAA - and I endorse this principle. But I endorse it not just for musical compositions - but for sound recordings as well.

Congress has repeatedly used such licenses to advance public policy goals in the context of new and frequently inefficient marketplaces. Industry wide licenses with clear payment structures have encouraged beneficial new technologies, and responded effectively to particular market failures.

Music on the radio works because of what is functionally an industry wide license. Cable television. Satellite television. Web casting. You in the Congress have effectively encouraged new technologies through industry wide licensing in a way that fostered competition and benefited consumers and creators alike.

Copyright requires a constant balance between the public's interest in promoting creative expression and the public's interest in having access to those works. This is a balance that has often proven impossible to find without the help of the Congress.

Finally, the Napster community says loudly and clearly that it wants artists and songwriters to be paid. I think that the license you create should include a direct Internet rights payment to artists. There is certainly precedent for this in the so-called "writer's share" of public performance (radio and television) payments that are collected by ASCAP and BMI. As you know, a portion of those payments goes directly to the songwriter.

Senator, this is a moment of tremendous opportunity. For many years, our nation and this Committee heard wonderful promises of an emerging Internet music era, where people could have convenient access to the entire catalog of recorded music over the Internet at the touch of a button.

Well, as often happens, history arrived ahead of time.

And it is a uniquely American story.

A young man with no standing, no credentials, no connections, and no plan for placating the powerful, sat down outside Boston and created an entirely new system.

Within 18 months, we were no longer debating whether there would be music on the Internet, but rather debating the best way to make sure that it continues. More than 60 million people have started a new stage in our national love affair with music. All of us are finding new music - and music we'd forgotten how much we loved.

The question before this Committee is a matter of policy: how to make this new world of Internet music work. The next step should not be shutting it down. The Congress has effectively promoted new technologies in the past, while ensuring that creators benefit; it is essential that you do so again today.

Thank you.