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Copyright management in the digital age. (Management).

Listening to and buying music online is becoming increasingly popular with consumers. So much so that Merrill Lynch forecasts the value of the online music market will explode from $8 million in 2001 to $1,409 million in 2005. But online delivery is not with out problems; the issue of copyright management in particular has become a serious thorn in the side for digital content creators. Martin Brass, ex-music producer and senior industry consultant at Syntegra, explains.

The music industry has been forced to respond to a number of technological developments over the past 30 years, but none more challenging than those of the last decade. First came the boom of the Internet, followed swiftly by the advent of MP3, a file-compression format that rendered the transportation of CD-quality digital music across a network a viable option.

Then came the rise of wildly popular file-swapping services like Napster and Morpheus, allowing music fans to exchange MP3 files between their PCs across the Internet, free of charge.

With an incredible 300,000 new users signing on every day, the now infamous Napster became the biggest single-user community the Internet had ever seen, and undoubtedly the most exciting and controversial entertainment product ever released. Suddenly digitised music could be copied and distributed with ease and at virtually zero cost, threatening the future revenue of both artists and record companies. The music business, reeling from this perceived threat to its profit margins, fought back. It sued Napster, alleging infringement of mechanical copyright. Late last year the Recording Industry Association of America (RIAA) succeeded in closing Napster down, at a cost of an estimated $700 million. In a case that began back in July 2000, a US judge told Napster it had to cease the trading of copyrighted material, an action which Napster claimed was impossible to enforce and would compel its shutdown.

So Napster ceased to operate as a free service in September 2001, a web site that at its peak was prompting millions of downloads a day. But it was too little too late as far as the music industry was concerned; the damage had been done. When the Economist reported that 70 per cent of Napsters' 1.4 million user base had migrated to other peer-to-peer services like Gnutella and Morpheus, soon after its closure, it seemed users were voting with their feet. Clearly the market had already decided how it wanted to access content--online, anytime and anywhere--and control of copyright had, if only temporarily, shifted to the consumer.

Music industry guru Jupiter Research backs up this view, predicting that by 2006 around 32 per cent of all music sales will be online, and of this figure the subscription sales will be worth $1.2billion. In addition the number of Internet radio users is likely to rise from 75 to 106 million over the next two years. But the real thorn in the side for the record industry, apart from trying to keep one step ahead of the pirates, is not in the delivery mechanism but in managing their copyright.

In order to protect revenue, record companies have responded to the threat from pirates by launching their own subscription-based online services, such as Pressplay and MusicNet. Napster, now owned by BMG, will also soon re-launch as a subscription service. But this new online delivery model has raised many licensing issues, particularly from subscription, rental and download businesses driven from these channels; issues that the industry must get to grips with.

One of the biggest headaches is the complexity of the rights issue itself. In order to preserve the copyright of any song or recording, a mechanism must be in place that determines who owns what and in which territory, so that the necessary royalties can be paid to the respective parties. But as yet there are still no working models that enable individual rights management in the world of digital music distribution. Subscription models such as those used by MusieNet have yet to prove profitable. Copyright is complex because the rights to a particular piece of music or media extend to both the song in its written form and, separately, any recording of that song. There are also rights to perform the song, either live or as a taped performance, and to copy and distribute the song or recording. These rights are owned by different parties in different areas, and are assigned to different collection agencies in different territories. The trend for sampling has made copyright management even more intricate; songs that contain elements attributable to other owners must be included in the rights of those songs. This is all good news if you are a well-known artist like James Brown, but a hefty task if you're 20th Century Fox trying to produce a movie like Moulin Rouge, where half the script is composed of song lyrics and the music is composed of multiple songs all playing at the same time.

Another difficult issue then, and one which will certainly prevent the legal delivery of online content until it is adequately addressed, is the lack of back office systems to manage the administration and negotiation of rights contracts.

But even the rights agencies around the world who have recently initiated ambitious projects to develop and build huge databases that detail who owns what, where and until when, are failing to implement working solutions. For example IMJV (International Joint Music Venture), a worldwide consortium of rights agencies set up to address the back office problem was axed recently after around 18 million [pounds sterling] of investment.

Clearly while there is an absolute requirement for the back-office systems to be in place, to support and link up with online delivery channels, there is also a genuine need to connect rights owners with those looking to license music. Currently it can take days, weeks, or even months to find out who owns the rights to a particular song or recording in the territory you are interested in, and just as long, if not longer, to negotiate a contract. Doing a deal through your web browser is just not an option at the moment, a fact that is somewhat surprising in this super-information age.

Last year at Syntegra we produced a television commercial in conjunction with our advertising agency (Miles Calcraft Brigginshaw Duffy) and Simon Beaufoy, writer of the `The Full Monty', but one of our biggest problems in making this ad was obtaining a license to use a recording of `You Sexy Thing' by Hot Chocolate. First the owner had to be identified. Over a period of time we found out that `You Sexy Thing' was originally recorded on RAK records, produced by Mickie Most in 1975. Most then subsequently sub-licensed the track to many other labels, including EMI and CAPITAL. In fact the same recording can be found on 101 different record compilations since its initial release. To complicate things further, Hot Chocolate had either produced for, or licensed recordings to, several other record labels. And the movie soundtrack to `The Full Monty' was released by RCA, a division of BMG Music records, and contained 13 songs derived from numerous other record companies.

Finding out who has the rights to a recording at a certain time in a particular territory for a specific use, is not as easy as it might sound, and in our case the whole process took around four months. And then, for legal reasons, we were only given 20 seconds of music to play with.

Typically the process is a long, time-consuming, manual one in which the people who have to do the leg work rarely derive any financial benefit. Licenses, sub-licenses, administration deals and mergers are all hurdles that stand in the way of acquiring a license for a piece of music. Very little information, if at all, is available in electronic format. The majority of companies still use paper records, spreadsheets and shared files, fairly haphazardly, and therefore many licenses fall delinquent and are only found to be so more by luck rather than judgement. Huge opportunities to grow revenue are therefore going begging. Moreover the rules that govern licensing in the music industry have become incredibly complex, and describing these rules in electronic format presents a considerable challenge to all involved. Within Syntegra we are currently looking into an independent technology platform that will seamlessly connect rights buyers to rights owners online, not just in the music industry but in all industries. As the digital age evolves all companies are becoming content producers, whether that content be press releases, corporate videos, branded e-learning solutions or digital music. It is hoped that this platform will automate the costly and time-consuming process of negotiating and securing rights to use certain pieces of music, to the benefit of everyone in the process chain. Licensees will be able to manage portfolios of copyrights much more easily, and licensors will be able to manage portfolios of licenses and increase revenue through access to new markets. To do this, however, the system will have to store the `business rules' for the contract and make them available to Digital Rights Management (DRM) software capable of securing and controlling the usage of the recording online. One thing's for sure, development of such a platform will require a high level of integration to the systems of a range of third parties, and an expert in managing business process change.

So things are looking much brighter than they were 12 months ago. Technology partners are working with the record industry to put the necessary electronic systems in place to support digital distribution of music and copyright management online. But there is still much work to be done, to integrate back office systems and secure digital content, and with the European Union bearing down time is running out. In fact, the music industry has up until December 2002 until a new European directive addressing security of digital content delivery comes into force. This directive, aiming to harmonise certain aspects of copyright and related rights in the information society, indicates that all content delivered over a network must use a Digital Rights Management system. So content owners must wrap their content in a secure format that protects digital copyright. Member states must put regulations in place to comply with this directive before December 22, 2002.

One thing it's very important to remember is that the rules of copyright don't just apply to music. We are all potentially digital content producers in this electronic age, so the music industry will not be the only one having to face up to the issue of management of copyright for any content delivered over a network. All the concerns surrounding the protection of legal copyright could equally apply to the delivery of streaming video into homes for example, since streaming video providers need performance licences for their composition in the same way radio channels do. There's little doubt that multichannel digital delivery is the content delivery mode of the future, but that business is likely to be severely stifled until we all get our heads round the copyright problem.
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Copyright 2002, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Database and Network Journal
Geographic Code:00WOR
Date:Aug 1, 2002
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