Judge to pirates: Play nice
Published: 06 Oct 2000 09:38 BST
Well, as it turns out, most of our friends in the online music business learned their kindergarten lessons well -- at least the first part. The leaders of MP3.com, Napster and other online music distribution services have discovered the kind of power that can be generated in sharing licensed music content developed by major record labels.
But start-up online music firms still seem to need a little help on the "being fair" part of that early school years lesson. In the past month or so, it has been the federal judges reminding youthful, upstart Web companies that it's not nice to steal other people's copyrights.
The stakes are a little bigger in the courtroom than in the classroom. Napster is appealing a federal court ruling that would put the music swapping directory out of business. While MP3 is appealing a September 6 court ruling that said the company's MyMP3 service, which stores CDs online for access by the consumers who own them, violated the copyright held by record label Universal Music Group. The ruling may leave MP3 on the hook for as much as $250 million in damages.
Now, it's the lawyers for these Web companies who will be shouting "Not Fair." After all, the music really didn't generate any significant revenues for the Web companies. No revenues and no profits should translate into no royalty payments. Fair is fair. Right? Wrong.
The value that MP3 and Napster are generating from pirated music does not come from their ability to sell tunes on the street like some sidewalk peddler selling redubbed versions of hit CDs. The value of pirated music online comes from its power to help start-up Web sites attract millions of music lovers to a single place on the Internet. In doing so, the companies are creating a powerful marketing channel.
And, presumably, one could expect MP3 and Napster to eventually charge the music labels hefty fees to reach the same audiences that their pirated music helped to create. Which is a pretty good strategy; if only those pesky little copyright laws wouldn't get in the way.
On the same day MP3 was being swatted for copyright violations, Yahoo! was announcing a deal with the Recording Industry Association of America to license music broadcast from radio stations retransmitted online by its Yahoo! Broadcast unit. By choosing to comply with terms of the Digital Millenium Copyright Act of 1998 instead of fighting the music industry through protracted arbitration, Yahoo! becomes the first major player to strike an accord to pay royalties on copyright protected music that is incorporated into its online programming.
Like it or not, Yahoo! is playing by the rules and appears to understand the federal courts' lesson: Don't mess with copyrights.
Although Yahoo! gets it, MP3, Napster and other online music start-ups appear intent on learning the hard way. The advice is simple and straightforward. Get on the right side of copyrights first. Develop your online music distribution service second. You can build an online music distribution service by piggybacking the market power of unlicensed music, just don't expect to get rich. And, if you tried to pull a stunt like that in my son's kindergarten class, you'd probably lose recess, too.
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