Has RIAA Blown Royalties Issue Out Of Proportion?Has RIAA Blown Royalties Issue Out Of Proportion?

The primary hang-up in building legitimate Internet music services--making sure everyone who owns rights to a recording gets paid--shouldn't even be a hang-up, a prominent copyright attorney says. Ron Gertz, president and founder of Music Reports Inc., a provider of music copyright services, told digital entertainment execs gathered at this week's Webnoize 2001 conference in Los Angeles that sampling techniques used in the broadcast world would prove just as effective in monitoring the movement of music online, particularly in the file-sharing communities that have proven to be the Pandora's box of copyright concerns.

Gertz, while taking part in a panel discussion on copyright compliance, admitted that the sampling method--in which a percentage of broadcasts are monitored and the results used to estimate royalty payments--gets a little dicey when it comes to actually paying royalties. He also acknowledges that sampling is not as precise as the sophisticated (and costly) monitoring technologies that are available now and will eventually be a necessity. But he says simply comparing a sample of logs from a service's file servers to a database of rights owners could provide near-term relief. And the struggling economy provides an ideal opportunity to test the method's effectiveness. "It's all workable," Gertz said. "Especially now, when there's not much money in the pipeline."

Ken Hertz, a partner with the law firm of Goldring Hertz Lichtenstein & Haft, concurred. Hertz said that getting one of the Napster clones, such as the FastTrack network's KaZaA, Music City, or Grokster, to submit to such rudimentary monitoring certainly would be preferable to the Recording Industry Association of America's persistent attempts to shut down file-swapping networks and other royalty-unfriendly services. "No one's suggesting that the RIAA's strategy hasn't been successful," Hertz said. "The question is whether this is the best result for everyone."

But RIAA representative Robert Raben said that in the absence of legitimate music services that offer what consumers want while ensuring payment to all rightsholders, the RIAA would continue on its current course. There are legitimate sites that offer access to music from independent labels, and two major-label-backed services--MusicNet and pressplay--are scheduled to launch early next year. But very little major-label content has moved through online channels that generate royalty payments, and it's royalties related to major-label content that present the greatest financial concern. "I don't think anybody can say with clarity: This is what the business model should be," Raben said. "There are a lot of things to figure out."