After lawsuits, its slow going at MP3.com

Despite four months of effort and spending more than US$100 million, not to mention learning to navigate the byzantine structure of music industry copyrights, MP3.com Inc. is still unable to do much of anything with its flagship My.MP3.com service.

My.MP3.com lets users listen to CDs they own from any computer with an Internet connection. To do so, they "beam" their CDs to their MP3.com accounts by inserting a CD into a CD-ROM drive and using MP3.com-supplied software to verify that a legitimately-purchased disc is in the drive. Having proved they own the CD, they can access the song over the Web from any suitable music player via MP3.com's service.

The service caught the attention of the Recording Industry Association of America Inc., which filed suit in January 2000, charging that MP3.com had violated its members' copyrights by failing to get permission for the service before launch. By mid-year MP3.com had been forced to close its service as a result of the suit.

MP3.com eventually settled with four of the five major labels -- Warner Brothers Music Group Inc., EMI Group PLC, BMG Entertainment Inc. and Sony Music Entertainment Inc. -- for a reported US$20 million each. The one label that refused to settle, Universal Music Group Inc., won a court decision and was awarded US$54.3 million in damages. As a result of the settlements and the damages payment, MP3.com was granted licenses from all five labels.

My.MP3.com said in early December that it would resume service but under new terms. The plan was to offer a two-tiered service, with a free service that offered to store up to 25 CDs and a $49.95 per year subscription service which was unlimited.

However, the new plan is proving slow to implement and the going is proving tough for My.MP3.com. While it's no longer at loggerheads with the record labels, the company is only slowly gaining the necessary permission to make more songs available at its site.

The slowdown is the result of a problem with United States' copyright law, according to Robin Richards, president of MP3.com. Though the company has secured licenses from the record labels and some licenses pertaining to performance rights, it has yet to obtain other necessary licenses.

Music industry copyrights are complex because so many parties typically have a claim to a portion of any given recording. There are multiple copyrights for any one song including performance rights, publishing rights and recording rights, all of which are administered by different bodies. Having performance and recording rights isn't enough to avoid copyright infringement; publishing rights must also be secured, Richards said.

One company, the Harry Fox Agency, administers 70 percent of all publishing rights, but finding the publishers who hold the other 30 percent -- 10,000 publishers, according to Richards -- has proven to be nearly impossible, he said.

Because of this, and the slow pace at which Harry Fox receives and passes on the necessary information, MP3.com has been unable to update My.MP3.com as quickly as it would like, Richards said, though it adds new songs every day. Equally frustrating, according to Richards, is the inability of the U.S. Copyright Office to deal with requests on the huge scale that My.MP3.com requires.

The service has suffered for it. Whereas My.MP3.com saw 500,000 users sign up in the first few weeks it was available in January 2000, now only 20 percent of that number still use it, said Richards. Meanwhile, he said, the company has spent more than US$100 million to secure the music licenses from the record labels and keep the service running.

But Richards is not discouraged. Despite having to work within what calls a "prehistoric process," he is confident MP3.com will prosper. Richards testified before the Senate Judiciary Committee on Tuesday, where he urged Congress to adopt a compulsory licensing model that would allow services such as My.MP3.com to proceed, paying the necessary parties and avoiding legal entanglements.

"I am confident something like this (licensing scheme) will come about in 90 days," he said. The Senate Judiciary Committee is both consumer- and competition-sensitive and is doing a good job tackling the issue, he added.

Anyone interested in enjoying digital music had better hope he's right, because, as he believes, "nothing (in digital music) will happen until (a change in the licensing system) happens.".