Changes to copyright regime must be made for labels to satisfy consumers  Copyright changes are critical if record labels are to begin selling tracks securely over the Internet, a group of industry executives has told Canadian NEW MEDIA. In an exclusive two-hour roundtable discussion organized for CNM by Hawkestone Communications, participants agreed that the music industry will have to change traditional models to combat digital piracy and underscored that significant developments along that path have taken place since the rise of peer-to-peer music services such as Napster. But they also said that changes would have to take place at the legislative level before online music services that meet consumers' expectations can be launched. Participants hinted at a forthcoming deal that could open the floodgates. Participating in the roundtable were Graham Henderson, Universal Music Group Canada's senior VP of business affairs and ecommerce; Norman Miller, BMG Canada's VP of IS&T, new media and marketing services; Tara Luft, manager of artist & repertoire (A&R) and marketing at MapleMusic Recordings; Alistair Mitchell, president of Moontaxi Media; and Kaan Yigit, a partner of Solutions Research Group Consultants Inc. Each of the participants agreed that current trends in music are troubling for the industry's long-term viability if nothing is done either internally or by government to stem the tide of file sharing. Calling it a "perfect storm" - a reference to the novel detailing the doomed fate of a boat caught between several Atlantic squalls - Yigit said: "You've got on the one side, for the past five years, a huge explosion in the components market. The kids we're looking at now are the same kids who seven years ago bought CDs and videos but now have the option of other (technologies). That's part of it. Consumers are stronger as a result of being enabled by those technologies, but artists on the other hand also have some newfound…options. I think what you're seeing is maybe a search for a new model, a search for a new identity as you navigate some fundamental changes. I think people are interested in music; they're attached to music; they consume music. What's changing is how and what they're demanding. So it's a period of adjustment." The labels represented at the session agreed. Said Maple's Luft: "…he biggest fault of the industry is the attitude that consumers have to change their ways. This is a cultural thing and culture dictates business at the end of the day. Yeah, there's some give and take there, I've just never believed that business creates culture. I think business responds to culture and what you have right now is a youth culture in this country that's telling you that they're going to consume music a certain way. As an industry, we can keep looking to government to make them consume it our way, or no way, but at the end of the day it does have to be transitioned, because the model isn't viable in the current culture. Twenty years ago it was fine to do things the way the music industry has always done them, and that's part of why a company like Maple was started, and emerged, was the attitude that music is very viable in Canada and there's a huge market for music. But people are sending messages about what they want when they consume music that aren't necessarily being heard or resonating with the industry." In fact, each of the representatives of Universal, BMG and Maple told CNM during the roundtable discussion that the companies recognize that consumers want to, for example, burn CDs and are unwilling to embrace products that tie access to music to subscriptions. And, said Universal's Henderson, the attitudes of record companies toward consumer demands have experienced a radical turnaround, something listening audiences have been slow to recognize. " to where Jobs is now, if you support the à la carte model, is the major labels have to do two things. They first had to wrap their heads around the concept of burnable, portable downloads. When we started this business back in 2000, that was a no-no. It had to be tethered and fixed and bundled up. Then a switch went off a while ago - it was largely due to people like Kaan saying people are out there and they're just going crazy and in our company, in other companies, you know what, it'll be burnable, it'll be portable, and yes, there'll be some restrictions on where it can go, but that was a watershed moment when we suddenly said, ok, we can do that…It really has been a three-year process, and the perception in the public is this whole period of time we've been doing nothing. In point of fact, all our companies have been spending hundreds and hundreds of millions of dollars trying to get this - sometimes incredibly stupidly. Sometimes it's been money thrown down a black hole. But we're learning along the way and trying to compete with somebody who invented a hammer to smash in the front window and we had to build this store. I would say it's the challenges of getting our stuff there in a format that respects artists' rights and our own rights, getting around this burnability/portability issue, and getting the rights-holders lined up. And we're there. They're there in the States. We're right on the edge." During a discussion on the various rights associated with music, it was hinted that a new deal with the Canadian Recording Industry Association (CRIA) could ease some of the complexity. Said Henderson: "They did actually an unusual deal in the States where Harry Fox, who represents the publishers in the United States, went to the major labels and said 'go ahead and launch your services and we'll figure out what you're going to pay later.' They've just done that in England and we're on the verge of doing that here in Canada." Though no confirmation is available, there were hints in the conversation that a similar deal might be concluded between CRIA and the Canadian Musical Reproduction Rights Agency Ltd. (CMRRA), which represents publishers in this country. A deal with CRIA was referred to when Miller asked Mitchell whether Moontaxi had deals with the publishers (CNM, Feb. 22/02). Complex rights environmentBut at least Miller and Henderson agreed that the overall environment of rights is too complex. Miller argued that the system is too Byzantine. "The big debate is whether it's government legislation that solves this for us, or whether it's just internal reform," he said. "The fact is that the business is way too complicated today. The fact is, given the way the business is structured, labels, publishing, etc., we could be given the right to make available tomorrow, and we don't necessarily have it… company like Moontaxi will come along, wants to start a partnership with us, and we have the ability to give them one-quarter of a glass or one-fifth because, separately, they need to deal with publishers. They're in the streaming business. Then there's SOCAN who wants a piece of the action. Then there's NRCC who wants a piece of the action. And depending on your business model you might be involved with AVLA who want a piece of the action. And this has been the culmination of many years of the industry trying to protect itself and work around … a lot of these rights. And it's absolutely become ridiculously complicated. That needs to be blown up today and replaced with a fundamental ownership right that is 'let's do a deal and I'll grant you this right' and distribute it to consumers and it's clean and it's simple and it's the only thing that will give it any traction." But Henderson and Miller said the industry continues to fight for a right of making available currently under discussion as part of the section 92 review of the Copyright Act (CNM, Nov. 2/01). Henderson noted that the Digital Millennium Copyright Act in the U.S. has provided strong protection to labels by introducing the concept of contributory infringement in that country's laws, which has allowed offerings such as MusicMatch and PressPlay to find the capital to launch their businesses. A lack of a right of making available has also led labels to jealously guard their one right over reproduction, stalling some innovative services. Moontaxi's Mitchell said he's keenly aware of larger competitors to his service to the south and said shoring up Canada's copyright laws is an important step in creating a viable Canadian download service. "That's a cultural opportunity that's lost," he said. "We need that shored up and we need to say, wait a second, there's two opportunities. One, a), have a strong, viable domestic provider of music and cultural services online and b), we've got a great export opportunity here. So, yeah, PressPlay and MusicNet and these other titans do their stuff and we're not looking for their capital. We're just looking for a commitment to actually be a copyright contributor." The problem with any change to the legislation, Henderson said, is the dual structure of Canada's copyright laws. "We have a very unusual situation in Canada where two ministries are responsible for the Copyright Act, and they don't like one another. Industry has been through change after change after change at the top and over here you've got Heritage. Heritage would implement it tomorrow. Industry has its own views. They want to cherry-pick." But the parties agreed that legislation alone won't turn around the trend of falling CD sales where there is currently little replacement revenue, though each of the labels is hopeful of finding a successful model. Said Luft: "To me, when you look at the statistics on downloading, these people love music. How fantastic. At no other time in the history of the music industry have so many people cared enough about music to pursue it. How can we monetize that? I don't have that answer but I think that looking at the model and continually going back to the model and saying how can we make the model work? How can we make the model work? Well, how can you look at what's happening, look at your product, and figure out how to monetize it." But BMG's Miller warned that the technology will have to be reined in lest the best-laid plans go awry. "I think that there is a place for the streams or downloads in every marketing plan. And it's going to vary, by artist, depending on the demographic to which that artist appeals. The real issue, though, is that the technology is uncontrolled. It doesn't allow the artist to effectively, in partnership with a label, control their own destiny. And whether it is the selling of CDs as a priority or selling T-shirts as a priority or concert tickets or whatever, technology has caused this hiccup where there's this plan, and it's taken away from you. You could have a relationship between an artist and label where the artist gets 75% and the label got 25%, and put together a plan that the artist endorsed 100%, launch it, just to have consumers download and file share all their singles and burn copies of a few CDs they bought in a 10-to-1 ratio…y whole point in this is that in the end-game, the owner of the intellectual property needs some opportunity for control over ultimately their own fate."