A Look at Digital Audio Transmission and the Trouble with Innovation and Copyright

Christopher Doval, Esq. Assistant Professor of Management and Marketing Reginald F. Lewis School of Business Virginia State University http://christopherdoval.com

Historically copyright law

is a story of legislative response to new technology undermining the rights of creative works.
Creators Investors

Copyright Act of 1976

The right to exclude!

Derivative works Coping Distribution Public Performance and Display

Digital Performance in Sound Recordings Act of 1995

Creates a right to exclude others from publicly performing your copyrighted work by digital audio transmission.
Musical Compositions v. Sound Recordings.

Compulsory Licensing

An Exception to Copyright Law Compulsory licensing provides lower royalties and no bargaining power. Royalty rate set by Congress

Three Types of Broadcast

Non-Subscription Broadcast Transmission

Subscription Transmission Interactive Services

Type 1 of 3 Non-Subscription Broadcast Transmission

AM/FM Radio
Little interaction with content by the consumer How does Frank Sinatra get paid?
Advertising!

Negligible innovation in industry

Cars? Streaming? HD?

Type 2 of 3 Subscription Transmission

Satellite Radio

XM pays 7.5% of Revenue to Royalties

How does Frank Sinatra get paid?

By Compulsory License!

1. Controlled and Limited Transmissions 2. To subscribers

What do consumers want?

Content! Interaction

A Bit of Controversy The Inno

XM + MP3 One Touch Recording

And Purchase thru Napster

Marketed and Designed for the recording of 50 hours of satellite radio

XM gets sued for defaulting to compulsory licensing.

Subscription Transmission or Digital Download Service? Time shifting? Sony v. Universal

Whats their defense?

RIAA v. XM Settlement

4 Unique Settlements
EMI Sony BMG Warner Universal

Undisclosed Multi-year Agreement regarding XM radios with "advanced recording functionality," Crippling of 50 hour functionality to 10

Type 3 of 3 Interactive Services

iTunes - Digital Download Services

Pandora

a bit over break-even 2.25.10

50% of Revenue goes to Royalties

How does Frank Sinatra get paid?

Negotiations Required. Money wins and startups struggle
Tiered deployment based off of capital

The transmission of a particular sound recording . . . which is selected by or on behalf of the recipient

Historically copyright law

is a story of legislative response to new technology undermining the rights of creative works.
We dont know the world our kids are going to live in. Deregulate to support creativity
The Internet it notoriously unregulated.

All audio transmission services want to be interactive and consumers want to interact with them.

Thoughts on Business Models

Innovators are controlled by their content

Non-Subscription Broadcast Transmission

Archaic?

Subscription Transmission
Archaic?

Interactive Services

Too Expensive, but the future!

Conclusion

Is it time for a change of ground rules to shake up three stifled and legislatively dictated industries?
Lobbyists?

Any questions?