p2pnet news view | P2P | Music:- Vivendi Universal, EMI, Warner Music and Sony Music have been trying, and failing, to use their RIAA to sue people into becoming compliant corporate consumers, and until very recently, students were the primary Big 4 targets.

Ask Brittany Kruger and Joel Tenenbaum.  Like others in schools across America, they were, and are, being told:

Pay us thousands of dollars, or we’ll sue you and make your lives living hell.

Blackmail.

P2P file sharing continues unabated everywhere, but the RIAA were able to use the ever-cooperative  mainstream media to put across the totally erroneous message that the sue ‘em all marketing campaign was working.

The Big 4 were getting away with it, but at the cost of haemorrhaging customers and being villified as the cowardly bullies they are.

Then along came Warner Music with The Answer —- Choruss , organised around the same simple bottom line (since that’s what it’s all about) that’s already popular with Vivendi Universal (France), Sony (Japan), EMI (Britain), and Warner Music (US):

Blackmail: we won’t sue you if you pay us.

Except Warner calls it licensing.

“Warner Music has invested a lot of time, money and effort in its Choruss licensing project, declaring it’s something the academic world simply can’t do without,” said p2pnet recently.

Students would pay Warner $5 a month for unlimited music downloads under a scheme TechDirt’s Mike Masnick said amounts to a “Bait-And-Switch operation“.

If Choruss is to work, clearly there has to be some way of detecting who’s being good (adhering to the terms of the ‘license’), and who isn’t (and is therefore lawsuit fodder).

Could that possibly be something such as AudibleMagic, the corporate music industry’s (and RIAA boss Mitch Bainwol’s) favourite ‘filtering’ application?

Absolutely, definitely, categorically, not, said Jim Griffin (right) angrily when p2pnet raised the possibility with him.

He was hired by Warner to make Choruss sing.

AudibleMagic has no place in Choruss, he declared during a lengthy telephone conversation. Rumour. Nothing more.

However, ” We will work with universities to advance the state of the art in music data collection, and those technologies include the very efforts Billboard’s guest writer has elsewhere advocated, such as AudibleMagic (Vance and his team are first-rate and we like each others’ efforts),” said Griffin in when he gave the keynote address at Digital music Forum East, this March.

But, taking him at his word, if the necessary sampling software isn’t, as he says, related to Audible Magic, what will it be?

And where will it come from?

How, exactly, will it work?

Who’ll control it?

Who’ll get the resultant data?

And what will they do with it?

Still a work in progress

Griffin complains a new criticism of Choruss,”doesn’t pass the smell test”.

Of it, the EFF’s Fred von Lohmann said recently »»»

… Choruss is the name of the new entity, backed by three major record labels, that is interested in granting blanket licenses to universities (and someday residential ISPs) to authorize the music swapping (on P2P and otherwise) that has become a fact of digital life. As a big fan of voluntary collective licensing, EFF is following the development of Choruss closely and with great hopes. At the same time, there are many devils in the details.

Fortunately, the public debates about Choruss (which is still a work in progress) have begun, with those on both sides contributing valuable thoughts about the advantages and disadvantages of Choruss (or any system like Choruss):

• Jim Griffin, the head of Choruss, recently delivered a speech aimed at dispelling a number of myths that have been taking root.
• TechDirt, which is on record as opposed to collective licensing for music in general, has raised a number of questions about Choruss.
• Bennett Lincoff, who favors an approach based on legislating a “digital transmission right,” recently posted his concerns about Choruss at IP Watch.

The skeptics make some valid points. But so far, I haven’t seen anything that makes me think Choruss is necessarily destined to disappoint.

But, “I’ve … lost faith that this is the ‘Voluntary Collective Licensing’ program … Fred von Lohmann hopes it will be,” someone at a senior US university that’s been appproached to use Choruss told p2pnet, going on »»»

As has been stated before, they are proposing not licensing, but a “covenant not to sue.”

They claim it’s the same thing, but we both know it’s not.

They’re essentially saying that “you are still doing something illegal, we’re just going to let that slide.”

Also, because there’s no licensing, you are not free to do anything with that music other than listen to it – so students thinking they can finally embed music into their blog posts or use it in their YouTube videos are going to be in for a surprise.

Students would also be signing an agreement that says the songs they download are “not for redistribution,” which means that even though they would be getting songs from filesharing networks like LimeWire or bitTorrent, they wouldn’t be allowed to upload the songs.

Of course, this violates the whole principle of file-sharing- and promotes “leeching” from the community.

The kicker is that because of this, students would still be getting the DMCA takedown notices for uploading!

This is the most ridiculous part of the whole thing because as far as I know, nobody has ever received DMCA complaints for downloading files – it’s only the uploading that qualifies as infringement (because it has been interpreted by some as “distribution”).

So this isn’t protecting students at all – we’ll still be getting complaints as normal, only they’re saying they won’t sue.

Here [at the university under discussion], this is useless because nobody has been sued as it is – we don’t turn over student information.

But, “Sorry, this doesn’t pass the smell test,” Griffin told p2pnet, continuing »»»

Why? Because this doesn’t resemble the discussions we’re having with schools.

Attorneys are still discussing the form of the legal agreement, and it’s certainly not yet clear whether this will be characterized as a license or a covenant or a quit claim.

In addition, the number of songs downloaded may be amongst criterion for allocation, but that’s not been determined yet … every school is setting up its own program, so each implementation will be unique.

This sounds like a game of telephone, where rumor masquerades as fact.

“By the way,” Griffin added, “the covenant approach is much broader and is better at permitting live tracks and the like, but if people want a more narrow license we are open-minded to that approach, too.

“Nothing about the legal paperwork is yet set because we continue to evaluate the merits of different approaches.”

For and against

Huffington Post contributor Mike McCready, who believes the corporate music industry is just ahead of the Amish, says this about Choruss »»»

1. ISPs and universities will support it because they don’t want to get sued and in some cases are interested in the learning.
2. Signed artists will support it because they want to get paid.
3. Labels will support it because they want to get paid.
4. Publishers will support it because they want to get paid

But:

1. Millions of unsigned artists will not support it. They don’t believe enough in the long tail to think it will make any difference to them and they’ve grown very resentful of “the man”. They will try to boycott it and will rail against it.
2. Millions of fans will try to boycott and rail against it. They’re done paying “the man”
3. If it ever makes it past the universities in some sort of compulsory model non music consumers will try to boycott and will lobby against it. They will say, “Why should we pay for something they don’t consume?”
4. Lots of emerging businesses will try to boycott it and will lobby against it. They will say, “This creates market friction, benefits monopolistic parties and limits our opportunity to “provide a scarce, complementary service to something that is getting ubiquitous and cheap”. Also, an increasingly larger percentage of content is not owned by companies but rather by individuals. Their content will increasingly compete with the major content owners as technology enables the individuals to increase the quality of their content and increase their ability to level the playing field for attention-getting and distribution.

Finally, even the publishers and nonperforming songwriters that today will be proponents of Choruss will shift their support as soon as business models that compensate them fairly under a new model emerge. And those will emerge. They will emerge with more difficulty if their customers feel like they’ve already paid a Choruss fee and then have to pay again under the emerging business model.

I think there are lots of ways large content owners and labels can optimize their businesses, eliminate inefficiencies and return to revenue growth. It’s so hard to understand why they don’t adopt any/many of them.

Mike adds:

“Technologies that have disrupted the space can be harnessed by the very businesses that have been disrupted without the need to be perceived as ‘extracting’ money.”

Brazen money grab

For an in-depth, in detail analysis, “If Choruss abandons the time-tested approach of licensing and relies instead on covenants not to sue, it will facilitate a brazen money grab by the major labels it represents, leaving songwriters, recording artists and music publishers empty-handed, and college students holding the bag,” wrote Bennett Lincoff, an intellectual property law attorney, consultant and author.

His article, Choruss’s Covenant: The Promised Land (Maybe) For Record Labels; A Lesser Destination For Everyone Else, appeared in Intellectual Property Watch in March.

Is anything different ? – we asked him.

“Nothing seems to have changed,” he said.

In his post, he went on »»»

The music industry has struggled for more than a decade to find effective ways to monetise use of its content on the internet. One initiative, which has been incubating since March 2008, is led on behalf of Warner Music Group by Jim Griffin. It involves efforts to generate fees from college students in the United States who wish to engage in P2P file-sharing. For this purpose, Mr Griffin formed Choruss, LLC. To date, Choruss’s membership includes three of the four major record labels. Universal Music Group has not yet joined.

An outline of Choruss’s programme was first made public by Mike Masnick in December 2008, in a blog at techdirt. Mr Masnick based his report on a PowerPoint created by Mark Luker, a vice-president at Educause. Mr Luker based his PowerPoint on discussions he had with Mr Griffin.

Choruss claims it will offer college students the freedom to engage in P2P file-sharing using whatever software or service they wish. In return, students will pay a monthly fee to Choruss through their schools. The schools will monitor student file-sharing activities and report music use information to Choruss. Choruss will divide the student fees among the record labels it represents.

On 26 February, 2009, Mr Griffin delivered a keynote speech at Digital Music Forum East. The speech, available here, was billed as an “exclusive look under the hood of Choruss.”

According to Mr Griffin, it remains to be determined exactly how Choruss will operate. He said that Choruss will not “apply any one size fits all approach.” And that “[Choruss] will seek to implement different approaches at different college networks.” He hopes to launch Choruss at six colleges by the fall semester of 2009. If Choruss proves successful at the college level, Mr Griffin will seek to extend it to ISPs [internet service providers], and, through them, to all US-based internet users who access the network through broadband connections.

Throughout his speech, Mr Griffin sought to analogise Choruss with ASCAP, BMI and SESAC, the three US-based collective licensing organisations. I found this odd because, according to Mr Luker, Choruss does not intend to engage in any form of licensing, collective or otherwise. (See, in particular, the 5th slide of Mr Luker’s PowerPoint.)

Rather, Choruss will implement its programme through a legal mechanism known as a covenant not to sue. That is, Choruss’s label members will refrain from asserting claims of copyright infringement against compliant students for their file-sharing activities. They also will refrain from asserting claims against the schools these students attend arising from file-sharing of Choruss’s members’ recordings over the schools’ networks.

During a Q&A period, I asked Mr Griffin to clarify whether Choruss intends to issue licences or to rely instead on covenants not to sue. He responded that several attorneys had assured him that the two approaches are effectively the same and that it makes no difference on which basis Choruss proceeds. I said I disagreed, but was not given the opportunity to elaborate. Mr Griffin ended our exchange, saying: “We’ve spent over a decade with the lawyers nitpicking over what we call the transfer of money for music and I’m tired of it. What we’re trying to do [with Choruss] is to make sure we don’t have another decade of nitpicking because this business won’t survive.”

On 3 March, 2009, Mr Griffin was interviewed by Steve Worona, director of policy & networking programmes at Educause. Mr Worona asked Mr Griffin to comment on whether Choruss would rely on covenants not to sue. Mr Griffin responded that that is a matter for attorneys to decide. Beyond that, his response was no more informative than the one he gave me. (You can listen to Mr Worona’s question and Mr Griffin’s answer beginning at the 30:40 mark of the interview.)

To be sure, there are circumstances, in patent law, for example, where a covenant not to sue is roughly equivalent to a licence. However, licences have always been the gold standard for music industry rights administration. And, as discussed in the remainder of this post, in the particular context of P2P file-sharing of recorded music by students on college campuses, the differences between licences and covenants not to sue are fundamental and far-reaching.

As Mr Griffin said in his speech: “The light of day is the best disinfectant, so let’s make a few exemplary comparisons between the myths about Choruss and what’s really happening.”

Choruss’ reliance on covenants not to sue will enable the major labels to extract revenue from student file-sharing while continuing their efforts to eradicate P2P altogether.

The music industry has no intention of allowing P2P file-sharing to be lawful; at least not file-sharing of the sort that might actually meet consumer demand. The recent torpedoing of Virgin Media’s file-sharing service in the UK illustrates the point. And in his speech, Mr Griffin confirmed that “licensed P2P is not our focus in Choruss.”

The cornerstone of the labels’ assault on file-sharing services and technology providers (as opposed to their campaign against consumers themselves) is the 2005 decision of the US Supreme Court in the Grokster case. There, the Court created the concept of inducement liability. It held that “one who distributes a device with the object of promoting its use to infringe copyright . . . is liable for the resulting acts of infringement by third parties.”

To date, practically every instance of student file-sharing of major label content constitutes copyright infringement. This is because the majors have refused to license uses of their recordings for that purpose. Therefore, under Grokster, P2P services and software providers who promote use of their products on college campuses risk exposure to inducement liability for the resulting acts of infringement by students.

If Choruss were to grant licences, file-sharing by students who buy in to Choruss’s programme would no longer constitute infringement. In such event, student file-sharing could not serve as the basis for claims of inducement liability by Choruss’s record label members. Obviously, the major labels that dominate Choruss are not prepared to accept that result.

On the other hand, in the context of Choruss’s programme, a covenant not to sue would constitute nothing more than a promise by the labels involved to refrain from asserting legal claims against compliant students. It would not negate the labels’ underlying position that student file-sharing constitutes copyright infringement. And, in such event, P2P services and technology providers would remain exposed to claims of inducement liability by Choruss label members even for the file-sharing activities of those students who buy in to Choruss’s programme; and this despite that the students themselves would be free of infringement claims by those same record labels. Only if Chorus relies on covenants not to sue can its label members continue unimpeded with their efforts to eradicate file-sharing altogether.

Choruss’s reliance on covenants not to sue will render its programme a classic bait and switch.

Students who buy in to Choruss’s programme will do so believing that that will free them to engage in file-sharing using whatever P2P services or software products they wish.

However, if Choruss relies on covenants not to sue, students likely will find that the very services they signed up to use have been shuttered in response to copyright infringement actions brought by Choruss label members.

Mr Griffin hinted at this in his speech when he acknowledged longing for the day when “Limewire [the most widely used P2P software product] will be the answer to a trivia question.” Thus, to the extent that Choruss offers students freedom of choice, it will be the freedom to choose from among the P2P services and software products, if any, that the major record labels approve.

Choruss’s covenant not to sue students who engage in file-sharing of recordings owned by Choruss label members does not mean that those students will not be sued for doing exactly that.

P2P file-sharing implicates the reproduction and distribution rights in the sound recordings that are shared. It also implicates the reproduction and distribution rights of the songs contained in those recordings. With respect to individual songs, these rights, collectively known as the “mechanical right,” may be owned by a single music publisher or, more likely, owned jointly by multiple co-publishers.

Typically, when record labels grant licences for digital downloads of their recordings in the United States they assume responsibility to “clear” mechanical rights. That is, they obtain and pay for mechanical rights licences for the benefit of their licensees. The labels’ licensees, in turn, reimburse them for this cost and effort through the licence fees they pay. In addition, when labels clear mechanical rights, they also commit to indemnify their licensees for claims made by music publishers for infringement of those rights.

The current rate under the compulsory mechanical licence in the United States is 9.1 cents per song per download [pdf]. For so-called “controlled compositions,” those written, owned or controlled in whole or in part by the recording artist, a bargain rate of 75 percent of the compulsory rate, or 6.825 cents, is charged per song per download.

It has been reported that “the current per-student monthly figure being kicked around is somewhere less than $5.” Given this, the economics of Choruss’s programme will not allow its record label members to clear mechanical rights for participating students. Of course, Choruss could limit students to a handful of downloads per month but that would make Choruss a difficult sale on campus. Instead, Choruss will refrain from issuing licences and rely on covenants not to sue. In that way, Choruss’s members can avoid even the implication that they have any legal obligation for mechanical rights licences.

If Choruss does not clear mechanical rights, then students who buy in to its programme will bear sole responsibility to secure and to pay for those licences. Students who fail to do so – and that will be practically every student on campus – will be exposed to claims of copyright infringement by every music publisher with any interest whatsoever in any of the songs that the students share.

It remains to be seen whether music publishers would sue students for these infringements. The music publishing industry may not want to repeat the public relations disaster that resulted from the RIAA’s long campaign of infringement litigation against consumers. But the fact remains that if Choruss relies on covenants not to sue, students who buy in to its programme will not be fully protected from exposure to infringement liability for sharing the very recordings that Choruss represents.

(Given all this, one may wonder what appeal Choruss possibly could have for college students, especially in light of the RIAA’s announcement that it is suspending its litigation campaign against consumers.[NOTE: This claim has proved to be false - Jon]

The answer is that it doesn’t matter what students think about Choruss. Mr Griffin said in his speech that Choruss is “working with professors and chancellors and provosts, university attorneys, IT departments and their public policy advocates.” The decision whether or not Choruss’s programme will be implemented at particular campuses, whether or not students will be required to participate, what limits, if any, may be placed on student file-sharing activities, and how much the monthly fee will be, will all be made at the university administration level.

It does not appear that student groups will have meaningful input into this decision-making process.)

Under Choruss’s programme, songwriters and music publishers will not have an enforceable right to receive royalties through Choruss for student file-sharing of recordings that contain their songs.

In the United States there is no public performance right in an internet transmission that is nothing more than a digital download of the song that is transmitted. Because P2P file-sharing involves digital downloads, songwriters and music publishers will not have any claim to payment of public performance right royalties derived from the student file-sharing fees that Choruss collects.

Moreover, if Choruss relies on covenants not to sue and thereby avoids the obligation to clear mechanical rights, songwriters and music publishers will end up with nothing, or next to nothing from student file-sharing of their songs.

In order to avoid that result, they may be willing to forego their right to mechanical rights royalties under existing law and accept the best terms they can negotiate directly with Choruss. Mr Griffin would call this dynamic “a voluntary market approach to compensation.” Songwriters and music publishers would likely call it something else.

Under Choruss’s programme, recording artists will not have an enforceable right to receive royalties for student file-sharing of their recordings.

The circumstances under which individual recording artists have a right to receive royalties for digital downloads, as well as the amounts of those payments, will be specified in their agreements with their respective record labels. Recording artists can be eligible to receive up to 50 percent of record label licence fee revenues (albeit net of various and often costly deductions). However, it is practically unheard of for a recording artist to have a right to share in record label revenue derived from covenants not to sue.

To be sure, if Choruss relies on covenants not to sue, some of its label members may share student file-sharing fees with their artists. But any such payments would be voluntary, and likely not made in a uniform, predictable or transparent manner. The way to assure that recording artists have an enforceable right to receive royalties for student file-sharing under Choruss’s programme is for Choruss to issue licenses.

Colleges and universities will participate in Choruss’s programme largely out of fear of losing federal funding if they refuse.

Mr Griffin said in his speech that colleges and universities are motivated to cooperate with Choruss because “[t]hey want to do the right thing.” That is an understatement.

Recently, in response to vigorous lobbying by the music and motion picture industries, Congress imposed certain obligations on schools with respect to copyright infringement on campus. According to an analysis prepared by the American Council on Education [pdf], the Higher Education Opportunity Act of 2008 (the “HEA”) requires that colleges and universities “develop a plan to combat unauthorised distribution of copyrighted material.” It also requires that they “offer, ‘to the extent practicable’ and in consultation with the chief information officer, alternatives to illegal downloading.” The consequences of non-compliance are severe. According to Kent Wada, director of IT strategic policy at UCLA, the HEA provides that schools that fail “to combat digital piracy . . . risk fines and being cut off from federal student funds” [pdf].

The HEA renders colleges and universities particularly vulnerable to Choruss’s approach regardless of the merits of the legal mechanism Choruss will employ to implement its programme. Mr Griffin seeks to position Choruss as the provider of choice of the means by which colleges and universities can demonstrate (what the schools must hope will pass as) adequate compliance under the very provisions of the HEA that the music industry urged Congress to pass in the first place. (Interestingly, Choruss does not hold leverage equivalent to the HEA over ISPs generally. That may explain why it has singled out colleges and universities on which to experiment.)

“’When I use a word,’ Humpty Dumpty said in a rather scornful tone, ‘it means just what I chose it to mean – neither more nor less.’”

The question remains, how will Choruss implement its scheme? Will it issue licences or rely on covenants not to sue? At Digital Music Forum East, Mr Griffin announced that because of a felt-need to be precise he would read a prepared speech rather than speak extemporaneously as is his want. He then proceeded scrupulously to avoid specifically using either term to describe what Choruss will do.

But Mr Griffin need not address the matter directly in order to affect public perception of it. Through his repeated analogy of Choruss to ASCAP, BMI and SESAC, he has firmly fixed in the minds of many that Choruss will operate as a collective licensing organisation.

For example, articles about Mr Griffin’s speech bear headlines such as: Colleges ready to try blanket licenses from Choruss; Consultant Provides Details About ISP Music Licensing Plan; and New label initiative to experiment with campus music licensing.

Even bloggers who spot the issues inherent in Choruss’s likely reliance on covenants not to sue almost invariably fall back on the more familiar nomenclature and perpetuate the mischaracterisation that Choruss will be engaged in licensing. Worse, MusicTank, the UK-based music industry think tank whose goal is to “bring hot topics into sharp focus,” has uncritically reported that Choruss “goes as far as legitimising students’ P2P behaviour within college networks by providing a blanket licence to cover file sharing activity.” (See page 12 of MusicTank’s March 2009 report entitled “Let’s Sell Recorded Music.”)

In the context of P2P file-sharing by students on college campuses, licences and covenants not to sue are not equivalent, not interchangeable. The differences between them may seem obscure or inconsequential to some, but they are real and substantial.

If Choruss abandons the time-tested approach of licensing and relies instead on covenants not to sue, it will facilitate a brazen money grab by the major labels it represents, leaving songwriters, recording artists and music publishers empty-handed, and college students holding the bag. It is difficult to believe that Mr Griffin’s handlers at Warner Music Group have not fully vetted the possible outcomes of Choruss’s plan. It could well be, therefore, that it is precisely these results that are intended.

In my opinion, time spent pursuing Choruss’s programme will only further delay implementation of change that might actually meet the needs of the many competing stakeholders in the digital music marketplace. To echo Mr Griffin’s sentiment, we must not allow more time to be wasted “because this business won’t survive.”

Stay tuned.

Jon Newton – p2pnet

Follow p2pnet on Twitter.

May, 2009

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This entry was posted on Monday, May 18th, 2009 at 10:02 am and is filed under Music, P2P. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

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