A New Business Model Explained

The digital transmission right would only be enforceable against those who provide digital transmissions, retransmissions or further transmissions of recorded music.

Accordingly, consumers would not incur any liability to rights holders for accessing streams, downloading music, or making copies of recordings for personal use. Similarly, software distributors, technology firms, consumer electronics makers, and telecommunications and Internet service providers, as such, would have no liability.

On the other hand, audio service providers will need licenses if they operate web sites or other services that provide digital transmissions, retransmissions or further transmissions of recorded music. (In the article, I also discuss application of the digital transmission right as an alternative to creation of a new and separate performance rights in sound recordings for over-the-air broadcast transmissions of traditional radio stations.)

Some web sites and other services enable users to upload recorded music, as well as to access streams and download music. Uploading constitutes a digital transmission of the recording involved; and consumers who initiate uploads will need authorization under the digital transmission right. Service providers who enable user-uploading would be jointly liable with their users for that conduct. For these services, a single “through-to-the-user” license held by the service provider would authorize both user-uploading to the service as well as streaming and downloading from the service; and would eliminate the need for individual users who wish to upload music to obtain licenses in their own right.

A similar analysis applies to P2P.

P2P participants who only download music will not need licenses. Those who facilitate transmissions by sharing recordings with others will need authorization.

Operators of centralized P2P networks would be jointly liable with their users who share music. These operators would also be liable for further transmissions or retransmissions through their servers of transmissions of recordings initiated by their users. A through-to-the-user license would authorize all transmissions of licensed recordings through an operator’s centralized network; and individual users would be free to share those recordings through that network without the need to obtain licenses themselves.

Decentralized P2P networks do not operate centralized servers through which file-sharing transmissions pass. Moreover, software for these networks that already has been downloaded is likely beyond the control of the distributors who released it. Under the digital transmission right, distributors who do not exercise control over the decentralized networks that their software spawns would not incur liability for use of that software by file-sharers. Because of this, however, there would be no single entity through whom to issue a network-wide through-to-the-user license. Accordingly, each participant in such a decentralized network would be responsible for securing authorization for their own conduct.

On the other hand, licenses would be available to software distributors for decentralized networks who configure future releases of their software to allow for filtering to prohibit the sharing of certain recordings, and to monitor which recordings have been shared so that rights holders can receive royalties. A through-to-the-user license held by the software distributor would authorize the activities of network participants who use the enhanced software.

It stands to reason that the vast majority of those who are interested in P2P will seek out centralized and decentralized networks that secure licenses authorizing their activities; especially if the sharing that is permitted offers consumers what they really want from P2P. More generally, if the music industry makes licenses available on reasonable terms, the vast majority of those whose conduct will require authorization – audio service providers of all stripes and, where applicable, individuals alike – will pay the license fees that are due.

No doubt, no matter what is done, a “Darknet” will continue to operate. However, unlike the reproduction and distributions rights (and the market for sales of recordings that they underlie), the digital transmission right cannot be subverted by one or more unlicensed digital audio services, P2P networks, social networking services, or the like. For all intents and purposes, the digital transmission right would be impervious to copyright infringement.


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