A New Business Model Explained

The digital transmission right would be implemented through a combination of voluntary collective rights management and license agreements directly negotiated by individual rights holders and audio service providers. In my view, the ideal marketplace would contain at least one collective in each territory whose catalog encompassed all or nearly all recordings and which was authorized to grant worldwide rights at its local rates for all digital transmissions of recorded music that originate in its territory.

Accordingly, in the article, I elaborate on the advantages of voluntary collective rights management; offer suggestions regarding governance, transparency, accountability and regulation of collectives; discuss the relationship of collectives to their rights holder members; the relationship to each other of collectives in different territories; the basis upon which collectives might license digital transmissions, including transmissions that originate in one territory and end in another; the role of licensing by individual rights holders in the context of collective management; the conduct of music use monitoring to support royalty distribution; and the allocation and payment of royalties, including those for transborder transmissions.

License fees under the digital transmission right would reflect the benefit realized by service providers from their transmissions of recorded music. In the article I suggest a structure for calculating this benefit in various circumstances including for those site operators who charge users to receive transmissions of recorded music; those who transmit recordings in connection with advertising; those who transmit recordings in connection with the sale of goods or services other than access to music; and those who do not charge for transmissions, carry ads, or sell goods or services. I also suggest license fee structures for P2P and social networks and for those instances when individual Internet users must pay license fees.

Finally, I suggest that a temporary levy be imposed on consumer electronics and technology products to help sustain the music industry financially during its transition. The levy would be adjusted downward in response to increases in license fee collections under the digital transmission right and would be subject to sunset not more than four years from implementation. After that, the music industry would be expected to thrive in the digital music marketplace without subsidies.

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Implementation of the digital transmission right would not depend on access restrictions or anti-copying measures for its success. Its monetization would not involve the imposition of a statutory license or an Internet access tax. And it would not require the enlistment of Internet service providers or colleges and universities as enforcers on behalf of music industry rights holders.

Nevertheless, the digital transmission right would allow transmissions of recorded music to be made available through the largest number and widest array of licensed sources, anytime, anywhere, to anyone with network access. Such a result would provide music industry rights holders with their best opportunity to do as well financially, if not better than they have done under the system that my proposal would replace.

In addition, the digital transmission right would promote technological innovation, enhance the free market for consumer electronics and technology products, and facilitate the unrestricted growth of all manner of licensed digital audio services (including streaming and download services, and P2P and social networks). And, perhaps most importantly, it would meet consumer demand for full, unfettered, DRM-free, and lawful access to music when, where and how consumers want.

The digital transmission right is the means by which to bring about change that meets the needs of all the many competing stakeholders in the digital music marketplace.

To download my article, “Common Sense, Accommodation and Sound Policy for the Digital Music Marketplace,” click here.

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