Analysts examined how Microsoft’s long-anticipated streaming music service could affect the overall industry this past week. And the entertainment industry teams up with Internet Service Providers (ISPs) to fight digital piracy. Also, a legal dispute over the rights to Ray Charles hits could change royalty payments for other artists.
Microsoft and Xbox Music
On October 14, Microsoft announced the launch of a new streaming music service, Xbox Music. It will be available for Android, iOS, Windows 8, Xbox 360 and a few other operating systems and according to an article in PCWorld is a reboot of the company’s expensive Zune project, which emerged and flickered out when iTunes first exploded.
News of the new service came days before the anticipated release of Windows 8 Pro and Microsoft Surface tablet, products which will be part of Microsoft’s new mobile-heavy business strategy. It also was timed right after reports that Microsoft Office would soon be available for both Android and iOS.
Xbox will present free streaming music as well as a subscription option for those that want to download individual tracks or hear music devoid of advertisements. It will also feature a full music store. It will be a direct competitor with companies like Spotify, Pandora, Google Music, iTunes and Amazon Music.
Xbox Music will also offer a special deal: Those that purchase a Windows 8-run tablet will be able to stream millions of songs for free, unlike Spotify, which charges $10 monthly for use on tablets.
Microsoft’s new music service will allegedly offer free access to 18 million songs for those in the U.S., with ads run every 15 minutes. Then, for $9.99 per month or $99.99 annually, consumers can listen without interruption. Music fans will also get the Microsoft Music store, which will have MP3 versions of songs for download at around $.99 per track. A “Smart DJ” tool will also serve as a music discovery system that will play new music for music lovers based on their favorite bands and artists.
How do analysts feel Xbox Music will impact the industry? Opinions are varied, said a piece in the International Digital Times. Some experts stated they feel that a shift to mobile could alienate many Microsoft fans; others feel it is a smart move that will draw in different types of users. Industry analysts and ZDNet contributor Steven J. Vaughan-Nichols declared, “No matter when Microsoft delivers the Android and iOS goods, Microsoft’s support of any version of Office on a non-Windows smartphone or tablet strikes me as an odd move. In a shareholder letter, Microsoft CEO Steve Ballmer said that Microsoft is shifting its model to focus on devices and services. This is a radical and dangerous shift for a company that’s always made it money from software licensing. And, now, instead of using Office as a crowbar to pry users from iPad and Android tablets to its Surface tablets, Microsoft is going to offer Office 2013 on its device rivals?”
Microsoft is giving up some of its market share with this latest move by creating cross-platform software. However, this could be a move to create more sustainable revenue in light of the fact that Windows has become a much smaller part of the company’s annual income. Microsoft’s 2012 revenue reports show that Windows only brings in the third-largest revenue for the company, behind Microsoft Office and its Server and Tools department.
The Xbox branding could help the company rev up its entertainment division, though it will not likely save the music industry. Xbox Music will be the default music application on every Windows 8 PC’s Start screen. And it is one of the first apps built for touch. The Windows 8 app – the best entry into the Xbox storefront – will ship on October 26. Spokespeople for Microsoft said it will expand the regions where Xbox Music is offered in the coming months.
“Six Strikes, You’re Out” to Combat Piracy
The Center for Copyright Information (CCI) will soon join together with ISPs such as Comcast, Verizon and a few others in order to establish a new “Six Strikes and You’re Out” system to fight digital music piracy and provide much-needed education to music fans, according to a report offered by CBS News last Wednesday. While news of this new program was first reported in September by both PC World and Ars Technica, more details and exact dates have recently emerged.
CCI Director Jill Lesser stressed, “It’s not a six strikes program. This is an educational program …There are a series of educational alerts that will be sent out to subscribers.” And it will be officially known as the Copyright Alert System.
Rob D’Ovidio, associate professor of criminal justice at Drexel University stated that this program is meant to help people understand that committing copyright infringement online is no different from stealing anything else: “Under the eyes of the law, downloading a piece of music from one of these file-sharing sites without authorization is no different than walking into a store and stealing a physical good.”
Five ISPs will begin to go after infringers in November, as exposed by leaked AT&T U-Verse training materials received by TorrentFreak. The program will give violators five chances via written warnings that detail violations and potential consequences.
D’Ovidio said the outline of the program supports the idea that education is a priority for both the entertainment companies and ISPs: “It’s definitely not a zero-tolerance type of approach … They’re working with the customer, recognizing there’s still a lot of misinformation out there – especially among the younger users They don’t know what’s acceptable and what’s not. Copyright law is a confusing thing for lawyers, let alone teenagers.”
Information about the program does not suggest cutting off pirates from their ISPs or other services. It will, however, require them to go through educational tutorials online before being allowed access to certain sites. But six strikes could result in a lawsuit from copyright holders. D’Ovidio continued, “The Internet Service Providers don’t want to lose customers; at the same time, they do have a responsibility … [But] the fact that someone is watching, and somebody knows where you’re going, hopefully that can serve as a deterrent.”
The program will put file-swapping users at the mercy of ISPs and content owners after the sixth strike. During the process of the program, no personal information about Internet subscribers will be offered to content owners without due legal process and the subscribers’ consent.
D’Ovidio added that content creators have to take more responsibility: “It’s been shown if the industry can put out alternatives that are low-cost, easy to use, where consumers can get access to those files very quickly, people do shy away from the use of illegal services.”
Lesser said in September that the “softer language” is an extension of the new approach the CCI has taken in the wake of the controversial Stop Online Piracy Act (SOPA). This latest initiative will team up the MPAA, RIAA with a handful of ISPs.
How Ray Charles Could Further Change the Music Industry
Music producers are on the edge of their seats as a legal fight over the rights to many of Ray Charles’ hits – including “I Got a Woman, “A Fool for You” and “Mary Ann” – rages on between his surviving family members and his charitable foundation. An article on The Hollywood Reporter site showed how the lawsuit is testing important issues regarding song terminations.
Charles’ children, whom he mostly cut out of his will, are trying to terminate a copyright grant on the songs to Warner/Chappell Music. If the songs go back to the children, the Ray Charles Foundation will no longer receive royalty checks.
The foundation sued his children in late March, saying that the termination notices they offered are invalid because the songs were created while Charles was employed by a record label and music publisher. Thus, the songs are “works made for hire, ‘authored’ by the predecessor to Warner/Chappell,” meaning his offspring have no legal rights to terminate.
A judge determined that the songs were not made for hire in late September, leaving the door shut for a potential lawsuit to be filed by Warner/Chappell. However, the Ray Charles Foundation recently decided to argue the side opposite to its original complaint. The foundation said earlier this month that the songs were not made for hire.
This statement is setting up a lawsuit directly related to termination rights, which has recently become a hot topic in on-going copyright law debates, especially since Bob Dylan, Tom Waits and Tom Petty have all just sent their own termination rights notices. And the industry now waits to see whether a court will feel that artists do their work as “employees” of record labels and publishers, thus giving them no right to some royalties.
This issue was broached earlier this year as Victor Willis of the Village People won a lawsuit and was able to get a federal judge to deny publishers the right over his works. However, this particular decision did not take into account the “made for hire” defense, because the music publisher dropped the claim before that particular component was decided.
In the lawsuit begun by the Ray Charles Foundation, the decision made by Judge Audrey Collins ruled that if “the works were not works made for hire and the foundation were receiving royalties from simple assignments, [then] it would be a ‘beneficial owner’ in the copyrights and would have standing to assert an infringement claim.” However, the judge was not sure if the foundation would be able to challenge the terminations and ordered more evidence to be presented.
The foundation’s response on October 2 was that Congress has not been clear about who can challenge terminations. The “if” was not well defined in Collins’ ruling. Howver, the foundation does admit that Charles is the author who assigned the work to someone else. And this left an opening for Charles’ children to try to get Charles’ songs back from the label, which they began to do on October 9.
If the judge decides that the foundation’s claims have merit and lets the case to continue, it could change the outcome for industry players like record producers to challenge termination notices.
And the judge will likely address whether or not the Ray Charles songs are “made or hire,” a distinction that could represent a critical change for record labels and publishers that find themselves inundated with termination notices.