Chuck D Challenges RIAA and SF Attorneys Over MP3

By Robin D. Gross
March 1999

A diverse panel of music industry executives, Internet entrepreneurs, technologists, musical artists, and intellectual property attorneys, squared off at a recent discussion sponsored by the Entertainment and Sports Law Section of the San Francisco Bar Association to debate the future of music on the Internet. Headlining the March 4th discussion, was Chuck D, founder and leader of the rap group Public Enemy, and nascent spokesman for the revolutionary MP3 audio technology sweeping the Internet.

The two-hour panel discussion aptly entitled "How Soon is Now? Cutting Edge Issues for the Digital Music Revolution" consisted of a broad range of speakers including Jeff Patterson, President and founder of IUMA, the Internet Underground Music Archive; David Samuel, founder and CEO of Spinner.com; Ron Sobel, the Assistant Vice President of Repertory at the performance rights organization, ASCAP; Matt Oppenheim, Associate Counsel for the RIAA; and Arnold Brown, President and CEO of San Francisco based Internet start-up Audio Explosion.

The panel's moderator Anthony Berman, entertainment lawyer with the firm Idell, Berman & Seitel, explained the lure of the Internet for artists such as Chuck D. "The artists see the promise of online delivery as a means to break the stranglehold of a decades-old system in which the creators of the music are lucky to receive ten percent of the sales revenues of the product. In contrast, online distribution services split revenues with the artist in a more appealing ratio -- often 50-50," Berman stated at the outset to the sold-out room of attorneys and Internet entrepreneurs.

Chuck D boldly criticized the traditional power structure within the music business, equating industry executives and lawyers with "pimps" who would soon be out of jobs themselves. Pointing to the recent example of a record label executive who was given $5 million in a pay-out for getting fired, Chuck D exclaimed, "I've sold over 10 million records -- and I never got that much!" He told the $50 a seat crowd that established record companies, radio stations, and retail stores had a virtual lock on the music business before the Internet.

Ironically, sitting next to Chuck D, Matt Oppenheim of the RIAA insisted to the openly hostile and disbelieving audience that the industry is, "excited about the possibilities the Internet provides for artists and consumers." The RIAA, responsible for creating, manufacturing, and/or distributing 90 percent of all sound recordings sold in the United States, currently enjoys a virtual monopoly on mainstream music distribution. Last fall, the RIAA initiated a law suit against the makers of MP3 devices that is currently pending before the Ninth Circuit Court of Appeals. Oppenheim stated that the industry trade group is putting together the Secure Digital Music Initiative (SDMI) to launch late this year, facilitating the secure and copyright protected digital distribution of music.

However one panel attendee, John Gilmore, co-founder of the cyber liberties watchdog organization, the Electronic Frontier Foundation, reminded Oppenheim and panelists that industry initiatives such as SDMI often act to restrict free speech by excessively locking-up music with technology and laws. Many others present also insisted on implementing an open standard for music distribution on the Internet based on consumer preference and convenience which does not encroach upon civil liberties.

Ron Sobel from ASCAP said he expects the industry will adapt to new technologies with artists finding new revenue streams for their music. According to Sobel, the majority of artist income may shift from the payment of mechanical royalties to performance royalties. Sobel predicts that relationships between artists and labels will transform to resemble "joint ventures" between the parties. "Artists will hire labels as promoters and consultants rather than manufacturers and distributors of their music," he told the crowd, adding "a label will become more like a brand name for music."

According to Sobel, critics of the Internet do not take into account its value in connecting people. He pointed to the recent Tom Petty song available at MP3.com, where over 157,000 Petty fans downloaded the free song during the 48 hour promotion. "Now Tom Petty's manager has the name and email address of over 150,000 Petty fans. What's the value of that information?" Sobel asked.

One topic of discussion among panelists centered around the different business models expected to take shape online. Dave Samuel envisioned a day when fans would "buy the lifetime rights to all works by any given artist - for example pay $200 for the right to listen to the entire Natalie Merchant catalogue whenever you want," he explained.

IUMA's Jeff Patterson agreed, predicting artists would return to a patronage model for disseminating their music to fans. Patterson stressed the importance consumer convenience will play in defining the new frontier of online music distribution.

Andrew Bridges, the attorney representing Diamond Multimedia in its suit against the RIAA over the legality of the portable "RIO" MP3 device called the panel discussion "outstanding", stating, "the observations and questions from the audience were particularly astute. It was a pleasure to see how up on these issues lawyers in the Bay Area are," the Wilson Sonsini partner added. Oral argument in the RIAA v. Diamond Multimedia Systems appeal will be heard by the Ninth Circuit Court of Appeals in Pasadena on April 15th.

Cyberspace law attorney in attendance, Gil Silberman who represents several Internet music companies said he felt sympathetic to Chuck D's comments and frustrations in dealing with major recording labels and lawyers. But for Silberman, it remains unknown if the Internet will provide a forum for individual artists to directly reach consumers. "You have to be a big player if you want market penetration and distribution," he stated. "In any case, music distribution is definitely one of the major activities on the Internet this year," stated the lawyer with the San Francisco firm Britton, Silberman & Cervantes.

Like any good debate, the panel raised more questions than answers, but the diverse combination of panelists and a well informed and energy-charged audience provided for a rich and lively discourse on what will likely become the future of music on the Internet.