October 12, 2006
By Chris Nolter
When old media and new technology collide, the former often limps away. Questions about Internet distribution and evolving business models have shaken broadcasters, publishers and other traditional media companies, and they’ve contributed to the sale and breakup of Knight-Ridder Inc. New-media outfits can feel the pain as well, as companies such as Grokster Ltd. and the first incarnation of Napster LLC can attest. And with its $1.65 billion buyout of the video-sharing Web site YouTube Inc., and its bounty of content created by others, Google Inc. is stepping into an area that has proved at times gray and perilous.
“This is a fantastic platform for content providers,” says a Google spokeswoman regarding the company’s acquisition of YouTube. “We respect the rights of content owners and want to work with them to more broadly distribute their content and help them to monetize [it] better than ever before.”
That’s nice. Still, Google’s investment in video sharing comes as the music-publishing industry has targeted Web sites and communities that post guitar and bass tablature — a form of sheet music for people who don’t read music. Web sites such as Olga.net have received “cease and desist” letters from music-publishing industry groups this year.
Cathal Woods, a philosophy professor at Virginia Wesleyan College in Virginia Beach, Va., who administers Olga.net, pulled the site from the Web on July 7. “We’ve taken the site down, and as far as I know, other sites they have asked, and some they haven’t asked, have also gone off-line,” Woods says. One exception is Russian site Ultimate-Guitar.com, which carries guitar tablature and other features, says it conforms with Russian Federation laws and remains on-line.
“Our focus is clearly on sites that are profit-making or have profit-making potential,” says Jacqueline Charlesworth, general counsel for the National Music Publishers’ Association spokeswoman. Some of the sites are sophisticated organizations, with thousands of titles and advertising. “They are being monetized, and there is the potential of being monetized more,” she says. “That’s sort of the story of the Internet: developing a community, seeking to attract advertising and generating other revenue.”
Woods says he has never been paid for his work on Olga.net. The site started to sell advertising and merchandise when it was first presented with legal challenges in the late 1990s, he adds, because it had to incorporate, hire lawyers and cover other costs. “We’re certainly not a profitable organization,” Woods says. “We’re not even a wage-paying organization.”
YouTube is laden with clips from television shows and video produced by others sources. Google’s investment, alongside the music copyright disputes, illustrate how legal and business paradigms are evolving online.
“What it tells you is that fair use online is still very much an open question. What it’s going to look like. The contours of fair use online are simply not resolved,” says Corynne McSherry of the San Francisco Electronic Frontier Foundation.
“It’s a very rough environment out there if you’re charged with infringing copyright,” adds Philip Corwin of the Washington law firm Butera & Andrews.
The Supreme Court’s 2005 ruling that file-sharing company Grokster Ltd. and others could be held liable for copyright infringement by the users of its software stands as a landmark. Justices ruled that companies contribute to copyright violations “by intentionally inducing or encouraging direct infringement,” and that they infringe vicariously when they do not stop or limit violations.
“As a result of the Grokster decision, companies charged with infringement no longer have any realistic chance of getting summary judgment against the plaintiffs,” Corwin says. “It becomes a very expensive, fact-intensive inquiry that is going to go to full trial.”
Winning in the courtroom is not the same as winning in the marketplace. If one file-sharing site is shut down, traffic often migrates to another. Media companies such as Universal Music Group and Sony BMG Music Entertainment, which recently reached a deal with YouTube to resolve disputes, may be more amenable to settlements.
“Early on with Napster, nobody thought there could be an arrangement that could be worked out,” says Mitchell Weinstein of Chicago’s Levenfeld Pearlstein LLC. “Along comes iTunes, and, low and behold, all of a sudden you have this huge industry.”
As of yet, of course, the music-publishing industry does not have its iTunes. “The business models are still very much in development, and I know that publishers are definitely looking at expanding beyond the iTunes model and trying to figure out other revenue streams for their assets, which include sheet music and lyrics,” Charlesworth says.
There are music-publishing efforts online. Hal Leonard Corp.’s Sheet Music Direct sells songs on the Internet for $4 each. However, customers can print only one copy and can’t download a copy of the song onto their hard drives.
“I’m not sure what happens if your dog eats your one copy,” says Olga.net’s Woods. He adds that the quality of the transcription is good, though the selection is limited.
“If you could buy for a dollar the kind of product that they’ve got there,” he says, “an ordinary home guitarist would really have no reason to go pick up a crappy Ascii tab file from Olga or from any of these Russian sites.”
Chris Nolter covers media and telecommunications for The Deal.