MMW-53 -- Ringtone Copyright Licensing in the US

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J@pan Inc Magazine Presents:
M U S I C M E D I A W A T C H
Commentary on the week's music technology news
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Issue No. 53
Wednesday, January 14, 2004
Tokyo

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CONTENTS

++ FEATURE: Ringtone Copyright Licensing in the US

++ NOTEWORTHY NEWS:
** Hewlett-Packard to Sell Branded Version of iPod
** MP3 Newswire Announces Digital Media Winners, Losers in 2003
** Napster Makes University Debut at Penn State in US

==================EVENT====================
ICA January 15 Event

PRESENTER: Jeff Funk - Professor of Business at the Institute for
Innovation Research - Hitotsubashi University
TOPIC: Key Technologies, Applications. and Strategies for the
Mobile Internet

RSVP required, complete event details at http://www.icajapan.jp/
Date: Thursday, Jan 15
Time: 6:30 Doors open, sit down dinner included
Cost: 3,000 yen (members), 5,500 yen (non-members)
Foreign Correspondents' Club
http://www.fccj.or.jp/static/aboutus/map.php
============================================

++ FEATURE: Ringtone Copyright Licensing in the US

Over the past year, we've seen a large increase in Japanese ringtone
providers setting up services on carriers overseas. Most of the major
providers here have either started or are planning to start at least
one overseas service. At present, most of the attention is centered
around the US, especially Verizon Wireless. In setting up an overseas
service, one of the major obstacles is the acquisition of copyright
licenses for the song catalog. In this feature, we'll take a look at
the issues surrounding ringtone copyright licensing in the US.

Performance Rights vs. Publishing Rights
Japanese content providers are used to dealing with only one
organization, JASRAC, for all of their copyright licensing needs.
Overseas, however, it is often necessary to negotiate with individual
record companies, publishers and even artists for the rights to use a
song in ringtone form. In the US, providers must obtain two different
sets of rights for each song in their catalog:

Performance Rights -- These are "blanket" rights to publicly
perform a song or to transmit it via the Internet. These
rights are relatively easy to obtain because they are
generally managed by a performance-rights society such as
ASCAP or BMI.

Publishing Rights -- These rights are needed in order to make
a reproduction of a song (such as a ringtone version) and must
be obtained from each individual publisher for a particular
song.

In general, the performance rights for a song are much easier to
obtain than the publishing rights. Most major artists are members of
ASCAP or BMI (see section on US Rights Agencies). By signing a
standard license agreement with these agencies, it is possible to
acquire performance rights for all of their artists' repertoire.

Publishing rights, on the other hand, tend to be much more complicated
because they require first finding and then negotiating with the
publishers for each song. According to Luis Samra of Wireless Latin
Entertainment, a song frequently has two or more owners for the
publishing rights, and they may own different percentages of those
rights. In this case, it is necessary to contact and negotiate with
each owner. For songs that don't have a publisher or for which the
artist is a right holder, it can also be necessary to negotiate with
the artist for the publishing rights. Carolynne Schloeder, CEO of
Faith West (which operates the popular "Modtones" service on Verizon),
says that because many popular hip-hop songs contain obscure samples,
they sometimes find themselves tracking down publishing info for
smaller artists from early 70s funk bands.

Rights for Compressed Audio
In addition to performance rights and publishing rights, it is also
necessary to obtain a third type of license in order to offer a
compressed audio version of a song. In the United States, handsets
that support compressed audio (also known as "song tones" or
"chaku-uta" in Japanese) are just beginning to appear on the market
and are expected to become highly popular in the coming year. In order
to offer a song-tone version of a particular song, it is necessary to
obtain a license for the "master recording" rights to the song, which
is owned by the record company that produced the original recording.

While most people involved in the US mobile music industry are now
familiar with polyphonic ringtones and their licensing procedures,
the industry is still working to find an appropriate system for
handling the licensing of master recording rights. At present, there
appears to be no standard royalty rate for song-tone licenses; rather,
each potential song-tone provider is dealt with on a case-by-case
basis. And as with publishing rights, it is not uncommon for artists
to also have at least partial ownership of the master-recording rights
for their works.

Opportunities for Japanese Providers
Due in large part to a growing awareness of revenue potential for
ringtones and song tones, most US record companies seem receptive to
proposals and ideas for new mobile music services. Several Japanese
companies are rumored to be in active negotiations for master-
recording rights. In particular, For-side.com recently announced that
it had reached an agreement with Sony Music Entertainment for
song-tone licensing, and is also believed to be in negotiations with
other labels for the rights to their catalogs. Announcements from
other Japanese companies are likely to follow in the coming months as
song tones become more common in the US.

-- Steve Myers

Link:
"Ready to Rock," a piece on the creation of chaku-uta, or song tones,
from our Feb. 2003 issue:
http://www.japaninc.net/article.php?articleID=1014

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++ NOTEWORTHY NEWS

** Hewlett-Packard to Sell Branded Version of iPod

In brief: Hewlett-Packard announced last week that it will sell an
HP-branded version of Apple Computer's iPod music player. The devices
will be manufactured by Apple and have the same design as Apple's
current models. In addition, HP will begin preinstalling Apple's
iTunes on its consumer PCs.

Source:
http://news.com.com/2100-7354_3-5137473.html?tag=st_pop

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Taking the pulse of patient-centred reforms
February 10th 2004, Tokyo

Discuss key issues for IT providers

Assess the business opportunities for IT and internet providers within
the healthcare system. Gain insights into the financial impact of IT
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For information:
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================================================

** MP3 Newswire Announces Digital Media Winners, Losers in 2003

In brief: MP3 Newswire recently released its annual list of the
winners and losers in the digital media industry. No. 1 on the list of
winners is Apple Computer (surprise!), for showing the music industry
how to make money from online music services. Other 2003 winners
include "independent record companies," Archos and Kazaa. Among the
losers are Sonic Blue, MP3.com and Ogg Vorbis.

Sources:
http://www.mp3newswire.net/stories/2003/winners2003.html
http://www.mp3newswire.net/stories/2003/losers2003.html

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** Napster Makes University Debut at Penn State in US

In brief: Penn State is offering the now-legal Napster 2.0 service to
all its 17,000 resident students in an effort to reduce the use of
illegal file-trading sites. When spring classes started last Monday,
2,600 students had registered for the service, generating about
100,000 downloads for the day.

Source:
http://www.boston.com/business/technology/articles/2004/01/12/penn_sta
te_launches_online_music_service/

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Subscribers: 2,259 as of January 14, 2004

STAFF
Written by: Steve Myers (steve@thetamusic.com)
Steve Myers is president and chief enthusiast of Theta Music
Technologies, which specializes in the development of music-related
software applications.

Edited by J@pan Inc editors: (editors@japaninc.com)

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