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Ringtones Breed Tension Within Music Industry
As senior vice president and general counsel for The Harry Fox Agency ' the New York-based collecting agency that acts as a clearinghouse for much of the licensing monies flowing to music publishers ' Jacqueline Charlesworth has spent 4 years helping reap billions of dollars for her firm's clients from the incoming phone-call alerts known as ringtones. Ringtones funneled $3.5 billion into music-industry coffers last year, according to London-based telecommunications consultancy, The Arc Group, and insiders say they may account for 25% of music sales by the end of 2006, thanks to millions of consumers paying $3 for 25-second versions of songs ' when a full-length version of a hit can be purchased for just 99 cents on a digital music store such as Apple Computer's iTunes.
Even more mind-boggling is the disarray this suddenly popular technology has caused, as lawyers for music publishers, record labels, performance-rights organizations, re-cording artists, ringtone vendors and others in the music industry struggle to determine how laws that govern the sales of its products apply to ringtones. Recording companies and publishers have always argued about money, and now they have intellectual-property ambiguities and a gigantic new revenue stream to fight over. Publishers, historically the industry's stepchild, may have the upper hand this time.
What's at issue is the interpretation of Sec. 115 of the Copyright Act, which forces music publishers to accept relatively small “compulsory” license fees for their copyrighted music. These days, that figure is 8.5 cents for each unit (a record or CD, for example) that's sold. However, Sec. 115 also states that reproduced works subject to compulsory fees can't be fundamentally altered, notes Charlesworth. “If you take just a 30-second clip of a song, that's a fundamental alteration,” she says.
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