DRMs and Internet Radio

There have been many stories recently about the negotiations between Internet radio stations and the RIAA's SoundExchange over new royalty rates. Those negotiations - the result of the dramatic increase in rates set by the Copyright Royalty Board -- also include members of Congress. I have no views on the merits of any of the proposals or what is the right rate to be paid. One point is of interest in the negotiations and that is the possible inclusion of required DRMs (Digital Rights Management information) as a part of a reduction in fees from the CRB rate. Such a quid pro quo is referenced in a press release available here from SoundExchange, which states that the $50,000 cap mentioned in the popular press was being offered to those webcasters "who agree to provide more detailed reporting of music that they play and work to stop users from engaging in 'streamripping' - turning Internet radio performances into a digital music library." The labels brought suit against XM Satellite last year over XM's "XM+Mp3 Player." SDNY Judge Deborah Batts rejected XM's reliance on Section 1008, added in the 1992 Audio Home Recording Act, Atlantic Recording Corp. v. XM Satellite Radio,Inc., 2007 WL 136286, 81 USPQ2d 1407 (S.D.N.Y. Jan. 19, 2007). The XM+ Mp3 player permitted consumers to not only listen to XM broadcasts, but to store MP3 files consumers already possessed (lawfully or not), and to "record, retain and library individually disaggregated and indexed audio files from XM broadcast performances." XM further provided its subscribers with playlists from blocks of programming that had been disaggregated into individual tracks. In a rare stance by a very liberal judge, Judge Batts regarded XM's reliance on Section 1008 as so facially mertiless that she refused to look at the legislative history. (XM's claimed that Section 1008 offers the distributor of a Digital Audio Recording Device (DARD) "absolute immunity" from infringement).

Her decision was, however, based on "the unique circumstances of XM being both a broadcaster and a DARD distributor," and its violation of the terms of its license, 2007 WL 136186, at *8. By seeking to ty rate reduction for pure Internet Radio broadcasters to their agreement to provide the means to block at the source future products or services that capture all or part of broadcast streams, SoundExchange appears to be taking the labels' concern over such services to a new level. One could, for example, decry XM's product (and interpretation of the AHRA) while still believe that there may be legitimate future products or uses. One may also question whether such DRMs are consistent with the purposes of the AHRA.

An easy rejoinder is that what is contemplated is merely a private industry agreement, and therefore raises no public policy issues. Congress's involvement in the negotiations shows otherwise, and it should not be forgotten that it was the CRB's extraordinary rate increase that led to the specter of DRMs as leverage. In the end, the deal will be what it is; however, I do think it fair to point out that more than just money may be involved.