The Future of Music Coalition

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Thoughts About the Future of Music Coalition Policy Summit
© 2001-01-18--Anne Freeman

The beautiful hall of Georgetown University in Washington, DC, contained all the elements of high drama: doom sayers and nay-sayers, rabble-rousers and pie-in-the-skiers, winners and losers - and lots and lots of passion. All that was missing were economists and historians…What? How do economists and historians fit into this Shakespearean drama, you might ask?

The drama played out in Washington's venerable institution was not read from a manuscript; it was real time. The debates were about the future of music and the music industry - and the event was named, appropriately, the Future of Music Coalition Policy Summit. Music industry heavy weights filled the seats of this well-planned conference. Speaker panels, where the debates sometimes raged, were packed with government regulators, entertainment attorneys, record label executives, Congressional staff, Dot.com survivors, artists, songwriters and others, who opined about the state of the music industry and its future. As expected, the opinions offered varied widely and reflected many of the current strands of thinking and/or reacting.

Some presenters remarked that progress has been made since the first Future of Music Coalition Policy Summit last year. They were also pleased that the Summit had reconvened. A consensus appears to be building in the industry for more government regulation of the digital marketplace, even though the reasons for and types of intervention desired differed. Copyright holders obviously want greater protection of their copyrights, which heretofore have been the sacrificial lambs of the digital music era. Musicians, record labels, and artists want new revenue streams, particularly with streaming audio. An interesting debate broke out between a songwriter who called statutory royalty rates a "cap" on songwriter income, while others countered that without a statutory royalty rate, songwriters would receive little or no compensation for their work.

Napster's new CEO, Konrad Hilbers, led the call for additional Congressional intervention in the digital marketplace. Now a subsidiary of Bertelsmann, the giant German entertainment conglomerate, the Napster chief said that to ensure continued business investment in creating new models for distributing and delivering music that respects everyone's rights and interests, Congress would have to help create a more stable business environment on the Net. Without such interventions, he warned that capitol investment in the digital music marketplace might dry up. Other speakers, including some label and dot.com reps, echoed his comments.

The most important presentation of the day came from Congressman Rick Boucher, who is a member of the Congressional Telecommunications and Internet Subcommittee and who serves as one of two House co-chairman of the House Internet Caucus. Boucher is one of the leading architect's of federal policy for the Internet and a key gatekeeper for any new regulations.

What I found most intriguing about Boucher's comments was not his discussion of the Digital Millennium Copyright Act, the Fair Use Doctrine or other major regulations, but rather some of his more subtle asides and answers to audience questions. Some examples: Music consumers are becoming more involved and active in representing their interests. Congress is becoming more aware of differing viewpoints within the industry. Congress recognizes that the industry is changing and members are trying to get a better understanding of the issues. Congress is nervous about stepping up regulatory intervention in the digital marketplace, because many members don't feel comfortable in their grasp of the issues. The Congressional Telecommunications and Internet Subcommittee is committed to bipartisanship with regard to copyright issues, but consensus within the music industry is difficult to come by. Without industry consensus, Congress would have to rely on its "traditional" political process of hearings and debates, more hearings and more debates, committees and compromise, which is a lengthy process. By the time the "traditional" political process creates a "solution," technology may have so transformed the digital market that the solution might already be outdated.

No high drama here. These comments are pretty benign, but they do have implications. What I hear the Congressman doing is gently nudge music industry representatives to take more responsibility for developing their own vision and directing their digital destiny; and, doing so in manner that addresses the rights of those whom Congress has already recognized as requiring protection. He is also warning that Congress’ interest in what is going on in the huge industry is growing and that interest isn’t likely to abate. If industry representatives can’t or won’t present their cases in a manner that Congress feels comfortable with, it will be forced to orchestrate the digital future for the music industry and Boucher doesn’t think that Congress is well equipped to do that job. In other words, do it yourself responsibly or take what gets handed to you.

Fortunately, despite its problems the music industry is not alone. Plenty of other industries have taken their turn under the hot lights, facing gut-wrenching changes that brought them to their knees. Remember what happened to the US automakers decades ago, when the first inexpensive, well-made foreign imports showed up on our shores? They lost their market monopoly. They grew too big, to careless, and too satisfied with making substandard products with high rates of failure, because they thought they had the US auto market tied up. They eventually recovered from their fall – after they improved their product lines, revamped their production strategies, improved their labor/management relations, restructured their top-heavy management, and fought a long, hard battle to win back customer confidence. Remember IBM and Apple? When they faced issues like moving from mainframe servers to desktop PCs and some decisions about proprietary systems, the decisions they made cost them a great deal. There is a lot of business history to draw from and lessons to be learned. Are all the issues exactly the same? No, but analogies can certainly be drawn.

This is the moment when the economists and historians enter stage right. There are lots of people who are well equipped to help the music industry sort things out. To find them, start with Georgetown University, the Summit’s gracious host, whose two former students, Jenny Toomey and Kristin Thomson, organized the Summit. Our nation’s great colleges, universities, and think tanks are full of people whose job it is to think about the very issues the music industry is struggling with. It would behoove representatives from all of the different industry sectors to conscript the services of economists, business consultants, economic historians, and the like to help them articulate a vision and present their case to Congress in a manner that Congress will feel comfortable with. And, maybe find some consensus along the way, which Congress would very much like to see.

If I heard Congressman Boucher correctly, Congress’ interest in the music industry and the digital marketplace is growing and will continue to do so. It is one of the largest industries in the US with a positive trade balance. It impacts international trade. It’s becoming high profile. When giant international conglomerates like Bertelsmann call for more Congressional regulation of the digital marketplace to assure that there will be continued investment in that marketplace, i.e., do something or watch the market collapse and your positive trade balance start to slide, those requests are not falling on deaf ears. Congress cannot and should not ignore them. And don’t think for one moment that the Bertelsmann and the other big four don’t have a raft of issue papers, policy papers, and white papers created by "professional thinkers" to help them present their case to Congress. They know how this process works.

Enter the Greek Chorus, Stage Left: Finally, Boucher’s most compelling comments reflect his understanding of the sensibilities of many in the music community, and how those sensibilities might work against them in the real-life fights that lies ahead. "The revolutionary side of us is drawn to the anarchists, he said. "But in the end," he warned, "those who fail to engage the political process do so at their own peril."

Future of Music Coalition