THE MAJOR RECORD COMPANIES, which have made a habit lately of suing digital music fans, struck out in a new direction this week. They sued a digital radio broadcaster. The defendant is XM Satellite Radio, a subscription service that offers more than 170 channels of music, sports and other programming for $12.95 a month. At issue is the Inno, a portable recorder for the XM service. The device gives people up to 50 hours of programming, then stores it as individual songs playable on demand, as long as the user subscribes. The recorded songs can be mingled in playlists with MP3s from the user's personal collection.
The fight recalls the one between Hollywood and Sony over the VCR and home taping of TV programs. The difference here is that the target isn't the manufacturer of an envelope-pushing device, it's the broadcaster that feeds it
Not only are the labels suing XM, they're trying to change federal law to require satellite, cable and Internet-based radio services to restrict home taping. Under current rules, all of these services have a legal right to broadcast music in a "noninteractive" way — in other words, they pump out streams of songs, not individual tracks picked by users. But newly introduced bills in the House and Senate would require such services to block recorders like the Inno or else lose their legal right to broadcast, forcing them to negotiate for a more expensive "interactive" license — the kind required by online jukeboxes such as RealNetworks' Rhapsody or MTV's Urge.
The underlying issue is how much labels and artists should be paid by the new generation of digital broadcasters. And while the current system is broken in several important respects, neither the suit nor the bills point to the right solution.
For starters, all competitors should be subject to the same rules. If satellite, cable and online broadcasters have to pay royalties to labels and artists, so should over-the-air stations. And while the royalties don't have to be the same for all players, the framework for settling disputes over those rates should be.
Also, while technology blurs the distinction between radio broadcasters and on-demand services, copyright law makes it difficult for broadcasters, artists and labels to find a middle ground at the negotiating table. The labels have a right to seek higher royalties from broadcasters who design iPod-like devices that subscribers can easily fill with the songs they choose. But that's a far cry from crippling the devices, or treating the services like an online jukebox.