Top executives from Sony Music and BMG will take center stage in Brussels this week for the European Commission's oral hearing on the proposed merger of the companies. The June 14-15 hearing with the

Breaking News

Sony, BMG To Defend Merger Plans Before EC

By Leo Cendrowicz and Emmanuel Legrand

BRUSSELS -- Top executives from Sony Music and BMG will take center stage in Brussels this week for the European Commission's oral hearing on the proposed merger of the companies.

The June 14-15 hearing with the EC's competition department is one of the final and crucial stages in the merger process.

During the closed-door hearing, the execs are expected to counter accusations of price-fixing, market collusion and collective dominance that the EC claims are already prevalent in the music market.

Other interested parties, such as European independent labels trade body Impala, are also expected to present their views on the merger during the hearing.

As an executive at one of the companies involved says, "It will be our job to convince (the EC) that we have a sound case."

The EC -- the European Union's executive authority -- last month sent Sony and BMG a preliminary report, the Statement of Objections (SO), on the proposed merger.

The most serious charge in the document, an edited copy of which was obtained by ELW, relates to price collusion between the majors, described in the SO as "parallelism."

"The Commission considers that the majors have been coordinating on the prices of a large part of their sales," the SO says.

The statement says that the majors' pricing policies are coordinated through an alignment of the published price to dealer (PPDs) of hit CD albums. "The Commission found it extremely easy for majors to monitor those PPDs at which new expected hit albums are released because those PPDs are publicly available in the major's catalogs," it says.

The EC considered that "there is sufficient evidence that majors are aware of each other's commercial terms."

The EC accepts that the existence of list prices "is not in itself indicative of collusion," but the data collected for the SO indicates that they have been used in a manner that is suggestive of "coordination."

Sony and BMG say the existence of discounts shows that there is no collusion. But the Commission says this does not significantly alter prices: discounts vary but are broadly stable over time, the EC says, and they tend to stay within the 5% limit.

The EC notes that "most majors have left real prices practically unchanged in the face of a falling demand." It adds, "In the light of this remarkable stickiness of prices over the years in the face of a changing market environment, and given the many aspects of the market that are conducive to cooperation, the Commission is of the opinion that the pricing policies adopted and particularly the decisions to stabilize prices during the years examined were the result of coordinated action."

Overall, it is the entire structure of the music market that the SO criticizes, saying it is endemically "conducive to coordination."

The SO identifies a number of factors that allegedly facilitate coordination. Among these are product homogeneity in format and use; a limited number of relevant price points (PPDs); a limited number of relevant albums; the weekly publication of charts; the stability of the customer base; and the relative stability of market shares over time. Also, the SO points to the high number of multi-market contracts due to the vertical integration of the majors; numerous structural links between majors, such as joint ventures for compilations, and licensing and distribution agreements; common membership in industry associations; and common negotiations of royalty rates.

The SO concludes: "Sony and BMG would significantly enhance a situation of collective dominance in which the majors try to align their pricing policies."

The 51-page SO devotes relatively little attention to the vertical integration from possible tie-ups between the merged Sony BMG and Bertelsmann's TV arm RTL Group or Sony's online services. There are just three pages devoted to vertical concerns on online music distribution. Of music publishing, the SO says it is likely a merger "would appreciably restrict competition."

The EC also warns of "the proposed merger strengthens a position of collective dominance of the majors in the wholesale market for online music." The SO says it is extremely difficult, if not impossible, to operate an online service without the repertoire of all major record companies. And it says, with the imminent launch of Sony Connect in the EU, there is a risk that Sony could use its position in the joint venture to deny competitors access to its library, or that it could discriminate against rivals via usage rules, release dates or download formats.

"The Commission has come to the preliminary view that the notified concentration is incompatible with the common market," the SO concludes. "It would strengthen a collective dominant position in the market for recorded music and in the wholesale market for licenses for online music, as a result of which effective competition would be significantly impeded."

The powerful indictment against the merger recalls the EC's response four years ago, when its fierce SO on the planned EMI-Warner merger forced those companies to call off their venture.

But one Brussels-based lawyer involved in the music business says he is not surprised at how much is in the SO. "It is only natural for the Commission to throw in the kitchen sink, including every possible argument that might emerge on the merger," he says.

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Final Vote Set For California Royalty Bill

By Scott Banerjee

Kevin MurraySACRAMENTO -- The crusade by California State Sen. Kevin Murray to help recording artists collect unpaid royalties is approaching the finish line.

His legislation, dubbed the Recording Industry Accounting Practices Act, goes to a final vote June 15.

The Democratic senator introduced the proposal in February 2003. The most recent form of the bill (SB 1034) was offered June 8 during a public hearing here at the California Assembly Committee on Arts, Entertainment, Sports, Tourism and Internet Media. That committee will cast the final vote.

The proposal seeks to create a statutory right to audit royalty statements that recording companies issue to recording artists. It would also institute penalties for underpayment by labels.

Jennifer WarnesAt the hearing, the American Federation of Television and Radio Artists, California Teamsters Public Affairs Council, Los Angeles County Federation of Labor, former industry executive Walter Yetnikoff and recording artists Jennifer Warnes, Joi Marshall and Kim Weston provided supporting testimony. The Recording Industry Assn. of America (RIAA) spoke in opposition.

The bill has evolved significantly over time as record labels have proactively modified their royalty accounting practices. The bill originally sought to create a fiduciary duty for labels to accurately report and pay royalties.

During the hearing, Yetnikoff said the labels are "conceding they are underreporting $150,000 for every million dollars in royalties, and they don't argue about it."

Yetnikoff also quoted noted entertainment lawyer Don Engel: "The intentional underpayment of royalties to all recording artists is a pervasive, consistent policy and practice."

Murray noted how the cost of an audit, usually around $30,000, forms an economic barrier for artists seeking unpaid royalties. The most recently proposed bill would allow individuals to join with other artists to conduct an audit on a contingency-fee basis.

During the hearing, the RIAA particularly opposed the notion of having to pay legal fees, audit fees and treble damages.

"If you have the kind of penalties that are in this bill with an after-the-fact determination by a jury as to what the interpretation of a contract should be, it's going to chill the record companies from exploring the new models that the record industry needs to survive," RIAA general counsel Steven Marks says.

Another bill from Murray, SB 1506, extends the current law that protects the distribution of CDs and DVDs to include digital content; it is another tool to fight Internet piracy. The bill received unanimous support from the assembly and will be heard by the Public Safety Committee in the coming weeks.

"I think that bill will be fine," Murray says, "and we'll clearly move forward on some piracy protection."

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IFPI Warns of More Legal Action Against Euro File Sharers

By Juliana Koranteng and Emmanuel Legrand

LONDON -- The IFPI is promising "more legal actions" against alleged illegal file-sharers.

Sweden, the United Kingdom and France are the next territories lined up for action in Europe by the international trade body. All three countries have started campaigns to warn alleged file-sharers about the possibility of litigation.

On March 30, the IFPI announced the first cases in its international campaign against file-sharers, with more than 200 criminal and civil actions filed in Denmark, Germany and Italy.

"On the strength of the developments in Denmark, Germany and Italy, we can confirm that there will be more legal actions in other countries in the near future," says IFPI chairman/CEO Jay Berman in a statement.

The London-based organization announced June 8 that several "serial" illegal file-sharers have agreed to settle out of court and pay compensation fines for copyright infringement.

Allen Dixon"The message is definitely getting out there -- litigation works," says IFPI general counsel/executive director Allen Dixon. "Litigation is working in deterring people from engaging in this activity. These penalties are for people who settled because they had done something wrong and agreed to pay."

Denmark has seen the biggest response to legal threats. More than 17 people have paid or agreed to pay penalties of about 3,000 euros ($3,696) each. Another 23 are negotiating payments. A new round of cases was brought June 8 against 24 more suspects.

In Germany, a 23-year-old who was nabbed with 6,000 MP3 music files on his PC and 70 CDs made from illegal downloads is paying a fine of 8,000 euros ($9,856). A 57-year-old Stuttgart teacher will have to pay a similar penalty after facing copyright-infringement charges.

Charles Law, a partner specializing in music at London firm Denton Wilde Sapte, comments, "The fact that they are willing to pay means they must have been pretty active in their (illegal) download activities to be fined that amount."

Dixon says the fines imposed in Europe are similar to those being charged in the United States by the Recording Industry Assn. of America.

Penalties are based on how many music files the pirate has been offering and how many times the files have been copied online. All fines paid are redistributed to cover the litigation expenses and then to copyright organizations and rights holders.

The IFPI reports that the number of illegally shared music files internationally has fallen 27% to 800 million from 1.1 billion a year ago, and the number of illegal files on P2P services fell 30% to 700 million during the same period.

"In Italy," says Dixon, "we're seeing a decline in particular kinds of P2P, especially those using WinMX and OpenNap. At the beginning of the year, there were about 60 WinMX and OpenNap servers trading millions of files. Now, the Italians (regulators) have closed down 58 of the 60."

Italy's public prosecutor has charged 30 people with copyright violations, with trials expected later this year.

In France, trade body SNEP has received the support of the government in its campaign against illegal file-sharing. Representatives from SNEP met last week with minister of industry Patrick Devedjian, who confirmed that in collaboration with his colleague in charge of culture, Renaud Donnedieu de Vabres, he will set up a national plan against piracy.

Announced on May 19, the French government's "Action Plan" will target illegal uploading and downloading through education, promotion of legal download services and legal action against alleged pirates.

In the United Kingdom, trade organization the British Phonographic Industry (BPI) on March 26 launched an instant-messaging campaign telling users of P2P services that they face legal action.

"We have sent 175,000 instant-message warnings to U.K. uploaders," says BPI chairman Peter Jamieson in a statement. "Nobody tempted to use these networks should claim ignorance of the law. Unauthorized file-sharing is illegal."

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Movielink Passes Muster At Justice Dep't

By Jill Kipnis

LOS ANGELES -- Online video-on-demand (VOD) company Movielink is not a hindrance to competition in the home-video industry, the U.S. Department of Justice (DOJ) has ruled.

Since Movielink was formed in 2001 as a joint venture between MGM, Paramount, Sony, Universal and Warner Bros., the DOJ has been exploring whether the company could be reducing competition. The antitrust division of the DOJ officially closed its investigation at the end of May; the decision was made public June 4.

In a statement, the antitrust division says that its "substantial investigation of Movielink does not indicate that the formation of this joint venture by five of the major movie studios harmed competition of consumers of movies."

The DOJ says the probe focused on "whether formation of the joint venture facilitated collusion among the studios or decreased their incentives to license movie content to competing providers. The division considered several theories of competitive harm, but ultimately determined that the evidence does not support a conclusion that the structure of the joint venture increased prices or otherwise reduced competition in the retail markets in which Movielink competes."

The DOJ further said that it will continued to monitor activity in emerging video markets, such as VOD, in order to enforce antitrust laws.

Movielink CEO Jim Ramo says in a statement that it is "encouraging that the federal government has concluded that there is no basis under the antitrust laws for taking any action against Movielink."

Three Movielink partners, however, are still the target of an antitrust lawsuit filed in 2002 in L.A. by independent VOD service Intertainer.

Intertainer claims that Sony, Universal and Warner were attempting to fix prices in the VOD market through Movielink, and that the studios had used confidential information supplied by former Intertainer employees to create Movielink.

A trial in that case has been tentatively set for next February.

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Marilyn Manson Wins Step In Case Against Ex-Bandmate

By Chris Morris

Marilyn MansonLOS ANGELES -- Marilyn Manson (real name Brian Warner) and bandmate Madonna Wayne Gacy (Stephen Bier) have resolved a key issue in a federal copyright infringement suit filed in April against former band member Scott Putesky (, May 13).

Putesky and the Empire Musicwerks label have agreed to remove artwork and images on the album "Lunch Boxes & Choklit Cows" that are similar to copyrighted art by Manson, according to Putesky's attorney, Richard Wolfe. The set is a collection of tracks cut by Manson's early band the Spooky Kids.

Retailers will be able to sell off copies of the album bearing the offending artwork; the artwork will be changed on future pressings. Film footage featuring an animated rendering of the art will be deleted from the limited-edition DVD that accompanies some copies of the album.

However, other issues in the action remain undecided. Jeffrey Light, one of Manson's attorneys, says that contrary to a press release issued by a public relations firm on behalf of Putesky and Empire, the suit has not been settled. Light says the plaintiffs will seek compensatory and punitive damages and attorney's fees.

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Gibson's Icon Sues Regal Over 'Passion' Box Office


Mel GibsonActor/director Mel Gibson's Icon Distribution Inc. has sued No. 1 movie theater chain Regal Entertainment Group for more than $40 million, claiming Regal failed to pay Icon its fair share of boxoffice receipts for "The Passion of the Christ."

In the suit, filed June 7 in Los Angeles Superior Court, Icon said its agreement with Regal called for the companies to share receipts on "studio terms," which Icon defined as 55% of gross ticket sales paid to it and 45% retained by Regal.

Icon claims Regal has reneged on that deal and offered to pay Icon only 34%, instead.

"The Passion of the Christ," about the final 12 hours in the life of Jesus, was the biggest movie hit of this past winter and spring. It generated slightly under $370 million in domestic markets -- the United States and Canada.

The suit did not stipulate how much of those receipts came from Regal theaters, but Icon claims it is owed actual damages in excess of $40 million. Icon also seeks punitive damages.

Regal operates over 6,000 movie screens in about 550 theaters around the world. A spokesman was not immediately available to comment.

Privately held Icon was formed in 1990 by Gibson to distribute films made by his Icon Productions film company, of which "The Passion" is one. Privately held Newmarket Films partnered with Icon in distributing the movie to U.S. theaters, but Newmarket is not a party in the lawsuit.

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Judge Dismisses Blockbuster Class Action Suit

DALLAS (Dow Jones)--Blockbuster Inc. (BBI) said a federal court dismissed a class-action filed last year that claimed the company failed to warn investors of the vulnerability of the rental market to DVD sales.

In a press release June 7, the video rental chain said the judge ruled that plaintiffs' claims of nondisclosure were not supported by fact and were "deficient as a matter of law."

The suit, which was filed in February 2003, claimed that Blockbuster made false and misleading statements about its financial health.

The suit stemmed from an earnings and revenue warning that the video rental giant issued on Dec. 18, 2002. On that date, the company said its fourth-quarter revenue and earnings would be lower than expected because of a surge in DVD purchases at rival retailers. Those sales, the company said, cut down on its rentals.

The company reduced its forecast for revenue growth at stores open more than a year to a high single-digit percentage range from a low- to mid-teen percentage range. In addition, it reduced its full-year earnings-per-share forecast to $1.03-$1.10, compared with its previous forecast of $1.31.

In New York Stock Exchange composite trading on Dec. 18, 2002, Blockbuster shares fell $6.27 to $13.13 each.

-Thomas Derpinghaus; Dow Jones Newswires; 201-938-5400.

Dow Jones Newswires
06-07-04 1227ET

AP LogoCopyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.

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Washington Report

RIAA Takes Aim At Digital Radio Recorders

By Bill Holland

Mitch BainwolWASHINGTON, D.C. -- Recording Industry Assn. of America (RIAA) chairman/CEO Mitch Bainwol says that while he is "enthusiastic" about High Definition (HD) digital radio, the trade group has major concerns that the planned second-generation receiver/recorders could allow consumers to "cherry-pick" and copy individual songs.

"You'll have a situation where radio isn't radio anymore, but a method for acquisition and redistribution (of tracks) without payment," says Bainwol.

Such use, he says, would be devastating to an already hard-hit industry. "You'll have a situation that undermines the future investment in music and funding of new art," he says.

Current digital radio receivers do not employ technology to copy individual tracks, only blocks of programming.

The RIAA is so concerned that it is planning to have its general counsel educate lawmakers about the dangers of digital radio recording in testimony at an upcoming House hearing.

It's certainly not surprising that the RIAA wants to alert members of Congress that future digital radio receivers might be able to "cherry-pick" individual tracks -- with the same audio quality as a CD -- and copy them without paying royalties to companies or artists. What is surprising, however, is that RIAA general counsel Steven Marks will bring up the concerns at a hearing to be scheduled soon to review an entirely different issue: Internet streaming of radio broadcasts.

U.S. radio broadcasters have never paid royalties to record companies for the performance of sound recordings on analog radio. And they're livid that they must now pay for digital simulcast streams.

The U.S. Court of Appeals in Philadelphia ruled in October 2003 that Congress mandated that simulcasters pay the royalties under two laws: the Digital Millennium Copyright Act of 1998 (DMCA) and the Digital Performance Right Act of 1995 (DPRA).

The National Assn. of Broadcasters (NAB) has stated publicly there will not be a Supreme court challenge. So they're taking their case back to Congress.

The RIAA is confident that the court's rejection of NAB's arguments, and a similar earlier Copyright Office ruling against broadcasters, ensures that Congress would be loath to revisit the performance-royalty sections of the DMCA and the DPRA.

The Federal Communications Commission (FCC) authorized interim regulations for digital radio in 2002. Its current inquiry will define and set final rules. Comments are due June 15.

"So the time is ripe," says Bainwol.

In addition to the upcoming testimony at the hearing and ongoing discussions at the FCC, the RIAA has already circulated legislative language on digital radio protection.

"Like we've talking to the FCC about our concerns, we've also talked to people on Capitol Hill," says RIAA's Marks.

The trade group is not specifically asking the FCC for a copy-protection audio flag, or for a limit on "manual recording," in which a consumer can start and stop a recording at will. However, the group opposes automatic functions in which a device can search for and record a specific track.

"We're not asking (the FCC) to say there can't be this cherry-picking functionality," says Marks. "We're just saying material shouldn't be allowed to be cherry-picked and redistributed unless it's paid for. What we're asking for is business-model-enabling."

One suggestion is to include a "Buy" button on new receiver/recorders. The RIAA execs say they have approached the NAB about sharing a percentage of any such radio-driven sales.

Gary ShapiroRadio stations have always said they're the best promotional vehicle for sales of music," says Marks. "Here they'd have the opportunity for the impulse purchase, which is the Holy Grail of retailing."

The Consumer Electronics Assn. (CEA), which represents manufacturers, opposes any changes in receivers, and believes customers have a right to tape any and all broadcast material for non-commercial use, according to chairman/CEO Gary Shapiro.

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International Section

Italian Body Sues MTV For Nonpayment Of Royalties

By Mark Worden

MILAN -- Italy's broadcasting and performance rights collecting society, SCF, is suing MTV Italy for non-payment.

The citation, filed June 8 in Rome, concerns the MTV Italy main station, which is broadcast terrestrially and by satellite, and the satellite channels MTV Hits and MTV Brand New.

The filing cites articles 72 and 73 of Italy's Copyright Law, which govern payments by radio and TV stations to composers and labels for the public use of recorded material.

Gianluigi ChiodaroliSCF president Gianluigi Chiodaroli tells ELW, "We reached an agreement with MTV Italy in 2002 which settled all outstanding payments until 2001 and which committed both sides to finding an arrangement for the future. Well, after two years of negotiations, which have gone absolutely nowhere, we have decided to resort to legal action."

MTV Italy managing director Antonio Campo dall'Orto says in a statement, "We're not at all worried because we've been paying these rights internationally for seven years, thanks to an agreement that MTV Networks Europe has made, both with the majors and with (U.K.-based Video Performance Ltd.), while in Italy we pay AFI."

AFI represents those labels not affiliated with Italy's main labels body, FIMI, which represents the majors and most of the country's indies.

He adds: "MTV Europe pays several million euros in rights every year, and we are firm believers in the concept of copyright."

SCF's Chiodaroli responds, "The fact is of the matter is that MTV Italy do not pay us, and the five majors and 90 medium-sized Italian indies that we represent."

While acknowledging that it is possible that the majors receive some form of remuneration from MTV for video material, Chiodaroli emphasizes that "most Italian indies don't. We know that, as negotiations with SCF have been going on, MTV have asked some of our indie members to provide videoclips for free, which is frankly unfair."

SCF reached an out-of-court settlement with MTV Italy's main competitor, terrestrial music channel, Rete A, after bringing similar legal action in July, 2003.

Says Chiodaroli: "Through negotiation or litigation we have developed working relationships with most of Italy's national and local radio and TV broadcasters, and only MTV Italy is missing from the picture."

He adds, "The first hearing is unlikely to take place until September, and court cases can drag on for years in Italy, but it's up to MTV Italy whether we can find a more rapid solution. Otherwise it will be for the judges to decide."

SCF, which was founded in 2000, collected 18 million euros ($21.6 million) on behalf of its members in 2003.

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Brazilian Pirate In Custody on Corruption Charges

By Emmanuel Legrand

LONDON -- Brazilian authorities have arrested Law Kim Chong, described as the country's "most notorious pirate."

Law was apprehended June 1 by Brazilian police as he attempted to bribe the chairman of the country's Congressional Anti-Piracy Committee (CPI), Luiz Antonio de Medeiros. The arrest followed a two-month investigation by the CPI, which was formed in 2003.

Law was caught as he was offering de Medeiros a sum believed to be between $1 million and $2.3 million, in return for a favorable CPI report on his business.

Law has been charged with active corruption and put in custody. All his activities in Brazil are currently subject to a criminal investigation.

Law is Chinese by birth but has been living in Brazil for 20 years and is a nationalized Brazilian.

In a public statement, de Medeiros says, "The (bribery) money came from smuggling, from piracy and from unpaid taxes. Money that should be used in public health and education -- not in corruption."

According to the Brazilian anti-piracy unit of the International Federation of the Phonographic Industry (IFPI), Law owns several popular shopping centers in Brazil that consist mostly of small outlets, rented to immigrants, that are famous for smuggling products. The IFPI also suspects Law of owning several plants in China that produce pirated product, including music CDs.

According to the IFPI, piracy has reached new heights in Brazil in the past five years. The trade group estimates that pirated product accounted for 53% of the Brazilian CD market in 2002, vs. 5% in 1997.

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French Collecting Societies Forge Alliance

By James Martin

PARIS -- After a 17-year feud, French rights societies Adami and Spedidam agreed June 10 to form a joint society to administer, collect and distribute royalties on behalf of their members.

The alliance, which has been in the works since 2002, does not go so far as to merge the two societies, which remain separate entities. For the time being, Adami and Spedidam will continue to manage their own legal, international and artistic affairs. However, it is thought that the societies could merge completely in the future.

According to the agreement, the organizations will consolidate their collection, processing and payment operations by 2006. They have also agreed on a new split of royalties.

Since 1987, the societies have argued about their respective roles. Adami has about 20,000 members, comprising musicians (generally solo artists) and professionals from theater, television and film. Spedidam's 25,000 members are solely from the music sector, and are generally musicians in groups such as orchestras.

The bulk of the revenues from both societies come from the blank-tape levy and from broadcasting rights charged to radio and TV stations and nightclubs for playing music. Both fees were introduced as part of France's 1984 copyright bill.

Adami had complained that Spedidam was collecting royalties that should have gone to Adami members. Adami has estimated that it is owed 67 million euros ($80.7 million) by Spedidam. As a gesture of goodwill, Adami now says it will settle for 7.5 million euros ($9 million).

Jean-Fran├žois Dutertre, managing director of Adami, says the matter is insignificant compared with the benefits of the two societies "having reached an agreement on how rights should be distributed. Pierre SantiniThis means that, in music for example, we'll be able to pay according to the number of artists involved in a given track. It makes things much more simple."

Adami president Pierre Santini says that from now on artists and performers "will rediscover the unity they should never have lost. They can now together face the difficult coming battles over the defense of their rights in the digital age."

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Bay City Rollers Producer Sues For Royalties

By Roger Pearson

Bay City RollersLONDON -- Philip Wainman, who produced some of the biggest hits of the Bay City Rollers, is suing BMG U.K. and Ireland for royalties dating back 24 years.

In a writ issued at London's High Court, Wainman claims that BMG has failed to pay him royalties since 1980 for the group's singles "Bye Bye Baby," "Give a Little Love" and "Money Honey," as well as two albums.

Wainman seeks damages of more than 150,000 pounds ($275,294).

Wainman, who worked for Utopia Management when he produced the Bay City Rollers material, says the Arista label agreed to pay Utopia royalties of 2% on some singles and albums by the group.

He says he produced the 1974 albums "Wouldn't You Like It" and "Once Upon a Star," and claims that BMG, which then took over Arista, breached the agreement by failing to pay royalties on the works since February 1980.

Wainman is also seeking interest from the record company.

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Dream Makers & Deal Breakers

This Week's Dream Makers & Deal Breakers:

Victoria BassettiEMI Music has promoted Victoria Bassetti to senior VP of industry and government affairs, worldwide. She was VP of legal and public policy, North America.

Bassetti, who joined EMI last year, will continue to advise the company on government, regulatory and industry matters. She will now also oversee activities involving trade associations and industry bodies on a global basis, work with senior management to forge stronger relationships with policymakers on issues affecting EMI and its artists, and manage anti-piracy initiatives in North America.

Based in New York, Bassetti reports to EMI Music chairman Alain Levy and vice chairman David Munns.

Before joining EMI, Bassetti held key posts with the U.S. Senate Judiciary Committee. From 1999-2000 she served as legislative director for Sen. John Edwards, D.-N.C.

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Case Analysis

Observers Hoped For Trial In CCC, NIPP Case

By Ray Waddell

NASHVILLE -- Following the settlement in the closely watched case between Denver's Nobody In Particular Presents (NIPP) and Clear Channel Communications (CCC), some industry observers are expressing disappointment that there will be no trial.

"I would have preferred to see this issue resolved and decided once and for all (as to whether CCC is) doing anything illegal or not," says Seth Hurwitz, president of Washington, D.C.-based promoter IMP.

As previously reported (ELW, June 7), NIPP settled its monopoly claims against CCC; terms of the Denver agreement are confidential. A trial had been set for Aug. 8.

NIPP had alleged that Clear Channel's radio and promoter businesses in Denver constituted a "monopolistic, multimedia empire" that was "severely harming NIPP's ability to compete."

"My guess is (CCC) paid a great deal of money to make sure the facts of this case did not go public," says Gregg Perloff, who worked at CCC in San Francisco before exiting to form indie Another Planet. CCC in August 2003 filed a civil suit against Perloff in California Superior Court, alleging, among other causes of action, misappropriation of trade secrets, unfair competition and "interference with prospective economic advantage." Perloff has countersued; both suits are pending.

"While there has been a great deal of discussion about ticket prices being too high in our industry, I think it's time for the industry as a whole to get more sophisticated about the issues surrounding radio, radio airplay, radio concerts, and how they affect concert industry sales as a whole," Perloff says.

Hurwitz adds, "There's no way (the settlement) could be interpreted as anything but bad news for an industry wishing to bring these issues to light."

It is clear that many independent promoters still feel they are at a competitive disadvantage to CCE. "Some people want to compete and compete fairly," says Jerry Mickelson, co-president of Chicago indie promotion company Jam Productions, "and others want to eliminate the competition."

John ScherJohn Scher, president of Metropolitan Talent in New York, believes "no one can really compete with Clear Channel. The assets they have amassed -- including the amphitheaters and the exclusive venues, along with their radio clout, however it's used, and their sheer bulk -- doesn't allow anyone to compete with them."

That said, he adds, "I still believe there are considerable opportunities for independent promoters, record companies and certainly managers in the current climate."

Scher is involved in two complex, parallel cases with CCC, one in New York Federal Bankruptcy Court, and one in federal court in Newark, N.J. The latter is an antitrust case relating to Scher's non-compete, which was inherited by CCE.

"Our claims are challenging the non-compete, and we've alleged some antitrust claims," Scher says. "Many of the claims we have asserted in our federal antitrust case are similar, if not exactly the same as, those asserted by Nobody In Particular Presents."

Some wonder whether the U.S. Department of Justice will take a closer look at the CCC situation.

"It's just a matter of whether the government wants to pursue it," says Hurwitz, adding that he believes the current political environment doesn't seem favorable to that. "I think any questions about cronyism between President Bush and the guys in San Antonio (CCC principals the Mays family) are true, or the government would have pursued this already."

Scher still hopes for a change in corporate philosophy at CCC. "I hope senior executives (at CCC) will find the wisdom to stop what seems to be a self-destructive course they've taken in bullying people that often leads to very expensive litigation for both sides."

CCC officials declined to comment for this story, but have steadfastly maintained that they compete aggressively but fairly and legally.

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Nothing Better To Do Than Sue

By Michael B. Ackerman

In perhaps the worst corporate blunder since the introduction of New Coke, the Recording Industry Assn. of America (RIAA) has filed 493 more lawsuits in a vain attempt to stop the scourge of downloading. The RIAA previously settled more than 400 copyright infringement lawsuits with downloaders for about $3,000 each.

The filing of these new lawsuits is evidence that the previous 400 cases have not stopped or effectively diminished downloading. Since the practice is still rampant, and album sales are up nearly 10% this year over last year, this would seem to deflate the argument that the industry is being destroyed by downloading.

Conversely, I propose that legal downloading, and not these lawsuits, have helped discourage illegal downloading as well as stimulate sales growth. Clearly, Apple's iTunes and most of the other prominent legal download services either did not exist a year ago, or did not have the A-list content that they now offer.

However, you'll never hear a positive thing about downloading from the RIAA. More troubling than the erroneous spinning, the record industry fails to embrace the modern world and continues to misperceive and execute poorly by:

1) Giving away money. Major record companies could have set up their own downloading services but failed to do so, and instead sponsored Apple's service and gave Apple several million dollars last year alone. The major labels could have monetized their dormant catalogs and therefore turned wasting assets into profit centers, but they wasted this corporate opportunity.

2) Conservatively embracing old-school ideology. The major record companies still think of themselves as "record" companies, or companies that sell recorded music in a particular storage medium (currently, CDs). Instead, the labels should fashion themselves as companies that deliver music, via a storage medium, download, ringtone, satellite or other media. The record companies are still desperately clinging to the CD, a product with a lifespan destined to be shorter than that of the vinyl LP.

3) Demonstrating an over inflated sense of self-importance. In this modern age, it is easier than ever for artists to reach an audience directly. However, the major record companies still act as though they are the only route to the consumer. They demonstrate this arrogance by failing to pay the artists their share of the recoveries from the aforementioned RIAA lawsuits (has any artist seen a dime of the more than $1 million that has been collected?), through consistent accounting chicanery, and by conservatively reacting to marketplace successes with imitation, rather than innovation.

4) Failing to embrace its target audience. Sure, there are always outlaws who will illegally steal music that is available for free. But there are also voracious music lovers out there who are not served by radio or by major record companies, and so they look to download services to sample new music. Sadly, because of a lack of funded studies, there is no data to show how many people who download a song (illegally or otherwise) later buy the album, so it is impossible to calculate how many sales are gained from downloading -- although the RIAA assumes that every download is a lost sale.

Sure, illegal downloading should be curtailed, if not eliminated, but the RIAA lawsuits remind me of previous misplaced lawsuits, such as when the record companies sued the nascent radio networks to force them to stop playing records, and when Universal Films sued Sony to stop the Betamax video recorder.

Hey, record industry: Start swimming, or you'll sink like a stone. For, as a wise man once said, "The times they are a-changin'."

Michael Ackerman

Michael B. Ackerman is an entertainment lawyer and lifelong music consumer in Los Angeles who has never downloaded a track, legally or illegally.

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