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A Look at Digital Audio

Transmission and theTrouble with Innovation

and Copyright

Christopher Doval, Esq.Assistant Professor of Management and Marketing

Reginald F. Lewis School of BusinessVirginia State University

http://christopherdoval.com

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Historically copyright law

is a story of legislative response to newtechnology undermining the rights ofcreative works.

Creators Investors

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Copyright Act of 1976

The right to exclude!

Derivative works Coping

Distribution

Public Performance and Display

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Digital Performance in SoundRecordings Act of 1995

Creates a right to exclude others frompublicly performing your copyrighted workby digital audio transmission.

Musical Compositions v. SoundRecordings.

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Compulsory Licensing

An Exception to Copyright Law

Compulsory licensing provides lowerroyalties and no bargaining power.

Royalty rate set by Congress

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Type 1 of 3 Non-SubscriptionBroadcast Transmission

AM/FM Radio

Little interaction with content by theconsumer

How does Frank Sinatra get paid? Advertising!

Negligible innovation in industry Cars? Streaming? HD?

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Type 2 of 3 SubscriptionTransmission

Satellite Radio XM pays 7.5% of Revenue to Royalties

How does Frank Sinatra get paid? By Compulsory License!

1. Controlled and Limited Transmissions 2. To subscribers

What do consumers want? Content! Interaction

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A Bit of Controversy The Inno

XM + MP3

One Touch Recording And Purchase thru

Napster

Marketed andDesigned for the

recording of 50 hoursof satellite radio

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XM gets sued for defaulting tocompulsory licensing.

Subscription Transmission orDigitalDownload Service?

Time shifting? Sony v. Universal

Whats their defense?

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RIAA v. XM Settlement 4 Unique Settlements

EMI

Sony BMG

Warner

Universal

Undisclosed Multi-year Agreement regardingXM radios with "advanced recording

functionality,"

Crippling of 50 hour functionality to 10

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Type 3 of 3 Interactive Services

iTunes - Digital Download Services a bit over break-even2.25.10

Pandora 50% of Revenue goes to Royalties

How does Frank Sinatra get paid? Negotiations Required. Money wins and startups struggle

Tiered deployment based off of capital

The transmission of a particular soundrecording . . . which is selected by or onbehalf of the recipient

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Historically copyright law

is a story of legislative response to newtechnology undermining the rights of creativeworks.

We dont know the world our kids are going tolive in.

Deregulate to support creativity The Internet it notoriously unregulated.

All audio transmission services want to beinteractive and consumers want to interact withthem.

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Thoughts on Business Models Innovators are controlled by their content

Non-Subscription Broadcast Transmission Archaic?

Subscription Transmission Archaic?

Interactive Services Too Expensive, but the future!

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Conclusion

Is it time for a change of ground rules toshake up three stifled and legislativelydictated industries?

Lobbyists?

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Any questions?