HITS Daily Double
"We have never had a single discussion with a label about how they intend to compensate artists or in what manner the service will work. The contracts require labels to ask [our] permission before posting songs."
——Jim Guerinot


Managers Want To Know How and When Payments Will Be Made
Another glitch has hit the business of online music distribution.

Just as the major labels began to launch their legal online pay subscription services last week, attorneys for dozens of angry artists began preparing cease-and-desist notices that would bar the use of their songs on MusicNet and Pressplay.

Managers for several top performers say Vivendi Universal and Sony, which own Pressplay, and AOL Time Warner, EMI and Bertelsmann, which own a controlling stake in MusicNet, are engaging in strong-arm tactics to allow the distribution of their artists' material without their approval."

Artist managers are very alarmed about what's going on here," Simon Renshaw, a manager at the Firm, which represents such acts as the Dixie Chicks, Korn and Limp Bizkit, told the Los Angeles Times: "Attorneys representing a number of our artists have already transmitted notices to the labels requesting that their copyrights not be included on Pressplay or MusicNet."

Jim Guerinot, whose Rebel Waltz management firm represents the Offspring and No Doubt, also has put at least one label on notice. "Nobody has ever contacted us about using any of our music," Guerinot said. "We have never had a single discussion with a label about how they intend to compensate artists or in what manner the service will work. The contracts require labels to ask [our] permission before posting songs."

However, the Big Five say that that is not necessarily true. Representatives of the global music giants said they never sought permission from most of their artists because they didn't have to.

According to the companies, recording contracts typically grant labels exclusive distribution rights to an artist's entire catalog, the Times said. Companies contend that those rights cover all forms of distribution, including digital streaming and download transmissions.

Some contracts specifically forbid the label to distribute music over the Internet without the artist's permission. That's why EMI and AOL Time Warner, for example, haven't tried to peddle songs by the Beatles or the Eagles online.

"It's a shame that this is being turned into a controversy by certain artist representatives," said Zach Horowitz, President of UMG. "Of course we have rights. Where we know we don't, we won't authorize the use of the music. The big picture is that right now thousands of sites are illegally using millions of musical tracks without making any payments whatsoever to artists, songwriters or record companies. Record companies are spending tens of millions of dollars to launch legal services that, we hope, will provide new revenue streams and compensate the creators of music. Everyone's energies should be directed against illegal services, not legitimate ones."

The companies say they cannot establish a payment structure for songs posted on the services until they determine how many consumers register for them and how many times each track gets streamed or downloaded. Companies say each artist will be paid according to his or her contract.

The Times said artist managers say they resent the way the companies are handling the roll-out of their subscription services, without even consulting their own artists. Meanwhile, the same companies, managers say, have worked aggressively to keep songs off the artists' own Web sites.

Managers say the companies have portrayed themselves in court cases as protectors of artists, sending out cease-and-desist notices to MP3.com, Napster and other online ventures for trying to post songs without the permission of copyright holders. The Big Five won more than $100 million in settlements from MP3.com before the weakened company was gobbled up by Vivendi Universal.

Several managers interviewed last week by the Times say their artists have yet to see a nickel from those settlements and may never reap any money from MusicNet or Pressplay either. And managers contend that Pressplay and MusicNet, just like MP3.com, must consult artists before posting their songs as part of a subscription package.

Licensing disputes have been the biggest stumbling block to legitimate online music services. Most of the major record companies have been slow to grant licenses for subscription services, and their own online ventures were held up for months by a licensing dispute with the publishers.

MusicNet, launched through RealNetworks on Tuesday (12/4), and Pressplay, plans to start distributing songs within weeks.