Copyright: Waits V. MP3.Com

"I don't know about the Internet. I'm not on that. I'm way behind. I have a rotary phone. Progress is compulsive and obsessive, I guess. I get the feeling that people aren't leaving their homes. They are sitting in front of their computer desks and everything comes to them from their screens. That's what the whole nation really wants, but anything that is that popular or easily accessible is usually not good for you."

An MP3 is a tool that compresses the size of a digital music recording, enabling songs to be transmitted quickly and efficiently to others via the Internet.

In the late 90's, a company called MP3.com sought to capitalize on this technology by offering a way to access MP3s quickly and easily, for a small fee (although they share the same name, MP3.com did not develop and did not own the MP3 format). In January 2000, MP3.com began offering a service called My.MP3.com that allowed users to store music digitally and then access via any computer connected to the Internet.

The service had two key aspects. First, it allowed users to purchase a CD online, through various cooperating sites, and placed the contents of the CD into the customer's MP3 account, so that the music could be "streamed" to his or her computer, wherever it was located. Second, if the user inserted a CD he already owned into his disk drive, the "Beam-It" service allowed the consumer to access the contents of the same CD from MP3.com's library - which consisted of tens of thousands of CDs that had been purchased by MP3.com and copied onto its servers. Because of the library, a user did not have to store space-consuming copies of her CDs onto her own hard drive in order to access the music on the CDs via the Internet. Moreover, by using the library, the user could access the music from any location - not just the location of the hard drive.

The company hoped to differentiate itself from Napster by requiring users to prove ownership of CDs before they downloaded their contents in MP3 format. The idea - and the legal defense to copyright claims - was that the user was not pirating an MP3 by gaining access to it for free; rather, he was only listening to music for which he had already paid. MP3.com aimed to profit through the use of subscription services and advertising, not through owning any other rights connected to the underlying work. Its users would take care of the copyright issue when they obtained, by purchasing CDs, a license to use them. Or so MP3.com thought.

 MP3.com soon became a high-profile Internet resource for independent musicians. It became an example of how to do an end-run around the music industry. How to let unheard music bubble up to the surface, by the will of the people, rather then stars being manufactured by the big record companies. Michael Robertson, who founded MP3.com in 1998, once hoped that his company would lead "an online revolution that could one day wrest control of music distribution from the major record labels." But it didn't take long before the major record companies started sueing MP3.com. Warner Music Group, Bertelsmann, EMI, Sony Music Entertainment and Universal, they all came seeking damages for the copyrights of the master sound recordings.

Jonathan Valenia (1999): "I don't know how aware you are of the Internet, but there is this technology called MP3 that basically allows artists to put songs on the Net and people can download them and burn their own CD's, essentially cutting the record companies out of the equation." Tom Waits: "I don't know what I think about that. I don't know about the Internet. I'm not on that. I'm way behind. I have a rotary phone. Progress is compulsive and obsessive, I guess. I get the feeling that people aren't leaving their homes. They are sitting in front of their computer desks and everything comes to them from their screens. That's what the whole nation really wants, but anything that is that popular or easily accessible is usually not good for you. It's like tap water is not good for you; it's recycled piss and chemicals, that's all. There is a reason that a bottle of water costs more than a gallon of gas. And what's the biggest enemy of computers? Water. And the computers are trying to eliminate all the water. I don't know where I'm going with this. I guess we're in the middle of a revolution and nobody knows where the rocks are going to fall."⁽¹⁾

In 1999 Tom Waits signed with Epitaph Records to have Mule Variations released on their Anti label. Unlike many other artists Tom Waits owns the copyright in the musical work and the publishing rights (Jalma, Gibaldi/ ASCAP). Until then, Waits had never been involved in digital internet technology. But in July 1999 Epitaph struck a deal with EMusic (launched in 1998) to have part of its catalog sold as downloadable MP3's with a fee for every song.

Punk Label Takes MP3 Plunge⁽²⁾

July 13, 1999. By Chris Oakes.

Leave it to a punk rock label to provide MP3 with its most significant deal to date for selling a label's music online.

Internet music seller EMusic struck a deal Tuesday with punk label Epitaph to sell MP3 cuts from such acts as Offspring, Tom Waits, and Bad Religion.

"Downloadable music is here to stay," said Andy Kaulkin, president of Epitaph. "EMusic.com has the most thought-out and sensible approach to this medium that will benefit artists, fans, labels, and even traditional retailers like our partners at The Wherehouse. We can't wait to get rolling."

The strategic partnership lets EMusic promote and sell portions of Epitaph's catalog in the popular MP3 digital music format. While major artists have dabbled in online distribution, the fledgling Internet music industry has yet to become a major reseller of an established catalog.

One of the first packages is the compilation PUNK-O-RAMA 4, an Epitaph collection available on CD that will sell as a collection of MP3 songs for US$4.98. The collection features a track from the recently released Tom Waits album, Mule Variations. It also includes rare and unreleased tracks from bands including Pennywise, Bad Religion, NOFX, Rancid, Voodoo Glow Skulls, and H2O.

The partnership calls for releasing selected cuts every two weeks over the next several months.

For songs that are released, EMusic will provide direct links to the site of music retailer Wherehousemusic.com, using the online releases as a promotion for CD purchases from the Wherehouse Web site.

Three previous PUNK-O-RAMA collections will be sold as well, the companies said. Co-marketing and promotional agreements between the companies include EMusic.com's sponsorship of Epitaph's upcoming PUNK-O-RAMA national concert tour.

In the mean time MP3.com was getting in more and more trouble. All the major record companies wanted to have a piece of the cake (MP3.com had grown into a million dollar company). In November 2000 MP3.com stroke a much publicised deal with record company Universal (and agreed a settlement with the National Music Publishers' Association).

MP3.com strikes Universal deal⁽³⁾

November 15, 2000. BBC news

Controversial online music service MP3.com has ended its legal dispute with record company Universal, after agreeing to pay it $53.4m (�37.1m). MP3.com has now secured a licensing agreement which allows it to use songs owned by Universal, which is the world's largest record company. In return, Universal also has the right to buy a stake in MP3.com, and on Wednesday the label bought warrants to purchase nearly 5% of the company. Universal acts include Eminem, U2 and Jimi Hendrix.

MP3.com chief executive Michael Robinson said: "Our shareholders should be excited. It gets us out of the courtroom and into the business of delivering digital music." The company has already reached settlements with four other major companies - Warner Music Group, Bertelsmann, EMI and Sony Music Entertainment - and has arranged licensing deals with each of them.

In a joint statement issued by Universal and MP3.com, Universal president Zach Horowitz said his company had "pursued this case to send a strong message that copyrights will be protected and that copyright owners and artists need to be properly compensated for their work". He added: "It was never our intention to put MP3.com out of business with a judgement so large it would threaten their viability as a company. "We support the development of legitimate music businesses on the internet."

At stake was MyMP3.com, which allows computer users to listen to CDs over the Internet. Members must first prove they paid for the recording by inserting the original CD into a computer's CD-Rom drive. A judge ruled in September that MP3.com had intentionally violated the copyrights of the music companies, and awarded Universal $25,000 (�17,400) per CD - which could have resulted in a bill of up to $250m. Hilary Rosen, president of the US music industry body, the Recording Industry Association of America, welcomed the deal. She said: "It will drive home the point that the marketplace for legitimate music on the internet really works."

Some disputes between smaller record companies and MP3.com remain to be resolved, but these are not expected to pose a threat to the internet outfit. Last month, Bertelsmann announced it was teaming up with another internet music service, Napster, in developing a membership-based system which would guarantee royalties to artists. Napster simply acts as a clearing-house for users to find music on each other's hard-drives, while MP3.com stores the music on its own servers.

Only weeks later EMusic filed complaint against MP3.com for copyright infringement.

EMusic file complaint against MP3.com⁽⁴⁾

December 20, 2000. Press release

EMusic.com Inc. announced that it and several of its independent record label partners have filed a copyright infringement complaint against MP3.com Inc. and its My.MP3.com streaming service.

The complaint was filed in the United States District Court for the Southern District of New York. "Although MP3.com has entered into settlement agreements with the five major record labels, they have chosen to ignore their infringing actions with respect to independent record labels," said Gene Hoffman, EMusic president and CEO. "EMusic strongly supports the rights of music fans to have access to convenient, inexpensive digital music -- as well as the rights of all labels and artists to choose how and where their music is used."

EMusic has the exclusive digital rights to approximately 13,000 albums from over 600 record labels. At this time, EMusic is unable to determine how many of these albums have been infringed upon in the MP3.com service. The complaint was initially filed by EMusic and six of its partner-labels: Fearless Records, Fuel 2000 Records, Gig Records, Invisible Records, SpinART Records and Victory Records. EMusic anticipates that more of its partner-labels will join in the action or settlement discussions, as applicable, as this matter progresses.

About EMusic.com www.EMusic.com is a Web site for purchasing music in the MP3 format. Through direct relationships with leading artists and exclusive licensing agreements with over 600 independent record labels, EMusic.com offers an expanding collection of over 140,000 tracks for purchase -- individual tracks for 99 cents each or entire downloadable albums for $8.99. The site also offers "EMusic Unlimited," a revolutionary new music discovery service that allows fans to download as much music as they desire for as little as $9.99 a month.

EMusic.com features top artists in all musical genres, such as Hip Hop (Kool Keith, Blackalicious, The Coup), Alternative (They Might Be Giants, Bush, Violent Femmes, Tom Waits), Punk (Green Day, Pennywise, Rancid, NOFX), Rock (Phish, Elvis Costello, Goo Goo Dolls), Electronic (DJ Spooky, Sasha & Digweed), Jazz (Duke Ellington, Dizzy Gillespie, Louis Armstrong, Concord Records), Blues (John Lee Hooker, B.B. King, Buddy Guy) and Country (Kenny Rogers, Willie Nelson, Patsy Cline).

Only 5 months later Waits, Randy Newman and Ann/ Nancy Wilson (represented by "Gradstein, Luskin & Van Dalsem" a Los Angeles trial law firm) jumped the bandwagon.⁽⁵⁾ All four of them artists who own the publishing rights to their own songs, were not claiming copyright infringement for the recordings, but for the "ownerships of the songs". They hadn't been represented by any of the major record companies or the National Music Publishers Association, who had previously sought damages.

Ann And Nancy Wilson, Tom Waits, Randy Newman Sue MP3.com⁽⁶⁾

May 8, 2001. By Brian Hiatt.

Songwriters ask for $40 million in copyright infringement case.

Tom Waits, Randy Newman and Heart's Ann and Nancy Wilson have launched the latest legal salvo against online music site MP3.com, asking for $40 million in a copyright infringement lawsuit.

Like prior lawsuits by record labels and publishers, the suit from the four songwriters focuses on MP3.com's "My.MP3.com" service. When it launched, My.MP3.com allowed users to listen to CDs online if they proved that they at least temporarily possessed a physical copy of the CD, or bought it through certain online retailers.

MP3.com made the service work by building an electronic library of music, which copyright holders argued they had no right to do. The company ultimately paid multimillion dollar lawsuit settlements last year to each of the major record companies, as well as to music publishers. After shutting down for several months, My.MP3.com relaunched in December, though with a much smaller catalog of songs and little major label material.

Waits, Newman and the Wilson sisters filed their suit because they are among the relatively few artists who own the publishing rights to their songs, according to their lawyer, Bruce Van Dalsem. "I think anyone who owns something and has someone taking it who's not entitled ... would be upset," Van Dalsem said Tuesday (May 8). "This is their life's work." Other artists who own their publishing rights are discussing the possibility of joining the suit, according to Van Dalsem.

A spokesperson for MP3.com said the company would not comment on the lawsuit until it has a chance to look over the complaint.

The suit, filed in U.S. District Court for the Central District of California, cites 270 songs by the four writers, including the contents of Waits' Mule Variations (1999), Newman's Little Criminals (1977) and Heart's Bebe Le Strange (1980).

And the lawsuits kept coming: Hanson (2001), Zomba record company (2001), Major Bob Music publishers (2001), Copyright.net (2001), Chrysalis Music Publishing (2001), America Mechanical Rights Agency (2001), Bob Dylan, Billy Joel and James Taylor (2003).

Only days after Waits, Newman and the Wilson sisters had filed suit against MP3.com it was announced that the world's largest record company conglomerate Vivendi Universal (who had previously sued MP3.com, and in the mean time had bought Emusic) was going to buy MP3.com.

Vivendi Universal to buy MP3.com⁽⁷⁾

May 21, 2001. By Kenneth Li.

MEDIA CONGLOMERATE VIVENDI Universal, whose music arm has made aggressive forays into digital music, announced Sunday that it plans to buy online pioneer MP3.com for $5 a share, or $372 million.

In a statement, Vivendi Universal said it expects MP3.com to contribute heavily to Universal Music Group's online music initiatives, including its upcoming Duet joint venture with Sony. That service is expected to launch sometime this summer. Vivendi Universal cited MP3.com's technology, including patented technology for music distribution, as well as comprehensive data management and tracking systems, as a driving reason for the acquisition.

The company said the combined audience for MP3.com and for Vivendi Universal's GetMusic, Farmclub and Emusic initiatives would reach some 40 million registered users. That would give Vivendi the largest online music audience of any of the major music groups.

For now, MP3.com will operate as a separate brand. But it remains uncertain how much of MP3.com's management and how many of its employees will stay on. (The press release stated that 120 MP3.com technologists will help Vivendi Universal get a handle on its digital content-delivery initiatives.) Vivendi Uniersal spokeswoman Anita Larsen said much of MP3.com's senior management will become employees of Vivendi Universal when the deal is completed. In a prepared statement, the company said MP3.com founder and chief executive Michael Robertson will become the digital distribution "special adviser" to Vivendi Universal chief Messier.

Vivendi Universal did not comment on outstanding lawsuits against MP3.com, but one company source said it "has done extensive due diligence on the question of litigation. While risks associated with this or any litigation should not be minimized, we believe that adequate measures have been taken to protect the interests of Vivendi Universal."

A number of lawsuits are still pending against MP3.com, mostly from independent music labels and artists, including Nashville, Tenn.-based Major Bob Music. Tom Waits, Randy Newman and members of the band Heart also sued MP3.com for $40 million in early May.

In November 2001 Vivendi Universal announced the merger of: MP3.com, Emusic and other web properties into a single entity to be called Vivendi Universal Net USA Group and to be based in Los Angeles. Other sites blended into the new group included; Get Music.com, RollingStone.com, InsideSessions.com, Uproar, Flipside, iWin.com, Education.com, casino site VirtualVegas.com, and MP4.com. In November 2003, the domain "MP3.com" was sold to CNET (which shut it down and dumped all of its content). Music.download.com became CNET's re-launched version of the old MP3.com. The new MP3.com has been re-configured as a music information site.

Jerry Flattum (2001): "The world economy is easily described by the metaphor of one big fish swallowing up a smaller fish. I suppose this applies to nations as well. In entertainment, the smallest fish of all is, of course, the artist. But it's not just an image of big and little. It's more like a big bang theory. Radio stations, TV stations, newspapers, magazines, book publishers, record labels, movie companies, Internet companies--are only a few of the diverse kinds of enterprises falling under the umbrella of a megaconglomerate. Through the 1990's, Napster, MP3.com, and other companies gave the appearance in their rise to fame that new companies could survive and even thrive independently from a parent company. Vivendi/ Universal bought MP3.com in Spring of 2001 and Bertelsmann followed a deal with Napster. So much for independence. It's hard to say if mega-merger-mania is the force behind convergence or if it's the other way around. The lines between communications (phone, cable, satellite) broadcasting (TV, radio), entertainment (movies, CDs), publishing (books, magazines) and hi-tech (computers, online, software) are disappearing at an ever accelerated rate."⁽⁸⁾

It is indeed fascinating to see the mechanics of the music industry at work. It certainly seems as if the big record companies aren't interested in copyright at all. It's only about the money (through settlements or through buying the entire company). But the reality is of course, that artists and record companies should get paid for the work they do. It's also interesting to see how much attention was given to the lawsuits when being filed, only to be never heard of once Vivendi Universal was in control. It's obvious that EMusic's claim was dropped (as EMusic was bought by Universal and later merged with MP3.com, only to be sold to Dimensional Associates, a private equity arm of JDS Capital, in October 2003). Nothing has been published about the Waits/ Newman/ Wilsons claim after Vivendi Universal took over MP3.com. All of them however are now listed on the new MP3.com. So one might assume some settlement has been agreed upon. The entire Waits catalog is now available on MP3.com (links to a service selling the music ic.: EMusic, AudioLunchbox, RealPlayer, iTunes, Musicmatch, RealRhapsody etc.). Free Tom Waits MP3's can now be found on the official Anti.com site.

Further reading:

• CNET's MP3.com
• Dimensional Associates EMusic
• Anti.com Tom Waits downloads
• Vivendi Universal Music Group

Notes:

⁽¹⁾ Source: "The Man Who Howled Wolf ". Magnet magazine. By Jonathan Valania. June/July 1999

⁽²⁾ Source: "Punk Label Takes MP3 Plunge" July 13, 1999. By Chris Oakes. www.wired.com

⁽³⁾ Source: "MP3.com strikes Universal deal" November 15, 2000. BBC news

⁽⁴⁾ Source: "EMusic file complaint against MP3.com" December 20, 2000. Press release. Copyright � Hitsquad Pty Ltd.

⁽⁵⁾ US CD California 01 04160: "Randall Stuart Newman, aka Randy Newman, Tom Waits, Ann and Nancy Wilson v. MP3.com, Inc."

⁽⁶⁾ Source: "Ann And Nancy Wilson, Tom Waits, Randy Newman Sue MP3.com" By Brian Hiatt. May 8, 2001. MTV.com

⁽⁷⁾ Source: "Vivendi Universal to buy MP3.com" By Kenneth Li. May 21, 2001. The Industry Standard

⁽⁸⁾ Source: "Entertainment Cyberscope" by Jerry Flattum. 2005. Musesmuse.com