To wit, Google’s announcement Monday of a number of concessions to the European Union, which seems a bit dubious of the whole thing. In a letter to several publisher associations in Europe, the company invited two non-U.S. representatives to join the board that will oversee the book rights registry that is to distribute royalties from digital book sales under terms proposed by the settlement. The company also promised to seek their permission before digitally publishing European works still protected by copyrights.

“Books that are commercially available in Europe will be treated as commercially available under the Settlement,” Google (GOOG) explained. “Such books can only be displayed to US users if expressly authorised by rights holders.”

Quite a concession, given Google’s plans to create a so-called “last library,” but clearly necessary with opposition to the deal abroad so pronounced. Already, Germany has filed an objection to it, saying the agreement would “irrevocably alter the landscape of international copyright law.” And now France is about to do the same.

“Google will have a monopoly digitalising European orphan works without permission,” Nicolas Georges, director for books and libraries at the French Culture Ministry, told Reuters. “Google has the power to determine which work will be in its database or not. For example, some works that are not commercial may be removed by Google.”

Seems Google’s effort to establish a de facto worldwide copyright regime isn’t going to be quite as easy as the company had hoped.

At issue here was whether the sale of digital music downloads falls under the “distribution” agreements that cover physical releases like CDs. FBT argued they do not, claiming that the label incurs none of the costs typically associated with them–things like CD jewel cases and inserts, breakage fees and in-store displays. Instead, the production company said that downloads should be covered by “licensing” agreements that don’t include such expenses. And the difference between the two is significant: Under distribution deals, artists typically take a 30 percent split of royalties earned. Under licensing deals, they take 50 percent.

But the jury didn’t quite see things FBT’s way and instead bought Universal’s argument that the economics for digital downloads should be viewed as similar to those of the single. A nasty blow to FBT and other artists hoping to see their royalty rates adjusted to account for the new economies of distribution provided by digital music storefronts. Seems that much as technology has changed the relationship between musicians and their fans, it’s done little to change the one between musicians and their labels.

At issue here is whether the sale of digital music downloads falls under the “distribution” agreements that cover physical releases like CDs. FBT says they do not, arguing that the label incurs none of the costs typically associated with them–things like CD jewel cases and inserts and in-store displays. Instead, the production company says that downloads should be covered by “licensing” agreements that do not include such expenses. And the difference between the two is significant: Under distribution deals, artists typically take a 30 percent split of royalties earned. Under licensing deals, they take 50 percent. “If you give the music to a third party without cost to you, like manufacturing or packaging, that’s the same as a licensing agreement,” a source close to the case told The Wrap. “[Universal] are characterising it as something else.”

Universal, of course, disagrees. It claims the sale of a digital download is no different from the sale of a CD. But it seems to be having a tough time supporting that argument in court. To wit, this exchange between FBT attorney Richard S. Busch and Lawrence Kenswil, the former head of UMG’s e-commerce arm, eLabs.

Busch: “Universal provided two digital files to the download companies–a master recording and a metadata guide setting forth a procedure for getting the music on their system. With the digital download agreements–Universal has no manufacturing costs connected with that, correct?”

Kenswil: “Generally, that’s true. But it has costs. You don’t call them manufacturing costs the way that term has been used traditionally. Manufacturing costs are for physical costs, and that has gone away.”

RIAA Sues Radio Stations for Giving Away Free Music

–Headline from satirical newspaper The Onion, Oct. 2, 2002

Talk about life imitating The Onion …

Apparently the recording industry’s institutional memory is about as solid as its crumbling business model. As recently as 2007, it was paying radio stations to play its music. Today, it’s accusing them of pirating it. Yersterday, the ironically named recording industry group musicFIRST demanded that broadcasters pay royalties for the music they play over the radio, dismissing as a red herring their claims that radio airplay is a form of free promotion.

And to illustrate that point, the group sent the National Association of Broadcasters a can of herring and a dictionary. Some clever folks over there at musicFIRST.

“[AM-FM broadcasting is] a form of piracy, if you will, but not in the classic sense as we think of it,” Martin Machowsky, a musicFirst spokesman told Wired. “Today we gifted them a can of herring, about their argument that they provide promotional value. We think that’s a red herring. Nobody listens to the radio for the commercials.”

Well, he got that much right. Nobody does listen to the radio for the commercials. They listen for the music. And there was a time when record labels paid broadcasters to play it. They even coined a word for the practice: payola.

At the Music Matters confab in Hong Kong, McGuinness slagged broadband Internet service providers, accusing them of aiding and abetting music piracy while CD sales and royalty payments to musicians plunge. “The recorded music industry is in a crisis, and there is crucial help available but not being provided by companies who should be providing that help–not just because it is morally right, but because it is in their commercial interest,” said McGuinness, adding that Internet service providers have been “turning their heads” away from the music industry’s troubles. “One way or another, ISPs and mobile operators are the business partners of the future for the recorded-music business. But they are going to have to share the money in a way that reflects what music is doing for their business. The music business once had to bear the accusation that it was full of dinosaurs who looked back to an old business model rather than embracing a new one,” McGuinness said. “Today, though, it is the music business that is charting the way to the future. If there are dinosaurs around today, I think they are the Internet free-thinkers of the past who believe that copyright is the great obstacle to progress, that the distributors of content should enjoy profits without responsibilities and that the creators and producers of music should simply subordinate their rights to the rights of everyone else.”

By Internet free-thinkers, McGuinness presumably means those crazy longhairs in Silicon Valley whom he accused of destroying the recorded music industry in another keynote address back in January. “Embedded deep down in the brilliance of those entrepreneurial, hippy values seems to be a disregard for the true value of music,” he said at the time. “I suggest we shift the focus of moral pressure away from the individual P2P file thief and on to the multibillion dollar industries that benefit from these countless tiny crimes: the ISPs [internet service providers] the telcos [telecom companies], the device-makers. … We must shame them into wanting to help us. Their snouts have been at our trough feeding free for too long.”

Out of the car, longhair …

Under the terms of the court’s order (PDF), AOL (TWX), Yahoo (YHOO) and RealNetworks (RNWK) as well must pay ASCAP
2.5% of their streamed-music revenues between 2002 and 2009. That could amount to as much as $100 million for ASCAP and its membership.

Quite a windfall and one that ASCAP was quick to ballyhoo. “The Court’s finding represents a major step toward proper valuation of the music contributions of songwriters, composers and publishers to these types of online businesses–many of which have built much of their success on the foundation of the creative works of others,” said Marilyn Bergman, president of ASCAP. “It is critical that these organizations share a reasonable portion of their sizable revenues with those of us whose content attracts audiences and, ultimately, helps to make their businesses viable. This decision will go a long way toward protecting the ability of songwriters and composers to be compensated fairly as the use of musical works online continues to grow.”

But what is there for the software giant to talk about these days other than Yahoo, really? Why that old saw, software interoperability, of course. In a statement issued this morning, the software giant announced changes to its technology and business practices intended to “increase the openness of its products and drive greater interoperability, opportunity and choice for developers, partners, customers and competitors”–which translates roughly as “appease European antitrust officials.”

Among the key changes:

• Microsoft will make the protocols and APIs in its high-volume products openly available to the developer community.
• Microsoft will indicate which protocols are covered by Microsoft patents and will issue licenses to those patents on “reasonable and nondiscriminatory terms, at low royalty rates.”
• Microsoft will implement a covenant not to sue open-source developers for development or noncommercial distribution of implementations of those protocols.
• Microsoft will support open standards and work with developers and standards-setting bodies to enable the transfer of user data from Microsoft applications to apps designed by third-party developers.

“Customers need all their vendors, including and especially Microsoft, to deliver software and services that are flexible enough such that any developer can use their open interfaces and data to effectively integrate applications or to compose entirely new solutions,” Ray Ozzie, Microsoft’s chief software architect, said in a statement. “By increasing the openness of our products, we will provide developers additional opportunity to innovate and deliver value for customers.”

Quite a move for a company whose leadership once likened Linux to “cancer” and derided open-source licensing models as “Pacman-like.” Though it’s not like we haven’t seen this all before.

“They are not making the source codes open, but they are opening the gates that allow you into the compound,” said Matt Asay, a general manager at open-source management company Alfresco. “It’s a great first step. … It’s a bold move by Microsoft. It’s a good indication of Microsoft’s self-confidence that it feels it can open up what effectively are its crown jewels and not lobotomize its company at the same time.”

The RIAA and its online counterpart, the Digital Media Association, have petitioned the Copyright Royalty Board to slash the so-called mechanical royalties paid to musicians and music publishers for digital downloads, subscription music services and ringtones. Seems the RIAA and DiMA feel they’ve suffered unfairly during the transition to digital distribution and they’d like artists to share in their misery.

The National Music Publishers’ Association, noting the favorable economies of digital distribution, asks for a royalty of 15 cents per track for permanent digital downloads. The RIAA argues that a royalty of approximately 5 cents to 5.5 cents per track is more reasonable. The DiMA–which represents Apple, Amazon and RealNetworks, among others–suggests cutting that royalty further still.

Find that astonishing? Just wait; it gets worse. For streaming music services, the NMPA proposes a rate of the greater of 12.5% of revenue, 27.5% of content costs, or a micro-penny calculation based on usage. The RIAA finds 0.58% of revenue more reasonable. And the DiMA says there really shouldn’t be any royalty at all. “Fundamentally, this fragile marketplace is showing signs of promise, but it cannot be saddled with additional, excessive costs,” the DiMA argues. “The board should be careful not to impose a royalty that kills the proverbial goose and deprives songwriters and publishers of their golden egg.”

An interesting choice of metaphor and one in which the DiMA and RIAA might easily figure as the giant at the top of the beanstalk:

Fee! Fie! Foe! Fum!??
I smell the blood of a musician.
Be he ‘live, or be he dead,
I’ll grind his bones to make my bread.”

Grind his bones to make my bread, indeed.

Said Rick Carnes, president of the Songwriters Guild of America: “Our opponents have to recognize that this rate-setting is not a matter of gamesmanship for songwriters, but rather one of survival. As I stated in my testimony, in response to a question from those seeking to cut the mechanical royalty rate in half and to denigrate the importance and contribution of professional songwriters to the music industry, ‘Yes, songs are plentiful, just as rocks are plentiful. But if you want diamonds, you are going to have to pay the miners a living wage.’ ”

To keep you abreast of tech news while he’s away, we’re compiling a daily digest of 10 must-read tech stories. We’re calling it the Tech 10 and it appears below.

1. Music to their ears: SoundExchange, the recording-industry group that has been in a protracted battle with Internet radio companies, has reached a deal with them on royalties. The Associated Press reports that SoundExchange would cap fees at $50,000 a year for Webcasters offering more than 100 channels–down considerably from the much higher per-channel tax it had sought to impose.
2. Playing catch-up with YouTube, Yahoo plans to revamp its video portal. Miguel Helft of the New York Times writes that Yahoo will consolidate the Internet site’s somewhat messy video interface into a more interactive one enabling users to view and share videos and compile playlists. Of the plans, Helft quotes Mike Folgner, general manager of Yahoo Video: “We’re going to make it a more cohesive experience. Video is going to be everywhere on Yahoo.”



3. A teenage hacker from New Jersey has picked the lock that links the iPhone to AT&T. According to the Associated Press, 17-year-old George Hotz, using a complicated procedure involving both software and soldering, unlocked an iPhone from AT&T and was using it on T-Mobile’s network, freeing the handheld for calls overseas using carriers outside the U.S. After announcing the feat on his blog, Hotz put the reconfigured iPhone (pictured, left) up for sale on eBay.
4. Google goes Gotham? Bloomberg is reporting that the Internet search titan is in talks to provide online transit guides in New York City and environs. The guides, which are already available in more than a dozen cities, including Dallas and San Diego, show how to navigate transportation systems and could greatly expand Google’s revenue from ad sales to restaurants, hotels and other businesses that serve the nine million commuters in metropolitan New York.
5. IBM may take elements of its Jazz collaboration software open source. According to IDG News Service, the tech giant is considering open-sourcing some of the lowest layers of the framework, which makes software development easier, so people could “build on the kernel,” said a member of the Jazz management committee.
6. Sweet juice: Sony has developed a battery that uses sugar as an energy source. TMCnet reports that test cells of the battery have 50 milliwatts, so far the world’s highest electrical output for the so-called passive bio batteries. Sony engineers proved they work by putting four together to power a Walkman.
7. And in an industry where power is everything, Via Technologies has produced a processor that consumes a maximum of one watt of electricity. Reporting on the development, PC World notes that the Eden ULV chip will be used in mobile devices and embedded applications.
8. Manhunt 2, the sequel to Rockstar Games’ eponymous video-game gorefest, got a break in the form of a less-severe rating from the Entertainment Software Rating Board. According to CNET blog Crave, the board changed the rating from “adults only” (the equivalent of an NC-17 for video games) to an M-for-mature after Rockstar eliminated some ultraviolent content. The new rating means that companies like Sony and Microsoft will allow the game to run on their players, clearing the way for sales pegged to Halloween.
9. Decrying its role in “promoting” child prostitution, Atlanta Mayor Shirley Franklin is calling on online classified-ad service Craigslist to police itself better, according to the Atlanta Journal-Constitution. In a letter sent this week, Franklin asked the Web site to toughen warnings for personal ads and pages that offer erotic services and to delete postings advertising sexual services for sale. An Atlanta vice officer claims that Craigslist and similar Web sites facilitate 85% of the sexual trysts men in Atlanta make with underage youths.
10. News this week of a study that linked gender with color preference prompted Shiny Shiny (the self-described “girl’s guide to gadgets”) to assemble a selection of pink laptops. We eyed the Hello Kitty model (pictured here) and concurred that this was indeed a laptop that only a girl (of either sex) could love.

–posted by Associate Editor John Sullivan

“After extensive review, DHS [Department of Homeland Security] has advised that it does not believe there are public-safety risks sufficient to justify disapproval of the USITC’s limited exclusion order,” U.S. Trade Representative Susan Schwab wrote in her decision. “DHS has also advised that Broadcom Corporation’s offer of royalty-free public-safety licensing to state and local public safety organizations and its licensing agreements with two major wireless carriers will ameliorate to a significant degree concerns regarding the order’s potential effect on public-safety wireless broadband systems and 3G network deployment. We also understand that other market participants are investigating the use of a noninfringing software workaround. We believe that such licensing agreements and workarounds will address in large part the concerns raised about delay in 3G network deployment.”

Quite a nasty turn of events for Qualcomm. The company had lobbied–fiercely–for White House intervention to reverse the ITC ruling, arguing that allowing it to remain would harm consumers, telecom carriers and handset makers. But the administration apparently didn’t buy it, and without the sort of deus ex machina it could have offered, Qualcomm is nearly out of options. It is facing an immediate ban on all forthcoming handsets running its WCDMA and EVDO chips–a potentially devastating blow to the company’s hugely important chip IP licensing business.

“If I’m one of Qualcomm’s customers, I’m furious,” Gartner analyst Michael King told the Associated Press. “My product line has the potential to be disrupted. The merits of the case notwithstanding, the fact they let it get this far is going to be somewhat unconscionable to their customers.”

Qualcomm, which is working on a software workaround to avoid any infringement on the Broadcom technology in question, is pursuing a stay of the ITC ban. Third time’s a charm, right?

At least not yet. Internet broadcasters will not have to start paying sharply higher royalties next week, though the U.S. Court of Appeals in Washington, D.C., yesterday refused to halt the royalty increase. SoundExchange, the organization that collects and distributes Internet music royalties, said late yesterday that online radio outlets can continue to operate under their old licenses next week without fear of legal action. “For the people who want to comply with the law and are in bona fide negotiations with us, we don’t want those people to be intimidated,” SoundExchange Executive Director John Simson told Radio and Internet Newsletter. “And we don’t want them to stop streaming. That’s just so long as they’re continuing to pay under the license they had. … Look, Monday’s not that magical a day. It’s going to be business as usual at SoundExchange–trying to process data, trying to get deals done. We’re not gonna be filing lawsuits.”

Thoughtful, yeah? But don’t mistake Simson’s remarks for benevolence. Because this isn’t a reprieve, it’s simply a stay of execution.