It's no secret that the legacy recording industry players are constantly searching for new ways to make money. Of course, they don't seem all that keen on actually searching for new business models
to make money, but rather they tend to default to new ways to squeeze
money out of others through legal changes or lawsuits. That's what happens when you have an industry dominated by lawyers, rather than innovators. It's why so many new music services end up getting sued. It's why ASCAP tried to declare that ringtones were a public performance
(ditto for the 30 second previews
of songs at iTunes). Basically, these industries just go searching under the couch cushions for spare change to sue for because that's how they operate.
The latest such example is the AARC -- the Alliance of Artists and Recording Companies -- deciding to file a lawsuit demanding $2,500
for every car in which Ford and GM have installed CD devices that will automatically rip CDs into MP3s to store on a local hard drive. The AARC is a smaller and little known collection society. It was created solely to collect fees from the Audio Home Recording Act (AHRA)
, one of the many (many) laws that the RIAA foisted upon the world in fear over the rise of digital music. It was designed as something of a "compromise" between the RIAA and the computing and consumer electronics industry. The focus was supposedly to better enable personal, non-commercial home copies of music, while putting royalties on devices used to make serial (repeated) copies
The problem is that the AHRA is basically a deadletter act, with little real standing in the world today, partly because the act itself killed the market for such devices. The RIAA had tried to use it in the late 1990s to ban the mp3 player (or, well, to tax them to death). But, thankfully, a court in RIAA v. Diamond rejected that interpretation
of the law, making mp3 players perfectly legal (without the corresponding royalty tax). That ruling, which destroyed the RIAA's (wrong) interpretation of the law, also opened up the wonderful digital music world we have today, where you can store thousands of songs in your pocket. Without the RIAA v. Diamond ruling, it's unlikely that we'd ever have the iPod.
There are still a very small number of things that are supposedly covered by the AHRA, but AARC collects a tiny, tiny amount of money. The Copyright Office's data
shows a total of $748,277.72 in 2013. That's down from previous years, but at it's very highest AARC collected $5.3 million, and most years it was closer to $2 million. Oh, and in case you're wondering, almost none
of that money actually gets paid out. The last year that the Copyright Office has published details concerning these fees, 2010, it notes that AARC collected $1.75 million... and paid out just $7,894.84
. Yes, you read that right. AARC collected nearly $2 million, but gave less than $8,000 to copyright holders (likely the major labels, who probably didn't give any of that money to actual artists). The previous year, it paid out a whopping $16,564.63
However, suddenly AARC seems to think that these CD-to-mp3 devices violate the law, and the auto companies and the electronics firms that make the devices, Denso and Clarion, must pay. The AARC is pulling out all the stops to explain why the lawsuit makes sense
, focusing on claims by GM (in its marketing material) that "the hard drive will not accept photos or other sorts of data" but just music. This is in part because of the Diamond ruling noted (correctly) that a general purpose hard drive doesn't apply. But the AARC appears to be totally ignoring other key parts of the ruling.
For example, the court focused on the fact that the AHRA was targeted towards devices that are making more copies of works, and not
on attempts to make recordings for private, non-commercial use. Here's what the court said about Diamond's Rio mp3 player (SCMS is the DRM the AHRA required device manufacturers install -- the Rio didn't have it, because they noted you can't copy works off the device, so it wasn't needed):
the Rio does not permit such further copies to be made because it simply cannot download or transmit the files that it stores to any other device. Thus, the Rio without SCMS inherently allows less copying than SCMS permits.
In fact, the Rio's operation is entirely consistent with the Act's main purpose - the facilitation of personal use. As the Senate Report explains, "[t]he purpose of [the Act] is to ensure the right of consumers to make analog or digital audio recordings of copyrighted music for their private, noncommercial use."... The Act does so through its home taping exemption, ... which "protects all noncommercial copying by consumers of digital and analog musical recordings," ... The Rio merely makes copies in order to render portable, or "space-shift," those files that already reside on a user's hard drive. Cf. Sony Corp. of America v. Universal City Studios, 464 U.S. 417, 455 (1984) (holding that "time-shifting" of copyrighted television shows with VCR's constitutes fair use under the Copyright Act, and thus is not an infringement). Such copying is paradigmatic noncommercial personal use entirely consistent with the purposes of the Act.
In other words, the court recognized that devices that are just recording for home and personal use (and not allowing further copies) fit nicely into the purpose
of the act and aren't subject to the royalty rates. It seems likely that the same argument applies to Ford and GM in this case. The AARC coyly claims
that "other manufacturers, importers and distributors of comparable music recorders pay the required royalties without controversy," but it doesn't name who actually pays or for what.
Of course, these days, even CD ripping is well on its way to the technological graveyard. If the AARC magically succeeds with this lawsuit, I would imagine it would receive a one-time payout (how much do you think artists will see?), followed by Ford and GM ditching CD rippers from their vehicles, and moving straight to built-in streaming setups via things like Pandora and Spotify. But, you know, these days, the legacy record labels are searching under every damn legal cushion, never once thinking that maybe not trying to demand cash
, but rather earning it
from willing buyers
might make more sense.