Cloud Music Services Defend Their Right to Exist Against Record Labels

Last month, supporters of cloud music services had a victory when MP3Tunes.com prevailed over EMI Group Ltd. in a lawsuit. The U.S. District Court of the Southern District of New York found that these sound cloud services are not directly liable for copyright infringing uses and did not need to conduct independent investigations into whether the legitimate copyright owner uploaded the song or not.

Portions of the decision favored EMI. The court found that MP3Tunes.com was contributorily liable for not immediately taking down songs uploaded to the service that the copyright owner provided notice of infringement through the Digital Millenium Copyright Act. In order to maintain  DMCA safe harbor protection, the court reiterated the fact that MP3Tunes.com “must adopt, reasonably implement and inform subscribers of a policy providing that it may, in appropriate circumstances, terminate the accounts of repeat infringers.”

MP3Tunes.com is a reminder that services that simply provide a venue for individuals to store information cannot be held liable for the the users’ infringing actions if they register and implement the DMCA, responding quickly to DMCA notices where the service provider is given notice of alleged infringment.

So how does this decision impact artists and consumers?

One of the biggest concerns of musicians today is how they can monetize their music. The different revenue streams that artists tap into are: selling records, licensing songs, touring, and selling merchandise. Since the debut of Napster in 1999, many artists across the board are finding that selling records the traditional way is not a reliable revenue source.

Consumers are also on their own quest for finding a variety of music at a low-cost. Peer-to-peer downloading services capitalized on this, but it came with a price via the threat of lawsuits for illegally procuring copyrighted work. Enter the new model of sound cloud technology: users can download an application to their computer and upload their own libraries while browsing a larger catalog of uploaded music. Each account is accessible by password, so an user can retrieve their music locker on various computers. The sound clouds are either free with minimal commercials or one can upgrade to a paid account which provides more services.

With MP3Tunes.com’s recent success in the courtroom, other sound cloud websites like Grooveshark are now able to maintain the integrity of their business model without fear of litigation.

Overseas services like Spotify recently expanded in the United States adding to competition in this space, and consumers are quickly signing up to create their own playlists. Playlists include a combination of music in an user’s own locker and music that can be streamed via a search of other users’ lockers. Users can view the playlists of their facebook friends, as well.

While a listener has many artists to choose from, not every artist or song can be found on the website due to resistance by the record label or the copyright owner. As time goes on and the music industry realizes that these services are going to go away,  artists and record lables have begun to investigate how to take advantage of these services. Spotify pays royalties every time a song is played, by reporting the metadata (encrypted information about the song and artist) to record labels and artist aggregators (for unsigned artists). If metadata is incorrect, an artist can notify their record label or artist aggregator to have the information changed, or the software Gracenote will identify and rename the files via music fingerprinting technology. Sound cloud websites have taken notice of newer artists’ concern for promotion; at this time, promotional tools are still in development but they encourage artists to tell fans of their sound cloud involvement.

The citation for this case is Capital Records Inc et al v. MP3tunes LLC et al, U.S. District Court, Southern District of New York, No. 07-09931. A PDF of this most-recent 2011 decision is attached at the bottom of this post.

Photo credit:
MP3tunes Screenshot by googlisti
Spotify screenshot by Dekuwa