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S. HRG. 109–864

PARITY, PLATFORMS, AND PROTECTION: THE FUTURE OF THE MUSIC INDUSTRY IN THE DIGITAL RADIO REVOLUTION

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE

ONE HUNDRED NINTH CONGRESS

SECOND SESSION

APRIL 26, 2006

Serial No. J–109–71

Printed for the use of the Committee on the Judiciary

(

(II)

COMMITTEE ON THE JUDICIARY 

ARLEN SPECTER, Pennsylvania, Chairman 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERB KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

DAVID BROG, Staff Director 

MICHAEL O’NEILL, Chief Counsel 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

(III)

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page

Cornyn, Hon. John, a U.S. Senator from the State of Texas, prepared statement ...................................................................................................................... 87

Feinstein, Hon. Dianne, a U.S. Senator from the State of California ................. 1

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 3

prepared statement .......................................................................................... 98

Schumer, Hon. Charles E., a U.S. Senator from the State of New York ............ 25

Specter, Hon. Arlen, a U.S. Senator from the State of Pennsylvania ................. 1

WITNESSES 

Baker, Anita, Performing Artist, Grosse Point, Michigan ................................... 4

Bronfman, Edgar, Jr., Chairman and Chief Executive Officer, Warner Music 

Group, New York, New York ............................................................................... 9

Lam, N. Mark, Chairman, Executive Committee, and Chief Operating Officer, 

Live365, Foster City, California .......................................................................... 14

Parsons, Gary, Chairman of the Board of Directors, XM Satellite Radio, 

Inc., Washington, D.C. ......................................................................................... 11

Reese, Bruce R., President and Chief Executive Officer, Bonneville International Corporation, Salt Lake City, Utah, on behald of the National 

Association of Broadcasters ................................................................................. 13

Rundgren, Todd, Lead Singer, the New Cars, Darby, Pennsylvania .................. 6

Shaw, Victoria, Songwriter, Nashville, Tennessee ............................................... 7

QUESTIONS AND ANSWERS 

Responses of Edgar Bronfman to questions submitted by Senators Specter 

and Feinstein ........................................................................................................ 29

Responses of Gary Parsons to questions submitted by Senators Specter and 

Feinstein ............................................................................................................... 35

Responses of Bruce Reese to questions submitted by Senator Specter ............... 43

Responses of Victoria Shaw to questions submitted by Senator Specter ............ 50

Responses of N. Mark Lam to questions submitted by Senator Specter ............ 52

SUBMISSIONS FOR THE RECORD 

American Federation of Musicians, Office of the President, Thomas F. Lee, 

New York, New York, prepared statement and letter ...................................... 61

American Federation of Television and Radio Artists, Kim Roberts Hedgpeth, 

National Executive Director, New York, New York, prepared statement 

and letter .............................................................................................................. 73

Baker, Anita, Performing Artist, Grosse Point, Michigan, prepared statement 81

Bronfman, Edgar, Jr., Chairman and Chief Executive Officer, Warner Music 

Group, New York, New York, prepared statement ........................................... 82

Greenberg, Rebecca, National Director, Recording Artists’ Coalition, Beverly 

Hills, California, letter ......................................................................................... 89

Lam, N. Mark, Chairman, Executive Committee, and Chief Operating Officer, 

Live365, Foster City, California, on behalf of the Digital Media Association, 

prepared statement .............................................................................................. 90

National Music Publishers Association, Anna Marie Persky, Washington, 

D.C., letter ............................................................................................................ 99

Parsons, Gary, Chairman of the Board of Directors, XM Satellite Radio, 

Inc., Washington, D.C., statement and attachment .......................................... 100

Page

IV

Recording Academy, Daryl Friedman, Vice President, Advocacy & Government Relations, Wahsington, D.C., letter .......................................................... 116

Recording Artists’ Coalition, Jay Rosenthal, Esq, Berliner, Corcoran & Rowe, 

LLP, Washington, D.C., statement ..................................................................... 117

Recording artists organizations, joint news release .............................................. 123

Recording Industry Association of America, Washington, D.C., news article .... 126

Reese, Bruce R., President and Chief Executive Officer, Bonneville International Corporation, Salt Lake City, Utah, on behald of the National 

Association of Broadcasters, statement .............................................................. 128

Rundgren, Todd, Lead Singer, the New Cars, Darby, Pennsylvania, statement 

and attachment .................................................................................................... 138

Shapiro, Gary J., Consumer Electronics Association and the Home Recording 

Rights Coalition, joint statement ........................................................................ 142

Shaw, Victoria, Songwriter, Nashville, Tennessee, prepared statement ............ 148

Sirius Satellite Radio, Inc., Ruth Ziegler, Deputy General Counsel, statement 151

United States Copyright Office, Marybeth Peters, Register of Copyrights, 

Washington, D.C., statement .............................................................................. 159

(1)

PARITY, PLATFORMS, AND PROTECTION: THE 

FUTURE OF THE MUSIC INDUSTRY IN THE 

DIGITAL RADIO REVOLUTION 

WEDNESDAY, APRIL 26, 2006 

U.S. SENATE, 

COMMITTEE ON THE JUDICIARY, 

Washington, D.C. 

The Committee met, pursuant to notice, at 9:33 a.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Arlen Specter, 

Chairman of the Committee, presiding. 

Present: Senators Specter, Hatch, Cornyn, Leahy, Biden, Feinstein, and Schumer. 

OPENING STATEMENT OF HON. ARLEN SPECTER, A U.S. 

SENATOR FROM THE STATE OF PENNSYLVANIA 

Chairman SPECTER. Good morning, ladies and gentlemen. The 

Judiciary Committee will now proceed with our hearing titled ‘‘Parity, Platforms, and Protection: The Future of the Music Industry in 

the Digital Radio Revolution.’’ 

This morning, we revisit a topic involving the tension between 

protecting artistic works and encouraging technological innovation. 

Specifically, our hearing today will examine whether current applicable copyright law is keeping pace with emerging digital radio 

technologies. Whereas at one time we had radio on AM and FM, 

now we have the Internet, satellite, high-definition, and the question is whether our laws are adequately compensating artistic 

work. 

In 1995, there was a major revision of the copyright law. Satellite radio producers are charged different royalty rates than 

Internet service providers, while traditional broadcasters are almost totally exempt from paying a royalty unless the same programming is retransmitted over the Internet. So it is again a clash 

between technology and artistic effort, and we are going to try to 

move into the field on the Judiciary Committee, understand the 

complex issues involved and see if we can provide a fairer, level 

playing field. 

Before turning to our witnesses, let me recognize Senator Feinstein and ask if she has an opening statement. 

STATEMENT OF HON. DIANNE FEINSTEIN, A U.S. SENATOR 

FROM THE STATE OF CALIFORNIA 

Senator FEINSTEIN. I do, if I may, Mr. Chairman, and let me 

thank you very much for holding this hearing. 

2

Yesterday, I, along with Senators Graham and Frist, introduced 

the Platform Equality and Remedies for Rights-Holders of Music 

Act, called in the ubiquitous acronym the PERFORM Act. This bill 

is designed to address two problems that have recently been 

brought to my attention. 

First, although we have a statute creating a compulsory license 

for new forms of radio, this license actually treats Internet, cable 

and satellite service providers differently, even though as technology advances their services they have become increasingly similar. 

Second, some businesses that are granted a performance right 

under this compulsory license are exploring new technologies that 

effectively turn a performance into a distribution, thereby not paying separate royalty rates. 

While I support advancements in technology and believe it is important that these new service providers succeed and grow, I believe our law must strike the proper balance between fostering new 

businesses and technology and protecting the property rights of the 

artists whose music is being played. As the modes of distribution 

change and the technologies change, so must our laws. 

This bill does two things. First, it creates rate parity for all service providers under the compulsory license. Any company covered 

by this compulsory license will be treated the same. This means 

that Internet, cable and satellite will all be subject to the same rate 

standards. 

Second, it requires that Internet, cable and satellite providers 

employ technology that will prevent downloading, manipulation 

and sorting of the music that they play to prevent individuals from 

creating their own personalized play lists. 

I also want to be clear about what this bill does not do. It does 

not deal with traditional, over-the-air radio broadcasting. I understand that the Commerce Committee is examining this issue and 

that private negotiations are underway at the same time. 

Finally, let me say I believe this is the beginning of the legislative process. There may be disagreements over how to strike the 

proper balance on these difficult issues and we are certainly open 

to a robust dialog. We have tried over a 6-month period now to negotiate between the parties. These were the two points about which 

there were the clearest agreement. I know there were people that 

did not want me to introduce this bill at this time, but I believe 

I should introduce it. 

I believe that the two points that are made in the bill are essentially unassailable, but I also agree that there are other things that 

can be added to the bill if there is agreement. I would like to say, 

though, that it is very difficult to achieve that agreement, and we 

have done the best we possibly could over the past 6 months and 

at least have reached these two points. 

So thank you, Mr. Chairman. 

Chairman SPECTER. Thank you very much, Senator Feinstein. 

We now turn to our first witness. Ms. Anita Baker has gained 

critical acclaim as a soul, rhythm and blues singer with such charttopping hits as ‘‘Sweet Love’’ and ‘‘I Just Want to Be Your Girl.’’ 

She has performed duets with Frank Sinatra and Joel Davis, and 

won Grammy awards in 1987, 1988, 1989, 1990, 1991 and 1996. 

3

That is quite a record, Ms. Baker. You are part of history all by 

yourself, but especially having sung with Frank Sinatra. 

Our Senate rules provide for 5-minute opening statements and 

then we will come to the panel for questions. 

Ms. Baker, you are recognized. If you would care to do it in song, 

we would be pleased to hear it in any way you—would you withhold for just a moment? We have been joined by our distinguished 

ranking member, and before he can catch his breath I would like 

to call on Senator Leahy, with whom I work very closely on 

progress and productivity of this Committee. 

Senator Leahy.

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR 

FROM THE STATE OF VERMONT 

Senator LEAHY. Thank you very much, Mr. Chairman, and I 

apologize for being late. Unfortunately, we got into a number of 

conflicts. I see several people here I know, and I appreciate being 

here. 

The issue raised is an important one, and I know Senator Feinstein has worked so hard on this. The principles that guide us here 

are simple. We should be supporting and promoting the artists who 

write and perform the music that enriches all of our lives. We 

should be helping everybody else to hear and enjoy that music. 

The copyright laws exist in this arena to define how creators can 

control and profit from the use of their works. Then we have all 

the technological advances of recent years and all the improvements in quality and quantity of music that the digital age has 

brought us. It ought to mean that more people can hear more 

music more easily, while everyone gets paid their due. 

I recognize and appreciate the fact that many other people and 

businesses are involved in getting music from the artists to the listeners. The record companies, from the smallest independents to 

the largest of the majors; the broadcasters, whether they own one 

station or thousands; digital music providers, including cable and 

satellite and Internet—all of these play crucial roles in turning the 

copyrights of artists into the listening pleasure of the consumer. 

But they are not ends in themselves. They are best when they are 

helping to develop new artistic talent to nurture creative endeavors 

and to facilitate ever-better ways of getting people, wherever they 

may be, the music they love. 

The statutory license in Section 114 is complicated. Nobody denies that. Maybe it is too complicated. Maybe it is outdated. Maybe 

in Congress should take a whole new approach to this situation. 

We have legislated in a piecemeal fashion partly because the technology has moved so much faster than a legislative body can work. 

We have tried to make reasonable and effective changes to the licensing scheme when new technologies have changed the music 

marketplace. 

Maybe it is time for us, both those up here on the dais and those 

at the witness table, to step back and try to consider music licensing from its first principles. Maybe we should primarily focus not 

so much on the technologies, but on the rights that are at stake. 

Maybe then we could produce a licensing scheme that has a real 

foundation on the rights of creators and the interests of consumers. 

4

Maybe then the purposes of the Copyright Act, and of this Committee, will be better realized in the marketplace for music. 

I love music. I was coming back from a long trip the other day 

and I was listening to music on the plane. The music was eclectic, 

ranging from Puccini to the Grateful Dead and a whole lot in between. I am glad that we have the ability to do that. Just a few 

years ago, I couldn’t carry a 7- or 800-song library with me. 

So I thank my colleagues, Senators Feinstein, Graham, Cornyn, 

and Frist, for taking up the formidable task of beginning this inquiry. And, of course, I especially thank the Chairman, my good 

friend from Pennsylvania, who has just been nationally recognized 

as one of the best Senators in the country of either party, and I 

agree with that. 

So let’s see where we can go. This is not an easy subject, and 

when we listen to the people all across the spectrum who are involved, it gets less easy. But I have an enormous amount of respect 

for the people who are here. Some of you are close personal friends 

and I am anxious to hear the testimony. 

So thank you, Mr. Chairman. 

[The prepared statement of Senator Leahy appears as a submission for the record.] 

Chairman SPECTER. Thank you very much, Senator Leahy. 

I had introduced Ms. Baker, and we look forward to your testimony. 

STATEMENT OF ANITA BAKER, PERFORMING ARTIST, GROSSE 

POINT, MICHIGAN 

Ms. BAKER. Thank you, sir, and thank you to Mr. Rundgren for 

engaging my microphone. Thank you. 

Mr. Chairman and members of the Senate Judiciary Committee, 

thank you for inviting me to testify before you today. I will be brief. 

I have something really simple to say, and that is that artists 

should be compensated in a fair and standardized way by businesses that distribute their music. It is essential that this compensation reflect a fair market value. 

Satellite radio is planning on selling devices that allow their listeners to find and record individual songs and then create permanent libraries and play lists of these songs. So as an advertisement 

for XM Satellite Radio says, their radio is not a pod, per se, but 

it the mother ship, a distribution outlet. Traditional radio may be 

about to do something similar soon as well. 

The technology is here, the cat is out of the bag, the genie is out 

of the bottle. There is no going back, so let’s move forward to negotiate a standardized fair market value for this amazing commodity. 

As the digital revolution has arrived, it brings with it exciting new 

ways of listening to and using radio. As someone who listens to 

radio, I think it would be great to be able to record big blocks of 

music from the radio and then pick individual songs out of them 

so that I can keep them and listen to them later at my discretion. 

I think it would be great to 1 day be able to tell my computer 

radio to beep me and tell me the minute that the next new Bonnie 

Raitt single comes over the airwaves. And I would love to be driving in my car listening to a song and have the option to hit a button and immediately save that whole song. All of these technologies 

5

are exciting and tremendous ways for connecting music with the 

fans. 

However, I hope this Committee considers and supports legislation that recognizes that the folks who create music, an amazing 

commodity, need some consistency. We need to know, as these technologies develop with mind-blowing speed, that we will be able to 

look forward to a standardized fair market rate of compensation. 

This idea doesn’t just affect me. It affects my entire family and colleagues that I work with—the songwriters, the musicians, the engineers, all of whom make great music. 

So I hope this Committee understands that I support radio and 

listeners being able to do this. I have spoken with EMI and Blue 

Note, two of the companies that work with me, and they have 

promised me that they support this, too. I just happen to think 

that when a radio station is acting as a download service/distribution outlet, the artists should be paid appropriately. 

I am also glad to be able to say that many of my fellow music 

groups like the National Academy of Recording Arts and Sciences, 

the Rhythm and Blues Foundation, AFM, AFTRA and a variety of 

other coalitions and organizations support this view. 

I truly appreciate the time that you have given me, and I would 

like to say also personally that I respect each artist represented 

here and their right to express their opinions about the commodity 

that they create. I would also like to say that as an artist and as 

someone who has been in the business for over 20 years, I have 

come to a place where I have been in the artist’s shoes, I have been 

in the producer’s shoes, and on occasion I have even been in the 

engineer’s shoes. And as I sit before you today, I am somewhat of 

an independent myself in the sense that I have come from an artist 

signed to a label, as an artist who is owner of their property represented by a joint venture with my record label. So, essentially, 

we are partners and I come to you not as just an artist, but as 

somewhat of an independent, and this is my view and I appreciate 

the time that you have given me. 

Unfortunately, I do have another engagement and I will be saying good morning. 

Chairman SPECTER. Thank you very much for coming in, Ms. 

Baker, and for your testimony. We understand you are busy and 

we wish you well. 

Ms. BAKER. Thank you, sir. 

[The prepared statement of Ms. Baker appears as a submission 

for the record.] 

Chairman SPECTER. Our next witness is Mr. Todd Rundgren, recording artist, songwriter, producer, and current lead singer for 

The New Cars. I am pleased to tell you that he hails from Darby, 

Pennsylvania, right around the corner, and began his musical career in Philadelphia with the Philadelphia-based band Woody’s 

Truckstop. 

Throughout his career, he has written and recorded notable hits 

such as ‘‘Hello, It’s Me’’ and ‘‘Bang the Drum All Day,’’ and is acknowledged by Rolling Stone magazine as having one of the 500 

greatest rock albums of all time. He has produced albums by Cheap 

Trick, Meatloaf, XTC and All the Notes. 

6

Thank you for coming in today, Mr. Rundgren, and we look forward to your testimony. 

STATEMENT OF TODD RUNDGREN, LEAD SINGER, THE NEW 

CARS, DARBY, PENNSYLVANIA 

Mr. RUNDGREN. Thank you, Chairman Specter, Senator Leahy 

and members of the Committee. My name is Todd Rundgren. I am 

58 and I am a professional musician. I have also been employed as 

a record producer, composer for film and television, technology 

spokesman and computer programmer. I am the designed and developer of PatroNet, an Internet-based subscription service that allows audiences to provide direct underwriting of artists in exchange 

for insider information, direct communication, discounted merchandise and first-look experiences of the artist’s work, all within a 

community structure. 

This is my 40th year as a musician and 18th year as an independent. I left Warner Brothers in 1998 with the conviction that 

the major labels were unprepared for, and were indeed hostile to 

the inevitable changes that digital technology would effect in the 

way that music would be created, marketed and experienced. I 

wasn’t so prescient that I foresaw the rise of the Internet, but I 

was convinced that I would be hindered in any attempt to use new 

developments to alter the ground rules. 

One of the first cutting-edge projects I was involved in concerned 

digital rights management, a concept that did not yet exist. I was 

hired by, ironically enough, the Warner Full Service Network, an 

interactive television pilot project that sought to merge video computers and high-bandwidth home delivery. The plan was to create 

on-demand music services that could be navigated on one’s home 

TV, kind of like an iTunes for the early 1990s. 

When it came time to plug the music in, everything I had suspected about the savvyness of the industry was crystallized. To a 

label, every one of the majors refused to consider the possibility of 

putting music they controlled onto a server. Ironically, even the 

Music Division of Warner Brothers would not cooperate, even 

though this was only a demonstration project. 

Ever since then, the behavior of the majors has been that of a 

mindless parasite contributing nothing, yet trying to get its snout 

into the bloodstream of any new development. The knee-jerk justification is the protection of artists, which would more accurately 

be represented as the interests of highly bankable artists still 

under contract. For every one of those, there are a hundred with 

a lifelong bad taste in their mouths over the way they were treated 

when sales began to lag. 

I have striven to tie together the replacement parts an independent musician would need to build enough audience for a sustainable living. Amongst these is, of course, the Internet and a raft 

of contractors who can press and distribute disks for you, if you can 

afford it, and take on the promotion and production and marketing 

normally provided by a label. The only problem is getting heard. 

Terrestrial radio, especially of the syndicated flavor, is not available to most artists even if they do have a traditional label deal. 

I am opposed to any measures that would insinuate the major labels into an area they have failed to husband and to capitalize off 

7

of artists they have abandoned or never had any interest in. The 

myth that you could survive very long on record company advances 

has long been debunked. Players need to play to get paid and need 

audiences to play to. All the majors have ever done is try to claim 

the audience as theirs alone and to lower expectations by exposing 

them only to the generally sub-standard product the majors begrudgingly underwrite. 

Worse yet, across-the-board fee structures like those proposed 

discourage the exposure of new talent in deference to audience favorites as broadcasters try to recover those fees. And worst of all, 

syndicated radio, the majors’ partner in neglect, does not deserve 

exemption for the abysmal quality of product they deliver. The fantasy that this type of legislation helps music or musicians should 

be summarily exposed for what it is—yet another futile attempt to 

turn back the clock to the days when they were the sole gatekeepers to an artist’s future. 

Thank you for inviting me here to testify and I would be pleased 

to respond to your questions. 

[The prepared statement of Mr. Rundgren appears as a submission for the record.] 

Chairman SPECTER. Thank you very much, Mr. Rundgren. 

Our next witness is Ms. Victoria Shaw, a songwriter based in 

Nashville, Tennessee. Her songs have been performed by a variety 

of recording artists, including Garth Brooks, Ricky Martin and 

Christina Aguillera. She has won two Emmys for her work, the 

first in 1999 for the song ‘‘In This Moment,’’ featured on the daytime drama ‘‘As the World Turns,’’ and the second in 2000 for the 

song ‘‘When I Think of You,’’ featured on the daytime drama ‘‘One 

Life to Live.’’ 

Thank you for joining us today, Ms. Shaw, and the floor is yours 

for 5 minutes. 

STATEMENT OF VICTORIA SHAW, SONGWRITER, NASHVILLE, 

TENNESSEE 

Ms. SHAW. I am happy to be here. Thank you, Chairman Specter 

and members of the Committee. Thank you very much for having 

me here today to speak on the issue of parity among the different 

platforms offering digital music. 

These are exciting technologies in an exciting time, and we are 

all here today not to keep them from taking root, but to ensure an 

environment in which they all can thrive. That environment is only 

possible when everyone plays fairly. 

As a composer, musician, and owner of my own label, Taffetta 

Records, I get to experience the thrills of the music business on 

many different levels. I have been lucky enough to have my songs 

recorded by some of the biggest artists, and even got to open for 

Garth Brooks in Central Park. And trust me, this is a lot scarier, 

but I consider among my honors this opportunity to come before 

you to speak on behalf of the many, many artists and composers 

who will be greatly harmed if they are denied appropriate compensation for their work. 

We want to help usher in the digital radio revolution, but to continue to be a part of it we need your help. Undoubtedly, you are 

aware of the extremely difficult times the music industry has faced 

8

these past few years due to online theft of music. Nashville, in particular, where I live, home to one of the greatest songwriting communities in the world, has seen a massive reduction of those able 

to make a living from their craft. 

This is why we have been so excited by the many new digital 

services offering our work. For those who want our songs in digital 

form, the choices now range beyond unauthorized and free. From 

cable and satellite, to Internet radio, to download services, licensed 

services offer music fans the music they want in the way they 

want, all for the prices that are appropriate to consumers and fair 

to those of us who create it. This is the bright future of the music 

industry. 

But whether we are operating in the physical world or in that 

bright digital future, one truism remains: Artists, composers, 

record labels and everyone involved in making music depend on 

sales to survive. In the digital world, those sales are made through 

download services like iTunes and Napster. The licenses required 

by these services to allow people to purchase our music is what will 

sustain us as we move further away from the physical world of 

tapes and CDs. 

Yet, it is precisely those licenses and those sales that are being 

threatened by the new offerings of radio platforms. By allowing listeners to record broadcasts and buildup entire jukeboxes of music 

on portable devices, radio services are becoming download services, 

but without paying the down license. 

I am not talking about casual recording off the radio. Certainly, 

we have all done that, and I have no interest in seeing that disappear. Just imagine how proud I am when I see someone race to 

the radio to record one of my songs that came on. But now imagine 

my frustration if I saw someone with an entire collection of my 

work automatically recorded, labeled, sorted and transferred to 

them in pristine, permanent and portable digital copies without 

seeing a cent from a sale in return. This is not radio. This is 

iTunes, this is Napster or Yahoo!, or any of a number of other 

download services that pay the appropriate license for this type of 

distribution. Those are the services that make the sales we need 

to survive, but those services can’t compete with others that offer 

the exact same functionality without paying the same license. 

This is a matter of fairness to other broadcasters, to download 

services, and to all of us making the music for those services. This 

is a matter of treating platforms that offer the same services equally. This is a matter of parity. 

The PERFORM Act, recently introduced by Senators Feinstein 

and Graham, accomplishes this parity by ensuring that all services 

follow the same rules in how they offer music. By giving everyone 

equal footing, we give everyone an equal opportunity to grow. This 

is important legislation that places value on the music we work so 

hard to create. 

As I look back on my career, I am grateful for all the opportunities I have had to share my music with others and to experience 

the works of all those who have chosen to share with me. My own 

songs come from stories of love and loss and fear and faith, but the 

story of digital radio should be simply one of hope. On behalf of evVerDate 0ct 09 2002 15:18 Apr 25, 2007 Jkt 034115 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\34115.TXT SJUD1 PsN: CMORC
9

eryone in the music community, and my kids, I hope you will support this bill and secure for all of us that bright digital future. 

Thank you so much for your time. 

[The prepared statement of Ms. Shaw appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Ms. Shaw. 

Our next witness is Mr. Edgar Bronfman, Chairman and CEO of 

Warner Music Group, and general partner of the venture capital 

firm Creative Technology Partners. Warner Music Group is one of 

the leading music companies in the world, consisting of both a 

record label and a music publishing arm. 

Thank you for joining us today, Mr. Bronfman, and we look forward to your testimony. 

STATEMENT OF EDGAR BRONFMAN, JR., CHAIRMAN AND 

CHIEF EXECUTIVE OFFICER, WARNER MUSIC GROUP, NEW 

YORK, NEW YORK 

Mr. BRONFMAN. Thank you, Mr. Chairman. Thank you for having 

me here. I come here today not just as the CEO of a major American music company, but as a representative of the intellectual 

property industry. IP is the backbone of the U.S. economy today 

and in the future. The U.S. Government rightly seeks to protect 

American IP around the world, and we must ensure that it receives 

appropriate protection here at home as well. 

Although piracy remains a plague on the IP industry, Warner 

Music operates now on the premise that as a result of the digital 

revolution, there will be more music delivered to more consumers 

in ways that we never before imagined possible. No one at this 

table has a greater incentive to embrace digital distribution than 

we have. Digital distribution allows us to offer more music to more 

people in more ways than ever before, and I would like to underscore three points. 

First, if there is going to be a compulsory license for performances of recordings, then at least the royalties should be set at 

market rates. XM has paid market rates for everything from electricity to satellites. It has paid market rates for content like 

‘‘Oprah Winfrey’’ and Major League Baseball. It is only fair that 

XM pay market rates for the music on which it has built its business. 

Second, a performance is distinct from a distribution. A performance allows someone to listen, while a distribution allows someone 

to keep a copy. They are different consumer experiences, require 

different licenses, and command different royalty rates. It is not 

fair for satellite services or anyone else to turn performances into 

distributions without obtaining and paying for a distribution license. It is unfair to the creators who lose royalties when satellite 

services give away their music for satellite’s own business purposes 

without paying for it. It is unfair to satellite’s competitors, who actually pay for the right to distribute our music under a license negotiated in the marketplace. 

We already license a large number of distribution services across 

all platforms, everything from the Internet to mobile phones, and 

we are excited about licensing new distribution services like XM. 

Indeed, we already have market rate licenses with companies like 

10

Napster to Go and Rhapsody for the very functionality that XM desires to offer without compensation to artists and labels. 

Third, and more broadly, the same rules should apply to services 

competing across all digital platforms. Whether we are talking 

about rate-setting standards or the obligation to protect our content, the law should treat all digital music services the same. No 

category of services should enjoy advantages over its competitors 

because of arbitrary differences in the law. 

Music is licensed along a continuum, with royalty payments depending on how much control the user has over the music. At one 

extreme is the purely passive listening experience provided by traditional radio. At the other extreme is ownership of copy which is 

provided by services like iTunes and Yahoo! and Rhapsody. 

Unlike a passive listening experience, distribution services offer 

consumers varying degrees of control to determine what music they 

hear and how and when they hear it. Cable, satellite and Internet 

performance services are regulated by the Government and by this 

Committee through a compulsory license. I am generally not a fan 

of compulsory licenses and feel they are only appropriate when ordinary market mechanisms cannot work. 

Unlike contractual arrangements negotiated in the marketplace, 

compulsory licenses are more difficult to fix if the passage of time 

or technological innovation makes them outdated, and there is no 

better example of this than the treatment of satellite services 

under Section 114 of the Copyright Act. These services are obtaining their content through compulsory licenses that were designed 

only for listening. 

Now, satellite services are going even further, offering new devices that transform a performance service into a distribution service. The device permits consumers to record satellite programming, 

see a list of songs recorded, disaggregate the specific tracks they 

want and library them for future and permanent use. This device 

is not only similar to an iPod, but it is like an iPod linked to a supply of free iTunes music. 

The law already prevents an Internet webcaster from engaging 

in similar attempts to transform their listening services into distribution services. Why shouldn’t satellite services be subject to the 

same rules? 

The PERFORM Act that Senators Feinstein, Graham and Frist 

have introduced requires just that. It would ensure that competition is based on the marketplace, not on arbitrary legal advantages. It would ensure parity across all platforms, parity in the way 

a fair price is derived, parity in the ways that content is protected, 

parity plain and simple. At the same time, it protects consumers’ 

expectations when it comes to being able to record music off of 

these services, as consumers have traditionally done while listening 

to the radio. 

Mr. Chairman, no one appreciates the promise of the digital era 

more than Warner Music. We believe that the integrity of the digital marketplace represents the very future of music. I urge you to 

support this legislation and move it to enactment in order that all 

of the parties here today and all others who seek to legitimately 

bring content to consumers can make beautiful music together. 

Thank you, Mr. Chairman. 

11

[The prepared statement of Mr. Bronfman appears as a submission for the record.] 

Chairman SPECTER. Thank you very much, Mr. Bronfman. 

Our next witness is Mr. Gary Parsons, Chairman of the Board 

of XM Satellite Radio and Chairman of Mobile Satellite Ventures. 

XM Satellite Radio is America’s leading satellite radio company, 

providing consumers access to digital radio in the home, car, or on 

portable devices. 

We appreciate your coming in, Mr. Parsons, and you have the 

floor for 5 minutes. 

STATEMENT OF GARY PARSONS, CHAIRMAN OF THE BOARD 

OF DIRECTORS, XM SATELLITE RADIO, INC., WASHINGTON, 

D.C. 

Mr. PARSONS. Thank you very much, Mr. Chairman, Senator 

Leahy, members of the Committee, and thank you for inviting me 

to testify this morning. 

XM Radio is America’s first and largest satellite radio service. Although our industry is in its infancy, over 6.5 million subscribers 

pay an average of $10 per month to receive 170 channels of programming, including Major League Baseball, Fox News, CNN, C–

SPAN, and even Spanish-language broadcasts. 

While most of our channels are non-music, our 69 commercialfree music channels give every music fan something to enjoy, 

whether they are discovering a new artist or reconnecting with favorites like Todd Rundgren, Anita Baker or Victoria Shaw. And at 

XM, we are passionate about music. I fell in love with music and 

radio 40 years ago when I was a disc jockey and attending high 

school in South Carolina. 

Unfortunately, during the ensuing decades, radio play lists became dominated by narrow, canned formats that excluded the lesser-known artists and, in fact, entire genres of music. XM play lists 

feature thousands of artists from a library of more than two million 

tracks. Our radios display the artist and song names, and our announcers educate listeners about music that they heard for the first 

time on XM. And it is working. Our research shows that XM subscribers buy more music than the average consumer. In fact, the 

longer a person subscribes to XM, the greater variety of music they 

buy and the more concerts they attend. 

In addition to exposing customers to new music, XM also pays 

tens of millions of dollars to performing artists, songwriters, record 

labels and music publishers. While the terrestrial radio giants are 

exempt from paying performance rights, XM Radio is the largest 

single payer of sound recording performance royalties. 

In spite of this disparity in treatment, we are not here asking for 

a change in copyright law. We launched our service in late 2001. 

We invested more than $3 billion, we launched our satellites, and 

we negotiated and paid performance royalties on music to the 

record labels and the artists. We pay these royalties under the 

structure set in place by Congress in 1998, and supported by the 

major record labels at that time. 

Now, the record industry is back asking you to rewrite the established rules of performance rights just a few years after they were 

created by Congress and, interestingly, just as we began the reVerDate 0ct 09 2002 15:18 Apr 25, 2007 Jkt 034115 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\34115.TXT SJUD1 PsN: CMORC
12

negotiation of those rates for the next 5 years. Based on our current rates alone, satellite radio will pay hundreds of millions of dollars over this period. 

The labels also unfortunately seek to eliminate long-held consumer rights. For decades, a consumer’s right to record material for 

their personal use off the radio has been upheld by the courts. It 

has been honored by Congress and reinforced by the Audio Home 

Recording Act. 

Not only does XM Radio pay for performance rights under the 

Copyright Act, but our manufacturing partners pay millions of dollars in additional payments under the Audio Home Recording Act 

for the portable radios that we distribute. These radios should be 

viewed as a boon, not a bane. 

Consumers do want more choice about where and when they 

hear and see entertainment, and we have introduced a new generation of innovative devices to let subscribers hear live XM Radio on 

the go. Like a TiVo for the radio, subscribers can save XM programming for later listening at their convenience of for when they 

are in places where the satellite signal cannot reach, like in this 

hearing room. 

We made the process simple and we made it convenient. But just 

because it is convenient, it doesn’t make it illegal. XM and its manufacturing partners designed these devices to fully comply with 

copyright law. And despite the record companies’ claims, recording 

from the radio is not a download service. You can’t choose to record 

any song that you want right when you want it. Anything recorded 

from the radio is locked to the device. It cannot be transferred to 

computers or out to the Internet, ensuring it is only for personal 

use. And you can only hear the recorded material as long as you 

remain an XM subscriber. 

Satellite radio is an American success story and we have played 

by the rules. We pay for the right to play the music and our manufacturing partners pay again for our subscribers’ right to record 

what was played. The PERFORM Act is not about piracy, and 

given that it changes the rules for XM but not for broadcast radio, 

it is really not about parity either. Congress created very balanced 

copyright laws to protect the rights of users, as well as the rights 

of the rights-holders. XM pays and protects the interests of the content owners, but we also will strongly fight to defend consumers’ 

rights to record as well. 

Thank you for the opportunity to share my views here today and 

I am pleased to answer your questions. 

[The prepared statement of Mr. Parsons appears as a submission 

for the record.] 

Chairman SPECTER. Thank you very much, Mr. Parsons. 

We now turn to Mr. Bruce Reese, President and Chief Executive 

Officer of Bonneville International Corporation, based in Salt Lake 

City. Bonneville operates 35 radio stations throughout the country. 

He serves on the board of directors and is Chairman of the Radio 

Board of the National Association of Broadcasters. 

Thank you for appearing here today, Mr. Reese, and we look forward to your testimony. 

13

STATEMENT OF BRUCE T. REESE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, BONNEVILLE INTERNATIONAL CORPORATION, SALT LAKE CITY, UTAH, ON BEHALF OF THE NATIONAL ASSOCIATION OF BROADCASTERS 

Mr. REESE. Thank you, Chairman Specter and members of the 

Committee. We appreciate the opportunity to be here. As was 

noted, I am here in my capacity as joint board Chairman of the National Association of Broadcasters. The NAB advocates on behalf of 

more than 8,300 free local radio and television stations, as well as 

broadcast networks, before Congress, the FCC and the courts. 

I have two simple points here today. First, Congress should not 

take any actions that would delay the continued role out of the new 

digital radio service for terrestrial radio stations. Second, Congress 

should improve current copyright law so that it does not inhibit 

Internet radio streaming. 

As to the first point, local broadcasters are engaged in an exciting transition to digital. Currently, 765 AM and FM stations are 

on the air in digital, with many more that will roll out in the near 

future. HD radio will enable us to better serve our local communities and remain competitive in the evolving digital media marketplace. 

Digital radio not only offers crystal-clear audio. It also permits 

the broadcasting of multiple, free over-the-air program streams. 

Radio stations will be able to bring additional local content to the 

public within their current spectrum, as well as providing expanded opportunities to promote more and varied artists and 

music. 

But we face many challenges as we work toward a successful and 

timely transition to digital radio. The HD radio revolution involves 

not just radio stations, but the consumer electronics industry, the 

auto industry and, most importantly, consumers. 2006 and 2007 

promise to be pivotal years for this revolution in radio. Automakers 

are signing up for factory-installed radios. Retail outlets are featuring many new digital radio products, and many major radio 

groups are engaged in a marketing campaign to make consumers 

aware of digital radio. 

We must not add to these challenges by a premature adoption of 

a quick-fix technical system to jury-rig some copy protection device 

into digital radio. To that end, NAB is working with the recording 

industry to develop options for content protection, so long as those 

options don’t slow down radio’s digital transition. These discussions 

have been very productive so far and the NAB strongly believes 

that the broadcast industry, the recording industry and other 

stakeholders can work toward a consensus on a digital radio copy 

protection system. While those discussions continue, Congress 

should refrain from adopting an unnecessary legislative mandate 

at this time. 

As to my second point—the changes needed in copyright law to 

promote Internet radio streaming—first, Congress should exempt 

from sound recording fees streams to a station’s local over-the-air 

audience. This Committee has recognized on several previous occasions that the mutually beneficial relationship between the radio 

industry and the recording industry is a more than appropriate offset for a performance fee. 

14

It simply makes no sense to impose a tax on a model that has 

worked well for decades simply because the same audience hears 

a radio station through a computer rather than over the air. The 

same local public service benefits are provided, as well as the same 

promotional benefits to the recording artists. 

Second, the sound recording performance fee and the standard by 

which it is set must be reformed. The willing buyer, willing seller 

standard set in 1998 has been a recipe for abuse. It has inflated 

royalty rates to levels that have inhibited radio streaming services. 

Instead, Congress should establish a fee comparable to what is paid 

to BMI, ASCAP and SESAC. 

Third, Congress should reform the statutory license conditions to 

make them consistent with broadcast practices. By way of example, 

some of these conditions prohibit DJs from pre-announcing songs 

and prohibit the playing of any three tracks from the same album 

within a 3-hour period. Radio stations should not be forced to 

choose between either radically altering their programming practices or risking uncertain and costly copyright infringement litigation. 

Fourth, Congress should eliminate additional copyright liability 

for ephemeral recordings that simply exist to facilitate a licensed 

or exempt performance. And, fifth, Congress should ensure that the 

reporting and recording recordkeeping requirements do not discourage broadcasters from streaming. 

NAB believes that these changes in copyright law are necessary 

so that Internet radio streaming can reach its full potential both 

for the benefit of broadcasters and for the listening public. 

Mr. Chairman, the radio industry is indeed at the beginning of 

a revolution. The successful deployment of digital radio and the 

growth of Internet radio streaming will significantly improve services for our listeners and your constituents. The future of digital 

radio also holds much promise for the very industries and groups 

represented here at this table. 

Thank you. 

[The prepared statement of Mr. Reese appears as a submission 

for the record.] 

Chairman SPECTER. Thank you, Mr. Reese. 

We now turn to Mr. Mark Lam, Chairman and Chief Executive 

Officer of Live365, which is one of the world’s largest Internet radio 

providers, with over 10,000 broadcasts and 2,600,000 listeners a 

month. 

Thank you for coming in today, Mr. Lam, and you may proceed. 

STATEMENT OF N. MARK LAM, CHAIRMAN, EXECUTIVE COMMITTEE, AND CHIEF EXECUTIVE OFFICER, LIVE365, FOSTER 

CITY, CALIFORNIA, ON BEHALF OF THE DIGITAL MEDIA ASSOCIATION 

Mr. LAM. Yes, thank you. On behalf of Live365 and the Digital 

Media Association, thank you, Chairman Specter and Senators 

Hatch, Biden and Feinstein, for the opportunity to speak today 

about how the Copyright Act discriminates against Internet radio. 

I am Mark Lam, CEO of Live365. In a world of giants such as 

RIAA, Clear Channel, XM and Yahoo!, we are the Internet radio 

15

service which is most at risk. I often analogize us to the little 

mouse amongst all the elephants in this field. 

Today, I ask the Committee to build on the PERFORM Act introduced by Senators Feinstein and Graham to, one, legislate royalty 

and programming parity among all digital radio services; two, protect recording artists and copyright owners from radio services that 

promote and profit from substitution of consumer recording; and, 

three, resolve the dispute over the definition of interactive service 

so that consumers, radio services and creators can maximize the 

benefits of Internet technology and radio. 

On the issue of royalty parity, consider two comparisons. 

Live365’s audience compares to a good-sized radio station in Harrisburg, Pennsylvania. The radio station pays about 3.5 percent of 

revenues to songwriters and music publishers. Live365 pays 6.5 

percent. The radio stations pay nothing to record labels and artists, 

but in 2005 Live365 paid $1.2 million to labels and artists, more 

than one-third of our radio revenue. Most outrageously, in the current royalty arbitration, the RIAA is demanding that we pay twoand-a-half times more royalties. This will put us out of business. 

Satellite radio is similar. I have heard that XM and Sirius pay 

5 to 7 percent of their subscription revenue to record labels and 

artists, substantially less than the 10.9 percent paid by subscription Internet radio. Even worse, royalties for advertisers’ support 

of free Internet radio are based on music usage only, so the royalties have no relationship to revenue. As a result, advertiser-supported Internet radio pays an extremely percentage of revenue to 

record labels and artists, and some companies’ royalties exceed 

their total revenue. 

The issue of programming parity is simple. Congress should 

eliminate restrictions that were intended to ensure that digital 

radio does not offer music on demand, but which instead have prevented us from engaging in common broadcast practices that promote labels’ and artists’ interests. If royalty-paying Internet radio 

is to compete against royalty-free broadcasters, we should be allowed to announce songs and events to keep listeners tuned in and 

to play more than two songs by an artist consecutively, just as 

radio stations do. 

Regarding the issue of content protection, today’s law requires 

Internet radio services to reasonably protect sound recording creators from substitution of consumer recording, but the existing requirement is not balanced like the reasonable recording definition 

in the PERFORM Act, introduced by Senator Feinstein. Therefore, 

DiMA agrees that the reasonable recording limitations should extend to all digital radio platforms, but only when a service is promoting and profiting from consumer recording. 

Live365 and other services that are mainly broadcasting music 

in digital form should not be obligated to police or technologically 

inhibit independent consumer conduct. Services such as XM that 

are promoting and profiting from consumer conduct should act reasonably. 

Third, I turn to interactivity and how much consumers may influence radio programming before service is deemed interactive and 

ineligible for the statutory license. Congress enacted a statutory license to promote Internet radio as an innovative, competitive meVerDate 0ct 09 2002 15:18 Apr 25, 2007 Jkt 034115 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\34115.TXT SJUD1 PsN: CMORC
16

dium. Unfortunately, the interactive service definition is so unclear 

that it has not been resolved by Copyright Office proceedings or 5 

years of litigation. 

Internet radio innovation has been stymied, harming services 

and recording artists who had joined DiMA in seeking a legislative 

resolution. The problem is simple. If Internet radio programming 

is less interesting than broadcast or we are mired in complex negotiations about royalties that our competitors do not pay at all, we 

cannot compete, succeed, or generate even more royalties. DiMA 

companies want to focus on developing exciting royalty-paying 

products and services that combat piracy and pay the creators 

rather than on lawyers and litigation. 

Thank you, Mr. Chairman. DiMA members and the sponsors of 

the PERFORM Act agree that the Copyright Act treats Internet 

radio inequitably, but that platform parity, content protection and 

continued innovation are all achievable. Thank you for the opportunity to testify today about a legislative solution that would benefit consumers, promote competition and increase royalties to creators. This is the balance that the Copyright Act is intended to accomplish. We look forward to working with you to make sure that 

it succeeds. 

Thank you. 

[The prepared statement of Mr. Lam appears as a submission for 

the record.] 

Chairman SPECTER. Thank you, Mr. Lam. 

We now will proceed with questions from the panel of Senators 

with 5 minutes each. 

Mr. Parsons, satellite had a tremendous publicity surge when 

there was the announcement of the contract of Mr. Howard Stern 

for $600 million. That is from a competitor of yours, Sirius. That 

created a very substantial public awareness of satellite. 

What is there in the operation of satellite and its profit-making 

potential which would bear on the subjects we are talking about 

here which would warrant such a phenomenal contract for Mr. 

Stern? 

Mr. PARSONS. Well, Senator, since that deal was struck by my 

competitor and not myself, I certainly did not see the economics of 

that amount of a paycheck. However, that being said, the one element that I would put in there that is—— 

Chairman SPECTER. Well, I am interested to know the import, 

the scope, the profit-making potential. When we call upon you or 

may call upon you to pay parity, as Mr. Bronfman, Mr. Shaw and 

Mr. Rundgren have urged, it is a complex subject to grapple with, 

and when I saw the Stern contract, it gave some insight. They are 

still a competitor of yours even after paying the money. They are 

not bankrupt, they are not out of business. 

Mr. PARSONS. That is true, Mr. Chairman, and the element that 

I would put there that I think is critical to understanding that is 

the exclusivity nature of it. I mean, that certainly does bring an 

enormous difference in the price that is paid for the different content. Clearly, we have long said that—— 

Chairman SPECTER. Well, Sirius obviously calculates that by having Mr. Stern on their program, they are going to get listeners and 

17

they are going to make money. So what is there about satellite 

which has such great profit-making potential? 

Mr. PARSONS. I think in this particular case, the exclusivity of 

that nature is the answer because obviously Mr. Stern was making 

enormous amounts when he was exclusive on terrestrial radio as 

well. And we have said relative to music rights that the minute 

that the top new star that Warner Music wants to bring out will 

be taken off of the air anywhere else and put exclusively on satellite, then we would be very happy to start talking about fairly 

significant additional amounts of compensation beyond the amount, 

when it is certainly available through many different mediums. 

And I will speak for my competitor in this sense: They have indicated they would never have paid fees of that enormity as long as 

it was available in other formats, as well, too. 

Chairman SPECTER. I see you want recognition, Mr. Bronfman, 

and I will come to you in just a minute. 

But, Mr. Parsons, why shouldn’t satellite pay the same royalties 

as others? Parity has a ring of equality and justification. Why not 

have satellite pay the same royalties? 

Mr. PARSONS. Senator, I believe the Congress acted appropriately 

in establishing the rules that were there. And by the way, those 

rules don’t necessarily say there is a different rate for the Internet 

streamers versus XM Satellite Radio. 

Chairman SPECTER. Wasn’t the action of Congress really at a 

time when satellite radio was in its infancy and it is a different 

commercial situation today? 

Mr. PARSONS. I think those laws were placed to look at all different digital mediums and, in fact, looked at all different digital 

mediums from what were the investments they put in. And if you 

look at the fairness of the rates, I think many of the Internet suppliers have also indicated they would be reasonably handled under 

the same 802(b) provision that, in fact, satellite radio is because it 

takes into account a fair return for the artist, a fair return for the 

record labels, as well as a fair return for the investment that the 

distributors have put in place. 

Chairman SPECTER. Mr. Reese, why shouldn’t satellite pay the 

same as other payers of royalties? 

Mr. REESE. I guess I am not sure that I have a position on that 

one, Mr. Chairman. I think that they have a very—— 

Chairman SPECTER. Well, if you don’t have a position on it, how 

do you expect us to have a position on it? 

Mr. REESE. I am not here speaking on behalf of the satellite folks 

here. 

Chairman SPECTER. But you are an expert in the field. OK, we 

will pass on you and go to—— 

Mr. REESE. Thank you. 

Mr. LAM. May I have—— 

Chairman SPECTER. Well, all right. Before my time expires, you 

may comment, Mr. Lam, and then Mr. Bronfman may comment. I 

will ask no further questions. I have only 4 seconds left. 

Mr. LAM. Thank you, Senator Specter. Well, we do have a position because on the issue of performance royalties, terrestrial radio 

pays nothing, zero, whereas satellite radio pays much less than 

18

what we pay. We are really, really unfairly discriminated against. 

We pay many more times than they do. 

In the case of regular radio and terrestrial radio, it is infinity; 

you know, they pay nothing. We pay performance royalties for 

songs that we stream over the Internet for essentially the same 

thing, for essentially the same functionality. People listen to us just 

like radio, except through Internet streaming. That is all. 

Chairman SPECTER. Mr. Bronfman. 

Mr. BRONFMAN. Yes, Mr. Chairman, thank you. Mr. Parsons’s 

answer, I think, really gets to the heart of the matter because satellite is trying very hard to have it both ways, and it is really a 

disingenuous position to take. To suggest that he would pay a great 

deal of money for an exclusive right, knowing that music is subject 

to compulsory license, and therefore has no ability to offer music 

exclusively to XM or Sirius. We are subject to a compulsory license, 

so to suggest that he would pay money in a circumstance which he 

knows is not possible, I think, is disingenuous on its face. 

And then on the other side, to suggest that the laws that exist 

are perfectly appropriately, which, of course, include that compulsory license—so, you know, it is one thing or the other, and that 

is why we have argued, frankly, for recognizing that if we are going 

to be subject to a compulsory license, which we think is probably 

inappropriate, at least let that be a standard because it is our content that is providing such great momentum for satellite. And we 

want satellite to succeed. We just want our artists and our creators 

to get a fair shake and they are not getting that. 

And the other thing is, just to be clear, a distribution service and 

a performance service are two different things, and the fact that 

XM refuses to see that and hides behind the Audio Home Recording Act in order to become a distribution service without paying 

our artists is just an untenable position. And we are here to say 

that as the march of technology goes forward, the best way to resolve differences between parties is to allow the free market to operate. But to the extent that compulsory licenses are the order of 

the day, we must make a clear distinction between a distribution 

service and a performance service. 

Chairman SPECTER. Thank you, Mr. Bronfman. 

Senator Leahy. 

Senator LEAHY. I was interested in these last couple of answers 

when we go back through all the definitions, of course, in the Copyright Act. But just to kind of followup on that, the Act doesn’t define distribution, which is probably one of the reasons why we are 

here. We have these new satellite devices, XM To Go and the like. 

You can hang on to a song that has been played Mr. Parsons on 

something like your radio prescription service. 

So let me ask each one of you this question: Is this a distribution 

or not? As you can imagine, a lot hangs on the answer to that question. 

Mr. Rundgren? 

Mr. RUNDGREN. Well, my feeling is that, first of all, the record 

industry has depended on a commoditized view of music that 

makes all artists equivalent. In the case of the iTunes store, we are 

all worth exactly $.99. As I understand the device, it is incapable 

of decontextualizing any music that is played over the radio. It can 

19

certainly label it, but that is not a unique feature. I have seen 

prototypical devices where you can hold up a cell phone to a piece 

of music that is playing in the air and have it be identified by a 

data base that is on a remote server. 

So my feelings are that even while they are making something 

a little more convenient, they are not doing anything unique and 

the likelihood is that some hacker somewhere will find a way to do 

this anyway. 

Senator LEAHY. But is it a distribution? 

Mr. RUNDGREN. What is that? 

Senator LEAHY. Is it a distribution? 

Mr. RUNDGREN. Internet distribution, in general? As I say, I believe that artists make the most income when they go out and play 

somewhere and need to have things like radio for the purposes of 

promotion. The fact that people may make an illegitimate copy of 

one of your songs has never bothered me at all because I feel it increases my audience. 

Senator LEAHY. Let me ask Ms. Shaw, if you have something like 

XM To Go and you could hang on to a song that has been played 

on satellite radio, a subscription service, is that a distribution? 

Ms. SHAW.. I think it is a simple answer of yes, I mean absolutely. I used to do things off of radio, too, as a kid. It was bad 

quality and I went and bought the record. This is pristine, perfect 

quality. 

And I have to say in respect of Mr. Rundgren, I think it is great 

if you want to get one of your songs out there for free and you don’t 

mind that and it helps to increase your touring. I don’t tour. I 

make 9.2 cents per song that is sold. That is how I feed my children. I am the parent that works out of the house, so it is a distribution. 

Senator LEAHY. I got you. 

Mr. Bronfman. 

Mr. BRONFMAN. The services allow you to record 10, 20, 30 hours 

of music, see exactly what you have recorded by song title, 

disaggregate and delete those that you don’t want and keep the 

ones that you do want permanently so long as you are a subscriber, 

which benefits XM. So, Senator, with respect, if it swims like a 

duck and it quacks like a duck, it is a duck. 

Senator LEAHY. Mr. Parsons. 

Mr. PARSONS. Well, Senator, when I was a high school disc jockey 40 years ago, I made eight reel-to-reel recordings off the radio. 

I still have some, I guess, permanently archived or something in 

my basement. I can do it on a cassette tape. This device does it off 

the FM radio, separates it by song directly off the air, stores it not 

only in memory but on a—— 

Senator LEAHY. Distribution or not? 

Mr. PARSONS. No, no different distribution than the distribution 

that has gone on for 50 years. 

Senator LEAHY. Mr. Reese, distribution or not? 

Mr. REESE. If, as this Committee has recognized, the consumer 

has a right to—and I think this Committee has recognized the consumer’s right to make a personal copy, and if you want to redefine 

that, I guess that is appropriate. 

Senator LEAHY. Without redefining it, is it distribution? 

20

Mr. REESE. I think if that is not a distribution, I am not sure 

why this is. 

Senator LEAHY. Mr. Lam? 

Mr. LAM. I agree completely. 

Senator LEAHY. A consumer asks for a specific piece of music, receives it, pays for it. Is that the definition of distribution? Or the 

music service transmits a piece of music and the consumer can 

keep it or not, as he chooses. Is that a distribution or is it something else? 

Mr. Parsons? 

Mr. PARSONS. That is a very close analogy between it. I think the 

only other element of it that I would add is, yes, it clearly is distribution. If it goes out, you can find it, you can bring it down, and 

then you can use it as you want, which is a critical differential. If 

a radio station is playing a collection of songs that you did not request, but you hear one that you like and you record it, you have 

done that for 50 years. 

The critical additional differential that has always been put into 

the law is, yes, every consumer has the right to make that one 

copy, and you are pleased when they run to the radio and they put 

down that one copy. They do not have the right to then distribute 

it, turn it digitally, put it on the computer and distribute it. We forbid that and keep our devices from being able to allow that to 

occur. 

Senator LEAHY. Mr. Bronfman? 

Mr. BRONFMAN. Sir, I think a performance is the right to listen. 

A distribution is the right to keep a copy. The point for consumers 

is not to get their music off of their device onto their computer. The 

trick for consumers is to get the music off of the services, onto a 

mobile device, so that you can travel wherever you are traveling, 

sir, and can have a 700 or 800-song library. Mr. Parsons proposes 

that his consumers should have that library for free. 

Senator LEAHY. I want to add I bought and paid for everything. 

I even have the record. I am buying and paying for every single 

song. 

Mr. BRONFMAN. We are delighted, Senator. 

Senator LEAHY. A lot of them were from your company. 

Chairman SPECTER. Thank you, Senator Leahy. 

Senator Hatch. 

Senator HATCH. Mr. Reese, welcome back to the Committee. I always enjoy having you here from our home State of Utah. Could 

you please explain for us what differences exist between satellite 

radio and over-the-air radio? 

While you are explaining that, please address whether these differences warrant different treatment with respect to paying for performance rights. And after Mr. Reese gives his answer, I would be 

happy to have any of the rest of you on the panel respond. 

Mr. REESE. I think the terrestrial radio business is now in its 

86th year, starting in the Chairman’s home State, and it is a local 

service. It is in that respect largely unique in the world. It is based 

on 15,000 radio stations who serve a finite area, depending upon 

the power they operate and their tower locations. But it is a local 

service with public service obligations imposed by this Congress in 

the 1920 Act and again in the 1934 Act. 

21

The satellite business, on the other hand, is licensed as a national distribution service and it is a subscription service. It is not 

free over-the-air; it is by and large not advertiser-supported. This 

Committee has recognized numerous times, and specifically in the 

1995 copyright legislation and the 1998 copyright legislation, the 

differentiation between—or the value that the record industry gets 

from promotion of its recordings on our radio stations and has identified that as an adequate basis for not imposing that performance 

right. 

But I would add that to the extent radio stations use their programming expertise and become webcasters, as the kinds of folks 

Mr. Lam’s organization represents, we do pay those fees when we 

distribute over the Internet. And at this point, one of the recommendations we would strongly make again is that when we simply redistribute our radio stations over the Internet, within the 

service areas of those stations we ought not to have to pay those 

performance rights. When we create new products over the air, we 

are webcasters and we pay a fee. 

Senator HATCH. Anybody else? Mr. Lam? 

Mr. LAM. Yes, I would like to address that point. I think if we 

look around the world, almost all countries require terrestrial radio 

to pay performance rights royalties, if I am not mistaken. I think 

it is a fact that we have very antiquated legislation that needs to 

be looked at and addressed. 

I think terrestrial radio is enjoying an incredibly unfair advantage over Internet radio. I think if we were to grant the exemption 

that Mr. Reese is asking for, we would forever be disadvantaged 

and we wouldn’t have a business because there is no parity. 

Senator HATCH. Anybody else? Mr. Parsons? 

Mr. PARSONS. Senator, I would say, yes, a good characterization 

of some of the differences between the subscription services versus 

the free over-the-air. I think there are differences there, predominantly local, predominantly national, and room for both. I think we 

both have that. 

When it comes to the issues before this Committee—can you 

record music played and should the artist be compensated for that 

music that is played—there is not that great dissimilarity, and particularly as digital radio emerges each of those should pay. We pay 

twice. We pay for the performance rights. Our manufacturers pay 

for the right to record. 

The only difference I will have in the characterization of whether 

it is a distribution versus a listening—the characterization is not 

just simply listening or making a recording. If so, once again, every 

cassette tape and every TiVo and every reel-to-reel recorder would 

be considered a distribution and paying royalties. 

Senator HATCH. Ms. Shaw. 

Ms. SHAW. I have sat here and listened to Mr. Parsons and written down how many times you have said ‘‘performance rights,’’ 

‘‘performance rights,’’ or ‘‘we pay for the right to play the music,’’ 

and never once said ‘‘to download,’’ ‘‘to distribute.’’ 

You are paying for playing and I appreciate that, but you are not 

paying for the sale, for the download, for the person taking it on 

the plane with them. And you have used these words, and I don’t 

know if it is purposely phrased perfectly, but you have used the 

22

word ‘‘play,’’ ‘‘play,’’ ‘‘play,’’ and never ‘‘download,’’ and I think there 

is a significant difference to that. 

Senator HATCH. Mr. Parsons? 

Mr. PARSONS. Yes, sir. I mean, there is definitely a difference, 

and that is the reason I say we pay twice. We pay both for the performance and through the manufacturers under the Audio Home 

Recording Act that did say if you create a digital device to record 

a digital transmission over the radio or over the air, then, in fact, 

there is an additional payment that then goes to the artist and to 

the record labels. 

Ms. SHAW. I am not an artist or a record label. I am a songwriter, so I am not getting anything here. I am getting something 

stolen from me. 

Senator HATCH. Mr. Bronfman, you have the final comment. 

Mr. BRONFMAN. Yes, Senator Hatch, thank you. Again, Mr. Parsons, when he says he is paying twice—first of all, he is paying for 

a performance and he is paying significantly below market rates for 

that performance, No. 1. No. 2, he seeks to have a distribution 

service and not pay for it at all. 

And No. 3, when he talks about how the manufacturers are paying under the Audio Home Recording Act, the manufacturers pay 

approximately $1 to $2 million a year to the industry. By contrast, 

the digital music service, the business will be a $1 billion-a-year 

business this year, growing dramatically. The industry gets $2 million a day. So the Audio Home Recording Act and the manufacturer’s royalty does nothing to address artists’ concerns. Mr. Parsons 

knows that full and well. 

Senator HATCH. Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you very much, Senator Hatch. 

Senator Feinstein. 

Senator FEINSTEIN. Thank you very much. Mr. Chairman, as you 

can see, it has been somewhat difficult to put this together, but I 

do think we have a good bill. I would like to put in the record, if 

I can, letters from the American Federation of Musicians, the 

American Federation of Television and Radio Artists, the Recording 

Academy, the Recording Artists Coalition, the National Music Publishers Association, and the Recording Industry Association of 

America. 

Chairman SPECTER. Without objection, they will all be made a 

part of the record. 

Senator FEINSTEIN. Thank you very much. 

Let me thank you, Ms. Shaw, for your presentation because I 

really think you illustrated what the problem is. America’s greatness is our pioneering soft products, the talent that we have, and 

the expression of that talent. As technology improves and takes 

over, we have to change our laws so that the talent is protected, 

and that is what we are trying to do in this legislation. 

I think Mr. Bronfman put his finger on it when he said performance is listening, distribution is keeping. You have something you 

keep forever, and when digital radio comes about, you will be able 

to do it right off the radio. So the Commerce Committee is looking 

at that because you lose your rights as the technology increases, no 

question about that. So what we are trying to do is change that. 

23

Now, let me ask Mr. Parsons a question. In your testimony, you 

talk about this new device that will allow a subscriber to store up 

to 50 hours of programming and how XM wants to provide a device 

that would be supportable so a subscriber could listen to your service at the gym or on an airplane. I think you even showed it. The 

manufacturers pay for it, but nobody pays for the distribution of it. 

Both of these characteristics would be allowed under my bill, as 

would some modifications, including sorting by programs, channels 

or time periods. What would not be allowed is the disaggregating 

of songs and the ability to allow consumers to create personalized 

play lists. This seems to me like a fair balance. Consumers get a 

lot of flexibility and functionality, but it does not allow for a complete substitution of sales. 

So how can you argue that to give this functionality to consumers 

is not a distribution? This puzzles me. I just can’t understand your 

logic. 

Mr. PARSONS. Senator, I appreciate the question, and certainly 

we appreciate the artists’ concerns as well. That is why we say we 

pay for the performance; we also from the manufacturing end 

through the Audio Home Recording Act pay for the devices that do 

the recording. If that is not the right rate, then great, we will revisit the rate. We have discussions ongoing relative to what those 

rates should be. We are in the process of that renegotiation to find 

what is the right economic balance for that on a fair value type of 

a basis. 

But we also need to understand that all of those items that you 

just mentioned—the ability for a consumer to record one song 

versus two songs, or erase one song if they want to—are all rights 

that have been long in place. Whether it was tape, whether it was 

digital or not, those are all functions that have been there for 

years. They have served essentially as a marketing venue in many 

cases for getting exposure to new products. 

But there is nothing that is new. This one does it off the FM 

radio and this one does it off the XM radio. Both can create individual copies and rearrange them. I make a jogging tape off of my 

cassette tape off of the radio, and they are all the same. 

Senator FEINSTEIN. But let me just argue this with you for second. 

Mr. PARSONS. Certainly. 

Senator FEINSTEIN. So you are giving everybody individual CDs, 

effectively, but there is no royalty paid on them by the individual 

or by you. 

Mr. PARSONS. The ongoing royalties that continue to be paid—

and we can debate whether they are the right amount or the wrong 

amount, but they are the up-front costs that Congress decided 

needed to be paid by every manufacturer to have a recording device 

in the first place. Then, second, at least with our service, not with 

regular radio, but with our service, we continue to share a portion 

of our revenue on an ongoing basis for that right to continue to 

hear and have that information available. 

Senator FEINSTEIN. Mr. Lam, you wanted to comment. 

Mr. LAM. Yes. I think I disagree with Mr. Parsons on his analogy. I think in our case, when people listen to us, every song 

stream that we stream we have to pay for. In your case, when you 

24

get your listeners downloading or recording on XM, that is the end 

of paying for that stream. So, basically, you are benefiting unfairly 

from that. 

If we are talking about parity here, that means should we be entitled to the same kind of conditions or legislation? I think one 

thing that we do appreciate and that we want to do as Internet 

radio is that we have been paying lots of royalties. In fact, every 

month I sign a big check, paying ASCAP, BMI, SESAC and the artists. I am very happy to do that because we fully support them, we 

fully support them. 

On the other hand, we have to be careful not to over-legislate or 

to over-assert intellectual property rights because in our particular 

case we are bearing the brunt of it, and as a business we cannot 

continue to operate under this unfair circumstance. 

Senator FEINSTEIN. Yes? 

Mr. RUNDGREN. I would be interested to know if this random 

bunch of songs that you have recorded is considered a distribution, 

would not XM be entitled to a refund when somebody erases one 

off the device? 

Senator FEINSTEIN. No more than if you break your CD. 

Mr. RUNDGREN. Well, the whole point is it is an arbitrary bunch 

of songs and the likelihood is you might not keep any of them. 

Senator FEINSTEIN. But the point is you have them, just as you 

have your record library or—— 

Mr. RUNDGREN. Well, you are making the assumption that it is 

kept just because it is recorded. It may be immediately discarded 

afterwards. 

Senator FEINSTEIN. No, because it is distributed. 

Mr. Bronfman? 

Mr. BRONFMAN. Yes, I think that is a fundamental misunderstanding of the legislation and the proposal. The legislation actually allows people to record blocks of programming. When it becomes a distribution is when those recordings are disaggregated 

and libraried, and that is a distribution. 

What Mr. Parsons is arguing for is that the compulsory license 

covers a distribution as well as a performance, and that will result 

in his not having to pay a fair market rate. We want consumers 

to disaggregate, we want consumers to store music, we want consumers to buy, we want songwriters like Ms. Shaw to be compensated. What we don’t want is a situation where the misuse of 

copyright law is used to allow a distribution to be delivered under 

a compulsory license. 

Then why would iTunes ever exist? It shouldn’t exist because 

this service substitutes for iTunes. And as Mr. Parsons advertises, 

his device is not a pod; it is the mother ship. In other words, it is 

better than an iPod because it is a distribution service and you 

don’t have to pay for it. It is absolutely free. 

Mr. RUNDGREN. You cannot get a song on demand from XM 

radio. You cannot get a single piece of music on demand. 

Mr. BRONFMAN. Mr. Rundgren, you can record 50 hours of music. 

You can identify the five songs that you wanted. 

Mr. RUNDGREN. But you can do that off of terrestrial radio. 

Mr. BRONFMAN. No, you really cannot do that off of terrestrial 

radio. And I think the other distinction that is clear here is that 

25

this is a single service. Terrestrial radio is a broadcast service and 

some third-party device manufacturer that Mr. Parsons is holding 

up consistently is not part of a single service, which is what XM 

is doing. 

Chairman SPECTER. Mr. Rundgren, do you care to respond? 

Mr. RUNDGREN. I mean, just insisting something is different 

doesn’t make it different. As I say, there may be some convenient 

elements that are built into this device. It doesn’t mean that everybody is going to use them. We are making the assumption that just 

because that capability exists, people will use it to the extent that 

justifies additional fees. 

On top of that, this is not the record industry’s problem. The 

record industry’s problem is peer-to-peer networks, where people do 

get the songs they want and they get them without paying royalties and they are fully decontextualized direct from the record. 

Chairman SPECTER. Thank you. 

Senator Schumer. 

STATEMENT OF HON. CHARLES E. SCHUMER, A U.S. SENATOR 

FROM THE STATE OF NEW YORK 

Senator SCHUMER. Well, thank you, Mr. Chairman. I want to 

thank you for having this hearing and thank all of our witnesses 

for a lively discussion. It is a very important discussion because 

many of the issues our Committee deals with come when technology bumps up against intellectual property. And we want to see 

both furthered, so you have difficult situations all the time. 

I told my kids the other day I had that record and they didn’t 

know what I was talking about, and they are 21 and 16. Like most 

people, I guess, we have this big collection of records that we don’t 

want to get rid of because I remember buying them all when I was 

a teenager and in college and later. They are sentimental, but they 

take up all this space and they are so heavy and we don’t know 

what to do with them, but they are still in our house. 

Digital music technology is allowing more people to enjoy music 

in more places than ever before. That is great. The advance is a 

huge step forward for everyone involved in music, from the artists 

who want to see as wide a distribution of their work as possible, 

and producers, to broadcast companies and listeners. 

But as I said, while we support the advance of music and technology and all the new possibilities it brings, we have to make sure 

it is done in a way that treats all parties involved fairly. And to 

me at least, that means making sure intellectual property is protected because average people would say, hey, I don’t want to—in 

China, there is a whole different mentality and they don’t even believe in protecting intellectual property right now. They don’t think 

there is anything wrong with taking somebody else’s work and not 

paying for it. 

So to me at least, this argument here is Napster all over again, 

except it is radio. I remember when Napster first appeared on the 

scene. It was great. Everyone loved it, and then people realized as 

it became more and more prominent that it wouldn’t lead to more 

music, but it would lead to less music because people weren’t being 

rewarded for the work that they put in. 

26

I think what happened with Napster was very good. We have a 

whole new view that it was wrong, and people now, because all the 

companies got together, don’t mind paying the $.99. I don’t. I give 

my kids $20 a month so I can have 20 new songs on my iPod. It 

is great for everybody. So Napster taught us we need balance, that 

we should support the progress being made in new technology for 

music listeners, but we need to do it in a way that treats parties 

fairly, promotes healthy competition, and rewards intellectual property. 

That is why I am glad you are holding this hearing and that is 

why I am glad Senators Feinstein and Graham have introduced 

their legislation which I intend to support. I think it does strike 

that fair balance. The best new ideas should be allowed to compete 

in the marketplace, but to truly promote healthy competition, everyone needs to be competing on a level playing field that makes 

sense. 

The standards that apply to one provider of digital music should 

apply to others providing the same kind of services. That is basically my view. As we learned from Napster, even when exciting 

new ways of getting music to listeners are created, it shouldn’t be 

simply at the expense of people who make that music possible in 

the first place. Our laws, simply put, need to keep pace with rapid 

technology. 

The basic framework of rewarding people for the efforts of their 

labors has to keep pace with technology. Just because a new technology comes in doesn’t mean you throw that away, even if it 

makes it a little easier and more convenient for the listener, because in the long run the range and the depth of entertainment, 

music, joy, whatever you want to call it, will decrease if we do that, 

not increase. So that is why I support this legislation. 

I just have one quick question, Mr. Chairman. I only have a 

minute left, so I am only going to ask it of Mr. Parsons. Let me 

just ask you, at what point do we draw the line? At what point 

does recording a radio show turn into creating your own personal 

music library? The devices you are holding up are made for the 

purpose of providing music for listeners to record and keep, not just 

listen to once. Where is the line? You would draw it in a different 

place than I would or Senator Feinstein would. 

Mr. PARSONS. Senator, probably so, and I agree with you a hundred percent, by the way, on all of the Napster comments. The primary difference between the Napster issues and these issues are 

the in the Napsters issues there were no payments; it was for free. 

In these issues, we are the single largest payer of performance 

rights existing of anyone at this table. 

The large companies pay nothing. We pay more than all other 

distribution mechanisms combined, and so that element of paying 

for performance, and particularly on a compulsory license where, in 

fact, the little artist as well as—Madonna doesn’t need much help; 

Warner watches after her well. But the smaller artist—when it is 

compulsory, the little guys get played and the little buys get paid, 

and that has been the elegance behind this system. 

Where, in fact, it becomes a difference and where across the line 

does it, in fact, go when you record is a question that I think has 

been seminal to the question of whether it is a cassette, whether 

27

it is a reel-to-reel tape, whether it is recorded off of FM radio, 

whether it is recorded off of ours. Certainly, where this Committee 

has come out in the past and where Congress has come out in the 

past is it is permissible to make one copy for your personal use, not 

for distribution, not for sending it out across the Internet, at which 

point it becomes illegal. 

So what we have done is we have looked at the laws and we have 

designed the products consistent with the laws. We have paid for 

the manufacturing of them and we have paid again for the performance of them. But we have made the things that are legal easy 

to do. We have made the things that are illegal almost impossible 

to do. 

On this device, you can pull out a card, slide it into your computer and, boom, it is out on the Internet. Your music is compromised forever. We actually had a service that tried to abuse a 

product of ours 2 years ago by, in fact, putting it on to the computers, being able to tag it and get it off of the Internet. We worked 

very quietly and very cooperatively with the recording industry 

who, by the way, have been our partners in this process, I mean, 

really for a while in developing this business. 

We shut that down. How did we shut it down? Well, actually, we 

removed our product from the market. No one even noticed it. We 

terminated that product completely because someone had found a 

way to abuse it and get it out on the Internet and distribute it beyond their own personal use. 

But when this Committee or this industry decides that it is time 

to deny the American public the right to make a single copy over 

the air for their own use, then there are far larger issues at play 

than XM radio. There is TiVo and HBO and the Internet and tape. 

So those are the issues that the laws are in place. We pay under 

the laws. We pay for recording, we pay for performance, and we are 

willing to continue to do that, but not to be isolated and picked out 

as a single industry to enforce. 

Senator SCHUMER. Thank you, Mr. Chairman. 

Chairman SPECTER. Thank you, Senator Schumer. 

Mr. Bronfman, do you have another comment? 

Mr. BRONFMAN. Yes. I just want to say Mr. Parsons continually 

hides behind the consumer and this notion that they have the right 

to record one song off the radio. Certainly, they do, and there is 

nothing about this bill or nothing about our arguments that suggests that we want to stop consumers from recording off of the 

radio. 

This is not a radio. This is an iPod, this is a distribution. This 

is clearly what XM calls their devices. It is in no way an iPod, and 

to suggest that librarying thousands of songs is somehow the same 

thing as a consumer with a reel-to-reel tape recording off of a radio 

is just, as I said before, completely, utterly and without question 

disingenuous. It is not the case, and we must insist that a distribution is a distribution, not a performance. 

My only other point to Mr. Parsons, who continually says that 

he is the largest payer of performance royalties, is that is true. It 

just shows how under-compensated our artists are in relation to 

the rest of the industry. 

28

Chairman SPECTER. Thank you very much, Mr. Bronfman. 

Thank you all. Senator Cornyn was here earlier, but had other 

commitments and had to leave. Without objection, his statement 

will be made a part of the record. 

This has been a very illuminating hearing, and it is obvious that 

it is very complicated, very technical and very controversial. We 

make an effort, as Senator Feinstein alluded to earlier, to try to 

bring the parties together to see if we can’t find some accommodation. I am prepared to undertake that further as Chairman of the 

Committee to invite you in for a roundtable discussion on a less 

formal basis, more informal basis. Senator Feinstein, I hope, will 

join us to see if we can work it out. 

Very frequently, all of your interests are best served by coming 

to an agreement rather than leaving it up to the Congress because 

you know the issues much better than we do. We will try to become 

familiar with them, but our expertise is not going to match yours. 

Ultimately, we have the responsibility for making a public policy 

judgment as to what is fair and what is equitable, but we have 

found that a better path on many, many similar controversies is to 

try to bring the parties together. You are better off in working it 

out than in relying on our judgment very frequently. 

Senator Feinstein. 

Senator FEINSTEIN. I would thank you for that, Mr. Chairman. 

These are the two least controversial areas. Wait until you get to 

interactivity. These are the two areas where I thought there was 

considerable consensus, I guess, outside of XM, and so I am rather 

puzzled how anybody could have a problem with just allowing everyone to do the same thing, which is parity, under the compulsory 

license. To me, it is the fairest thing that could be out there. In 

any event, we will see. 

Chairman SPECTER. Well, beauty is, as we know, in the eye of 

the beholder. I heard a fair amount of controversy here today. Perhaps it is contagious when you come to a hearing room occupied 

by Democrats and Republicans. We sometimes have disagreements 

between the two parties. 

That concludes the hearing. Thank you all very much. 

[Whereupon, at 11:06 a.m., the Committee was adjourned.] 

[Questions and answers and submissions for the record follow.]

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