Letter to RIAA Stating NARM's Position on Licensing of 30-Second Sound Samples

May 29, 2001

Cary Sherman

Executive Vice President and General Counsel

RIAA

1330 Connecticut Ave. Suite 300

Washington, DC 20036

Dear Cary,

            I am writing to inform you about NARM’s position with respect to whether a license is required for making and performing sound samples used online or in-store exclusively to promote the sale of sound recordings at the point of sale.  The last time you and I spoke about the need to create a place for an online equivalent of in-store play was about 18 months ago.  Our discussion was in the context of the performing rights organizations telling retailers that they needed to pay a performance royalty for sound samples.  At that time, you told me that your member companies were supportive of the need to let consumers hear small samples of music online prior to purchase, and that you were actively engaged in negotiations with ASCAP and BMI for reciprocal rights in this area.  In the intervening months, however, several record companies have begun asking retailers to sign license agreements in order to offer sound samples at the point of sale online.  One company is taking the position that even sampling which occurs in a store, if provided through an internet connection and service, must be licensed.

            Let me first note that NARM agrees with RIAA (and with BMI) that there is no automatic exemption for any and all uses of a 30-second sample.  We know that there may be circumstances in which 30 seconds (or even less) might be used in a manner that directly exploits copyright. So, to be clear, our position is related solely to content that` is offered at the point of sale by retailers who are selling lawful copies of sound recordings either in a physical store or over the Internet.  In that context, it is NARM’s position that the employment of 30-second samples solely to promote the sale of lawful copies of sound recordings falls well within the boundaries of permissible fair use.

Second, let me note that we recognize the need to take into account the difference between point-of-sale promotion to a consumer who is in a physical store (and can’t walk out with the music) and point-of-sale promotion on the Internet (where streams and downloads are transmitted to a consumer’s computer).  We believe that the 30-second sampling approach adopted by most online retailers and provided for in the SDMI protocols is entirely reasonable and warrants the unqualified support of our industry.   NARM’s position is that no license should be required if the use of 30-second samples is limited to promotion at the point-of-sale, whether in the store or online, of the same sound recording.

            We believe that our position makes good sense and that supporting retail efforts to promote the sale of music is in the best interests of the record label, it’s artists, and the consumers.  We are troubled that retailers are now being told that they need permission, and perhaps payment, to advertise what they sell.  Industry practices in support of independent promotion of music by retailers have historically been so strong as to have been codified in law.  Why would record companies now be concluding that retailers are no longer fit partners for this practice?

            Further, we believe that because retailers have the legal right to promote and advertise products which they offer for sale, they also have the legal right to outsource the activities and services required for cost-efficient, first rate promotion.  Third party providers of sound samples do not, in our opinion, profit from the intellectual property contained in a 30-second sound sample.  There is no consumer market for incomplete songs.  Third party providers profit from providing services that facilitate the retailer’s fair use of the sample.  In other words, the bottom line is that the only use being made of the song samples helps the copyright owners make more money by selling more of their music through legitimate partners.  We are at a loss as to why a label would oppose this practice.

            Therefore, we oppose efforts to require our members to obtain a license to lawfully advertise the products they sell, and we ask for your support and for that of your member companies of this position.

                                                                                    Kind Regards,

                                                                                    Pamela Horovitz

cc:                   Hilary Rosen, RIAA

                        Richard Cottrell, EMD

                        Pete Jones, BMG

                        Dave Mount, WEA

                        Jim Urie, UMVD

                        Danny Yarbrough, Sony