FullAudio Signs EMI

Baldwin Louie — Mon, 16 Jul 2001 15:00:00 -0700

FullAudio landed a licensing deal with EMI Recorded Music, which paves the
way for a launch of the subscription music service in the fall.

The deal brings FullAudio's license tally up to three, with EMI Publishing,
EMI Recorded Music and BMG Music Publishing. For a subscription-based music
service like the one FullAudio has developed, there are generally two
licenses required to use a song, one from the publisher and one from the
label.

Now that FullAudio has both deals signed with EMI, they could theoretically
launch their service using songs from EMI's vast catalog including artists
such as Radiohead, Coldplay and the Beatles.

"We could launch the service today with 20,000 tracks," said FullAudio
president and former BMG executive James Glicker. "But we think that by the
time we launch we'll have another label or two."

The label deal is a major step for FullAudio, which is in a race to get its
subscription service up and running before competitors MusicNet and
Pressplay. The first label deal is always the toughest, Glicker explained,
"it should open the door to the other majors."

Though FullAudio has acquired two licenses from EMI and one from
Bertelsmann, it still has quite a bit more talking to do before it will have
access to repertoire from the other major labels, Universal, Warner, Sony
and BMG Entertainment.

The majors have lined up behind their own subscription efforts. Pressplay,
backed by Sony and Universal, is using Microsoft technology and has a portal
deal with Yahoo. MusicNet, backed by EMI, Warner, BMG and Real Networks will
be using Real's technology to power its service.

Glicker believes he will have an easier time getting a license from all the
majors because of the independent status of his service - though it's staffed
with former BMG executives, it is not affiliated with any of the major
labels.

By obtaining two sets of rights - from EMI's publishing and label arm - Glicker
can launch its service without fear of the legal repercussions suffered by
Napster. There is one caveat, however. In digital music there always is.

Some rights societies are claiming that music played on an individual's
computer constitutes a public performance, which requires a third license.
Typically, a public performance right is necessary to legally play a song
during a concert, in a bar, or on the radio. These are collected by
performing rights societies like ASCAP and BMI in the US, or PRS in Britain.

ASCAP claims that a performance right is triggered any time a song is
transmitted digitally.

"The simple fact of the matter is it is still being delivered to your
computer," said Chris Amenita, senior vice president of enterprises at
ASCAP.

Glicker argues that the FullAudio service is a private performance in which
the user has paid for the temporary personal use of certain songs.

"We don't believe there is a public performance," Glicker said. "This is not
radio; the performance is wholly contained between the computer and the
user."

In disputes such as the one that seems to be brewing here, ASCAP can seek
recourse in a rate court proceeding to determine if a performance right must
be paid. Amenita says ASCAP has not gone through a rate court proceeding
with an Internet company, but, he said, "that is always something that is
available."

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FullAudio Signs EMI