MMW-32 -- JASRAC Wants Piece of Ringtone Software Pie

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J@pan Inc Magazine Presents:
M U S I C M E D I A W A T C H
Commentary on the week's music technology news
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Issue No. 32
Wednesday, October 9, 2002
Tokyo

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CONTENTS

++ FEATURE: JASRAC Wants Piece of Ringtone Software Pie

++ NOTEWORTHY NEWS:
- Bill Protecting Small Webcasters Passes House Vote
- Liquid Audio Sells Patents to Microsoft
- Archos Releases Jukebox FM Recorder 20

FEATURE: JASRAC Wants Piece of Ringtone Software Pie

It appears that 3.8 billion yen in annual ringtone royalties is just
not enough for JASRAC, the Japanese organization that makes and
enforces many of the rules regarding music copyright and licensing
issues. By taking a fixed percentage of the revenue generated from
ringtone downloads and subscriptions, JASRAC has emerged as one of the
big winners in the ringtone industry, and has further solidified its
position as gatekeeper of Japan's music industry.

In addition to revenue generated from ringtone downloads, JASRAC also
charges a lesser amount for ringtones categorized as
"trial-listening," meaning that the songs can only be used from within
a mobile Java application and cannot be stored onto the user's phone.
Until recently, ringtones used within music-related Java applications
have all been treated as trial-listening. This classification has
allowed providers to create a variety of applications for their
subscribers at little or no charge. Examples include visual jukeboxes
as well as "synchro" applications such as karaoke applis and
music-related games, or applis that teach the guitar chords for
popular songs by showing graphically where to place each finger on the
fretboard as the song is playing.

Now, JASRAC wants to reclassify the ringtones used in synchro
applications as standard ringtones, meaning that the providers will
have to pay a much bigger cut to the organization, based on the number
of times each song is used in one of these applications. The problem
is that there are now many services in operation relying on synchro
applications (some of them free and quite popular) which could become
very difficult to continue if the provider is forced to pay the higher
royalty rates.

For the time being, however, it appears that the larger companies that
have long-standing relationships with JASRAC have been able to work
out a compromise. According to one of our larger clients, as long as
the existing synchro application can be modified to have a button
somewhere that says "trial listening," which allows the user to simply
hear the song (with no animated graphics), the ringtones used in the
application will not be subject to the higher royalty rates. In
addition, the provider must keep a record of the number of times each
song is used in the application and file a monthly report with JASRAC.

While the inclusion of this little loophole will no doubt allow some
of the previously mentioned services to stay up and running, it is
likely to create a good bit of confusion for users. As an example,
take the appli for teaching guitar chords to popular songs. (If you
happened to catch the May 21 issue of MMW about Theta's Mobile
Jakajan i-appli, you'll realize that this is not exactly a
hypothetical example.) In order to avoid the higher rates, the
guitar-teaching appli will have to be changed so that the user is now
presented with a choice after selecting a song:

1. Hear the song and see the guitar chord fingerings as the song
plays, OR
2. Hear the song and don't see anything.

My guess is that many users will be in the dark as to why option #2
even exists. After all, they are paying to download an appli that
teaches guitar chords for songs. Why would they then deliberately
choose not to see those chords?

Nevertheless, for the time being, it seems that large ringtone/appli
providers like our client are just relieved to have found a way to
work around the issue, which lets them avoid the higher rates and
continue running their software services. However, it remains to be
seen how users will react to the modified applications. It is also
still unclear whether the same loophole will be available to
smaller services or to providers who are planning new ringtone
software services.

-- Steve Myers

=============================EVENT====================================
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14-17 January 2003, Tokyo, Japan
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For further information, visit: http://www.3gmobileforum.com
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++ NOTEWORTHY NEWS

** Bill Protecting Small Webcasters Passes House Vote

In Brief: A bill that would allow smaller Webcasters to pay a
percentage-based fee rather than a flat per-song fee to record labels
was approved by the US House of Representatives on Monday and will now
go to the Senate for a vote. The bill would grant a reprieve to many
smaller Webcasters who faced possible bankruptcy following a
controversial June ruling that requires Webcasters to pay a fixed
amount for each song played for an individual user.

Source:
http://news.com.com/2100-1023-961100.html

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** Liquid Audio Sells Patents to Microsoft

In Brief: Last week, Liquid Audio announced that it will sell its
digital encoding patents to Microsoft for $7 million. The deal is seen
as a boost to Microsoft's plans for developing its own music
distribution service and digital encoding standards.

Source:
http://www.europemedia.net/shownews.asp?ArticleID=12895

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** Archos Releases Jukebox FM Recorder 20

In Brief: The latest MP3 portable player from Archos is reviewed here
by Richard Menta from MP3 Newswire. The device has an FM tuner and
20GB storage capacity. This review provides detailed specs and
features and compares look and performance with the iPod as well as
previous Archos jukebox releases.

Source:
http://www.mp3newswire.net/stories/2002/archosfm.html

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STAFF
Written by: Steve Myers (steve.myers@l8tech.com)
Steve Myers heads the Theta Group at Layer-8 Technologies,
which specializes in the development of music-related
software applications.

Edited by J@pan Inc editors: (editors@japaninc.com)

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