There's nothing like losing a multibillion-dollar lawsuit to turn an outspoken critic of the recording industry into one of its most fervent supporters.
Michael Robertson was once known for his feisty statements against the industry. But the chief executive of MP3.com is singing a different tune now that he's settled with four of the five major labels that sued his company.
When his company was accused of willful copyright infringement in January, Robertson declared the recording industry was against "consumers' rights," "new technologies" and "the expansion of artists' revenues."
This is in sharp contrast to his statements following MP3.com's settlement with Sony Music Entertainment last week. There, Robertson said Sony clearly "embraces the Internet" and "values responsible technologies that excite consumers and reward content owners."
Similarly, when MP3.com settled with EMI Group in July, Robertson said: "EMI has once again demonstrated its grasp of the Internet and the difficult issues with which we are faced." Robertson was unavailable to comment.
Did the settlements require Robertson to publicly repudiate earlier statements that were damaging to the recording industry's image?
"It's an interesting speculation but no more than a speculation," said Peter Jaszi, a professor specialising in copyright law at American University.
The companies disclosed that MP3.com would pay Sony damages for "past acts" and enter into a non-exclusive licensing agreement in which Sony will get royalty payments whenever its music is uploaded or played on the My.MP3.com system. Further details, including dollar amounts, were not disclosed, although MP3.com said it was setting aside US$150 million to cover anticipated settlement costs in its second-quarter financial results.
Now Seagram's Universal Music Group is the only plaintiff that has not settled with MP3.com, though analysts expect that it will soon. The My.MP3.com service was shut down by a preliminary injunction but will be re-established once an agreement with Universal is reached.
MP3.com launched the controversial service in January to enable users to upload their CDs into a personal "locker" on the MP3 site, as well as transfer copies of CDs purchased from several online retailers. To save time on file transfers, the company compiled a huge database of CDs and placed copies in users' accounts once they proved they owned the CD.
The recording industry, unhappy with a business model that cuts it out of the transaction, sued the company for compiling a database of music for commercial purposes without permission from the copyright owners. The judge's preliminary decision in May was in their favour.
Still, the record labels have incentives to settle before the trial begins today, said Phil Leigh, vice president of Internet Research at Raymond James, a financial firm.
"They have seen that the service can be useful to them," Leigh said, adding that they will get incremental revenue from royalties and a new opportunity to market their music through a popular Web site.
MP3.com has even more to gain. Not only does it get to relaunch the system quickly, Leigh said, but it also develops a business relationship with the major labels at a critical time for Internet music.
