New Battle

needed for video Images, so that videodisks-long a hit product in Japan-will no longer need to be the size of pizza platters.

Then there is the jogging problem. While audio tape easily absorbs bouncing and jostling, the delicate laser pickups in portable CD players sometimes skip. In MD machines, special circuitry feeds 3 seconds of music into a one-megabit memory chip before it is played - meaning that if the music appears garbled, the machine has time to recover and read it again. "Even if you take the disk out, the music plays on for a few seconds," Mr. Aoki said.

The last trick was to design a way to record data without using gobs of electricity, because the MD will be used in battery-operated portables. Some other systems require two lasers-one for erasing data by heat. ing up a spot on the disk to 400 degrees Fahrenheit, one for recording. One-laser systems need several rotations of the disk to perform the same job, which takes time. The Sony system, using a single laser, can perform these operations in a single pass over the disk.

Philips's Cassette

While the technology has been much admired, the MD itself has not. The biggest critic is Philips, Sony's one-time ally in CD's. Next year, Around the time that the mini disk appears on the market, Philips is bringing out the digital compact cassette, or DCC.

Like digital audio tape, the technology that Sony and other electronics makers here have tried to promote for years, the cassettes have nearly the sound quality of compact disks. But unlike digital audio tape or mini disk machines, the new digital cassette players will also play the billlons of conventional cassette tapes that have been sold over the past two decades.

Some Fear Industry Ruin

Some are already complaining that Sony, by leaving consumers dizzy with yet another incompatible technology, is risking ruin for the industry. Alain Levy, who heads Philips's recording business, Polygram Records, says Sony "thinks the rest of the world is like Japan" - in love with the compact disk and willing to buy the latest technology. The percentage of the population that owns CD players in gadget-happy Japan is far higher than anyplace else.

"We can sell a lot more tapes, and a lot more CD's, without confusing the world with a new format," Mr. Levy said. Among his new allies is Sony's archrival, the Matsushita Electric Industrial Company.

The winner will be whichever for. mat attracts the most software whether M C Hammer and Mozart drift to the Sony camp or the Philips Cy1cord en promot:12 new

The New York Times

formats is spotty at best. The failure would enable recording pirates to of Betamax to attract good programs make perfect copies of compact ultimately led to its failure as a video- disks, worked out an electronic procassette format. That shortcoming tection plan that satisfied neither constarted Sony on its buying spree in resumers nor manufacturers. Sony is cent years, starting with CBS Records and moving on to Columbia Pictures.

Yet even with CBS Records and all Its top-selling titles in hand, Sony was unable to make digital audio tape a success. Last year, when digital audio tape sales were expected to boom, only 150,000 players were sold.

The industry, worried that DAT

now repositioning DAT for music professionals and audiophiles, not for the mass market.

The same piracy worries surround the new mini disks. Technologically, the mini disks are superior products: faster, cleaner and more durable than tape. Whether that will be enough to make it a winning product is hardly a sure bet.

ust as we were ready to write off digital audio tape (DAT) as a massmarket failure, we were again reminded how difficult it is to predict the future of consumer electronics. After more than a decade of Intra-industry fighting, the electronics manufacturers. recording companies, songwriters, music publishers, and performers have reached an agreement that could pave the way for DATS entrance as a mass-market Hem. Ironically, DAT may owe it's new shot at life to two new competing digital formats. Philips Digital Compact Cassette (DCC) and Sony's Mini Disc (MD), which were introduced earlier this year. :

History Repeats? Although most consumers consider DAT to be new technology, that's hardly the case it was Introduced more than five years ago in Japan. Before DAT could be brought to the U.S. however, threats of lawsults from the recording Industry forced manufacturers to hold back When Sony finally did Introduce a DAT deck here In June of last year, they were promptly sued by the National Music Publishers Association. That sult has been dropped as part of the recent agreement)

After a slow start, the DAT format has finally caught on in Japan. Sales in the US, however, have been poor at best.

The recording companies, who were worried about the potential decrease in profits that might occur if consumers. could make virtually perfect copies of copyrighted recordings, chose not to support DAI Since no prerecorded software was available, consumen more than satisfied with standard cassettes saw little need to buy DAT decia despite their impressive hi-fl capabilities - DAT is not the first electronic product to enter the market under the shadow of legal action. A similar situation arose In 1975 when Sony Introduced their Betomax videocassette recorder. The movie Industry was very worried about the potential competition of VCRS, and

me threat of financial losses brought about by home spoing. Universal Studios and Walt Disney Productions sued Sony, alleging copyright infringement in 1976.

Although a US. District Court ruled in 1979 that home video taping for private use didn't constitute copyright infringement, the ruling was reversed by a U.S. Court of Appeals. Congress stepped Into the controversy in 1981. Introducing legislation that would overtum the Appeals Court decision. Later, a bill was Introduced that would place royalty taxes on VCR's and blank video cassettes. Congress did not act on either

bill.

In 1982 the US. Supreme Court was petitioned to resolve the home videotaping question. Initial hearings were heard in January 1983, and one year later, the Supreme Court ruled that home video taping does not constitute copyright infringement. Ironically, Hollywood now makes more money from the release of movies on vaeocassette than it does from theatrical releases!

Not a Good Answer? Despite the Supreme Court ruling, the video- and audio-recording industries continued to seek legislation that would impose royalties on cassette decks and VCR's as well as blank tapes. Bills were introduced in Congress that would impose royalties as high as 25% on recorders and at least 1 cent per minute on blank tape! Other alternatives were offered. Including the requirement that antloping chips be built into recording decks. (Studies done on the anti-taping chip by the National Bureau of Standards concluded that it was not an ac ceptable solution because it seriously degraced the music quality)

The introduction of DAT to the US. at the January 1987 Consumer Electronics Show got the recording industry even more worried, even though no compamy announcea definite sales plans. A bill that would impose a 35% tariff on Imported DAT recorders was introduced in Congress, but that also died.

Although Congress took no action on any of the bills introduced, the RecordIng Industry Association of America' (RIAA) dd-they threatened to file a lawsuit against any manufacturer who sold DAT in the US.

In an attempt to find out how serious a "problem" home taping was, the Of. fice of Technology Assessment under. . took a study and issued a report. Copyright and Home Taping. in 1989.

MUSIC PUBLISHERS 16.66

The report concluded that, even though "home taping may reduce the recording industry's revenues, a ban on home audio taping would be even more harmful to consumers and would result in an outright loss of benefits to society... in the billions of dollars. Some of the more interesting findings included:

● Almost three quarters (73%) of home taping occasions do not involve prerecorded music. Instead, they include the taping of family members, lectures, band practices, answering-machine messages, etc.

• Most (72%) home-recorded tapes of copyrighted material were made from the taper's own music collection. Another 9% (for a total of 81%) were mode from material owned by other family members. The main reason for the taping was "place shifting." That is, home recorders mode tapes of CD's so they could be played in a car's cassette player, Walkman, etc. The second most popular reason that home tapers made cassette copies was to make custom tapes with only the songs that they wanted, In the order they wanted them.

• About one quarter of pre-recorded purchases were made after the con-. sumer heard the artist or recording on a home-made tape. (For example, d friend said, "Hey, listen to this song from this great new CDI just bought-you just gotta hear It"

ord, at least three quarters of home If home tapers were not able to rectapes would not be replaced by sales of prerecorded music.

After the report was issued, both

comps went back into negotiations. The Digital Audio Tape Recorder Act of 1990, Introduced in Congress early in the year, jeemed to be the compromise that would finally "Tegmimize the digital audio-tape recorder. Both sides realized that it was time to start working together. As the president of the RIAA testified before Congress. "Without our music, their products are worthless, but without their machines, no one can listen to our music.

The DAT ACT called for the inclusion of SCMS, the Serial Copynight Monagement System, in att digital audio recorders. (See the sidebar eisewhere in this article) The bill, if passed, still did not promise to be a definitive end to the home taping question (despre the Supreme Court's Betamax decision). The bill in fact, said. this Act does not address or affect the legality of private home copying under the copyright lows.

In the eyes of the recording Industry. the bill was a compromise that sought to preserve the status que by making DAT home laping equivalent to analog home taping-that is, you can only make first generation copies. (Secondgeneration cassette recordings are substantially worse than the preceding generation)

The "DAT Bir turned out not to be the answer we all were waiting for because of opposition from other factions within the music industry. The National Music Publishers Association (NMPA); the Songwriters Guild of America (SGA). and the American Society of Composers, Authors, and Publishers (ASCAP)who called themselves the "Copyright Coalition-strongly opposed the bill

What's at stake? Shown here are sales, in millions of units, of various prerecorded media and blank cassettes over the last decade or so. Note that, although few things are easier than making a cassette recording, pre-recorded cassettes still outsell blank ones. Both far outsell CD's.

and instead wanted to continue to press for royalties. As a result, the bill died in subcommittee, and Congress took no action before it adjourned for the year.

Even without an official bill to "legilimize it, DAT finally arrived in the US. In June of last year when Sony began of ficially importing and selling SCMSequipped decks. Almost immediately a class-action suit was brought against them by the NMPA. The suit was enough to keep other manufacturers from following Sony's lead, and although units from other manufacturers are now available (see Gizmo, elsewhere in this

issue, for a review of one such unit from Sharp). DAT sales fell for short of projections.

The Royalty Pact. Despite all the fighting, both sides knew that, without some sort of agreement, everyone had a lot to lose. The hardware manufacturers had the capability to produce new decis that they knew they could sell. The recording industry-though not admitting it publicly-knew that new formats are good for business. (Sales were virtually flat before the introduction of the CD in 1982) Both sides were talking-in secret-In the spring

of this year.

The impetus for the falls was likely that the hardware manufacturers were not so much trying to clear the way for DAT as they were looking for a way to ensure that Digital Compact-Cassette and Mini-Disc recorders could enter the market without the same obstacles that hindered DAT John Roach, Chairman of londy Electronics (which earlier had committed to introducing DCC to the US. In 1992) appears to have been instrumental in getting the two camps to come to agreement.

Like the agreement reached in 1990, the pact would require that all digital consumer recorders contain SCMS circultry. For the first time, however, royalty payments would be required on the sale of all consumer digital recorders and on blank tapes. On recorders, the payment would be 2% of the manufac turer's price, with a minimum royalty of $1, and a maximum of $8 ($12 for dubbing decks). On blank digital tapes, the royally would be 3%.

The royalty payments would be collected by the U.S. Copyright Office and distributed after deductions for the administrative overhead, of courseby the Copyright Royalty Tribunal into two unequal funds. One fund would be for the persons who own the copyright for the musical work, and the other for the copyright owners of the sound recording.

The total royalty pool would be divid ed up as follows: The record companies would get 38.41%; featured artists, 25.6%, songwriters, 16.66%; music pubshers. 16.66%; the American Federation of Musicians (which represents non-featured musicians), 1.75%; and the American Federation of Television and Radio Artists (which represents non-featured vocalists), 0.92%. It is unclear to us whether there is any cap on the administrative overhead that can be collected by the various groups who must distribute the monies to the artists and copyright holders. Although no studies have shown that the more popular music is the most recorded, royalty distributions would be based on recording sales; that means that the largest-selling artists would receive the largest payments.

The pact marks the first time that the hardware manufacturers have agreed that the payment of royalties should be required for home taping. It also maria the first time that the recording industry has agreed that consumers can make

copies of copyrighted recordings for private, noncommercial use without the threat of copyright-Infringement sults.

Analog tapes are not covered. Nor are video cassette recorders, even those with PCM (pulse-code modulation) digital-audio capabilities. The recording Industry has agreed to stop pressing for royalties on the sale of blank analog cassettes. We expect, however, that the video Industrywhich has also pressed for royalty payments is watching the action closely.

The royalty pact has the blessing of numerous groups, many of whom have rarely agreed in the past. Besides the ELA and the RIAA, the list includes the National Music Publishers Association (NMPA); the AFL-CIO Department of Professional Employees; the American Federation of Musicians (AFM); the American Federation of Television and Radio Artists (AFTRA); the American Society of Composers, Authors, and Pubshers (ASCAP); Broadcast Music, Inc. (BMI): the National Academy of Songwriters (NAS); the National Association of Retail Dealers of America (NARDA); the National Consumers League (NCL); the Nashville Songwriters Association In

ternational (NSA); and the Songwriters Guild of America.

There's only one group that has still to be convinced: Congress. If the pact reached by the various organizations Isn't put into law by Congress, things will be right back where they started. Without a law, it's likely that some manufac turers will refuse to pay royalties. That, of course, will lead to more lawsults, questions, refusal by recording companies *to support the new digital formats, and, ultimately, stalled sales.

Time, however, is tight. With the rollout of DCC due early in 1992, it is imperative to both sides that Congress act before the end of the year. As we go to press, no sponsors for a bill have come forward in either House. Congress, however, has historically resisted royalties because they raise the prices of electronic products. However, because previous adversaries are coming to Congress with a detailed pact—and, apparently, with no industry dissenters it would seem that only consumer groups will fight any proposed legislation. So far, none has come forward to do so, despite the "definitive" study by the Office of Technology Assessment that showed that home taping did not hurt the recording industry.