Digital Music Education _ Training by linxiaoqin


									D7.2-D7.6 — Digitization of music files (2)

        Digital Music Education &

                                      Workpackage      WP7-Digital Distribution of Music Files

                         Deliverable Responsible       Institute of Research on Music &
                                                       Acoustics - IEMA
                 Visible to the deliverable team       yes

                              Visible to the public    yes

                                   Deliverable Title   Digitisation of music files: Body of
                                    Deliverable No.    D7.2 to 7.6
                                            Version    2

                   Contractual Date of Delivery
                          Actual Date of Delivery      31/03/2008
                                       Author(s)       Vasiliki Zafeiropoulou, Christos
                                                       Kampilis, Kostas Moschos

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Executive Summary:

In this set of deliverables there are presented the implementation for digital protection, the
files distribution evolution and methods, the business process and subjects of rights clearing
in digital music distribution.

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1. Table of Content
1. TABLE OF CONTENT..........................................................................................................................3
2. INTRODUCTION...................................................................................................................................4
3. DIGITISATION OF MUSIC FILES: BODY OF KNOWLEDGE (2) ..............................................5
   3.1. DRM SOLUTION FOR DIGITAL AUDIO FILES .......................................................................................5
   3.2. OVERVIEW AND EVOLUTION OF THE DIGITAL AUDIO FILES DISTRIBUTION........................................7
     3.2.1. Evolution of digital music distribution .......................................................................................7
     3.2.2. The Move to Artist-Led on-line Distribution..............................................................................8
   3.3. IMPLEMENTATION IN THE MUSIC MARKET .........................................................................................9
     3.3.1. The new business model .............................................................................................................9
     3.3.2. Special Music Distribution Cases .............................................................................................10 WE7, a Free Music Download Community ......................................................................10 Qtrax ..................................................................................................................................11
   3.4. RIGHTS CLEARING AND CONTRACTS ................................................................................................12
     3.4.1. Rights clearing in P2P...............................................................................................................12
     3.4.2. Digital Music Distribution Model Contract ..............................................................................14
4. REFERENCES......................................................................................................................................19

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2. Introduction

Digital music has become widespread on the internet, but Internet poses two crucial
questions for the music Industry: one is for the distribution and the other for the sales. The
first is whether the industry comes up with distribution business models to overcome the
loss of off-line sales and the second is the protection of songs in the way to overcome the
illegal distribution and increase the sales. On the other hand new possibilities start to be
offered to the artists allowing them to distribute themselves.

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3. Digitisation of music files: Body of knowledge (2)

3.1. DRM solution for digital audio files
According to wikipedia “Digital rights management (DRM) technologies attempt to control
use of digital media by preventing access, copying or conversion by end users to other
formats.” DRM has become a pressing concern for digital music industry, in order to protect
artists’ intellectual propperties. Sai Ho Kwok suggests requirements capabilities in order to
enforce rights for DRM systems

    •    Rights specification and rights label management
    •    content protection
    •    right authorization
    •    rights tracking
    •    security and commerce infrastructure

There are some commercial digital rights management systems for the online music
business supporting these capabilities. They include Windows Media Rights Manager by
Microsoft , Electronic Music Management System (EMMS) by IBM, IntelSoftware Integrity
System (ISIS) by Intel , and MetaTrust by InterTrust Technologies. These DRM solutions
require rights insertion and rights enforcement processes. In addition, a license
management process is also needed for managing license documents.
 DRM first use was in 2002 on CDs, which made them not portable with all the media
players. In 2005 Sony BMG installed DRM systems On PCs by preventing illegal copies
through recordable devices. Many Online stores like Napster charge subscribers extra fees
in order to provide the ability ro record the downloaded music they buy. The main core of
DRM is to pay for a digital licence instead of the music song.

The most common way of DRM is watermarking. Digital watermarking is a process by which
identifying data are woven into media content. This process gives a unique identity to the
file that remains even through recording, editing encryption or decryption without affecting
the digital product and is very difficult to be detected
Copyright Industries and record Labels hope that DRM will prevent copying and will set
boundaries in the illegal digital distribution.

Many on-line retailers use the Microsoft DRM model in order to prevent illegal digital
distribution. Michael Clement presents this model in his paper “DRM – Lessons for Content
–For-Free Distribution Chanel” (2002)

    1. Expiration After First Use
This business rule specifies the length of time (in hours) a license is valid after the first time
the license is used. The content seller can set a license to expire 24hours after a consumer
begins to play the Windows Media file.
    2. Expiration On Store
eThis right specifies the length of time (in hours) a license is valid after the first time the
license is stored on the consumer's computer. The content seller can set a license to expire
72 hours after it is stored.
    3. Allow Saving of Protected Streams
If a packaged Windows Media file is streamed, this right allows the consumer to save the
stream as a file. The saved file remains packaged and still requires a license.
    4. Player Application Exclusion

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Player exclusion is a feature that allows a license issuer to prevent specific player
applications from playing certain packaged files. The result is that consumers cannot play
the packaged file on the excluded player application.
    5. Allow Play On PC
        Allows the consumer to play the file on a computer.

    6. Play Count
        Specifies the number of times a file can be played.

    7. Allow Burn To CD
         Allows the file to be copied to a CD in an unprotected format.

    8. Burn To CD Count
        Specifies the number of times a file can be copied to a CD.

    9. Allow Backup Restore
         Allows the consumer to back up licenses and restore them to the same computer or
        to different computers.

    10. Begin Date
        Specifies a date after which the license is valid.

    11. Expiration Date
        Specifies a date after which the license is no longer valid.

    12. Delete On Clock Rollback
        Deletes the license if the consumer resets their computer clock to an earlier time.

    13. Disable On Clock Rollback
        Disables the license if the consumer resets their computer clock to an earlier time,
        and enables the license once the clock is corrected.

    14. Allow Transfer To Non SDMI
        Allows the consumer to transfer the file to a non-SDMI-compliant portable device.

    15. Allow Transfer To SDMI
        Allows the consumer to transfer the file to an SDMI-compliant portable device.
        When using this right, the SDMI specification located on the Secure Digital
        Music Initiative Web site must be followed (http://www. ).

    16. Transfer Count
        Specifies the number of times a consumer can transfer a file to a portable device.

    17. PM Rights
        Specifies the rights to give with portable licenses for this file. A portable license is a
        new license that accompanies a file when it is transferred.

    18. PM Expiration Date
        Specifies a date when a portable license expires.

    19. Minimum App Security

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        Specifies the minimum security level that is required of a player application.

    20. PM App Security
        Specifies the minimum security level that is required of a portable device.

3.2. Overview and evolution of the digital audio files distribution.

  The rapid explosion of internet and new technologies has changed the music industry the
last decade. The value chain has changed and the distribution of music adapted new
business models. The use of Internet in addition to the interactivity of consumers into a
digital market, have create certain needs that the music industry needs to fulfill. Due to
digital data and the continuous evolution of Internet information a huge amount of products
is created and exchanges daily.

   3.2.1. Evolution of digital music distribution
               There was a first wave (1996) of digital distribution with e-retailers such as
               Amazon which provide the opportunity to costumers to purchase CDs via
               internet. The success of companies like cdNow and Amazon made physical
               retailers, like Virgin, to go online. That had many advantages fir retailers and
               consumers. Firstly, the transaction cost of physical stores was diminished, since
               they no longer had to pay for conventional storage. Second there were no
               geographical boundaries and consumers had instant access to the global
               market: consumers also have decreased the opportunity cost since they find
               easily what they want.
               The second wave, at late 1990s, grew digital music distribution due the
               unauthorized file sharing phenomenon via p2p networks. “Faced with ever-
               decreasing revenues since the emergence of Napster in 1999, the music
               industry has reacted to the development of peer-to-peer (“p2p”) file-sharing
               with a wide-variety of approaches aimed at eradicating illegal downloading”
               (Carlos Ruiz de la Torre, 2006). AT this point, music distributors try to prevent
               unauthorized downloading by embodying DRM systems on music tracks. In
               addition, they try to provide better information concerning copyright laws. The
               result was not satisfactory, since the evolution of new technologies (Digital
               media Player, High storage devices high speed Internet, Low price CD/DVD
               recordable and PCs) gave the chance to almost every household to have access
               to illegal downloading,
               The third wave was the establishment of legal downloading services (since most
               of DRM were cracked). The market place has changed and legal tried to be
               innovative in order to be more attractive than the illegal. Additionally, a
               competitive marketplace. Digital distributors tried to be competitive to the
               illegal market by (1) offering individual songs in addition to albums; (2) setting
               affordable prices for downloads; (3)allow for reasonable personal uses of
               downloads by consumers, including the ability to make limited copies of
               recordings; (4) offer incentives, like sponsored downloads and prizes; and (5)
               provide security from computer viruses.
               The new wave of digital music distribution can be constructed in the example of
               Radiohead. The group did no renew the contract with EMI and decide to supply,
               by itself, its new album via Internet, by letting the consumers to purchase it in
               any price they want to. This experiment, has not shown any result yet (however
               it is estimated that there have been more than 1,2 million legal downloading.
               This example is making clear that we are leading in a new age where artist is

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               the distributor and his targeting at the end consumer bypassing all the

Nowadays, there are more than 500 legal music online distributors providing music (with
DRM protection) for PCs and mobile phone. However, he cost of distribution is diminished
due to the fact that there are not many parts involved in this process, a fact that reduces
costs. Even though, the cost for IP protection is increase. There is a rapid explosion in the
new market place of digital distributors. An estimated 870 million songs are currently,
available illegally, as opposed to 1 million legally (IFPI 2005)

“Over the last five years, digital music distribution has become a new communication
service, where digital files are delivered over various networks to computing devices that
enable users to shop, store, manage, and play music files, as well as copy, share,
redistribute, and even modify them.
The digital music case study traces the evolution of this new marketplace from its roots in
the illegal file sharing phenomenon to the emergence of legal download services, the almost
instant dominance of Apple’s iTunes Music Store (iTMS), and the threats to its
leadership.”(Natalie Klim, 2005)

Up to 2005 the main target of legal digital music distribution was to struggle the illegal
market in order to cover the losses. Although in 2005 mobile music has been added to the
digital music market agenda and the mobile phone enter into the value chain as a
destination device of content

“On the other side of the coin, music phones are plugging into the value chain of PC-based
online services as a portable listening device via wired and/or wireless connections like USB
cable or Bluetooth, and competing with portable music players”(Natalie Klim, 2005).
Nevertheless, mobile phones have less storage space and functionality than the portable
music players they are improving continuously and becoming more attractive to consumers.
“On the other hand, mobile operators in Europe and Asia have started offering music
downloads and streaming directly to cell phones over their cellular networks. Sprint Nextel
introduced a mobile download service on October 31, 2005; the first of its kind in the U.S”
(Natalie Klim, 2005).

   3.2.2. The Move to Artist-Led on-line Distribution
In this paragraph we try to embody Bockstedt, Kauffman and Riggins survey for the future
of audio distribution in a music score business distribution model analyzing the
consequences for parts of the value chain.

The rapid evolution of media technology in addition to the great explosion of Internet,
Provide to musicians and composers the opportunity to produce, publish and distribute their
music-scores in a digital sphere with no interference. In the case of audio files a noticeable
example of this process is the ArtistLed Inc. ( In this web site musicians
produce and distribute their work themselves. According to a survey of Rainie and Madden
in 2004, 83%of musicians and songwriters provide music samples on-line (Bockstedt 2004).

The digital format has a positive impact on the artist, who can leverage the technology for
further gain. This direct distribution model (from the artist to the consumer) can by done
either by providing to him the whole content of the music score or a part as a sample. As a
result of that in the future more artist will form on-line direct distribution capabilities, as
well as, more artist will contact digital music retailers for online distribution of their work.

Artists can distribute their own music through internet sites, like MySPace. MySPace is a
social interactive networking website. In this web-space individuals have the chance to
contact or to visit personal web pages of artists. By 2006 MySpace had amended the user

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agreement with, " does not claim any ownership rights in the musical works or
any other materials that you post to the MySpace Services. After posting your Content to
the MySpace Services, you continue to retain all ownership rights in such Content, and you
continue to have the right to use your Content in any way you choose". by this agreement
an individual right management is created.
As a result of all the above, distributors role will be diminished and the distribution of audio
music files will be standardized in a free base system within a new E-Commerce system
which will generate revenues for the music industry by advertising and new marketing
business models. This artist led online music distribution model will change the value chain
of the music industry

3.3. Implementation in the music market
   3.3.1. The new business model
By 2008, digital music sales either as a-la-carte downloads or subscriptions are expected to
reach $1.8 billion, up from $187 million in 2004—a ten-fold increase. Despite illegal file
sharing activity, these figures indicate that the market for online music is rapidly growing.
The success of the Apple iTunes Music Store suggests that consumers are willing to pay for
online music that they can listen to anywhere and anytime.
Like the typical market, goods flow from firms to consumers. This is a good approximation
because it is the record label which controls the licensing and distribution rights of an
artist’s work; the record label owns the copyright for the musical piece.

As indicated in Figure 1, goods flow from the record label to the consumer via an Online
Music Provider (OMP). Unlike traditional markets, no physical products are transferred;
electronic payment and download is the means of payment and distribution.
The process begins with the consumer who visits the web site of an OMP to browse and
sample songs online. Payment is submitted electronically to the online music store and the
user is allowed access to download the purchased songs. Using media rights management
technologies, the music provider can allow and disallow permission to various end-user

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actions such as burning the songs to CD, creating duplicates playing on computers, and so
forth. The specific media management rights are determined by the record label which
grants the OMP a license to distribute the songs. In return, the record label receives
licensing fees from the OMP.
Also in the market presently is the recording industry’s most targeted entity: P2P file
sharing networks. A multitude of file sharing networks exist following the demise of Napster
in 2001 which had an active user base of over four million users per day. In terms of music
offerings on these networks, file sharing research firm BigChampagne reported that
approximately 1 billion songs were available in June 2004 compared to the 820 million
available 2007. These networks allow users to acquire music digitally but without paying for
the download.
While on one hand the p2p networks theorytically have damaged the music industry, on the
other hand a) of all these songs downloaded from p2p networks only a very small amount
were purchased by the users and b) the user become familiar with the internet downloading
process open the doors to the pay-per download OMP like iTunes Music Store.
Currently the iTMS is the premier pay-per download music provider. With the largest
catalogue size of any OMP, the iTMS has become nearly synonymous with paid online
music: it commands a 70 percent market share in legitimately downloaded singles and
Songs in the iTMS are offered using the AAC file format at 128 kbps, which is of higher
quality than the MP3 format at the same bit rate. Moreover, unlike MP3s, they can be
digitally protected from unauthorized re-distribution and re-play. Apple’s decision to adopt
the AAC/FairPlay specification pushes users towards its iPod portable MP3 player, the only
portable media device that can play the files purchased from the iTMS. Nonetheless, the
iPod has become wildly popular in the way that Apple can even optional offer the songs
without protection.
Traditionally, the record industry has made most sales from albums rather than singles.
With most retail outlet offering albums from €12+, OMPs must price their albums
competitively. Most OMPs, including the iTMS, price albums starting at €9.95. According to
the survey data results, should OMPs lower album prices to €5.00, they would double the
market reached and raise revenues. Reducing prices below this point captures a larger
market share but at the expense of revenues.
At present, OMPs enjoy a 40 percent cut for every dollar earned on a download sale, or
approximately double the traditional retail margin. This can partially explain why OMPs can
provide steeper discounts—such as for multiple purchases—than their retail counterparts.
Record companies also earn a larger share of revenues from downloads at 30 percent
versus 12 percent from traditional retail. Surprisingly in both cases, the artist earns 12
percent of the revenues regardless of whether the sale was conducted online or at a retail
Despite file sharing concerns, consumers have indicated that they would be willing to pay
for music insofar as they can enjoy the same usage rights as with a purchase. An additional
layer of differentiation for OMPs is thus universal playback compatibility and transfer to a
portable media device.

   3.3.2. Special Music Distribution Cases WE7, a Free Music Download Community
We7 is an initiative of artist Peter Gabriel, technology entrepreneur Steve Purdham, and
financial investor John Taysom. Users are registered for free and afterwards they can
download unlimited number of music files (MP3) and videos for free as well. Advertisement
messages are being displayed at the beginning of the song or video for 10 seconds or less.
Eventually, every time a song or video is being downloaded, a small payment is made to the
relevant artist. So, users download music for free, brands pay for their message and
musicians and artists get paid. We7 functions without DRM. However, four weeks after a
user has downloaded a free ad-targeted track, We7 will give the option of having the track

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'ad free'. According to a credit system, users will be allowed to download for free up to
twenty (20) ‘ad free’ songs per month that they had previously downloaded with
For users who do not wish to be exposed to commercial messages, there is the option of
buying songs without the advertisement messages at the beginning, at the normal prices.
History: The We7 platform was launched on 29th of April 2007. Nine months after its
function, on January 15th 2008, We7 reported having reached one million downloads, and
almost one month later, on February the 4th , We7 reported having doubled its downloads
(two million).
Sources: Qtrax
Qtrax is a P2P software where users, firstly, have to download and install it freely to their
PC, in order to start free and legal sharing of music files. Users will be asked to “register”
their music player, which through it the playback of the songs will be possible. Special
features include artists’ latest news, links to artists’ web-pages, and available songs that
have been recorded from recent concerts.
This service will be funded through advertisements. Tracks will contain DRM, but according
to company announcements this will be used more to track plays than restrict use. So far, it
is announced that it will not be possible for users to burn tracks to CD. Just download, store
and play them in their pre-registered player. According to Allan Klepfisz, portability for
tracks downloaded will be available from Feb. 29. Also, this service is currently not
compatible with Mac, but it will be by March 18 and that it will unveil an “iPod solution" by
April 15.
Qtrax claims to have licenses in place with the major labels and publishers, plus leading
independents. Their music catalogue estimation is of 25 million tracks - five times that of
Apple's iTunes. The majority of the revenues will be distributed to artists, publishers and
record companies. In addition, Qtrax has stated that McDonald's, Samsung, and ESPN are
among the advertisers that have already signed up (Source: Billboard).
History: The original Qtrax was one of several file-sharing networks to emerge after the
demise of the original Napster, but was shut down in 2002.
The following statement is from Qtrax’s website:
“Qtrax is the world’s first free and legal peer-to-peer (P2P) digital music site. Music lovers
can discover new music and legally download full-length, high-quality versions of their
favourite songs while compensating both the artists and the record labels through non-
intrusive and relevant advertising. Qtrax has the unparalleled support of the major record
labels and all of their respective publishing divisions. LTDnetwork Inc, a division of Brilliant
Technologies Corporation, developed Qtrax and its components.”
Comments: Qtrax’s service has not yet been launched. Despite the fact that the formal
announcement of Qtrax service was made in the MidemNet conference in Cannes, France
(27/1/2008), all four “majors” (SonyBMG, Warner, Universal, and EMI) denied having
reached an agreement, so far, with Qtrax over the licences (source: Reuters).

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3.4. Rights clearing and contracts

   3.4.1. Rights clearing in P2P
Initially the music industry focused on the problem of people distributing music protected by
intellectual property copyright laws. Not until recently has this focus shifted to the real
problem which is what do consumers want and are willing to pay for in order to meet
consumer needs and music industries rights as service providers of copyrighted goods so
that consumers are wanting to choose to pay for the product over downloading or trading
illegal copies.
A person who downloads music for free via P2P networks is stealing: exactly as if he took a
CD from a shelf in music store and walked out without paying. The major music companies
have so far taken legal actions against Napster, Grokster, Kazaa, and Limewire (soon), and
However, lawsuits against P2P network may not work in the long run. According to Dong et
al (2002), a lawsuit could stop Napster, because Napster had some central servers, so it
could actually be threatened with a shut-down. Furthermore, there was a visible person
behind it who was held responsible. This was also the case with Kazaa, where the initial
inventors of Kazaa (Janus Friis and… don’t remember, who also invented Skype) were held
responsible, even though they were no longer involved in the company.
However, “pure” P2P networks like Gnutella do not have central servers. The way they work
allows users to be anonymous, and the Gnutella type of P2P network is “almost completely
invulnerable” (Dong et al, 2002). Besides, there are Freenet, which is a kind of parallel-
network to the World Wide Web, but based on P2P technology, such that information is not
stored at fixed locations (servers), but delivered only on demand (Dong et al, 2002).
According to Dong et al (2002), this implies that users may remain completely anonymous if
they wish, and content can not be traced to wherever it is physically stored.
The major record labels have from time to time launched get-a-bad-conscience campaigns
reminding people that illegal file sharing is similar to stealing a CD.
According to a web-based survey by Walsh et al German internet users, almost 70 per cent
of the music downloaders were not willing to pay for music downloads. Besides finding
paying irrational when music can be downloaded for free, there were indications that these
users felt a need to oppose the major labels (Walsh et al, 2003), which, according to the
authors, “may point towards an image problem of the music industry” (Walsh et al, p. 311,
P2P technology users may feel that by downloading music illegally, they are not really
cheating the artists very much – he would not have received much money any way – but
the big, ugly, artist-exploiting international music company monsters. In that case, the
labels’ campaigns could be viewed as just another face of exploitation, trying to tell people
what is right or wrong while in the same time bankrupting young people with giant lawsuits,
trying to get some of the revenue back that they could not squeeze out of the artists this
time. In that case, the campaigns together with lawsuits might make matter worse.
“Sharing” means to have something and be willing to let others enjoy it too. Some things
diminish when shared; for example money, or apple pies. Other kind of things does not, for
example information, love… or digital files. They can be copied for ever and ever at almost
no cost. Not paying for something that someone is willing to give to you as a gift, is it
stealing? It is, but it does not feel that way.
One kind of sharing is piracy, as discussed. Another kind is when people just like to create
something and publish it on the internet for free. Or help others for free.
Many things on the Internet are actually both free and legal.
It might be difficult to run a business capturing value from artistic content when people are
willing to give it away for free on the Internet, and worse - when people are getting used to
free content of good quality.

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Today, the problem for the music industry is that people are stealing music by downloading
it for free. Tomorrow, the problem might be that new upcoming stars produce their own
music and publish it for free on the Internet.

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   3.4.2. Digital Music Distribution Model Contract

This AGREEMENT (hereinafter referred to as the "Agreement") is made effective this _____
day of _______________, 200__ by and between ____________________, located at
________________________________________ (hereinafter referred to as the "Label")
and ______________________________, (hereinafter referred to as the
"Distributor"). Distributor is an Internet record company, which offers sound recordings for
download by consumers over the Internet. Label owns or has the rights to distribute over
the Internet the master sound recordings referred to in the Addendum attached and any
additional Addenda added by agreement of the parties from time to time (hereinafter
referred to as "Licensed Recordings").

In consideration of the respective covenants contained herein, the parties hereto, intending
to legally bind hereby, agree as follows:

1. Grant of License.
1.1. Licensed Recordings. Label hereby grants to Distributor an exclusive right and license
during the Term of Grant throughout the Territory to make, cause or otherwise effect Digital
Audio Transmissions and Digital Phonorecord Deliveries of the Licensed Recordings. The
term "Digital Audio Transmission" shall mean a transmission that embodies a sound
recording. The term "Digital Phonorecord Delivery" shall mean each individual delivery of a
phonorecord by digital transmission of a sound recording which results in a specifically
identifiable reproduction by or for any transmission recipient of a phonorecord of that sound
1.2. Reserved Rights. All rights and license not expressly granted to Distributor hereunder
are reserved by Label. Ownership of the Licensed Recordings and Licensed Artwork shall
remain with Label or its licensors.

2. Delivery. Label shall deliver to Distributor by uploading the master versions of each song
or portion of song to the Distributor’s website that is a Licensed Recording hereunder. Label
may provide a reasonable number of items of the related artwork for use by Distributor in
connection with the marketing and promotion of the Licensed Recordings. Label shall
provide a written schedule of the names and contact information of the author(s),
composer(s), and music publisher(s) of the songs embodied in the Licensed Recordings,
together with any additional copyright information known to Label relating to such songs
and the Licensed Recordings, and a list of credits that Label is contractually required or
otherwise reasonably desires to provide in connection with the distribution, exploitation of
the Licensed Recordings hereunder. Distributor shall have no right to modify the Licensed
Recordings, except that it may encode the Licensed Recordings in any format now known or
hereafter devised for purposed of facilitating the exercise of the rights and licenses granted

3. Territory. The Territory shall be the world.

4. Term of Grant. The Term of Grant shall commence upon the date hereof and shall
expire three months from the date hereof. Distributor reserves the right to renew the term
of the grant for 100 years from the date hereof without notifying Label. After 100 years
after the expiration of the grant the grant shall have continuous renewal until the Label
cancels in writing.

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5. Consideration.
5.1. Fee. Label shall pay to Distributor the sum of __ or ________ for a song placed on
Distributor’s website or accessed by Distributor’s system. The Label shall pay the full
amount upon full execution of the Agreement.
5.2. Royalties. Distributor shall pay to Label fifty percent (50%) of any and all Net Revenues
derived from Digital Phonorecord Deliveries embodying the Licensed Recordings, after credit
charges are deducted. Please note the Label shall not be given any royalty until Label’s
royalty exceeds and is above _____
The following covenants in this agreement are optional and Label shall not initial unless
Label is in full agreement with the statements listed as follows:
_____ (Please initial) Label hereby attest under the law of perjury that the music and/or
artwork uploaded to Distributor’s website is owned by Label and is also copyrighted.
_____ (Please initial) Label agrees that if there is any litigation regarding this contract(s)
that the jurisdiction and venue shall be Eastern District of Wisconsin or in Milwaukee,
_____ (Please initial) If the individual signing this agreement is signing for the entire Label,
individual attests under perjury that he/she is an authorized officer and has the authority of
the Label, management, and/or shareholders to do so.
_____ (Please initial) Label agrees that Distribution shall not provide a royalty to Label until
Label’s payout or royalty is over _____.
_____ (Please initial) Label has read this entire agreement and understands that Label may
cancel this agreement by written notification to the Distributor at any time within three (3)
business days of the date the agreement was signed.
_____ (Please initial) Label has received a copy of the agreement.

This agreement included all of the terms and conditions set forth in the addendum(s) and
the Standard Terms and Conditions attached hereto, which are incorporated herein by this

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and
year first above written.


DISTRIBUTOR ____________________________

(an authorized signatory)

LABEL ________________________________

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D7.2-D7.6 — Digitization of music files (2)

(an authorized signatory)

This Addendum to the Internet Music Distribution Agreement is made effective this _____
day of _______________, 200__ by and between ____________________ (hereinafter
referred to as the "Label") and __________________________________ (hereinafter
referred to as the "Distributor").

The Licensed Recordings hereunder shall include the sound recordings (identified by title,
playing time, master number, songwriter(s), and/or music publisher) listed below or in an
attachment hereto:


Title      Artist   Playing Time       Master #   Songwriter   Publisher

Various other Artists to be attached as Exhibit A.

This addendum includes all of the Terms and Conditions set forth in the Agreement
referenced above, all of which are incorporated herein by this reference.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and
year first above written.



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D7.2-D7.6 — Digitization of music files (2)


(an authorized signatory)


(an authorized signatory)


This sets forth the terms and conditions under which Label grants to Distributor certain
rights and licenses in and to the Licensed Recordings identified in an Addendum hereto.
1. Additional Definitions. For purposes hereof, the following terms shall have the
respective meanings provided below:
1.1. The term "Artist" shall mean any recording artist whose performances are embodied in
the Licensed Recordings.
1.2. The term "Licensed Artwork" shall mean any artwork, drawings, photographs, liner
notes, or other graphical, textual or other graphical works relating to Artist or Label,
developed or created by or for Label for use in connection with the distribution or promotion
of the Licensed Recordings, and delivered to Distributor hereunder.
1.3. The term "Name and/or Likeness" shall mean the name, voice, photograph, drawing,
likeness, biographical material, any and all words, symbols, and logos which identify a
person or group, and any and all trademarks, service marks, trade names, or similar
properties, of, relating to or associated with a person or group, and any other exercise of
the "right of publicity" of, relating to, or associated with a person or group.
1.4. The term "Controlled Compositions" shall mean any and all musical works embodied in
the Licensed Recordings which are written or composed, in whole or in part, or owned or
controlled, directly or indirectly, by Artist or Label, collectively or individually.
1.5. The term "Licensed Works" shall mean the Licensed Recordings, Licensed Artwork,
Controlled Compositions, the Name and/or Likeness of Label or any Artists performing in the
Licensed Recordings, Music Videos, and any other materials licensed to Distributor
1.6. The term "Net Revenues" shall mean gross revenues less only the following costs and
fees incurred in connection with such deliveries, and only to the extent incurred:
(a) transaction processing fees, such as credit card transaction fees and other electronic
commerce processing, patent royalties or other fees, payable to or retained by unaffiliated
third parties in connection with effecting a transaction or transmission, if any;
(b) sales tax, if any;

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D7.2-D7.6 — Digitization of music files (2)

(c) returns and credits, including, but not limited to, those on account of defective
merchandise, errors in billing, and errors in transmission, if any;
(d) mechanical royalties, if any;
(e) public performance fees, if any;
(f) shipping, if any;
(g) union, guild or other third party fees that may be required by contract or the Copyright
Act, if any;
(h) Internet advertising and promotion costs, such as banner ads on other web sites to
promote the Recordings, if any, provided that costs shall not exceed 10% of gross
(i) Internet referral fees, such as fees payable to any third party who, through their web
site, email or other means, refers to us a purchaser of copy or phonorecord of a Recording,
if any, provided that such costs shall not exceed 15% of gross revenues.
Net Revenues shall not include, and no royalties shall be payable to Label on any Licensed
Works reproduced, distributed, performed, displayed, broadcast, delivered or transmitted on
a "free" or "no charge" basis.

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D7.2-D7.6 — Digitization of music files (2)

4. References
Arnold Michael, Dr. Christoph Busch (2003), “Watermarking of Audio, Music Scores and
3D Models”
Bailey Charles W., Jr.(2006), “Strong Copyright + DRM +Weak Net Neutrality = Digital
Bonardi Alain, Francis Rousseaux (2003), “New Tools and Practices for Electronic Music
Distribution”, ACM international Conference proceeding Series, VOl. 49
Clement Michel (2002), “Digital Rights Management – Lessons from Contentfor-Free
Distribution Channels
Dong, Y, Li, M, Chen, M, and Zheng, S, (2002), “Research of intellectual property rights
problems of peer-to-peer networks”, The Electronic Library, Vol.20
Graham, G, Burnes, B, Lewis, G, and Langer, J, (2004), “The transformation of the
music industry supply chain. A major label perspective”, International Journal of Operation
and Production Management, Vol.24
Liu Qiong, Reihaneh Safavi-Naini and Nicholas Paul Sheppard(2002) “Digital Rights
Management for Content Distribution”
Kauffman Robert J., Jesse C. Bockstedt, Frederick J. Riggins (2004), “The Move to Rtist-
Led online music distribution: explaining structural changes in the digital music market”
available on
Kiho Yoon (2007), “On the impact of digital music distribution” available on
Klym Natalie (2005), Digital Music Distribution, available on
Kwok Sai Ho (2002) “Digital Rights Management for the Online Music Business”, ACM
SIGecom Exchanges, Vol. 3, No. 3, August 2002.
López-Sánchez Maite, Xavier Noria, Juan A. Rodríguez, N. Gilbert, S. Schuster, (2004)
“Multi-Agent Simulation Applied to On-Line Music Distribution Market”, available on
Peitz, M. and Waelbroeck, P. (2006b), “Why the music industry may gain from free
downloading – The role of sampling,” International Journal of Industrial Organization 24, pp.
Ruiz Carlos de la Torre (2006) “Towards the Digital Music Distribution Age: Business
Model Adjustments and Legislative Proposals to Improve Legal Downloading Services and
Seifert, M, Hadida, A.L, (2006), “Facilitating talent selection decisions in the music
industry”, Management Decision, Vol. 44

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