Hatch's New Tune - Company Business and Marketing

Industry Standard, The, Jan 1, 2001 by Elizabeth Wasserman

Once a strong friend of the recording industry, Utah Sen. Orrin Hatch wants to put the dispute over Napster on Congress' hit parade.

ORRIN HATCH IS A SONGWRITING senator who longs for a hit single. A conservative Republican with a minister's demeanor, Hatch has cut 10 CDs of his own inspirational and patriotic music - and has been covered by no less than Gladys Knight. He once wrote a love song, "Souls Along the Way," for liberal icon Edward Kennedy and his bride, Vicki. Fans have posted his songs on Napster, the controversial online music-swapping service. Now Hatch, who also sells his music on the Web, is emerging as a key player in the coming congressional battle over Napster and other online entertainment services.

The 66-year-old Utah senator is vowing to use his position as chairman of the influential Judiciary Committee to turn the spotlight on the recording industry's copyright infringement lawsuit against Napster -- complete with hearings on whether Congress needs to clarify what constitutes "fair use," or the legal, but limited, copying of music, movies and literature in the digital age. In short, Hatch says he is for the creator and the consumer.

But is Hatch too late to the show? The courts, after all, may well decide Napster's fate. And Napster's recent alliance with Bertelsmann to develop a fee-based music-swapping service could make the legal wrangling moot. Hatch and his congressional allies believe, however, that the convergence of digital entertainment and peer-to-peer file-sharing technology demands changes to copyright law -- something that won't be accomplished through the courts or the marketplace.

Vermont Sen. Patrick Leahy, the ranking Democrat on the Judiciary Committee, is also committed to examining fair use of digital content this year, according to one of his senior aides. And Napster executives clearly have their eyes on Congress: They recently hired Hatch adviser Manus Cooney, chief counsel to the Senate Judiciary Committee, to be the company's Washington lobbyist.

"I think it may be time for Congress to resolve the matter," says Hatch, whose once-staunch support of the recording industry has wavered with the rise of Napster. "We have to ask ourselves what are the rights of creators to decide how their work is presented and to get paid for its exploitation? What are the rights of consumers who have purchased copies of copyrighted works and put those works into other formats, such as MP3? What sort of help can technology companies offer consumers in terms of exercising their rights?"

Two years ago, Hatch was one of the champions of the Digital Millennium Copyright Act, which sought to apply existing copyright protections to digital works. He herded warring factions from the entertainment and telecommunications industries into his office and ordered them to hash out a compromise over the copyright liability of Internet service providers within two weeks. They did.

Since then, the entertainment industry has been toying with different models for distributing music and video online. A few record labels have offered music for a fee. And several movie studios are working on delivering feature films over the Internet. But none of these steps has yet caught on with consumers, and that seems to be trying the patience of some members of Congress.

Meanwhile, Hatch appeared at a music conference with Napster founder Shawn Fanning last year and met with Scour executives on the day they were sued by the recording industry over the entertainment site's file-sharing network. And in July, the straight-laced lawmaker convened his first hearing on the future of digital music. It was a star-studded event, featuring the Byrds' Roger McGuinn and Napster nemesis Lars Ulrich, the Metallica drummer. To the chagrin of the recording industry, Hatch chastised the labels for taking a hard line against online music swapping. "What we are hearing is that fair and reasonable licensing needs to take place," he lectured record executives. "We aren't seeing that happening."

While the record labels seek a solution in the courts, the online music industry has been hiring lobbyists to press their case in Washington. MP3.com persuaded Rep. Rick Boucher (D-Va.) to introduce legislation to let consumers store their own music digitally and access it from the Internet site.

Hatch argues that his position on digital music distribution is consistent with his long-held view that the marketplace should take the lead in resolving disputes. He praises Bertelsmann's agreement with Napster, but insists the entertainment industry isn't moving quickly enough. "What we have here is largely a dispute between the middlemen businesses that bring the artists and the audiences together."

Some in the online entertainment industry seem skeptical of Hatch's embrace of the recording industry pariahs like Napster. "His biggest challenge is understanding new business models and his trust of the major record labels' says Broadcast.com founder Mark Cuban. "I think Sen. Hatch is realizing that it's the good fight on the Napster front."