FOOL PLATE SPECIAL
Newborn media giant Vivendi Universal will begin trading today amidst controversy over new technologies and intellectual property. For a birthday present, the company received a copyright infringement suit similar to the one it brought against MP3.com. The music site, meanwhile, has re-launched its beleaguered My.MP3.com as a subscription service and announced a new partnership with bricks-and-clicks music retailer Tower Records.
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While attention has been focused on the completion of America Online's (NYSE: AOL) merger with Time Warner (NYSE: TWX), the "other" media mega-merger closed Friday. That's when French utility company and publisher Vivendi, and Canada's Seagram, and French cable TV company Canal Plus completed their three-way deal to create Vivendi Universal (NYSE: V). Best known for its family of branded beverages, Seagram also owns Universal Studios and Universal Music, which are among the world's largest filmed entertainment and music companies. The new Vivendi Universal will be the world's second-largest media conglomerate after AOL/Time Warner, assuming the latter pair's deal is approved and completed. Seagram was delisted from the New York Stock Exchange today as it was absorbed into Vivendi Universal. Vivendi Universal was born at the center of several controversies about new technologies and intellectual property. In a bit of semi-instant karma, the company's Universal Music Group (UMG) last week found itself in the same shoes that kept online music service MP3.com (Nasdaq: MPPP) on the run for much of the last year. UMG's Farmclub.com is a subscription music service currently in development. The first test of its kind among the major record labels, it offers more than 20,000 songs for download to some 5,000 trial users. Not everyone is singing a happy tune, however. In U.S. District Court in New York on Thursday, a group of songwriters and publishers brought a copyright infringement suit against UMG, claiming Farmclub.com uses their works without permission. Those asking for damages of up to $150,000 per copyright violation include songwriters Jerry Leiber and Mike Stoller, Elvis Presley Music, Paul McCartney's MPL Communications, and the Rodgers and Hammerstein Organization. On the flip side By copying recordings of copyrighted works and streaming them from the Web, UMG is engaging "in the very same infringing activities that UMG itself... successfully challenged in this court," the complaint says, referring to UMG's lawsuit against MP3.com. That case was part of a larger suit against the online music service by all the major record labels. Following the separate settlements MP3.com reached with the other majors, it and Universal last month agreed to end their high-profile dispute. Last week, UMG said that the suit filed against it by the writers and publishers is "blatantly inconsistent with the legal positions they have taken before." The company says it has properly followed the licensing procedures necessary to cover online music distribution, which is a key component of Vivendi Universal's plans for realizing the benefits of their merger. MyMP3.com: Take 2 The new My.MP3.com has two pricing tiers: 1) a free, advertising-supported account that gives users online access from any computer to 25 CDs they have previously purchased, and 2) a one-year subscription that costs $49.95 a year and provides access to 500 CDs, with more functionality and less advertising. MP3.com also announced a partnership with Tower Records that ties in with the My.MP3.com service. The so-called Instant Listening agreement lets TowerRecords.com customers register CDs in a free MP3.com account and listen to them online as soon as the purchase is complete -- essentially, digital delivery of the music in advance of receiving the physical CD via snail mail. The service is expected to launch shortly and to eventually include CDs bought at nearly 200 Tower retail outlets worldwide. MP3.com Chairman and CEO Michael Robertson said the Tower partnership "potentially represents the future of music retailing." He could be right. It's a simple yet appealing service, and the company may get an early jump on similar schemes hinted at in the recent partnership between Bertelsmann's Music Group and Napster, the service Universal is currently testing, and comparable services under development by other record companies. While MP3.com is flexing its newfound legitimacy, it's not entirely out of the woods. It continues to face lawsuits from smaller record labels and publishers. In addition, the $53.4 million it will pay for its peace treaty with Universal exceeds the $20 million it agreed to give each of the other four major labels, and thus may have triggered renegotiations of those settlements.
The language of the suit highlights the irony of seeing UMG on the flip side of a copyright case. At issue is "the unlawful conduct of a major international record company." According to the plaintiffs, UMG "was fully aware that its new service would infringe on copyrights."
It's unknown whether MP3.com was amused at seeing former adversary UMG facing accusations similar to those previously leveled at MP3.com. The company did, however, relaunch the My.MP3.com service that was at the heart of its battle with the record industry bigwigs.
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