Agreement expected on digital recording Electronic manufacturers plan to pay royalties to music industry.

July 11, 1991|By Los Angeles Times

In a landmark accord that should open the floodgates to a wave of new music-recording technologies, electronics manufacturers have agreed to pay royalties to the music industry on the sale of all digital home-recording equipment.

The agreement, which will be formally announced today and requires congressional approval, will end a battle that began four years ago with the advent of digital audiotape technology.

By using the ones and zeros of computer code to record music, digital audiotape provides not only compact-disc-quality sound on a tape but also allows anyone to make perfect copies from CDs or from other digital tapes. Two competing digital formats that are scheduled to be rolled out next year -- Philips' Digital Compact Cassette and Sony's Mini Disc -- have similar attributes.

Record companies, music publishers and recording artists -- fearful that high-quality taping would cut into sales of recorded music -- have fought a largely successful battle to block the acceptance of digital audiotape, and threatened to do the same with Philips' Digital Compact Cassette and Mini Disc.

Although a handful of Japanese electronics companies, led by Sony,began selling digital audiotape machines in the United States last year, a lawsuit against Sony by the National Music Publishers Association and the absence of pre-recorded digital audiotape music has dampened sales and kept prices high.

The NMPA lawsuit, which alleged that Sony was illegally facilitating copyright infringement, was dropped yesterday as part of the agreement.

According to sources involved in the negotiations, the agreement -- initially disclosed in the trade newsletter Audio Week -- calls for electronics vendors to pay a royalty of 2 percent on the wholesale price of any digital recording machine, with a minimum of $1 and a maximum of $8 for each unit. Most digital audiotape machines sell for about $800 retail, but prices for all three digital recording formats are expected to be dramatically lower within several years.

A royalty of 3 percent will also be paid on the wholesale price of blank tapes and discs. One-third of the royalty payments will go to music publishers and songwriters, and two-thirds will go to record companies, which in turn will distribute some of the money to recording artists and their unions.

Consumer electronics vendors vehemently have opposed royalty payments on either audio or video recording equipment, and succeeded in 1984 in beating back a legal challenge from the film industry over video cassette recorders. Consumer groups also have opposed royalties because they raise prices.

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