A comprehensive effort to review music licensing concluded Thursday with the release of the U.S. Copyright Office’s Music Licensing Study. The 245-page document is the result of the Copyright Office’s request for comments on a variety of licensing issues as well as hearings in New York, Los Angeles and Nashville.
The Office guides and informs Congress on the complicated matters of copyright. As such, this report should influence Congress as it attempts to update copyright law in the coming years.
During its study, the Office found a broad consensus across four principals: music creators should be fairly compensated; the licensing process should be more efficient; market participants should have access to authoritative data to identify and license sound recordings and musical works; and usage and payment information should be transparent and accessible to rights owners.
It also provided addition principles it feels should guide copyright reform: government uses of music should aspire to treat like uses of music alike; government supervision should enable voluntary transactions while still supporting collective solutions; rate-setting and enforcement of antitrust laws should be separately managed and addressed; and a single-market oriented rate-setting standard should apply to all music uses under statutory licenses.
Here are just some of the standout aspects of the Copyright Office’s proposed rate-setting framework:
— A more equal footing for sound recordings and musical works. At least in the digital realm, the Office believes “sound recordings and the underlying musical works should stand on more equal footing.” An alternative, free-market approach “would give copyright owners an opt‐out right to withdraw specific categories of rights from government oversight in key areas where sound recording owners enjoy such benefits–namely, interactive streaming uses and downloads.” Music publishers have long complained that musical works shared too little in digital royalties.
— Replace the 801(b) standard with a single, market-oriented standard such as the “willing buyer, willing seller” (“or some alternative formulation”) for both sound recordings and musical works. The 801(b) standard used is currently used to set rates for satellite and cable radio. Rates for webcasters like Pandora are set using the market-based “willing buyer” standard.
— Allow publishers to withdraw from PROs for interactive streaming. However, the Office believes these withdrawals should be limited — “at least for now” — to interactive streaming rights for digital services. Publishers that opt out would be required to provide a list of withdrawn works to a central source (some kind of “general music rights organization”).
— Allow for transparency in direct deals. The Office suggests direct deals between rights owners and digital services (negotiated outside the performing rights societies) allow songwriters and artists to elect to receive their royalties from “the licensee through their chosen licensing entity.”
— Bundle mechanical and performance rights. Supported by industry stakeholders, this proposal would allow PROs and other entities to become “music rights organizations” that offer both mechanical and performance rights for musical works.
— Allow for blanket licenses for digital uses under Section 115. A move to a blanket license system would eliminate concern about liability and “allow marketplace entrants to launch their services–and begin paying royalties–more quickly.”
— Fully federalized pre-1972 recordings. The Office believes pre-1972 recordings, currently subject to state laws, should be brought within federal law “with the same rights, exceptions, and limitations as more recently created sound recordings.” The lack of federal protection has meant some digital services do not pay performance royalties for pre-1972 recordings.
— Establish of a new public performance right for sound recordings. These rates would be negotiated in a free market. Sound recordings do not currently have this public performance right, although some labels have negotiated deals for performance royalties with terrestrial broadcasters that also cover webcasting.
— From rate courts to CRB. The Office hopes for a “productive reconsideration” of 75-year-old consent decrees that bind ASCAP and BMI to the Department of Justice. Similarly, the Office suggests rate-setting of public performances of musical works could be more appropriately handled by Congress, via the CRB, than the DOJ.
— Incentives to create an “authoritative public database.” The Office believes any solution to the music data problem should be built by private actors rather than the government.