Broadcast Law Blog : Broadcast Lawyer & Attorney : Davis Wright Tremaine Law Firm : Broadcast Law Blog : Seattle, Los Angeles, Washington D.C., New York, San Francisco, Shanghai

Rights to the sound recording of most popular recorded music will typically come from the record label. And, for these sorts of on-demand uses, the rights to most recorded music will not be cheap and easy to obtain. It will come easily only for specific songs that the labels want to promote – sometimes referred to as “podcast safe” music.  This music is usually a song from a new artist, or an alternate take of a new song by an established artist, meant to be used to promote a new release.  Getting rights to the full catalog of music typically played by a music intensive radio station will require a negotiation with each record label and the payment of significant money - the kind of negotiation that has delayed the introduction of services like Spotify in the US for so long.

Rights to reproduction and distribution of the musical composition typically come from the music publishing company (or sometimes music publishing companies where there is more than one writer of a song).  These licenses—known as “mechanical licenses”— can be obtained through a statutory license, setting out payments to the copyright holders of any musical work that has been publicly released, but only if some strict procedures set out by law are followed.   These rights can also be obtained directly from the publishers or songwriters or, in many instances, through the Harry Fox Agency, which licenses compositions on behalf of many copyright holders. There are also a number of private companies that will help in getting the necessary licenses to use the musical composition.   Depending on the use that you have in mind, the record companies may themselves have already cleared the right to the musical composition, and that right will come with the right to the sound recording when you negotiate for that right.  But needless to say, it is not an easy process that will allow routine podcasts or downloads of music programming. 

Even the podcast of the performance of a local artist, with his permission, may require a mechanical license from the songwriter or music publisher if the artist has been singing “cover” songs.  So be careful when recording local artists - you may think that you are getting their music royalty free, and you may be avoiding the sound recording royalty and a negotiation with a record label, but you may still have the musical composition to deal with if the local performer has not written their own songs.

There are lots of other caveats and exceptions that may apply in certain circumstances.  But these don't allow the routine podcast of music programs or the other types of uses described above.   So be careful - or you may have the music industry knocking at your door demanding an unexpected payment.  For more information about these topics, check out our Advisory on the Basics of Music Licensing in Digital Media. 

The Copyright Office had recently issued a determination that ringtones and digital downloads were covered by this royalty, and could rely on the Section 115 compulsory copyright.  Again, in those contexts, copies were fairly easy to understand, as a copy is made when a ringtone or download is copied onto a phone or a computer, and when that happens, a specific fee is charged for the copy that is made.  The more difficult questions arise in cases of subscription services, limited time downloads, on-demand streaming, and even streaming done by a non-interactive service like an Internet radio station.  When is a "phonorecord" - a specifically identifiable copy of a recording that contains the musical work - made?  In the digital transmission process, multiple copies are made - on the servers of the music services, in transitory copies made by servers and routers on the Internet, and in the RAM and on the hard drive of the listener's computer.  Are these copies "specifically identifiable" such that a royalty should be paid?  In its Public Notice of this Roundtable, the Copyright Office raised many of these issues that formed the basis of the discussion on Friday.

 In 2003, the Recording Industry and the representatives of the music publishers entered into a settlement agreement that concluded that the non-interactive streaming did not involve copies that would give rise to a mechanical royalty, while interactive streaming and conditional downloads did.  However, as discussed at the Roundtable, the Harry Fox agency, the principal collection agent for the music publishing companies, represents less than 70% of the music publishers, so the agreement is not binding on all publishers.  Moreover, the Copyright Office representatives themselves asked at the Roundtable how they could draw a legal distinction between on-demand streaming and non-interactive streaming, when the technology involved was the same.  While the making of a copy in the streaming process may currently have no real value independent from the public performance (for which ASCAP, BMI and SESAC collect royalties for the musical composition), the Copyright Office asked if there should not at least be a recognition that a copy is made.  Questions even arose as to whether specifically identifiable copies are made in other digital transmissions that include buffer copies.

The question arose as to whether any copy made in a streaming process is specifically identifiable, and also whether the payment of such a royalty would be "double-dipping" - paying the composers twice for the use of their music.  In a recent decision in a Federal Court, a decision was rendered that ASCAP (and by implication BMI and SESAC) were not entitled to public performance royalties in connection with downloads, as no public performance was involved.  The question discussed on Friday was whether the reverse shouldn't also be true - that there is no mechanical royalty where there is a clear public performance.

Issues also exist as to the efficient operation of the statutory license.  The license requires notice to the copyright holder before it can be used, and as many of the copyright holders are difficult to find, and as there is no central database where the music publishers are identified, that is difficult.  In addition, as the Harry Fox agency, the one central licensing agency that exits, represents less than 70% of the copyright holders, a company that has a business model that doesn't allow for the per copy statutory royalty (e.g. a subscription service), doesn't have any group or groups with which it can negotiate to get blanket licenses for virtually the entire musical universe.  Thus,  licensing is difficult.

Everyone at the Roundtable agreed that the statutory language was ambiguous and did not cover all of the issues that arise in a digital world.  The Copyright Office itself has asked for legislative reform of the statutory license many times, to clarify these ambiguities.  In fact, at one point, the Register of Copyrights testified that she thought that one agency should collect all royalties for musical compositions, so that there would not be the issue of double dipping, and so that there would be organizations that would represent virtually all of the copyright holders for all purposes.   With the various entrenched stakeholders, that proposal didn't fly, thus we continue to have different groups representing composers for the public performance of music and for the mechanical royalty.  And, while we have had proposals for Section 115 reform floated in Congress for the last several years, the discussion on Friday was that Congressional action did not look imminent.  But all companies providing digital transmissions of musical compositions should continue to monitor these efforts, as the potential for problems arising from interpretations of who needs to get paid for digital services remains very high, and with the potential liabilities for copyright infringement being so great, the stakes are high.