According to British press reports, Warner Music’s CEO Edger Bronfman Jr. stated that it will cease making its music available to advertising supported streaming music sites. This has prompted some questions about how this decision would affect services such as Pandora, Slacker, Accuradio and other Internet radio companies – would it deny them access to substantial amounts of music? In fact, as these US services operate under a "statutory license", created by Congress, they get access to all legally recorded music in exchange for the payment of a royalty established by the Copyright Royalty Board. Essentially, under this statutory license (otherwise known as a "compulsory license"), a copyright holder cannot deny access to companies operating under the license, as long as those companies comply with terms of the license, and pay the established royalty. Thus, even if the Warner Music decision really is true, this decision should have little or no impact on US Internet Radio stations operating under the compulsory license.
What would it affect? Presumably it could hurt services that don’t rely on the statutory license. Internet Radio operators who want to rely on the statutory license must meet a set of requirements set out by statute in order to qualify for the license. We’ve written about those obligations before here, in connection with the waiver of some of these requirements in the royalty settlement between SoundExchange and the NAB. Services operating under the license must meet the "statutory complement", meaning that they cannot play more songs from an artist or CD in a given time period than allowed by the law, specifically:
- No more than 3 songs in a row by the same artist
- Not more than 4 songs by same artist in a 3 hour period
- No more than 2 songs from same CD in a row
In addition, Section 114 of the Copyright Act sets out other limitations on a service operating under the statutory license. The service must provide the name of the artist, song and CD in text on its site, to the extent technically possible, while the song is playing. There are also certain restrictions about tying the music being played to commercial content on the site, and requiring that sites take steps to prevent digital piracy. And, most importantly, the service cannot be "interactive."
The question of what is and what is not interactive is not an easy one, as we wrote in connection with the recent court decision determining that the Yahoo! Launchcast service was not interactive within the meaning of the statute, despite having some degree of user influence. But some services are clearly interactive – where a user can designate the song or artist that is to be played, or set up his or her own playlist, or otherwise specify what they want to hear when they want to hear it. Services that allow this kind of on-demand listening, including many of the so-called "subscription services" where you can effectively order up the music that you want to hear, must directly negotiate with the copyright holders for the rights to use the music that they play. And because they must get specific permission from the copyright holder, they may not necessarily get all the access to all the music that a user might want to hear. Sometimes a label will restrict access, sometimes a band will require in their label agreements that no digital access be provided. That’s one of the reasons that some of these services don’t feature all the music that a user might want to hear – no Beatles, no Metallica, and other gaps in the music that they provide. Thus, if Warner or any other record company decided that they didn’t want to provide access to the music to which they have the rights, they could do so.
So, while non-interactive Internet radio services would not, in the US, be affected by such a decision, some on-demand services may well be affected, if the press reports about this decision are true (and applicable world-wide). And we’ll leave the debate about the wisdom of any such decision to others to debate.