We’ve already written twice about the copyright issues being considered this summer before various agencies and branches of government – all dealing with music licensing issues (see our previous Summer of Copyright articles here and here). The pattern continues, as the Copyright Office has now requested further comments on music licensing issues, following up on its roundtables held across the country during the month of June to discuss its music licensing inquiry begun in the spring (see our summary of the initial Copyright Office notice on its study, here). In yesterday’s Federal Register, there is a notice asking a series of questions about specific issues that were raised in the roundtables which the Office apparently finds to be of significance. Additional comments on these issues, and on any related issues affecting music licensing, are due on or before August 22.
What are the questions being asked by the Copyright Office, and what do they portend for its ultimate recommendations to Congress who, as we recently wrote, is itself considering music licensing issues and the potential for a comprehensive reform of music licensing in this country? The areas in which the questions are being raised are not new ones, but instead continue the themes raised in other forums this summer. They include questions as to how withdrawals of major publishers from the Performing Rights Organizations (ASCAP and BMI in particular) could affect those organizations. We first wrote about potential publisher withdrawals and the impact that could have on music services back in 2011. Also, on a related question, they ask why, when these organizations have collected record amounts of money in recent years, songwriters are complaining that they are economically struggling. In addition, questions are asked about the procedures used by the Copyright Royalty Board in their rate-setting process and whether those procedures should be revised, how better identification of musical works and sound recordings could be adopted to make recordkeeping and royalty administration easier, how a system of setting mechanical royalties could work without a statutory license, and whether there are international licensing models that might be adaptable to the US market. Some details below.
This issue of publisher withdrawals from ASCAP and BMI is related to the complaint that songwriters have been making about the money that they receive in royalties from digital services (see our articles here and here). The songwriters look at what the sound recording copyright holders are receiving from companies like Pandora and Spotify, and complain that they are getting a fraction of the royalties that are being received by the artists and labels for the sound recordings. While, as the Copyright Office notes, the PROs have been reporting record revenue, it seems that this comparison versus the rates received by the sound recording royalty holders have driven the complaints that are emanating from songwriters in all corners. As we wrote in our last article that focused on the complaints of songwriters, the digital music companies have been buckling under the weight of the sound recording performance royalties so, unless those royalties are decreased, it is difficult to see where higher royalties can come from to pay more to songwriters. We will write more about these topics shortly in connection with the Department of Justice’s review of the consent decrees that govern ASCAP and BMI.
On a related issue, at all of the roundtables held by the Copyright Office, representatives of music publishers argued that the current “mechanical royalty” compulsory license (the royalty paid to songwriters when their songs are used in making CDs, records, downloads, ringtones and even on-demand streams – see this article on the latest rates set by the CRB) should be abolished. These publishing representatives suggest instead a free market system. While many expressed concern about such a change (including digital services that rely on licensing tens or hundreds of thousands of songs when building a digital service), the Copyright Office is asking for comments on how a marketplace would work if the compulsory license was repealed.
On the CRB reform, the Copyright Office asks how the CRB procedures could be made more efficient. Suggestions posed including the provision of discovery before direct case exhibits are proffered to the Board, so that the parties to the case actually have facts before they make their claims and pay significant sums to experts to opine about royalty theory, when they have no evidence on which to base the opinions as the best evidence will come from discovery. Under the current system, that discovery comes after the direct cases, setting out the various parties’ positions, have already been filed. Streamlining the hearing process, to have a single hearing for the direct witnesses and the rebuttal cases, has also been suggested.
How to promote the use of technology to make easier the identification of music – through the more widespread use of ISRC codes and similar identifiers – is another question asked by the Copyright Office. The CRB recently asked questions about the mandatory use of such codes – an idea roundly opposed by most services who argued that it was difficult or impossible to locate such codes. At the first hearing on music licensing issues before the House Judiciary Committee there was also a discussion of this issue, with some of the participants expressing some skepticism as to whether a truly universal musical licensing mechanism was near to being developed and adopted. But the Copyright Office seems to be hoping that there is a solution that can be advanced.
Finally, the Copyright Office asks for whether there are any international licensing models that might provide an example of a system to be adopted in this country. For our international readers, this is your opportunity to suggest ideas that we should pick up on here in the United States.
Whether these comments reveal any new ideas not already on the record in original comments, or discussed at the roundtables that were held around the country, remains to be seen. But these comments do provide parties with one more chance to make their views on music licensing known to possibly influence the myriad discussions of music royalty reform that are being conducted seemingly in almost every government agency in Washington DC.