The Songwriter’s Equity Act has once again been introduced in Congress (see our article about that Act when it was introduced in the last Congress). It proposes to make changes in provisions of the Copyright Act governing the way that songwriters are paid for the use of their musical compositions – with the obvious intent of raising the songwriters’ compensation. This legislative proposal is one reflection of the complaints by songwriters that they are not sufficiently compensated for the use of their music. It is interesting that this bill was introduced during the same week that ASCAP announced its first year of billion dollar collection for songwriter’s public performance royalties, and at the same time that the Senate explores more comprehensive changes to the antitrust consent decrees that govern ASCAP and BMI through a hearing held last week, with the Department of Justice review of these decrees expected in the not too distant future (see our article here).
The Act makes seemingly small changes in legislation, but those changes could have a significant impact on how rates paid to songwriters are computed. The first change proposed is to allow the rates set for the public performance of sound recordings (those royalties that digital music services pay to SoundExchange for the public performance of sound recordings – the actual recordings of songs as opposed to the performance of musical compositions for which ASCAP, BMI and SESAC pay songwriters) to be used as evidence by the judges setting rates for the public performance of musical compositions. That has been prohibited under current law. It is interesting to note that, under Copyright Royalty Board precedent, the Copyright Royalty Judges have in the past determined that the rates paid by music services for the public performance of musical compositions are not a precedent for the public performance of sound recordings, as they are different rights that are not necessarily of the same value. Yet this legislation seems to assume that the royalties for sound recordings are in fact instructive as to what those rates should be for public performances. While seemingly acknowledging the relevance, the legislation does not allow the reverse – stating that the legislation should not be seen as having any effect on the precedent already established by the CRB for the rates for the public performance of sound recordings, so that the rates for sound recordings should not be affected by this legislation.
Effectively, the intent of the legislation seems to be to raise the rates for the public performance of music generally as, with the suggestion of an increase in the rates for songwriters and the preservation of the already high rates paid by music services for the public performance of sound recordings, that can only mean that the overall cost of music would be expected to go up for any company that pays for the use of music. As we wrote before, there is a fundamental disconnect as to how much services can pay. When even the biggest and most successful webcaster already pays almost half of its revenue for music royalties, and as most digital music services lose money, one needs to ask from where the increased royalties are to come to pay these new royalties?
Songwriters have looked at the rates paid to sound recording performance copyright holders with jealousy, as those rates can be several times the amount of the rates that are paid to the songwriters. Songwriters suggest that their contributions to the success of a song are at least as important as is the performance. But this is perhaps one of those questions that can never be answered – which is more important, the song or the singer? Some have suggested that digital music services should pay one fee for the use of music, and that should be pooled and all of the rightsholders can work out who should receive the proceeds of that pool. Of course, one gets into the question then of how the pool would be shared. In the recent proceeding started by the Copyright Office to look at music royalties (see our summary of the Copyright Office report from that study here), the RIAA itself suggested such a concept, but their suggestion that the RIAA or the record labels collect the money and work out the distribution did not sit well with the songwriters, so the proposal seems destined not to proceed.
In fact, in the proposed legislation, the issue of the contribution of the songwriter to the success of a song is also addressed – as the legislation proposes to change the way that royalties are computed for the use of musical compositions in the production of sound recordings – the so-called “mechanical” right. Once a song has been publically released, under current law, any other performer can record that song, and pay a statutory royalty (set by the CRB) to the publishing company that owns the rights to the song. The rate, which has been in the neighborhood of 9 cents per copy made for quite some time, is set using the 801(b) standards. The legislation proposes to change to the willing buyer, willing seller standard used for Internet radio performance royalties (see our summary of the difference between those standards many times, including here and here).
The introduction of the Bill is probably simply a prelude to the introduction of much additional legislation to address music licensing, including the probable “music bus” comprehensive reform legislation under consideration by the House Judiciary Committee (see our summary here). We can expect much debate about copyright issues this legislative session, so watch carefully as these issues develop to see if any changes proposed changes could affect your business in the future.