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The US House of Representatives has been looking at potential reform of the Copyright Act for some time, holding a number of hearings before the Committee here in Washington DC (see, for instance, our article here about one of those hearings). Yesterday, the Committee announced that it is taking its examination on the road, conducting a “listening tour” of the country, starting with a roundtable on music issues to be held in Nashville on September 22. The Committee’s announcement of the listening tour (available here), says that future dates and locations (and presumably topics) will be announced at a later date.   The announcement states:

America’s copyright industries – movies, television programming, music, books, video games and computer software – and technology sector are vitally important to our national economy.  The House Judiciary Committee’s copyright review is focused on determining whether our copyright laws are still working in the digital age to reward creativity and innovation in order to ensure these crucial industries can thrive.

So what are some of the issues that are likely to be considered? On the music side, there are many issues, including questions about the disparity between the payments from digital media companies made to songwriters as opposed to sound recording rights holders (see our article here), the amounts of the royalties themselves (with digital media companies finding many royalties to be too high to allow for a profitable operation while rights holders argue that they are too low to compensate creators for the decrease in the sale of music in a physical form – see our article on how the one-to-one nature of the digital performance complicates the discussion of the value of music when compared with analog performances), issues as to whether broadcasters should pay a performance royalty for sound recordings, and the question of pre-1972 sound recordings (see our last article on pre-1972 sound recordings, here). Many of these issues were addressed by the Copyright Office in its report on reform of the copyright laws as they relate to music (see our summary here). Some of the songwriter issues are also being considered by the Department of Justice in its review of the antitrust consent decrees governing ASCAP and BMI (see our article here).
Continue Reading House Judiciary Committee Begins Nationwide Listening Tour on Copyright Reform – First Roundtable on September 22 in Nashville Focusing on Music Issues

Yesterday, it was announced that the Radio Music License Committee (RMLC) settled its lawsuit with SESAC (see the press release here, and the full agreement here), where the RMLC had charged that SESAC’s practices in collecting its music royalties from the radio industry violated the antitrust laws (we wrote about the filing of the lawsuit here). While there was no admission of guilt by SESAC, it did agree that, between now and 2037, it will negotiate royalties with RMLC on an industry wide basis (up to now, SESAC could negotiate on a station-by-station basis). If RMLC and SESAC can’t agree to a royalty, the royalty rate will be set by an arbitrator – and past SESAC royalties would not have any precedential value in such proceedings (broadcasters have contended that past SESAC rates are far more, in comparison to those charged by ASCAP and BMI, then would be warranted based on the percentage of music from SESAC writers that is played on most radio stations). In subjecting SESAC to industry-wide negotiations and potential arbitration, the settlement is very similar to the deal reached in antitrust litigation between SESAC and the TV Music License Committee (about which we wrote here).

The settlement also tracks the structure of RMLC agreements with ASCAP and BMI (see our articles here and here) in that future SESAC licenses will cover broadcasters not only for their over-the-air programming, but also for their Internet streams and their HD channels (which were charged separately by SESAC for many stations). However, the agreement provides that the unitary license should not diminish the total royalties that would have been paid by the industry to SESAC if these rates were negotiated separately.   In other words, the effect of the unitary license is simply administrative convenience – everything is covered by a single license, so each station does not need multiple licenses from SESAC for its normal broadcast activities. However, unlike the ASCAP and BMI agreements, this agreement puts limits on this unified coverage for a broadcaster’s business that is outside the retransmission of the broadcaster’s over-the-air signals, excluding on-demand subscription services (presumably ruling out Rdio, in which Cumulus has an interest, from being covered by the radio license), and also excluding music-intensive custom radio, specifically ruling out Pandora and iHeartRadio from relying on this license for their online services. The agreement also says that other music users that are not primarily radio operators cannot get coverage for these other non-broadcast businesses simply by buying a radio station. What else does the agreement provide?
Continue Reading Radio Music License Committee Settles Antitrust Suit Against SESAC – What Does it Mean for the Radio Industry?

Twice this morning, I was faced with the question of whether a business needs a license to play a radio or TV station on their premises, once in a story in one of the broadcast trade publications (see the article here, in the You Can’t Make This Up column toward the bottom of the article) about a gas station that thought that they got around paying ASCAP, BMI and SESAC fees by using “6 or 7” consumer radios around the station. After I saw that article, I thought that it was worth writing this article, as the difference between 6 and 7 radios could make a real difference as to whether the business needs to pay music royalties.

Broadcasters need to be careful about urging their clients to play their stations at their business locations. There are very specific rules, and if the rules are not followed, liability can result. But, as detailed below, there are some exceptions to the obligation of commercial establishments to pay ASCAP, BMI and SESAC that apply specifically to establishments that play only FCC-licensed radio or TV stations. But the details of the exceptions must be observed or there can be issues. All of the performing rights organizations have contractors who travel the country, checking out retailers, bars, restaurants, and other commercial establishments to make sure that they are following the rules. There are periodically press reports about these rights organizations seeking royalties (sometimes through legal actions) from coffee shops, nightclubs, and even farmers markets that publically perform music without signing license deals. So these commercial establishments need to know the rules about music use to avoid becoming a target. As set forth below, the rules are very specific, and broadcasters can actually benefit from the exceptions as, in the limited circumstances set out in the Copyright Act, businesses can play music from FCC licensed outlets without a license, but music from other sources could present an issue. But be careful, as there are very specific rules – and the difference between 6 and 7 radios could be a real issue.
Continue Reading Does a Local Business Need Licenses from ASCAP, BMI and SESAC to Play My Radio or TV Station on Their Premises?

Another month is upon us, with the typical list of FCC dates of importance – and some new issues (including incentive auction developments that will probably be a regular part of our news through a good part of next year). One date of importance to some TV broadcasters was yesterday – July 1 – when TV stations affiliated with one of the Big Four TV networks and located in the Top 60 TV markets need to be carrying at least 50 hours of prime time or children’s programming each quarter containing video description. While most of this programming will come from the networks themselves, affiliates in these markets should be now be passing through enough of this video-described programming to meet the quarterly minimums.

July 10 brings other routine filing deadlines. For all broadcasters, by July 10 you should have in your public file (the online public file for TV stations) your Quarterly Issues Programs lists describing the most important issues that faced your community in the prior quarter and the programming that you broadcast to address those issues. Also due to be filed at the FCC by July 10 is your station’s Children’s Television Programming Report on Form 398 describing the programming broadcast on your station to serve the educational and informational needs of children. In addition, TV stations need to place in their online public file information showing compliance with the commercial limits in children’s programming and, for Class A stations, documentation showing continued eligibility for Class A status. For other dates of importance to broadcasters, see our Broadcaster Regulatory Calendar, here.
Continue Reading July Regulatory Dates for Broadcasters – Quarterly Issues Programs Lists and Children’s Television Reports, Incentive Auction Actions, CRB Webcasting Closing Argument and More

It’s another summer with music copyright issues hitting the press almost every day. Over the next week or two, we will try to catch up on some of the legal issues raised by all the music news. First, let’s look at the significant actions in the last ten days in the battle over whether there is a public performance right in pre-1972 sound recordings. Just a few days after there was a court decision (available here) finding that there was no common law public performance right in pre-1972 sound recordings under Florida law, Sirius XM last week announced that it had settled the case brought against it by the major record labels by agreeing to pay $210 million for nationwide public performance rights to the catalog of recordings that these labels own, said by Sirius’ SEC 8-K filing to comprise about 80% of those sound recordings. Obviously, that settlement does not appear to resolve the issues with independent sound recording owners (like Flo & Eddie who brought the actions that have resulted in NY and California decisions finding a performance right in pre-1972 recordings in those two states). But what do the settlement and Florida decision mean for other users of these recordings?

First, a review of the issue with pre-1972 sound recordings. With all of the copyright issues that have been in the news in the last few weeks, that review is necessary so that readers really understand the issues involved in this case – beyond just the headlines. Pre-1972 sound recordings (sound recordings being a song or other audio material, as recorded by a particular artist) first released in the United States are different than other sound recordings, as they do not have protections under Federal copyright law. Prior to 1972, Federal copyright law did not protect sound recordings at all, only protecting what is referred to as the “musical work” or “musical composition” (the underlying words and music of a song). The actual recording of the song was protected only under state laws, and most state laws addressed only unauthorized reproductions of those recordings (e.g. bootlegged copies), not performance rights. When copyright protections over sound recordings were federalized in 1972, states were left with the right to determine how to deal with pre-1972 recordings.
Continue Reading Understanding the Murky State of the Performance Right in Pre-1972 Sound Recordings – Florida Court Rejects the Right yet Sirius XM Settles With the Record Labels

The Copyright Royalty Board has begun the hearing phase of its proceeding to set the royalties to be paid by webcasters (or noninteractive digital music services) for public performances of sound recordings for the years 2016-2020. These are the royalties paid by Internet radio companies to SoundExchange, allowing them to play any recorded music legally released in the United States since 1972 (see our article here about issues regarding pre-1972 sound recordings), as long as the digital service pays the royalties set by the Board and observes other rules set by the Copyright Act. This proceeding began in January 2014, when the CRB asked for petitions to participate in the proceeding. After those petitions, parties had time to engage in settlement discussions before filing “written direct cases” last October – written witness statements setting out the rates proposed by each party and the justifications for those rates (see our summary of the parties initial proposals here). Since that time, the parties have been engaged in discovery, producing mountains of documents relevant to the claims made, and conducting depositions of a number of witnesses. This week, the case moved into its trial phase.

On Monday, the parties still participating in the proceeding presented to the 3 CRB judges their opening statements where their attorneys summarized what they hope to prove over the next 5 weeks of trial. During the trial, the parties will formally introduce their written statements (available on the CRB website, here, with sensitive business information redacted), which have been amended based on facts uncovered during the discovery that was conducted, and their written rebuttal testimony – testimony that was provided to the CRB in February to rebut the initial written cases (available on the CRB website, here, with sensitive business information redacted). Such rebuttal testimony has itself been subject to the discovery process. There can be various objections to the written evidence presented – including questions of hearsay or relevance to the proceeding. For virtually all of the written statements, the individual who provided that testimony will be present at the hearing to introduce that testimony, and each witness will be subject to cross examination by the other parties. As is evident by the number of exhibits that have been submitted, there will be dozens of witnesses to be heard – from renowned economists and other experts, to record label and digital music company executives, to broadcasters large and small. 
Continue Reading Copyright Royalty Board Begins Hearings on Webcasting Royalty Rates for 2016-2020 – When Will We See a Decision?

Press reports indicate that the Department of Justice is nearing the completion of its study of whether to suggest the revision of the antitrust consent decrees that have bound ASCAP and BMI for over a half century (see our summary of the issues that DOJ is considering here). Much of the impetus behind this review comes from claims from songwriters and their associated publishing companies that they simply are not receiving enough money from digital music services. In the music industry trade press, one can barely go a day without seeing some article about a songwriter whose song was played a million times on a digital music service like Pandora or Spotify, with the artist only receiving some relatively small amount of royalty revenue from that seemingly large number of plays. In looking at this question, I think that there are a number of issues that are misunderstood – perhaps the greatest being the meaning of big numbers – what is really meant when a song is played a million times by a digital music service. I’ve moderated two panels in the last month where royalty experts debated royalties generally and this topic specifically, and I will be moderating another at the RAIN Summit West in Las Vegas on Sunday. Before that discussion, and for those who won’t be at the RAIN Conference, I thought that it would be worth exploring some of this confusion about this issue here.

Last month, the Senate Judiciary Committee’s Antitrust Subcommittee held a hearing on the DOJ’s review of the antitrust consent decrees (video of the hearing, and written witness statements, are available here). During the course of the hearing, a songwriter representative, when asked by a Senator about the alleged impact of digital royalties on the songwriting community, made the assertion that when his song was played a million times on terrestrial radio, he could pay his bills, but when that song was played a million times on a digital service, he received only a few hundred dollars. While this kind of claim is made every day by songwriter representatives, and has contributed to the examination of music royalties being conducted by Congress (see our articles here and here), the Department of Justice and the Copyright Office (see our article here), in many ways, these claims seem to evidence a fundamental misunderstanding of the nature of digital services. It is truly a comparison of apples and oranges (or maybe apples and watermelons might be more appropriate) that has distorted the conversation about royalties. The claim was challenged at the Judiciary Committee hearing by a representative of Pandora, who pointed out that the million people reached by the million spins of a record on Pandora is the equivalent audience reached by something like 16 spins on a New York radio station. I thought that this exchange was crucial to the understanding of the issues involved in the examination of changes to the ASCAP and BMI royalty structure, yet I saw little or no coverage of the issue in press reports after the hearing.
Continue Reading How Misunderstandings about Big Numbers Distort the Debate over Songwriter Digital Music Royalties – As the DOJ Readies its Recommendations for Reform of the ASCAP and BMI Consent Decrees

Could the Copyright Office become an independent agency with rulemaking power? Congress is examining all phases of copyright law, as well as the functioning of the Copyright Office. In connection with that review, the Register of Copyrights Maria Pallante (the head of the Copyright Office) sent a letter to John Conyers, the Ranking Member of the House Judiciary Committee, explaining her views on this topic. The letter was sent at the request of the ranking member, made at a recent hearing reviewing the functioning of the Office. In the letter, the Register suggests that the agency be made into an independent agency, like the FCC, to overcome constitutional issues about its powers and to allow it to act as an expert agency to more quickly respond to issues that arise under the copyright laws.

So what are the issues that this proposal raises? The constitutional issue that is mentioned in the letter is similar to the issue that faced the Copyright Royalty Board a few years ago, where a Court of Appeals decision concluded that the Copyright Royalty Judges were not constitutionally appointed under the Appointments Clause of the US Constitution. We wrote about the arguments in that case here. While the specific issue addressed in the CRB case, about the Judges being subject to the supervision of the head of a government agency, do not seem to arise in the appointment and supervision of the Register, another aspect of the Appointments Clause has raised from time to time, asking whether the Librarian of Congress, who oversees both the CRB and the Copyright Office, is truly the head of a department of the executive branch of government. In a government organization chart, the Library technically reports to Congress, not the President, and thus the arguments are that the Library is not a true executive agency (though the President does appoint the Librarian of Congress). While these issues generally have been resolved in favor of the Copyright Office, the fact that they have come up, and never been resolved by the Supreme Court, suggests the constitutional issues which the letter addresses. While this may be very theoretical there are more practical issues that would arise from an independent Copyright Office as well.
Continue Reading Copyright Office Calls for Greater Independence – What Would that Mean?

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.
Continue Reading Songwriter’s Equity Act Reintroduced – What Does It Propose?

The Copyright Office this past week released its Report following its study of music licensing in the US; a comprehensive report addressing a number of very controversial issues concerning music rights and royalties.  Whether its release during the week of the Grammy Awards was a coincidence or not, the report itself, which takes positions on many issues, is sure to initiate lots of discussion and controversy of its own.  The report was issued after two rounds of comments (the questions that were asked in each request for comments are detailed in our stories here and here) and three roundtables held in three different cities where representatives of music companies provided ideas on the questions asked (I participated in the Nashville session).  As detailed below, the report addresses some of the hot button issues in the music royalty space including the broadcast performance royalty, publisher withdrawals from ASCAP and BMI (see our article here), and pre-1972 sound recordings.

Before getting into the details of the proposals, it is important to note that the Copyright Office, unlike many other government agencies, does not itself make substantive rules.  Instead, it merely makes recommendations.  For any of the substantive proposals that it suggests in the Report to become law, Congress must act – which is never easy.  In the Copyright world, it is particularly difficult, as the rules and industry practices are so complex and often obscure, and where any change can have a very dramatic effect on some industry player or another.  Often, a simple change in the rules can take money from someone’s pocket and deposit into someone else’s.  Moreover, copyright is not an area where there are clear partisan divides.  Oftentimes, it matters more where a Congressman’s home district is than his or her party affiliation in their leanings on copyright matters.
Continue Reading Copyright Office Issues its Report on Music Licensing – Issues Include Broadcast Performance Royalties, Publisher Withdrawals from ASCAP and BMI, and Pre-1972 Sound Recordings