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50 years ago the Beatles invaded America, stacking up Number 1 hit records by the dozens, and creating music that, even today, remains incredibly popular with many Americans.  But go to many of the interactive or on-demand music services, like Spotify, and search for Beatles music, and what will you find?   Mostly cover tunes by sound-alike bands rather than the original hits.  But yet, on services where you can’t designate your next song, like Pandora, you can hear the original songs.  Why the difference?

As we wrote two years ago, when the Beatles first announced that their catalog would be licensed to iTunes as the first interactive service to get access to their music, such services need to get licenses from the copyright holder of the sound recordings (or “master recording” – a song as recorded by a particular artist) in order to play those songs. By contrast, the non-interactive services operate under a statutory license, where a digital music service pays a royalty set by the Copyright Royalty Board (or a negotiated rate agreed to in lieu of litigation before the CRB see our article here about the various rates that are currently available to webcasters, and our article here about the start of a new proceeding to determine what those rates will be from 2016-2020). If the service pays that royalty, and observes the requirements of the license (like the “performance complement” that limits the number of songs from the same artist that can be played in a given time period, the prior promotion of the playing of a song, and certain other matters – see our article on the performance complement here) – they can play any legally available sound recording available in the US, and the sound recording copyright holder can’t object.Continue Reading It’s the 50th Anniversary of the Beatles Arrival in the US – Why Are Their Songs Still Missing on Some On-Demand Music Services?

We recently wrote about FCC issues that will be facing broadcasters in this new year.  While broadcasters will no doubt be busy keeping track of what the FCC is up to, they also need to have their eyes on other government agencies, as there are numerous issues that may come from Congress and the other regulatory agencies in DC that could affect their bottom lines.  So, with a watchful eye on the FCC for the issues we wrote about earlier in the month, what other issues should broadcasters be watching for from all of the other regulatory power centers in DC? 

While this is an election year, and that makes many big pieces of legislation unlikely, the discussions that occur in 2014 on these issues may pave the way for action late in the year, or in 2015 after the new Congress is in place and before the Presidential election in 2016 commands everyone’s attention.  Here are some of the issues of interest to broadcasters likely to be on the DC agenda in 2014:
Continue Reading What’s Up in Washington For Broadcasters in 2014? — Part 2, Issues beyond the FCC Including Ad Taxes, Music Royalties, Privacy Reforms, and More

A new month in a new year, and a number of new regulatory dates are upon us for broadcasters – and important dates for webcasters also fall in this month.  So now that the holidays are quickly becoming just a foggy memory, it is time to sharply focus on those regulatory obligations that you have to avoid legal issues as the year moves forward.  January 10 brings one deadline for all broadcast stations – it is a date by which your Quarterly Issues Programs lists, setting out the most important issues that faced your community in the last quarter of 2013 and the programs that you broadcast to address those issues, need to be placed in the physical public inspection file of radio stations, and the online public file of TV broadcasters.

Full power TV and Class A TV stations by January 10 also need to have filed with the FCC their FCC Form 398 Children’s Television Reports, addressing the educational and informational programming directed to children that they broadcast.  Also, by that same date, they need to upload to their online public files records showing compliance with the limits on commercials during programming directed to children.
Continue Reading January Regulatory Dates for Broadcasters and Webcasters – Children’s Television Reports, Quarterly Issues Programs List, Webcaster Elections and Minimum Fees, the Return of Lowest Unit Rates and More!

The Good Wife is not usually where one turns for serious discussions of music copyright issues (nor is Stephen Colbert’s Christmas special where we found copyright issues discussed several years ago).  But I was surprised to find this Sunday that the principal plot line of The Good Wife was focused on a music rights dispute.  After watching, I wondered how many people in the show’s audience had any idea of what the legal issues being discussed were really all about.  In fact, copyright law, as confusing as it can sometimes be, is an unusual topic for a plot line on a TV show.  It is not as universally understandable as is a criminal trial, a custody case or some civil suit for damages.  In fact, as we’ve written before, the complexity of copyright law makes compliance difficult even for those involved in the industry.  The Good Wife episode itself made that complexity a comedic point throughout the program, as even the musicians involved in the plot line several times remarked that they, too, were clueless as to the rights issues involved in this fictional case.  But, with a couple of days to reflect on the program, I thought that it might be worth expounding on some of the copyright issues involved, as they illustrate some of the rights that are included in the copyrights to every piece of music.

As we have written before, what makes copyrights in music so confusing is that there are several copyright holders in each recorded song, and each copyright holder has different rights, often administered by different organizations.  We write much about the public performance rights in sound recordings (usually payable to SoundExchange by noninteractive digital music services, and to the record companies by interactive services) and in musical compositions (usually payable to ASCAP, BMI and SESAC, though some large publishing companies have started to pull their catalogs from these organizations to license directly).  But The Good Wife did not deal with the public performance right, but instead with other rights in music.  The two rights principally dealt with were the right to authorize the making of a reproduction (often referred to as a “mechanical right“) and the right to make a derivative work.  The first is the right of the copyright holder to authorize others to use their compositions or recordings to make copies.  In the TV case, the issue involved the rights held by the writer of the song to authorize others to make cover versions of that song and to reproduce those versions (e.g. through CDs, downloads or other digital reproductions).  The right to make a derivative work is the right that the copyright holder has to authorize others to take parts of the original work but to make more than cursory changes to that work, e.g., keeping the melody and changing the words, or as in the TV case, keeping the words but changing the melody (in the TV case, taking a rap song and giving it a real pop song melody). 
Continue Reading Learning Copyright Law from TV’s The Good Wife – Compulsory Licenses, Derivitive Works and Parody and Fair Use

The Copyright Royalty Board today published in the Federal Register its notice announcing the commencement of the next proceeding to set webcasting royalty rates for 2016-2020.  The Notices (here for webcasting and here for “new subscription services” – subscription webcasting and other similar pay digital music services, other than satellite and cable radio whose royalties were set in another proceeding about which we wrote here) were notable as they were not simply an announcement that the proceedings were beginning and a recitation of the procedure for filing a petition to participate (essentially a written filing setting out a party’s interest in the outcome of the proceeding and the payment of a $150 filing fee). Instead, the order sets out a series of questions for consideration by potential participants, asking that they consider some fundamental issues about the nature of the royalty to be adopted in this proceeding.  Petitions to participate must be filed by interested parties with the CRB by February 3. 

The questions asked by the Judges really revolve around two issues that have been raised many times in prior proceedings.  These questions are noteworthy only because the Judges are asking the parties to consider whether the CRB should address issues that have been litigated in prior proceedings – issues that some might have considered to be settled by these prior cases.  First, the Judges ask if the CRB would be justified in adopting a percentage of revenue royalty, rather than the per song, per listener royalty metric that has been used in the three prior proceedings. Asking that question raises several other sub-issues that are set out in the orders including:

  • Whether it is too difficult to determine what the revenues of a webcaster are, an issue that can be troublesome if the webcaster has multiple lines of business where determining which revenues are attributable to webcasting and which are attributable to other services might be complicated (though collection agencies like ASCAP and BMI are able to administer their royalty schemes, usually using a percentage of revenue rate).
  • Whether a percentage of revenue royalty is unfair to the artists because it does not pay each artists an equivalent amount for each song that is played, thought the Judges ask parties to address whether all music is worth the same amount (see our article here about the difficulty in assessing the value of music and the controversies that it raises).
  • Whether a percentage of revenue royalty encourages the webcaster to use too much music, as services not paying on a per song per listener basis might not need to be efficient in monetizing their music use unless, as suggested by the Board, there are substantial minimum fees adopted to encourage the webcaster to make money off of its use of the music.

In addition, the Board asks if there should be different rates for different types of webcasters – are some more efficient than others?  Can royalties be maximized by “price discrimination” – charging less to certain webcasters to get whatever can be received from them, while charging a higher royalty rate to other services that can afford to pay more?  In effect, there has been price discrimination in the webcasting market, but such discrimination has come about after there have been decisions perceived as adverse to webcasters, when webcasters and SoundExchange have come together, often as the result of political pressure, to negotiate alternative rates pursuant to a Webcaster Settlement Act (or the Small Webcaster Settlement Act in the initial proceeding).  See our summary of the differing royalty rates currently paid by webcasters pursuant to these negotiated deals, here. 
Continue Reading Copyright Royalty Board Calls for Petitions to Participate in Proceeding to Set Webcasting Royalties for 2016-2020 – Posing Many Questions for Potential Participants

“Business Establishment Services” are copyright-speak for those music services that provide background music to commercial establishments.  These services have come a long way from the elevator music that once was so derided – and now set the mood in everything from retail clothing stores to restaurants to department stores with formats as varied as the commercial businesses themselves.  While the rates paid by these services pay for music rights is a little off-topic for this blog, these rates are a bit unusual, so they are worth mentioning.  The Copyright Royalty Board just announced the adoption of a settlement between services and SoundExchange which will raise the rates from the current 10% of revenue to 12.5%, with a minimum annual fee of $10,000, effective January 1.

We have written about the rates paid by these services before (see for instance our articles here and here).  What makes them unusual is that the royalties are not paid to SoundExchange for the public performance of sound recordings, as are the royalties paid by other digital music services including webcasters or Sirius XM.  That is because, in adopting Section 114 of the Copyright Act, Congress did not want to impose on businesses a new performance right, as there is no general public performance right in sound recordings in the United States.  Businesses and other services that do not digitally transmit performances of audio recordings have no obligation to pay copyright holders in the sound recordings (usually the record companies) or artists for the public performance of music.  Users do, however, pay fees for the public performance of the underlying composition through ASCAP, BMI and SESAC.  As we wrote here, the Register of Copyrights has suggested that a general public performance right in sound recordings be paid in the United States, but as that would impose new fees on all businesses that use recorded music in the US, from stadiums playing “We Will Rock You” at the appropriate point in a big game, to DJs spinning their discs in nightclubs, to the trendy tunes playing in the hip clothing retail stores, to over-the-air radio – this proposal is very controversial.  So, if they are not paying public performance fees, why do background music services have to pay SoundExchange?
Continue Reading New Music Royalty Rates for Ephemeral Recordings Used By Business Establishment Services

Congressman Mel Watt from North Carolina this week introduced his long-awaited bill proposing that over-the-air radio broadcasters pay a royalty to sound recording copyright holders (usually the record label) and to artists. As we have written many times, currently, royalties on sound recordings are paid only by companies that make digital performances, including webcasters (see our summary of the current webcasting rates here) and satellite radio (see our summary of the recent decision on satellite radio rates here). While the bill’s proposals for a broadcast royalty has been covered in many other news reports, few note that the Watt bill, called the Free Market Royalty Act, goes far beyond past proposals for a royalty on over-the-air broadcasters. In addition to the over-the-air royalty, the bill proposes that the Copyright Royalty Board be taken out of the equation in setting royalties.  And the removal of the CRB from the process applies not just to the proposed new performance royalty on broadcasters, but also to the setting of royalties for all other noninteractive commercial digital music services. Instead of a CRB proceeding to set rates, commercial music users, including webcasters and satellite radio, would need to negotiate a royalty with copyright holders – principally with SoundExchange – a royalty not subject to review as to the reasonableness of the rates by the CRB or by the Courts.

And the proposal goes further than simply designating SoundExchange as the party with whom all noninteractive digital audio services would go to negotiate royalties. In addition, the bill provides that any copyright holder could opt out of the rates negotiated by SoundExchange, after they are set, and negotiate direct licenses for its music with music services, including radio broadcasters. Seemingly, a popular band, or a label with a number of hit acts, that thought that it could get more from its music than any rate to which SoundExchange agreed, could withdraw from any "deal" with SoundExchange, and negotiate on their own for what would presumably be higher royalties.  If the copyright holder withdraws its music from the SoundExchange royalty, broadcasters and other music services could not play that music unless and until a license deal was reached.Continue Reading Congressman Watt’s Music Royalty Bill – Performance Royalty For Over-the-Air Broadcasters And Other Fundamental Copyright Act Changes Impacting All Digital Music Services

No one ever claimed that music royalties are easy to understand, especially in the digital age when nice, neat definitions that had grown up over many years in the physical world no longer necessarily make sense. The complexity of the world of digital music licensing is clear from many sources, but the Commerce Department’s “Green Paper” on Copyright Policy, Creativity, and Innovation in the Digital Economy does a good job discussing many of the music royalty issues that have arisen in the last 20 years that make copyright so confusing for professionals, and pretty much incomprehensible for those not immersed in the intricacies of copyright law on a regular basis. The Green Paper discusses some of the issues in music policy that make this area so confusing, and highlights where interested parties and lawmakers should focus their efforts to reform current rules to make them workable in the digital age. The Paper also discusses other areas of copyright policy that we will try to address in other articles.  You can find the Green Paper here (though note that it is about 120 pages and will take some time to download).

One of the most controversial issues that it addresses is the concept of a general performance right for sound recordings. As did Register of Copyrights Maria Pallante in the speech we summarized here, the Commerce Department puts the current administration on record as supporting the creation of such a right – a right that has not existed in the United States, except for a limited sound recording performance royalty for performances by digital audio companies like webcasters (see our summary of the royalty rates paid by different types of Internet Radio services here) and satellite radio (see our summary of the royalties to be paid by Sirius XM under the most recent Copyright Royalty Board decision). While the most controversial aspect of the creation of a broad sound recording performance royalty has been in connection with the extension of that royalty to broadcasters, the adoption of a general royalty, as advocated by the Green Paper would extend payment obligations to others who publicly perform sound recordings – including bars, restaurants, stadiums and other retail establishments.Continue Reading Making Music Rights Manageable in a Digital World – Issues Identified In Commerce Department “Green Paper” on Copyright Policy

In a lawsuit filed last week (see the complaint here), Flo and Eddie, the artists who were behind the 1960’s band The Turtles, claim that Sirius XM has infringed on the copyrights in their songs by allowing copies of these recordings to be made by the satellite radio service and in certain Internet offerings that Sirius XM makes available. The article in THR.esq (the Hollywood Reporter’s legal blog) that first announced the lawsuit talks much about the ambiguous status of pre-1972 sound recordings under Section 114 of the copyright act (the section providing for royalties for the public performance of sound recordings by digital services), and seems to view the suit as a reaction to the decision in the satellite radio proceeding before the Copyright Royalty Board finding that Sirius XM owed no performance royalty to SoundExchange for its playing of pre-1972 sound recordings (see our article about that decision). As pre-1972 sound recordings are not entitled to Federal copyright protection, the Board decided that there could be no payment due to SoundExchange (which collects royalties for payments made under Section 114) as there was no Federal right. While that point seems to be well-established, a close reading of the complaint makes it appear that it is not the public performance that is the principal basis of the lawsuit, but instead the copies that are made in the digital transmission process and by certain features of Sirius’s Internet streaming services that allow the download or on-demand playing of their digital streams.

As we have written before, pre-1972 sound recordings were left out of Federal statutes as, until 1972, sound recordings (a specific recording of a song by a particular artist) had no protection at all under Federal copyright law. As these sound recordings had no Federal protections, state laws were adopted – principally to prevent bootlegging or other unauthorized copies of such sound recordings from being made and distributed. As there was not, and still is not, a general public performance right in sound recordings, there has been little in the way of court cases suggesting that pre-1972 sound recordings have rights that other sound recordings do not have, e.g. a general public performance right. If the Flo and Eddie suit were really alleging that there is a public performance right in pre-1972 sound recordings, then seemingly every restaurant, bar, or stadium that plays the original hit versions of Good Vibrations, Rock Around the Clock, Johnny Be Goode, the Twist or the Turtles’ Happy Together could find themselves looking at potential liability for public performance of these sound recordings. Certainly, these state statutes, many of which have been around for decades, did not contemplate the exclusively digital public performance right that exists for post-1972 sound recordings, which was not adopted until the late 1990s. So, if the plaintiffs are asserting that there is a public performance right inherent in these statutes, it would seem that it would have to be a general public performance right. But it sure seems difficult to believe that courts would find ambiguous state statutes adopted to prevent illegal copying created a public performance right where none has ever before existed in the common law of the United States.Continue Reading Flo and Eddie Use State Laws on Pre-1972 Sound Recordings to Target Certain Sirius XM Services

In one week this month, Apple announced that it will get into Internet Radio, and Pandora, the biggest player in that space, announced that it will be buying a traditional, over-the-air radio station. What do these two big announcements say about the state of music royalties for digital music services? Apple’s struggles to get its service launched were well chronicled, as it was working to get an agreement for its new service from the record labels. What was less reported was its simultaneous negotiations with the music publishing community. Pandora’s radio station purchase, on the other hand, was admittedly a simple deal to take advantage of a blanket license available to all similarly situated companies owning radio stations. We’ll explain why these two deals were so different, and what impact the deals may have on other digital music services below.

The Apple deal is one negotiated with the copyright holders for the simple reason that the service that it is offering appears to be an interactive one, unlikely to be completely covered by any statutory (compulsory) or other blanket license. As we’ve written before, a statutory or compulsory license is one where the copyright holder, by law, cannot refuse to make available his or her copyrighted work. But, in return, the copyright holder receives a royalty set by the government – in the US, usually the Copyright Royalty Board. In the music world, the two most common compulsory licenses are the ones that allow webcasters and other digital music services to publicly perform sound recordings (the royalties paid by webcasters, satellite radio and digital cable radio companies to the record companies and artists), and the royalty that allows users (including record companies) to make reproductions of musical compositions in connection with the making of a sound recording, downloads, ringtones, and probably on-demand streaming services. This royalty is commonly referred to as the mechanical royalty, and is paid to songwriters and composers or their publishing companies. To qualify for these compulsory licenses, a company must follow certain rules. If they don’t, then they have to negotiate directly for the licenses from the copyright holder – which appears to be what Apple did.Continue Reading Apple Announces an Internet Radio Offering and Pandora Buys a “Real” Radio Station – What Does It Mean for Music Royalties?