Music Rights

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Broadcasters beware – podcasts with music may be dangerous to your economic health.  In recent weeks, I’ve come upon more than one incident where a broadcaster was providing podcasts containing music on their website, or allowing listeners to download or stream on-demand some new, hot song.  I’ve even seen certain articles in the trade press advocating that stations do podcasts of their morning shows, or otherwise provide some sort of programming containing music on their websites in a manner in which the listener can listen over and over again to the same program or song.  Broadcasters need to know that they are asking for trouble when they provide services like podcasts, downloads and on-demand streams containing music without getting specific permission from copyright holders to do so, as these uses are not covered by the SoundExchange royalties paid for webcasting, nor (in most cases) by your ASCAP, BMI and SESAC royalties.  

The royalties paid to SoundExchange are for the right to publicly perform sound recordings in a noninteractive manner.  In other words, they only cover streams where the user cannot get a specific song when they want it, and where listeners do not know the order in which songs will be played.  ASCAP, BMI and SESAC (the "PROs") also cover public performances, but of the underlying musical compositions (the words and music of the song, as opposed to its recording by a particular singer or band).  By contrast, “podcasts,” ( and here I mean an on-demand program that can be downloaded onto a digital device for later replay, and which can also usually be played immediately on someone’s computer) are much like downloads – and involve a different right in music – the right to reproduce and distribute the music.  The rights of reproduction and distribution are different from the public performance right, and the permission to make reproductions and distributions are granted by different groups than are the public performance right.  SoundExchange and the PROs have nothing to do with granting this reproduction and distribution right (with the limited exception of ephemeral rights in streaming granted through the SoundExchange royalty – a concept too technical to be discussed here, and one that does not affect this warning.  But, if you are interested in these rights, you can see our article that discussed ephemeral rights in a bit more detail, here).  Podcasts, downloads and on-demand streams require a specific grant of rights from the copyright holders of the sound recordings and the musical compositions for each piece of music that is being used. Continue Reading Beware – Music Use in Podcasts, Downloads and On-Demand Streams are Not Covered By Your SoundExchange Royalties

Just as webcasters thought that they had their royalty obligations figured out, there comes news that the already complicated world of digital media royalties may well become more complicated.  Last week, EMI, which in addition to being a record label is a significant music publishing company, has reportedly decided to withdraw portions of its publishing catalog from ASCAP – which had been licensing the public performance of these songs. The withdrawal from ASCAP applies only to "New Media" licensing.  What is the impact?  As of today, webcasters pay ASCAP, BMI and SESAC for the rights to play virtually the entire universe of "musical compositions" or "musical works" (the words and musics of the song).  By withdrawing from ASCAP, EMI will now license its musical compositions itself, adding one more place that webcasters will need to go to get all the rights necessary to play music on an Internet radio type of service.  In addition to royalties paid for the musical composition, webcasters also pay SoundExchange for public performance rights to the sound recordings (the song as recorded by a particular singer or band) – and by paying this one organization, they get rights to perform all sound recordings legally released in the US.   But any Internet radio operation needs both the musical composition (except for those compositions that have fallen into the public domain) and the sound recording performance rights cleared before they can legally play the music.

The news reports quote EMI as talking about the efficiencies that will be created by its licensing the musical compositions directly – in conjunction with the licensing of other rights – like the rights to make reproductions of its compositions, or the rights to publicly perform sound recordings to which its record label holds the copyright. But the whole idea of a performing rights organization with collective licensing is that it provides to digital music services the efficiencies offered by a one-stop shop for the purchase of rights to all a very large set of musical compositions.  Up to now, a digital music service knew that, by entering into licensing agreements with ASCAP, BMI and SESAC (the "performing rights organizations, or "PROs"), it had rights to virtually all the musical compositions that it would normally use (i.e. they received a "blanket license").  If these rights are balkanized, so that each significant publisher licenses their own music, the webcaster will have to make multiple stops to license all the music they need – which always leads to confusion.  The more places they have to go to license music, the more possibility that they will overlook a necessary rightsholder.  But there is even a bigger potential issue for webcasters – price.Continue Reading Another Royalty Payment for Webcasters? EMI Withdraws From ASCAP For New Media Licensing

What should SoundExchange do with money that it collects for the performance of sound recordings, when it does not know what sound recordings were played by a particular service?  As we’ve written many times on this blog, SoundExchange collects royalties from digital music services , including satellite radio, cable radio and webcasters, for the performance of sound recordings (i.e. a recording of a song by a particular artist).  It is charged with the obligation to distribute these royalties one-half to those who hold of the copyright to the sound recording and one-half to the artists who perform on those recordings.  However, SoundExchange, according to a filing recently made with the Copyright Royalty Board, does not always know which songs were played by a particular music service.  Thus, it has had difficulty distributing all of the money it collects – currently holding $28 Million in royalties from the period 2004 to 2009 that have not been distributed.  Why?  According to SoundExchange much of the problem is that not all services report what they played and how often, and other information that is submitted is sometimes inaccurate or otherwise does not adequately identify the music that was played.  To deal with this problem, SoundExchange has asked that the Copyright Royalty Board authorize it to use proxy information to distribute these funds from 2004-2009.  The CRB has asked for comments on that proposal.  Comments are due on May 19.

What is proxy information?  Basically, SoundExchange plans to infer from the information that it does have what music was played by the services for which it has no information.  According to the SoundExchange filing, they would make these assumptions based on the type of service.  Thus, information from webcasters would be used to estimate what other webcasters were playing.  Information from background music services who did report would be used to determine what other background music services played, and so on.  The CRB, in its request for comments, asks if the proxy should be further broken down so that, for instance, noncommercial webcasters would serve as a proxy for other noncommercial webcasters, and commercial webcasters would serve as a proxy for other commercial webcasters.  The Copyright Royalty Judges are also seeking to assess whether SoundExchange has done all that it can do to get the required information, and if the proxy system is a fair way of determining distributions for the money that has not yet been awarded to rightsholders and artists. 

Does this proposal have any impact on the services themselves?  Apparently not, as SoundExchange is at this point only looking for this authority in order to distribute money collected for royalties that came in from 2004 to 2009.  It does not appear to be looking at imposing any new restrictions on webcasters or other digital music services.  Instead, it is only looking for the authority to distribute the money that it has already collected based on the information that it has available.  What should music services take away from this request?Continue Reading SoundExchange Seeks Permission to Distribute Royalties Based on Proxy Information

Last week, the Copyright Office published in the Federal Register the final decision of the Copyright Royalty Board on the statutory rates for Internet radio royalties – royalties paid by webcasters for the noninteractive streaming of sound recordings.  As we have made clear before, these are royalties that are paid in addition to the royalties paid to ASCAP, BMI and SESAC for the public performance of the musical compositions (see our memo on Using Music in Digital Media, here, that explains the difference between the sound recording and musical composition royalties).  The rates adopted by the CRB are the rates to be paid by any webcaster who has not elected alternative rates available under one of the many settlement agreements between SoundExchange and groups of webcasters, which were entered into under the Webcaster Settlement Acts.  The Final Decision corrects a few typos in the initial decision, but otherwise leaves the substantive holdings of the decision unchanged.  We described those holdings here.  While the publication of the final decision starts the clock running on filing an appeal, the new rates are unchanged from those that were in effect for 2010 for commercial webcasters who had not elected any available alternative set of rates.  Thus, these webcasters will continue to pay at the rate of $.0019 per “performance” (a performance being one listener listening to one song – e.g. if there are 100 people listening to a stream that plays 10 songs in an hour – there are 1000 performances in that hour) for the remainder of 2011.   The publication of these rates has, however, triggered a number of questions about the comparative royalties that different Internet radio services pay for streaming music on the Internet – rates summarized below.

As set out below in detail, there are significant differences in the royalties paid by different services for the 2011-2015 royalty period.  Broadcasters who are streaming their programming on the Internet pay lower per performance royalties than webcasters paying the statutory rate in the first years of the 5 year period, but higher rates at the end of the period. (See a summary of the Broadcaster royalty agreement here).  “Pureplay” webcasters, like Pandora, pay significantly lower per performance royalties than either broadcasters or those paying under the statutory rate, but are required to pay a minimum fee of 25% of the gross revenue of their entire business – ruling out these lower rates as an option for any service that has lines of business other than webcasting.  (See a summary of the Pureplay deal here).  The broadcaster deal and that which applies to the Pureplay webcasters were both arrived at pursuant to settlements reached under the two Webcaster Settlement Acts, passed in 2008 and 2009.  These allowed the groups covered by these agreements to negotiate with SoundExchange over the rates that would cover the industry for the digital noninteractive performances of sound recordings.  The statutory rates were arrived at by a decision of the Copyright Royalty Judges after litigation which took place last year.Continue Reading Final Webcasting Royalty Rates Published – A Comparison of How Much Various Services Pay

Public performances, synch and master use licensing, sound recordings, musical compositions – what are all these terms, and how does a digital media company make sense of them and figure out where to go get permission to use music in their business?  These issues were discussed in a webinar that I did with my partner Rob Driscoll…

The Copyright Royalty Board today released its Determination of Rates for noninteractive webcasting services for the period from 2011-2015. These rates will form the default rates for webcasters who have not opted into one of the many voluntary agreements negotiated last year under the Webcaster Settlement Act (see our summaries of the Pureplay webcaster deal here, the Broadcasters settlement here, the Small Webcasters or "microcaster" settlement here, the noncommercial webcasters settlements here, the Sirius XM settlement here, and the CPB/NPR settlement here).  The Board set the following per performance royalty rates as the default rates for webcasters who are not terrestrial broadcasters:

  • 2011 – $.0019 per performance
  • 2012 – $.0021 per performance
  • 2013 – $.0021 per performance
  • 2014 – $.0023 per performance
  • 2015 – $.0023 per performance

Thus, the rates for this coming year will remain at the same level at which they are now set for 2010, and will increase slightly every other  year.  A performance is one song played to one listener. 

The decision also adopted default rates for noncommercial webcasters, setting those rates at the levels agreed to in a settlement between SoundExchange and certain noncommercial educational webcasters reached last year. Those rates establish a minimum fee of $500 for each individual channel offered by a noncommercial webcaster. If the listening on any channel exceeds 159,140 Aggregate Tuning Hours in any month, the webcaster would pay for such overage on a per performance basis at the following rates:

  • 2011 – $.0017 per performance 
  • 2012 – $.0020 per performance
  • 2013 – $.0022 per performance
  • 2014 – $.0023 per performance
  • 2015 – $.0025 per performance

Continue Reading Copyright Royalty Board Reaches Determination on Royalty Rates for Webcasting for 2011-2015 – For Internet Radio Operators Not Covered by Webcaster Settlement Act Agreements

The Copyright Office today announced an extension of time for the fling of comments in its inquiry into the possibe extension of Federal Copyright protection to pre-1972 sound recordings.  We provided a details of that proceeding here.  Internet radio operators and other digital music services that play significant numbers of pre-1972 sound recordings (particularly…

The big news in the music world this week is that Apple finally is able to sell digital downloads of the Beatles catalog in its iTunes music store.  For years, the copyright holders who control the Beatles master recordings have withheld permission to use the Beatles recordings on iTunes and other digital download and on-demand streaming services, seemingly afraid of diluting the value of their copyrights.  There are other bands who have had a similar reluctance to make their recordings available on-line.  While this impasse has now been broken by the biggest name among these digital holdouts, at least as to iTunes, some have asked why it is that the Beatles were never missing from Internet radio, while they were absent from these other services.  The answer is the statutory license under which Internet Radio operates.

While there have been many disputes over the royalties that have been imposed under the statutory license created by Congress which allow non-interactive digital music companies to use sound recordings to provide music to their customers, there is no question that the license has fulfilled one of its primary functions – making sure that there is access by Internet radio operators to the entire catalog of sound recordings available in the United States.  One of the principal reasons that the statutory license was created was the inherent difficulty, if not the impossibility, for a radio-like digital service operating under the sound recoding performance royalty first adopted in 1995 to secure permission from all of the copyright holders of all of the music that such services might want to use.  Thus, Congress adopted the statutory license which requires the copyright holder to make available its sound recordings to non-interactive services, in exchange for the service agreeing to pay a statutory royalty – the royalty now set by the Copyright Royalty Board.  But only non-interactive services, where listeners cannot select the songs that they hear, are covered by that statutory royalty (see our summary here of one of the cases dealing with the question of what is and what is not a non-interactive service).Continue Reading Apple iTunes Gets the Beatles – Why Internet Radio Had Them All Along

The Copyright Office has just released a Notice of Inquiry asking whether Federal protection should be extended to sound recordings recorded prior to 1972.  A sound recording is a song as recorded by a particular artist.  Sound recordings were first protected under Federal law in 1972.  Prior to that, unauthorized recordings or reproductions of an artist’s recoding were policed under various state criminal and civil law.  While the Copyright Act has provided for the protection of pre-1972 sound recordings first registered in other countries, US sound recordings recorded prior to 1972, have not received Federal copyright protections.  Many have assumed that this also exempts pre-1972 sound recordings from royalty requirements under Section 114 of the Copyright Act – i.e. the royalties paid by Internet and satellite radio and other digital music providers under the statutory license.  How would a change in the law affect Internet radio operators?

That is one of the questions that is asked by the Notice of Inquiry.  Many Internet radio operators have not excluded pre-1972 recordings from royalty payments based on any exception that may exist for pre-1972 sound recordings, as the possibility has not been widely publicized.  Moreover, some copyright holders have suggested that the digitization of older songs may somehow bring pre-1972 recordings under the coverage of the Copyright Act, or that there may be state remedies that are somehow the equivalent of the Federal public performance right.  Others may just not want to go to the trouble of determining which copyrighted songs are subject to the Uruguay Round Agreements Act (making the non-US pre-1972 sound recordings subject to US Federal law).  The Copyright Office’s Notice of Inquiry asks what impact the inclusion of pre-1972 sound recordings would have on many undertakings – including the archiving and restoration of sound recordings, and on the current benefits that copyright holders and others enjoy under state laws.  In addition, it asks about the benefits and issues that would arise under Section 114 of the Copyright Act – the section that sets out the statutory license under which most Internet radio companies operate.Continue Reading Copyright Office Asks if Federal Protection Should be Extended to Pre-1972 Sound Recordings – What’s the Impact on Internet Radio?

Dave Oxenford this week conducted a seminar on legal issues facing broadcasters in their digital media efforts.  The seminar was organized by the Michigan Association of Broadcasters, and originated before a group of broadcasters in Lansing, but was webcast live to broadcasters in ten other states.  Dave addressed a variety of legal issues for broadcasters in connection with their website operations and other digital media platforms.  These issues included a discussion of service marks and copyrights, employment matters, music on websites, the use of social media, privacy, and sponsorship disclosure.  The slides used in the Lansing presentation are available here.    During the seminar, Dave also mentioned that stations with websites featuring user-generated content, to help insulate themselves from copyright infringement that might occur in the content posted to their website by their audience, should take advantage of the registration with the Copyright Office that may provide safe harbor protection if a station follows the rules and takes down offending content when identified by a copyright holder.  The Copyright Office instructions for registration can be found here.   

One of the most common issues that arise with radio station websites is the streaming of their programming.  In August, Dave gave a presentation to the Texas Association of Broadcasters providing  a step-by-step guide to streaming issues, with a summary of the royalty rates paid by different types of streaming companies.  That summary to Internet Radio issues is available here.  Additional information about use of music on the Internet can be found in Davis Wright Tremaine’s Guide to The Basics of Music Licensing in a Digital Age.   Dave also presented this seminar at the Connecticut Broadcasters Association’s Annual Convention in Hartford on October 14.Continue Reading David Oxenford Conducts Webinar for State Broadcast Associations on Legal Issues in the Digital Media World – Including a Discussion of Ephemeral Copies of Sound Recordings