Many are sitting around enjoying their holiday treats while listening to the Beatles on their favorite on-demand streaming service, and the press is treating this as a breakthrough – usually omitting the fact that the Beatles have been available on many streaming services for as long as there have been streaming services, namely on Internet radio.  We’ve twice written about this fact, first when the Beatles became available on iTunes, here, and then on the 50th anniversary of their invasion of America, here.  And we also recently wrote about the same legal issues which explained why Adele could withhold her new recording “25” from many streaming services, but not from Internet radio.  With the Beatles back in the headlines, for some post-Christmas holiday reading, we thought that we would reprise our 2014 article about the Beatles long absence from on-demand streaming services.  Here it is:

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?
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Adele’s decision to not stream her new CD “25 on services like Apple Music and Spotify has been the talk of the entertainment press pages – like this article from the New York Times.  These articles make it sound like, if you listen to any Internet music service, you’ll not hear a song from the new record.  But, in fact, if you listen to an Internet radio service, like a Pandora, iHeart Radio, Accuradio, the streams of over-the-air radio stations, or any of the myriad of other “noninteractive services” that are available online, you will hear music from 25.  The legal distinctions that allow these services to play Adele’s new music is often not recognized or even acknowledged by the popular press.  Why the difference?

As we’ve written before in connection with music from the Beatles (see our articles here and here), the difference deals with how music is licensed for use by different types of digital music services.  On-demand or “interactive” audio services, like Spotify and Apple Music or the recently in-the-news Rdio, obtain music licenses through negotiations with the copyright holders of the sound recordings – usually the record labels.  These are services where a listener can specify the next track that he or she will hear, or where the listener can store playlists of music they have selected, or even hear on-demand pre-arranged playlists with the tracks in the playlist identified in advance by the service.  If the record labels and the service can’t come to terms for the use of music by one of these interactive services, then the music controlled by the label does not get streamed.  Often, these negotiations can be lengthy, witness the delay of over a year from when Spotify’s announced its launch in the US and when that launch actually took place, because of the complexity and adversarial nature of these negotiations.   In some cases, major artists, like Adele, and before her Taylor Swift and, for a long time, bands like the Beatles and Metallica, had agreements with their labels that gave them the rights to opt out of any deal that their labels did with these audio services.  So, if an artist like Adele can opt out of being played by a service like Spotify, why is she being streamed by online radio? 
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Over-the-top video systems, using the Internet to transmit over-the-air TV signals to consumers, are back in the news. Last week, a US District Court Judge in the Central District of California, in a case involving FilmOnX, an Aereo-like service that had been involved in many of the court decisions that had preceded the Supreme Court’s Aereo decision, suggested that such platforms can get that public performance right through the statutory license provided by Section 111 of the Copyright Act – the same section of the Act that allows cable systems to retransmit broadcast signals without getting permission from every copyright holder of every program broadcast on those stations. Just last year, we were writing about the Supreme Court decision in the Aereo case, where the Court determined that a company could not use an Internet-based platform to stream the signals of over-the-air television stations within their own markets without first getting public performance rights from the stations themselves. The new decision raises the potential of a new way for these Internet services to try to get the rights to rebroadcast TV signals.

The FilmOn decision was on a motion for summary decision, and is a very tentative decision – the Judge recognizing that he was weighing in on a very sensitive subject, going where both the FCC and the Copyright Office have thus far feared to tread, and disagreeing with the Second Circuit Court of Appeals that had held the opposite several years ago in the Ivi decision. The FilmOn decision is a preliminary one – subject to further argument before the Judge at the end of the month. Even if adopted as written, the judge recognized the potential impact of his decision, and the fact that it contradicted Ivi and other decisions. Thus, the decision stated that its effect would be stayed pending an immediate appeal to the Ninth Circuit Court of Appeals. So, even if finalized, we have not seen the last of this argument yet.
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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.
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Who says that the Internet is not regulated?  Whether to treat Internet video providers by the same rules that apply to cable and direct broadcast satellite systems is the subject of a Notice of Proposed Rulemaking released by the FCC just before Christmas, notice of which was published in the Federal Register today, setting the comment dates on the proposal.  Comments are due by February 17, and replies by March 2.  This proceeding could have a substantial impact on Internet video providers – potentially extending FCC jurisdiction to a whole host of services not currently subject to its rules, and potentially subjecting Internet video services to all sorts of rules that apply to traditional MVPDs (multichannel video programming distributors), including the FCC’s EEO rules, captioning rules and CALM Act compliance.  Even the political broadcasting rules, which the FCC notes in the NPRM only specifically apply to cable and direct broadcast satellite rather than to MVPDs generally, could potentially be looked at in the future for these services should they come under FCC jurisdiction.  At the same time, the rules could also have an impact on program suppliers and broadcast networks, as various rules dealing with access to cable and broadcast programming could extend to Internet video providers, potentially conflicting with existing contractual obligations and even the Copyright Act.  What are some of the specific issues being considered?

The issues raised in the Notice are many – including the very fundamental one as to whether the FCC even has the authority to include Internet delivered video (what the FCC refers to as Over the Top or OTT providers) under the rules for MVPDs.  While the general definition of MVPD would seem to cover Internet video (as it covers anyone who makes multiple channels of video programming available for purchase by subscribers), it is not that simple.  As with any Federal law, one can’t just stop the analysis with a quick read of the statute.  The statute, in at least one place, defines a “channel” as a portion of the electromagnetic spectrum capable of delivering a TV channel.  And the FCC has defined a TV channel as one comparable to what is delivered by broadcast TV.  It’s that reference to “electromagnetic spectrum” that has tripped up previous services seeking an expansion of the MVPD definition.  In the case of Internet-delivered service called Sky Angel, the FCC staff 5 years ago determined that, as it was not a facilities based system – it did not control that electromagnetic spectrum on which its programming was delivered – it could not be an MVPD.  The full Commission sought comments on the staff decision then (see our article on that request for comments on Sky Angel here and here,) and, with the recent Aereo decision (see our articles here and here) and its aftermath, and the seemingly daily announcement of new online video service offerings from everyone from CBS to HBO to Dish and Disney, the FCC seems now ready to move with this expansion of its authority to cover video on the Internet.  Because of the potential for very similar video services to have very different regulatory burdens (cable and satellite could be subject to all the FCC MVPD rules, while the same programming, delivered by an Internet service, might have none of those obligations under the current regulatory interpretations), the majority of the FCC want to move forward with this proposal.  But it asks for comments on whether it really has the authority to do so. 
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Last week, the Senate approved a reauthorization of STELA, the new bill called STELAR (the “STELA Reauthorization Act of 2014”), adopting the version that had been approved by the House of Representatives earlier in the month.  In addition to simply giving satellite television companies (essentially DISH and DirecTV) the a five-year extension of their rights to rebroadcast the signals of over-the-air television stations without authorization from every copyright holder of the programming broadcast on those stations, STELAR made other changes to both the Communications and Copyright Acts that will have an impact on TV station operators once this bill is signed by the President.  The Presidential signing is expected before the end of the year.  [Update, 12/5/2014 the President signed the Bill yesterday evening, so it is now law]

Some of the important provisions for TV stations contained in this bill include provisions that impact not only the relationship between TV stations and satellite TV companies, but also ones that have a broader impact on the relationship of TV stations with all MVPDs, including cable systems. There is also a provision actually providing more latitude for LPTV stations to negotiate carriage agreements.  Some of the specific provisions of this bill include:

JSA Extension:  STELAR will give TV stations currently operating with a Joint Sales Agreement with another station in their market which they cannot own under the current multiple ownership rules 6 more months to terminate such operations – until December 19, 2016 (after the next Presidential election).  See our discussion of the changes in JSA attribution here and here.
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The FCC announced two significant policy initiatives by Blog post in the last week – perhaps recognizing that the Internet provides a better way of packaging a message about policy directions than an unpredictable news conference.  The two decisions announced this week by Blog post were (1) the Chairman announcing that he has directed that a Notice of Proposed Rulemaking be circulated among the other Commissioners to treat Over-the-Top TV providers (“OTT” providers, usually those that provide service over the Internet) of linear programming as MVPDs – meaning that they would be treated, for regulatory purposes, in much the same way as cable and satellite TV services, and (2) an announcement by the head of the incentive auction task force that the auction by which some of the broadcast TV spectrum will be purchased from TV users and resold to wireless carriers for broadband wireless uses will be postponed from its expected date in the summer of 2015 until early 2016.  We will write about the postponement of the auction later.  But what does the MVPD proposal mean?

The MVPD issue is one that we last wrote about here.  At the urging of some OTT providers, apparently including Aereo, the FCC has been urged to treat these providers, when they provide “linear” programming (programming that is provided at set times on a set schedule, in the manner of broadcast TV or cable programming, as opposed to the on-demand programming of a Netflix or Hulu), in the same fashion as cable and satellite.  The Chairman, in his blog post, announces his support for an FCC proceeding to review that proposal, apparently looking to use linear Internet programmers as a new competitive force against cable and satellite TV.  By treating these services as MVPDs, they could get access to over-the-air TV programming (if they can negotiate retransmission consent agreements with the TV stations) and equal access to programming provided by vertically integrated cable programmers (those programmers that have attributable ownership from cable system operators).  But, obviously, there are some big “ifs” here.
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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.
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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.


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Deciding how to pay music royalties has always been difficult – trying to figure out what permissions are necessary, who has the rights to grant such permission, and how much the rights will cost. The one place where the rights were fairly simple – paying for the right to publicly perform musical compositions – may be getting more difficult. According to an article in the New York Post, Pandora may be getting a taste of that new reality, having to pay significantly more money to Sony ATV music publishers than it had previously paid for that same music when it was licensed by ASCAP and BMI

The rights to publicly perform musical compositions had until very recently been relatively straightforward. All a broadcaster, digital media company or other music user needed to do was to pay ASCAP, BMI and SESAC royalties (ASCAP, BMI and SESAC are often referred to as the PROs, or Performing Rights Organizations) – and the music service essentially had the rights to publicly perform virtually all the musical compositions in the world. And ASCAP and BMI were covered by antitrust decrees – so their rates were more or less known for most categories of music use – only subject to a rate court hearing once every now and then when these collection societies could not come to an agreement with the members of a particular class of music users. While SESAC is not subject to the antitrust consent decrees, and not necessarily as easy to deal with, most music services figured out a way to cut a deal with the society too.


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