Last month, we wrote about the proposed settlement on "mechanical royalties" under Section 115 of the Copyright Act. These royalties are paid when "reproductions" are made of a musical composition. In the analog world, these were most commonly paid by a record company to a music publisher for the rights to use a musical composition when one
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).