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The DOJ yesterday issued its long-awaited review of the ASCAP and BMI antitrust consent decrees. We wrote about the issues raised by the DOJ in its initial inquiry here. The questions that had been advanced in DOJ’s initial notice included (1) whether to allow music publishers to partially withdraw their catalogs from one of the PROs (Performing Rights Organizations) to negotiate directly with some class of music users (principally a review to determine if certain big publishers could negotiate digital rights directly, while allowing ASCAP or BMI to continue to license less lucrative and more difficult-to-administer music users like bars, restaurants and retail establishments), (2) whether to strengthen the payment and enforcement rights of the PROs (including questions of how services should be paying before rates for a class of user are established, and whether rate courts were appropriate for all disputes over rates), and (3) whether the PROs should be allowed to license more than just the public performance rights (perhaps getting into licensing mechanical rights, as their Canadian counterpart SOCAN and their US competitor SESAC are now doing – see our article here). The DOJ’s report decided to hold off on addressing any of these questions, and instead focused solely on one issue – requiring that the PROs offer full-work licensing on all songs within their catalogs (which the DOJ raised in a second request for comments about which we wrote here).

Already, there has been much angst within the PRO and publishing worlds about this decision, while there has generally been relief among the users of music that there were no fundamental changes in the way that music is licensed through the PROs. But just what are the issues with full-licensing of musical works?

The concept is basically that, when a user pays ASCAP or BMI for the right to use their catalog, the user should get all of the rights they need to publicly perform all of the songs in that catalog. Most users probably already assumed that they were getting all of those rights when they paid the PROs their monthly fees. But the DOJ discovered that there was a basic conceptual question about just what the user was getting when they paid their license fee – and that question could prove even more problematic were the DOJ to agree to some of the requested more fundamental changes in the consent decrees, such as allowing partial withdrawal of catalogs by publishers. The question is whether a user gets all the rights to the songs that are listed in a PRO’s catalog, or merely the “fractional interest” that is owned by the songwriter or publisher who is a member of that PRO.
Continue Reading DOJ Recommends No Changes in ASCAP and BMI Consent Decrees, And Requires Full-Work Licensing – How It Affects Music Users

In tomorrow’s Federal Register, the Copyright Royalty Board will announce the commencement of three new proceedings to set music royalties for the 2018-2022 five-year period – each involving a different music right. The Board will begin a proceeding dealing with the digital public performances of sound recordings by satellite radio and “pre-existing subscription services” – the royalty that Sirius XM pays to record labels and performing artists for its performance of their songs on their satellite service, and the rates that cable radio pays for those same uses (see the draft notice here). Our summary of the last proceeding for satellite radio and pre-existing subscription services can be found here. Sirius XM was also a participant in the recent webcasting case, but only for its streaming service.  The statutory royalties at issue here are set by Sections 112 and 114 of the Copyright Act, the same sections that govern the webcasting royalty.

The second proceeding deals with the “mechanical royalty” or the making and distribution of “phonorecords.” That is the proceeding to establish what publishers and songwriters receive when there is a reproduction of their song. Traditionally, that was the royalty paid by a record company to the publisher or songwriter when a “cover version” of a song was made – a flat fee per copy of the song (whether a physical record or CD or a digital download). In recent years, the proceeding has expanded to include royalties paid by on-demand streaming services for their use of music. This is the royalty that has recently been much in the news in connection with the David Lowry lawsuit against Spotify. The CRB pre-publication version of that order is here (and our articles discussing the last decision on that royalty are here and here). This is one proceeding where the record labels and the digital music services are actually more or less on the same side – litigating against the publishing companies and songwriters over how much is paid for the use of the words and music of a particular song.  This proceeding is under Section 115 of the Copyright Act. 
Continue Reading Copyright Royalty Board Set to Begin 3 New Royalty Proceedings – Mechanical Royalty, Sirius XM Satellite Royalty, and Noncommercial Broadcasting Over-the-Air Royalties

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? 
Continue Reading Adele’s New Record is Not on Online Streaming Services – Except Where It Is – The Difference Between Interactive and Noninteractive Streaming

Last week, I listened in to presentation by RAIN News providing an excellent overview of the digital music industry (their Whitepaper setting out the findings reported during the presentation is available here).  One statement in that presentation suggested to me today’s topic – the use of music in podcasts.  In the RAIN presentation, a statement was made that most major podcasts are spoken word, but no explanation of that fact was provided. One of the biggest reasons for the lack of music in podcasts has to do with rights issues, as the royalties paid to SoundExchange and even to ASCAP, BMI and SESAC don’t apply to traditional podcasts meant to be downloaded onto a digital audio recording device like an iPhone or any other smartphone.  We wrote a warning about this issue a couple of years ago, but as the popularity of podcasts seems to once again on the rise, the warning is worth repeating.

The rights that a broadcaster or digital music company gets from ASCAP, BMI and SESAC (commonly called the “PROs” or performing rights organizations) deal with the public performance of music.  The PROs license the “musical work” or “musical composition” – the lyrics and the notes that make up the song.  They do not license particular recordings of the song.  As we have discussed before in other contexts, a public performance is a transmission of a copyrighted work to multiple people outside your limited friends and family (see our discussions here and here).  SoundExchange’s royalties also deal with public performance – but it is licensing the public performance of the sound recording – the words and music as recorded by a particular artist.  And SoundExchange only licenses such performances where they are made by a non-interactive service – where the user cannot determine what songs it will hear next (and where the service meets certain other requirements – see our article here for some of those additional requirements).  Podcasts don’t fit within the SoundExchange limitations, and while there has been some debate about whether the PROs have any licensing role in the podcast world (see this article), additional rights from music publishers (who usually control the musical composition copyright) are also needed.
Continue Reading Beware of Music in Your Podcasts – SoundExchange, ASCAP, BMI and SESAC Don’t Give You the Rights You Need

As we wrote in our previous articles on the music licensing issues being considered during this summer of copyright (here, here and here), one of the concerns driving many of the proposed reforms is the current demand of songwriters and publishing companies for a larger share of the music royalty pie.  In licensing the public performance of musical compositions, ASCAP and BMI represent the vast majority of songwriters, with SESAC representing far fewer writers (together ASCAP, BMI and SESAC are referred to as the “PROs,” the performing rights organizations).  ASCAP and BMI, having such a significant representation of musical compositions, have for over 50 years been subject to antitrust Consent Decrees that limit their operations and oversee the rates that they set for the use of their music.  Among the many requirements under the consent decree are those that obligate ASCAP and BMI to license all users of music who are similarly situated under the same rates and standards, and the oversight of a “rate court” to determine whether rates are reasonable whenever either of the PROs can’t agree on the amount of those rates with a class of music users.  In June, the US Department of Justice asked for public comment on several aspects of the consent decrees, and whether modifications of the decrees were called for.  Comments on the DOJ notice are due today.  Why was this proceeding started, and what is the DOJ looking at?

In two recent hearings examining music licensing, the motivations for ASCAP and BMI to seek changes in the consent decrees were discussed.  The first proceeding was a Copyright Office roundtable held in Nashville in June, in which I was a participant.  There, representatives of ASCAP discussed potential changes to the laws dealing with music licensing. The second was at the two part House Judiciary Committee hearing on music licensing held in late June.  ASCAP and BMI representatives in these forums suggested that there were several objectives in their seeking these reforms, and several specific changes that were requested in the Consent Decrees.  These include the following:

  • Replacing the rate court judges who determine rates when ASCAP or BMI don’t reach an agreement with a company that uses music (currently US Federal District Court Judges in the Southern District of NY) with an arbitration panel.
  • Instead of setting “reasonable rates” as required under the current consent decrees, the PROs request that a new standard be used to set rates – the willing buyer willing seller standard currently used in setting Internet radio sound recording performance royalty rates.
  • Allow publishers to withdraw some of their compositions from the PROs for licensing to certain classes of companies – specifically to withdraw so that the publishers can negotiate with digital media companies at rates that are not overseen by a rate court, while still leaving those same compositions with the PROs to collect from business establishment services (retail businesses that use “background” music) and potentially over the air radio stations – companies where there are lots of licensees who pay small amounts, making it difficult for anyone but a large, well-established company like ASCAP or BMI to pursue
  • Allow ASCAP and BMI to do more than simply license the public performance rights to music services – most likely allow them to provide reproduction and synch rights to the music that they license.
  • To impose interim royalties on any service that asks to be licensed, until an appropriate rate for that service can be set

What prompted this desire to change the consent decrees, and what will the DOJ be doing with the information it collects?
Continue Reading The Summer of Copyright Part 4 – The Department of Justice Reviews the ASCAP and BMI Consent Decrees – What Should Broadcasters and Music Services Know?

Using music in commercials and other broadcast station productions can be treacherous. As we’ve written before, contrary to what some stations might think (based on the questions we often get from broadcasters around the country), a station’s ASCAP, BMI and SESAC royalties do not give them the right to use popular music in their station productions – or in their commercials. Nor do they give you rights to use music in video productions used repeatedly on a station, or on a station’s website. Hearing an award winner at the recent broadcast awards banquet at the Montana Broadcasters Association annual convention thank the music publishers that gave her permission to change the lyrics of a well-known oldie for her PSA for a local animal shelter warms a lawyer’s heart, recognizing that there are broadcasters who understand the rights issues. But from questions that I get all the time, I fear that many other broadcasters don’t.

ASCAP, BMI and SESAC are commonly known as the Performing Rights Organizations (or PROs), as they grant music users only a single right – the right to make public performances of musical compositions (or "musical works"). A musical composition is the words and music in a song – not the actual recording done by a particular singer or band. The composer and lyricist of the song have a copyright in the musical composition, though the right is usually assigned to a publishing company to administer. Each copyright in a composition gives its holder the right to exploit it in several different ways – and then user needs to get the rights to use the composition in any of these ways. The different rights include the right to publicly perform the composition (e.g. to play it before an audience or to transmit it to an audience by means of radio, the Internet or other transmission media). But the copyright holder also has the right to limit users from making reproductions of the composition (e.g. a recording of the song or any other “fixation” of the composition), distributing the composition (e.g. selling it or otherwise making it available to the public), or making a “derivative work” (taking the copyrighted work, using it, but changing it in some manner which, in the case of a musical composition, is probably most commonly done by changing the words of a song). So, for the Montana broadcaster to take a well-known song and to change the lyrics for her PSA required that the broadcaster get permission to make a derivative work (and probably to make reproductions, too, if copies of the re-recorded song were made).Continue Reading Using Music in Radio or TV Productions – Why ASCAP, BMI and SESAC Licenses Usually Are Not Enough

With the National Association of Broadcasters big convention coming up next week in Las Vegas, this week we’ll look at a couple of the issues that will likely be discussed when the industry gathers for its annual reunion. On Sunday, before most of the NAB Show begins, the Radio and Internet Newsletter (RAIN) will be holding its RAIN Summit West, where I will be moderating a panel called The Song Plays On – which will focus on the music royalties paid by Internet Radio and other digital music services. We’ll not focus on what the current royalties are, but instead to try to explore what they could be in the future. This is really one of the most difficult issues in the industry, as the two sides (and really there are many more than two sides to this issue) come at the issue from far different perspectives. We will try to bridge those differences and explore where there might be common ground for music users and copyright holders to come together to arrive at mutually beneficial solutions to this thorny issue.

The Internet Radio Fairness Act introduced in Congress last year brought this issue into sharp focus. That Act sought to bring about a number of reforms in the way that the Copyright Royalty Board sets various music royalties – particularly the rates that apply to Internet radio stations. We wrote about the provisions of the bill dealing with Internet radio royalties soon after the bill was introduced. After that article, there was a Congressional hearing on the issue, and lots of debate before the bill died at the end of the year as the session of Congress expired. This year, the Chair of the House Judiciary Committee has promised a number of hearings on all aspects of music and audio copyright issues, though none have yet been scheduled. But the debate about IRFA last year illustrated the divide between the various sides in the music royalty debate. Continue Reading Why the Differing Perceptions of the Value of Music by Digital Music Services and Copyright Holders Make Royalty Decisions So Hard

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.Continue Reading Pandora Enters Settlement to Pay For Public Performance of Sony/ATV Musical Works – What’s Its Impact on Licensing for Music Services and Rights Holders?

Last week, the Radio Music License Committee (“RMLC” – see our article about the RMLC), filed a complaint in US District Court in Pennsylvania against SESAC, arguing that SESAC is a monopoly and should be treated like ASCAP and BMI.  RMLC is asking that SESAC be subject to an antitrust consent decree as are these two bigger collection societies. As we have written before, SESAC is not a non-profit organization like ASCAP and BMI, and is not subject to consent decrees like these other performing rights organizations (“PROs”). Instead, it is a private company, owned by venture funds which, up to now, has set its own prices for licenses subject only to negotiations with the rights holders. So what is this suit all about, and will broadcasters see any changes in SESAC licensing in the short-term? 

RMLC claims that SESAC, by effectively being the only way to license the public performance of compositions by thousands of different composers, effectively can get monopoly prices. Practically speaking, radio stations cannot individually license all the songs written by SESAC performers and, even if the stations were able to directly license some of the music from SESAC writers, SESAC still would not reduce their fees.  All SESAC licenses are blanket licenses that give stations the right to use all the music in the SESAC catalog, but are not reduced by any pro rata amount should any music be directly licensed. Thus, argues RMLC, stations cannot try to reduce their licensing liability through direct licenses with songwriters even if such deals could be negotiated.Continue Reading RMLC Files Antitrust Suit Against SESAC – What Does It Mean For Broadcasters?

The broadcast and music trade press brought news of a settlement between music companies and digital media services regrading digital music royalties.  Some press reports jumped to the conclusion that the decision had something to do with the royalty rates that Internet radio companies pay SoundExchange for streaming their music on the Internet.  Others expressed disappointment that it did not seem to address that issue at all.  In fact, the reason that the settlement had nothing to do with webcasting was because it was a settlement of a Copyright Royalty Board proceeding involving a totally different right – essentially the right to reproduce a the musical work, i.e. the words and music to a song – not any public performance right that is involved in Internet radio streaming.

As we have written before (including the last time a similar settlement was announced), webcasters pay their royalties principally under Section 114 of the Copyright Act, which sets up a "statutory license" requiring that all copyright holders in a "sound recording" (a recording of a song by a particular artist) make their songs available for public performance to any digital music service that meets certain criteria – including principally that their service is a non-interactive one, where listeners cannot pick the particular song that they want to hear.  In exchange for this right, digital music services pay a fee set by the Copyright Royalty Board.  These fees cover liabilities for music use in a process where a service generates a product that goes from the service to many people, much like radio does in the traditional world, without making any sort of lasting digital copy that would be akin, in the physical world, to a CD or record.  The settlement that was just announced deals with rights that like those paid, in the physical world, by a record company to a music publisher for using a musical composition in a record or CD that the record company is recording with a particular artist, not with the public performance right.Continue Reading Music Royalty Settlement Announced on Mechanical Royalties – Not A Decision on Webcasting Rates