Section 115

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This week, the US House of Representatives passed the Music Modernization Act. While widely supported among many digital media companies providing on-demand subscription music services as well as by many in the music industry, the bill seemingly has not received the publicity that has been afforded to past music royalty legislation. That may be, in part, because there were few who adamantly opposed the provisions of the bill, as evidenced by a unanimous House vote – something that never would have happened had any significant portion of the music industry opposed the bill. But this moment of togetherness may be, in part, due to the somewhat limited (though nevertheless very important) issues that it addresses.

The Modernization of Music Act began as a legislative effort primarily to address the issues raised under Section 115 of the Copyright Act – the section dealing with what are often called “mechanical royalties” – the royalties paid to publishing companies for the copyright in the “musical work,” i.e. the musical composition. In other words, these royalties are paid to the copyright holder of the words and music to a song (sometimes the composer but more often a publishing company) – not to the artist who actually records that song. The provisions of Section 115 were first adopted to allow artists to record songs once a song has been recorded and publically released in the United States – to record a “cover” of the original recordings – provided that compensation set by agreement between the user and the copyright holder is paid or, absent a voluntary agreement, that a royalty set by the Copyright Royalty Board is paid to the copyright holder (see our post here on the last CRB decision on those rates). That mechanical royalty was later expanded to cover “digital phonorecord deliveries” (“DPDs”) – the making of digital copies of the musical composition made in the context of a distribution and delivery of the song to individual consumers. Through caselaw and industry practice, DPDs were interpreted to include the need for royalties not just when a digital download is made, but also when an on-demand or interactive stream of a song is delivered to a consumer.
Continue Reading House of Representatives Passes Music Modernization Act – Looking for Clarity on Mechanical Royalties, Pre-1972 Sound Recordings and Other Music Rights Issues

The amount paid to songwriters and publishing companies for the making of “phonorecords” will be going up after a Copyright Royalty Board decision just released to the parties to the case. A summary of the findings have been published on the CRB website, here. The new rules are available here. A full decision explaining the CRB reasoning will follow at some later date.

These royalties are not ones paid by broadcasters or non-interactive webcasters or internet radio stations. Instead, these are the royalties paid under Section 115 of the Copyright Act for the making of copies of musical compositions when making a sound recording (this would include the amount paid by a record label or performing artist to the composer of a song or the composer’s publishing company for the use of the composition in a CD or for a digital download) and, more importantly in today’s world, in connection with on-demand or interactive music services. While one might wonder if an on-demand stream really makes a reproduction of a composition when it is sent to a customer to enjoy, by tradition that has grown up over the last decade, these royalties are paid by these services (though, in one case, Spotify questioned whether they were legally required).
Continue Reading Copyright Royalty Board Decision Will Raise Royalties Paid to Songwriters and Publishers By Digital Music Services

The press has been full of reports over the last few weeks about Pandora and Amazon negotiating deals with record labels over music royalties, and some observers have expressed confusion – why don’t these services just rely on the rates set by the Copyright Royalty Board at the end of last year? The answer, as we have written many times before (see e.g. our articles here and here) is that the CRB rates apply only to noninteractive webcasters (companies that provide radio-like services where the listener cannot designate what song he or she will hear next). The services that rely on the CRB rates (which we summarized here and here) must abide by specific rules, including something called the “performance complement” which limits how frequently the service can play a particular artist or a particular song. Even the number of times that a listener can skip a song has been set by caselaw and industry practice (see our article here) – the fear being that if you allow unlimited skips the service becomes more like an interactive one.

So a service that wants to provide listeners with the ability to set up their own playlists or to choose to play songs on demand cannot rely on the license available through the CRB decision (the so-called “statutory license” – so named as the license and the CRB rate-setting process were created by a statute passed by Congress). Similarly, services relying on the statutory license cannot cooperate to allow copying of the songs that they play – so even setting up a service to allow the temporary caching of an Internet radio service so that listeners can hear it when they are offline, most likely cannot be done by simply paying the CRB-established rates. So what do music services that want to provide more functionality do?
Continue Reading Pandora and Amazon Negotiating Agreements with Record Labels – Why They Don’t Just Rely on the CRB Rates?

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

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?
Continue Reading Big News That the Beatles Are Now Available on Streaming Services? – Actually They Have Been on Internet Radio All Along

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

The House of Representatives Judiciary Committee last week finished its second hearing on music licensing (written witness statements and a link to the webcast can be found here).  Congressional hearings usually are not in-depth proceedings looking to establish detailed facts as done in a hearing in a court proceeding.  Instead, they are formalized proceedings where parties get to make their canned statements setting out positions on issues.  Congressional representatives themselves make statements setting out their positions on the issues, and ask pointed questions to selected witnesses to reinforce those positions.  Minds are rarely changed, and the truly undecided are rarely illuminated on the issues.  But the hearings do serve to set out the issues that are going to be considered by the Committee in ultimately crafting legislation.  And last week’s hearing did just that – highlighting the issues likely to be considered in legislation promised by the Committee Chair, Representative Goodlatte, who promised an omnibus bill on music licensing, dubbed the “Music Bus,” to address the many issues on the table.

Note that any bill that is ultimately introduced will address many seemingly minor issues – details of process and procedure that don’t make the headlines.  But the big issues are the ones that will cause the most industry argument before the lawyers work out the details.  It’s also important to note that it is very late in the legislative calendar right now, with the Senate not putting the same emphasis on copyright issues as it the House.  With elections coming up in the Fall, and scheduled upcoming summer recess, Congress has much must-pass legislation that will fill up their legislative days before the next Congress is sworn in in January.  The start of a new Congress means that all legislation will have a fresh start.  Thus, any Omnibus bill that is introduced this year will most likely not become law, but instead will set the agenda for discussions for next year in the new Congress.  Certainly, there may be more limited bills that sponsors may try to get stuck on other legislation that must move before the end of the Congressional session, so interested parties will remain vigilant during the final days of this session of Congress.  But what are the issues that are on the table for inclusion in any Music Bus?
Continue Reading The Summer of Copyright, Part 2 – The House Judiciary Committee Plans Omnibus Music Licensing Bill – The “Music Bus”

In discussing music royalties, the controversy that usually makes the news is the dispute between music services and copyright holders – with services arguing that the royalties are too high and rightsholders contending that they are underpaid. The introduction of the Songwriters Equity Act in Congress earlier this year seems to point toward a new area of dispute – one between the various rightsholders themselves.  This issue was one that was much discussed on a panel that I moderated last week at the RAIN Summit West (audio of that panel is available here).  What is this conflict?

The Songwriters Equity Act, while not explicit in identifying the controversy, does point to the dispute. As we have written many times before, in any piece of recorded music, there are two copyrights – the sound recording copyright (also known as the “master recording,” the recording of a particular song by a particular artist, rights usually held by the record label), and the right to the musical work (or “musical composition,” the words and music to a song, usually held by a publishing company).  The proposed legislation suggests that the amount of the royalties for the public performance of sound recordings can be taken into account in setting the royalties that are payable to songwriters for the public performance of the songs that they have written.  This would amend Section 114(i) of the Copyright Act, which currently prohibits the consideration of the sound recording royalty in determining the rates to be paid for the public performance of musical works.  The proposed legislation would also substitute the “willing buyer, willing seller” standard for the 801(b) standard in setting rates under Section 115 of the Copyright Act, the mechanical royalty (see our discussion of the difference between these standards, here).  While this does not sound like a big deal, it may have a significant impact.
Continue Reading Raising the Royalties for Musical Works? A Discussion of the Potential Dispute between Music Rights Holders over the Value of Their Rights

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

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…