On Saturday, RMLC announced that it has reached an “interim” agreement with the new performing rights organization Global Music Rights (GMR) for a license to perform musical compositions controlled by GMR.  This agreement (available on the RMLC website here) is an interim agreement for radio stations that elect to participate, and covers only the first 9 months of 2017.  To be covered by this license, a station must make an election by January 31, and pay the first month’s assessment to GMR by that date.  GMR has promised not to sue any stations in January while stations are deciding whether to opt into this agreement.  The amount to be paid by any individual station can be ascertained by communicating with GMR at an email address furnished by the RMLC in the notice distributed on Saturday.

This is an interim agreement as it removes the threat of a lawsuit for playing GMR music after January 1 that could potentially be faced by any radio station that does not have a license.  The rates paid by any station that opts in could be adjusted retroactively, up or down, based on the results of further negotiations between RMLC and GMR, or based on the results of the lawsuits currently being litigated between the two (see our article here on RMLC’s suit against GMR, and the article here about GMR’s follow-up lawsuit against RMLC, each accusing the other of violating the antitrust laws).  It would seem obvious that RMLC believes that the amounts being paid under this interim deal are higher than justified based on the percentage of music played by radio stations that is controlled by GMR.  If it was believed that the interim fee represented a fair price, then it would seem that RMLC would have entered into a permanent license at these rates – but instead the litigation continues.  What is a station to do?
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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.
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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).


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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.


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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

Using music in commercials is not as simple as just paying your ASCAP, BMI and SESAC royalties.  While many broadcasters think that paying these royalties is enough to give them the rights to do anything they want with music on their stations, it does not.  The payments to these Performing Rights Organizations (PROs) only cover the right to publicly perform music, i.e. to broadcast it.  They do not give you the right to take the music and "synchronize" it with other words or video material, e.g.  you cannot put music in a recorded commercial or otherwise permanently fix it into a recorded audio or video production.  Instead, to make such a production, the producer needs to get the rights to both the underlying musical composition (the words and musical notes) and, if you are planning to use a particular recording of a song, the rights to use that particular recording ( the "sound recording" or "master recording").  Getting these rights may very well require that you deal both with the record company or performing artist whose recording you plan to use, and the publishing company that represents the composer of the music.  And, as some artists may have concerns about having their music used to pitch some products, getting the rights to that artist’s version of a particular song may not be easy. 

Even using the tune of a familiar song in an advertisement, with different words, is not permitted without getting the rights to do so from the publishing company.  A copyright holder in a musical composition has the right to prepare "derivative works" of that composition.  A derivative work is one that uses the original copyrighted material, but changes it somehow – like putting new words to an old tune.  Many think that "fair use" permits the making of a parody of a song, so they are allowed to use the tune as long as they produce a new version that is funny.  However, in the copyright world, fair use is not that simple.  A parody, to allow use of the original tune, must be making commentary or criticism of the original song.  Being independently funny or amusing, or otherwise dealing with some independent social or political issue, does not give you the right to use the music without securing permission from the composer of the music first.  A recent story in the Hollywood reporter’s legal blog, THR,esq.com, told the story of a Congressional candidate, Joe Walsh, who thought that it would be cute to use the music of former Eagle Joe Walsh, to make fun of Democratic politicians.  As set out in that story, Eagle Joe Walsh’s attorney did not find the campaign song very funny, and sent a very strong letter objecting to that use (the LA Times site had at one point had a link to a video of a band playing the candidate’s version of the Joe Walsh song "Walk Away", but it now says that the video has been taken down due to a copyright objection). Don’t let your station be the recipient of such a letter – get the rights to use music in commercials or other productions. 


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One of the fundamental questions that surrounds the proposed broadcast performance royalty for the use of sound recordings by over-the-air (or the "performance tax" as it has been labeled by the NAB) is how much it could it cost a broadcaster?  Right now, that question is difficult to determine, as the pending bills do not themselves provide any details as to what the fees would be, except for noncommercial entities and for small broadcasters for whom fixed yearly fees are proposed.  For a broadcaster with a station having over $1.25 million in yearly revenues, the current Congressional bills leave the amount of the royalty to be determined by the Copyright Royalty Board.  In the current Senate draft of the bill, the amount to be paid would be based on the "willing buyer willing seller" standard that has been so controversial for Internet Radio companies. But the hearing to be held by the Senate Judiciary Committee tomorrow will address, among other issues, the question of "platform parity," i.e whether all companies subject to the sound recording performance royalty should pay a comparable rate, so we may see that proposal change as it did in the House version, to some form of the 801(b) standard (about which we wrote here and here).

We will write about the differing rates paid by differing music services in the next few days, especially as it becomes clear as to what rates for Internet radio royalties were agreed to under the most recent settlements with webcasters pursuant to the Webcaster Settlement Act.   But even without a detailed analysis of all of the rates that have been agreed to, certain trends can be seen as to what SoundExchange, on behalf of the artists and copyright holders, believes to be a fair royalty for the use of their music.  And that number is likely to be a "Substantial" one, as suggested by a recent Congressional Budget Office review of the cost to broadcasters of the proposed performance royalty.


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The US Court of Appeals for the District of Columbia Circuit today issued a decision basically upholding the royalty rates set by the Copyright Royalty Board due under Section 114 of the Copyright Act by satellite radio operators for the public performance of sound recordings.  The CRB decision, setting royalties for the years of 2007 to 2012, established rates that grew from 6% to 8% over the six year term. As we explained in our post, here, the Board looked at the the public interest factors set out by Section 801(b) of the Copyright Act, factors not applicable to Internet Radio royalties, in reaching the determination these royalties.  Particularly important was the factor which took into account the potential impact of the royalties on the stability of the businesses that would be subject to the royalty, resulting in a reduction of the perceived fair market value of the royalty from what the board determined to be about 13% of gross revenues to the 6-8% final royalty set by the Board.  The Court upheld the Board’s reasoning, rejecting SoundExchange’s challenge to the decision, though the Court did remand the case to the Board to decide the proper allocation of the royalty to the ephemeral rights covered by Section 112 of the Copyright Act.

What was perhaps most interesting about the Court’s decision was the concurring opinion of one of the three Judges, who stated that the fact that the Board’s judges were appointed by the Librarian of Congress, and not by the President, "raises a serious constitutional issue."   This was the same issue raised by Royalty Logic in challenging the constitutionality of the CRB in the webcasting proceeding (see our posts here and here).  The Judge concurred in the majority decision as none of the parties to the satellite radio case raised the constitutional issue, but this very question was squarely raised in the webcasting proceeding, and thus may well be resolved in the decision on that appeal.


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A settlement under the Webcaster Settlement Act of 2009 was signed today by SoundExchange and a group of webcasters that I represented in the Copyright Royalty Board proceeding to determine the royalty rates for the use of sound recordings by Internet Radio stations for the period from 2006-2010. This agreement is for “pureplay” webcasters, i.e. those that are willing to include their entire gross revenue in a percentage of revenue calculation to determine their royalties. As permitted under the terms of the WSA, this agreement not only reaches back to set rates different, and substantially lower, than those that were arrived at by the CRB for the period from 2006-2010, but also resolves the rates for 2011-2015, relieving webcasters who join the deal from having to litigate another CRB proceeding to set the rates for those years. 

While no deal arrived at under the circumstances in which these webcasters found themselves (a CRB decision that did not set any percentage of revenue royalty rate and would seemingly put these webcasters out of business, the prospect of a new CRB proceeding that would costs significant sums to litigate with no guarantee of success, and with the only other current option being the “microcasters” deal unilaterally advanced by SoundExchange that severely limited the amount of streaming that a webcaster could do and imposed significant “recapture provisions” in the event of a sale of the webcaster’s business) may not be ideal, the settlement does provide significant benefits over any other existing option for any webcaster who qualifies under its provisions. These deal points are set out below.


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In recent months, SESAC has been writing letters to broadcasters who are streaming their signals on the Internet, asking for royalties for the performance of SESAC music on their websites.  More than one broadcaster has asked me why they have any obligation to SESAC when they are already paying SoundExchange for the music that they stream.  In fact, SoundExchange and SESAC are paid for different rights, and thus the payments to SoundExchange have no impact on the obligations that are owed to SESAC.  SESAC, along with ASCAP and BMI, represent the composers of music in collecting royalties for the public performance of their compositions.  SoundExchange, on the other hand, represents the performers of the music (and the copyright holders in those performances – usually the record companies).  In the online digital world, the SoundExchange fees cover the public performance of these recordings by particular performers (referred to as "sound recordings").  For an Internet radio company, or the online stream of a terrestrial radio station, payments must be made for both the composition and the sound recording. 

To illustrate the difference between the two rights, let’s look at an example.  On a CD released a few years ago, singer Madeleine Peyroux did a cover version of the Bob Dylan song "You’re Gonna Make Me Lonesome When You Go."  For that song, the public performance of the composition (i.e. Dylan’s words and music) is licensed through SESAC.  The actual "sound recording" of Peyroux’s version of the song would be licensed through SoundExchange, with the royalties being split between Peyroux and her record label (with backing singers and musicians receiving a small share of the SoundExchange royalty). 


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