Big Shake-Up to Music Licensing Regime Embraced by U.S. Copyright Office

If adopted, these proposals will impact record labels, music publishers, producers, royalty collection groups, terrestrial and satellite radio, and music streaming services.
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In a 245-page report issued on Thursday, the U.S. Copyright Office is throwing its weight behind what would be the most radical changes to how music is licensed in nearly a half century.

Many of the copyright laws governing music were first erected at the time that player pianos became popular and have developed through the advent of radio, new recording devices and, most recently, digital networks. Maria Pallante, director of the Copyright Office, believes the law is behind the times.

"The structures that evolved in the previous century to facilitate the lawful exploitation of musical works and sound recordings, while perhaps adequate for the era of discs and tapes, are under significant stress," states the report. "From a copyright perspective, we are trying to deliver bits and bytes through a Victrola."

Some of the proposals figure to spark controversy, debate and furious lobbying should the U.S. Congress tackle a broad overhaul of music licensing.

For example, the Copyright Office wants to extend the public performance right in sound recordings to terrestrial radio broadcasts — a big shift from the time when publicity was seen at payment enough to copyright owners. Also proposed is fully federalizing pre-1972 recordings, a change that would come on the heels of lawsuits against SiriusXM, Pandora and others who have been exploiting older sound recordings without compensation to their owners.

Many of the changes would be boon to those who hold or manage public performance rights.

The Copyright Office endorses reconsidering 75-year-old antitrust decrees for ASCAP and BMI and also wishes to give music rights owners such as publishers the ability to withdraw streaming rights from services. What's more, the proposal would essentially turn performance rights organizations into "music rights organizations" with the ability to bundle reproduction, distribution and performance rights together.

The report also envisions changes to which rights are subject to compulsory blanket licensing and which rights will be subject to free market negotiations. Certain digital uses and public television uses of music may fall under fixed rates while in other circumstances, music rights owners will be given more flexibility to seek bigger payouts. For the types of licensing that are subject to rate-setting, the Copyright Office is looking to streamline the procedures.

Other changes including allowing SoundExchange to administer record producer payments; having those in the music industry work on creating an authoritative public database of music data; and taking care of songwriters and recording artists who want more transparency in the deal-making between labels and publishers on one side and services like Spotify on the other.

The proposals would definitely be a huge shake-up of music licensing, though the Copyright Office makes clear that it is not attempting to reinvent the music industry altogether.

"As a number of commenters remarked during the course of this study, if we were to do it all again, we would never design the system that we have today," says the report. "But as tempting as it may be to daydream about a new model built from scratch, such a course would seem to be logistically and politically unrealistic. We must take the world as we find it, and seek to shape something new from the material we have on hand."

Here's the full report.

ASCAP president Paul Williams has this to say:

"With its report today, the US Copyright Office was clear: the current music licensing system needs reform and fast. The report emphasizes how the current system undervalues musical works – something many of our members experience daily. The many proposed updates – particularly recommendations intended to make the system more equitable for songwriters – underscore yet again the inefficiency of the current system for music fans and creators alike. As outlined in the report, the current marketplace is strained by the 70-year old consent decree regime and is not appropriately responsive to the free market, particularly in our new digital world. As we continue to advocate for our members in Washington, today’s report is an important step towards meaningful reform."

And here's the statement from Pandora's director of public affairs Dave Grimaldi:

"We believe that greater transparency will benefit artists and music lovers alike, and we look forward to working with the Copyright Office and stakeholders across the industry to advance a bright and thriving future for music. As we have said previously, Pandora would be open to supporting the full federalization of pre-1972 sound recordings under a technology-neutral approach that affords libraries, music services and consumers the same rights and responsibilities that are enjoyed with respect to all other sound recordings.  Full-federalization would also guarantee that the full rights granted to these deserving recording artists, including termination rights under Chapter 3 of the Copyright Act."

The RIAA put out a long statement and here's part of it:

"The office recognizes a consensus within the industry that the current system for licensing musical compositions is broken.  Reform is necessary to develop new revenue streams for all creators and innovative consumer product offerings for music fans.  The office also recognized that it is time to fix the system to ensure that all creators are paid fair market value for their work, regardless of the platform on which their work is used.  For example, a performance right for FM and AM radio is long overdue.  The fact that a multi-billion dollar broadcasting industry that derives its value from music gets a special interest carve-out from paying artists and labels continues to be indefensible."

Twitter: @eriqgardner

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