Copyright and the Music Marketplace
Copyright and the Music Marketplace
Preface
Fewwoulddisputethatmusicisculturallyessentialandeconomicallyimportanttothe
worldwelivein,buttherealityisthatbothmusiccreatorsandtheinnovatorsthat
supportthemareincreasinglydoingbusinessinlegalquicksand. Asthisreportmakes
clear,thisstateofaffairsneitherfurthersthecopyrightlawnorbefitsanationascreative
astheUnitedStates.
TheCopyrightOfficehaspreviouslyhighlightedtheoutmodedrulesforthelicensingof
musicalworksandsoundrecordingsasanareainsignificantneedofreform.1
Moreover,theOfficehasunderscoredtheneedforacomprehensiveapproachto
copyrightreviewandrevisiongenerally.2 Thisisespeciallytrueinthecaseofmusic
licensing—theproblemsinthemusicmarketplaceneedtobeevaluatedasawhole,
ratherthanasisolatedorindividualconcernsofparticularstakeholders.
WhilethisviewishardlyasurprisingonefortheU.S.CopyrightOffice,itisnosimple
mattertogetone’sarmsaroundourcomplexsystemofmusiclicensing,ortoformulate
potentialavenuesforchange. Forthisreason,inearly2014,theOfficeundertookthis
study—withallindustryparticipantsinvitedtoparticipate—tobroadlyconsiderthe
existingmusicmarketplace.3
Thisreportistheresultofthateffort. Inadditiontoidentifyingtheshortcomingsofthe
currentmethodsoflicensingmusicintheUnitedStates,itoffersanin‐depthanalysisof
thelawandindustrypractices,aswellasaseriesofbalancedrecommendationsto
improvethemusicmarketplace.
Acknowledgments
ThisreportwaspreparedbytheOfficeoftheGeneralCounsel,U.S.CopyrightOffice,
followinganexhaustiveanalysisofindustrypracticesandconsiderabledialoguewith
musiccreatorsandthebusinessesthatrepresentandinvestintheirinterests,aswellas
musicservicesanddistributorsandotherinterestedparties. Iamindebtedtothestaff
whoworkedsotirelesslyandthoughtfullytoseethereporttofruitionandamconfident
thatitwillbeamajorresourceforbothCongressandthepublic.
1 SeeMariaA.Pallante,TheNextGreatCopyrightAct,36COLUM.J.L.&ARTS315,334‐35(2013)
(“Tomakealongstoryshort,Congresscouldmakearealdifferenceregardinggridlockinthe
musicmarketplace.”).
2 SeeTheRegister’sCallforUpdatestoU.S.CopyrightLaw:HearingBeforetheSubcomm.onCourts,
Intell.Prop.andtheInternetoftheH.Comm.ontheJudiciary,113thCong.6(2013)(statementof MariaA.Pallante,RegisterofCopyrights).
3 See17U.S.C.§701(b)(4)(notingthattheRegisterofCopyrightsshallconductstudiesregarding
IdoubtthereportwouldhavebeenpossiblewithoutJacquelineC.Charlesworth,
GeneralCounselandAssociateRegister,whooversawthecomplexresearch,public
hearings,writing,andrecommendations. Itisdifficulttosaywithcertaintywhetheritis
Jacqueline’soutstandingskillsetasalawyerorherextensivebackgroundinthemusic
industrythatprovedmostvaluableforthisproject,buteitherwayshehasproduceda
reportthatisfair,rational,andforward‐thinking,afittingframeworkforafieldas
culturallybelovedandeconomicallyimportantasmusicistotheUnitedStates.
IamsimilarlyindebtedtoSarang(Sy)Damle,DeputyGeneralCounsel,whoprovided
additionalleadershipandnumerouscriticalcontributions,includingdeftdrafting,
dispassionateanalysis,anddeepregardfortheintersectionofmusicandtechnology.
IamverygratefulaswellforthecontributionsofReganSmith,AssistantGeneral
Counsel,whooversawtheeditingprocessandthefinalproductionofthereport.
AssistantGeneralCounselSteveRuwehelpedwiththehearingsandprovided
substantialresearchandanalysis,especiallyintheareaofstatutorylicensing. Likewise,
Attorney‐AdvisorsRickMarshallandJohnRileyassistedwithhearings,researchand
writing;Johnalsopreparedthehelpfulandimpressivechartsonthelicensingand
ratesettingprocessesthatareincludedinthereport. IalsowishtorecognizeMichelle
Choe,whoiswiththeCopyrightOfficeasaBarbaraA.RingerHonorsProgramFellow,
forhersubstantialresearchandwritingefforts. DonaldStevens,alsoaRingerFellow,
assistedwithparticularquestionsofinternationallaw,andLawClerksAndrewMoore,
KylePetersen,MarynaKoberidze,andMeganHartnettprovidedvaluableresearch
support,forwhichIamthankful.
Asalways,theCopyrightOfficereceivedsignificantandtimelysupportfromcolleagues
outsideofWashington,D.C. IsoappreciateProfessorRushHicksandLukeGilfeather
oftheMikeCurbCollegeofEntertainmentandMusicBusinessatBelmontUniversity
forfacilitatingtheroundtableheldinhistoricColumbiaStudioAonMusicRowin
Nashville. Mythanksandappreciation,aswell,toProfessorsDavidNimmerandNeil
NetaneloftheUCLASchoolofLawforhelpingtofacilitatetheLosAngelesroundtable,
andProfessorBartonBeebeofNYULawSchoolforhisassistancewiththeNewYork
Cityroundtable. IwouldparticularlyliketoacknowledgeRepresentativeJerrold
Nadler,whovisitedtheNewYorkroundtabletosharehisviewsabouttheimportance
oftheseissues.
Lastbutnotleast,Iamindebtedtothemanyorganizationsandindividualswho
providedwrittencommentaryandsharedtheirfrustrations,insights,andexperiencesin
theroundtablediscussions. Ihopethisreporthelps.
MariaA.Pallante
RegisterofCopyrightsandDirector
TABLEOFCONTENTS
EXECUTIVESUMMARY...1
I. INTRODUCTION ...12
A. StudyHistory...14
B. LicensingandRatesettingCharts...15
II. MUSICLICENSINGLANDSCAPE ...16
A. CopyrightOverview...16
1. BriefHistoryofCopyrightProtectionforMusic...16
2. MusicalWorksVersusSoundRecordings...18
3. KeyPlayersintheMusicMarketplace...18
a. Songwriters...18
b. MusicPublishers...19
c. PerformingRightsOrganizations(“PROs”)...20
d. MechanicalRightsAdministrators...21
e. RecordingArtistsandProducers...21
f. RecordCompanies...22
g. MusicProviders...23
h. Consumers...24
B. LicensingMusicalWorks...25
1. ExclusiveRightsinMusicalWorks...25
2. ReproductionandDistributionRights...26
a. HistoricalBackground ...26
b. MechanicalRightsLicensing...28
StatutoryLicensing...28
VoluntaryLicenses...30
RecentReformEfforts ...31
3. PublicPerformanceRights...32
a. ThePROs...32
b. AntitrustOversight...34
DepartmentofJusticeConsentDecrees...35
KeyAntitrustCases...38
c. ConsentDecreeProcedures...40
4. StatutoryLicenseforPublicandNoncommercialBroadcasting...42
C. LicensingSoundRecordings...43
1. ExclusiveRightsinSoundRecordings...43
2. ReproductionandDistributionRights...43
3. PublicPerformanceRights...43
b. Section112and114Licenses...46
Interactive/NoninteractiveDistinction ...48
RatesettingStandards...49
CRBRatesettingProceedings...50
RoyaltyRates...51
c. PrivatelyNegotiatedLicenses...52
4. Pre‐1972SoundRecordings...53
D. SynchronizationRights...55
E. LicensingEfficiencyandTransparency...58
1. DataStandards...59
2. PublicData...62
3. Non‐GovernmentDatabases...63
4. InternationalEfforts...65
5. DataSharingInitiatives ...66
III. CHALLENGESOFTHECURRENTSYSTEM...68
A. CompensationandLicensingDisparities...69
1. EffectofMarketTrendsonCreatorIncome...69
a. FromPhysicalFormatstoDownloadstoStreaming...70
b. ImpactofMusicStreamingModels ...73
c. Non‐PerformingSongwriters...78
d. AdditionalConsiderations...78
Piracy...78
ImpactofDMCASafeHarbors...79
2. DisparateTreatmentofAnalogousRightsandUses...81
a. InconsistentRatesettingStandards...81
b. DifferentRatesettingBodies...83
c. Pre‐1972SoundRecordings...85
FullFederalizationConsiderations...85
PartialFederalizationAlternative...86
d. TerrestrialRadioExemption...87
B. Government’sRoleinMusicLicensing...90
1. PROConsentDecrees ...90
a. RoyaltyRates...91
b. RateCourtProceedings...93
c. InterimFees ...94
d. InconsistentRegulationofPROs...95
e. Parties’Proposals...96
CompleteorPartialWithdrawalofRights...97
EliminationVersusExpansionofConsentDecrees...101
RateCourtChanges...102
BundledLicensing...103
2. MechanicalRightsLicensing...105
a. RoyaltyRatesandStandard...105
b. AdministrativeBurdens...107
c. PerceivedUnfairness...108
LackofAuditRights...108
AdministrativeIssues...110
d. Parties’Proposals...111
EliminationofStatutoryLicense...111
BlanketLicensing...112
3. Sections112and114...114
a. RoyaltyRates...114
b. Interactive/NoninteractiveDivide...115
c. TechnicalLimitationsofSection112...117
d. LackofTerminationProvision...117
e. RoyaltyDistributionProcess...118
4. PublicandNoncommercialBroadcasting...118
5. ConcernsRegardingCRBProcedures...119
a. InefficienciesandExpense...119
b. SettlementObstacles...121
c. DiscoveryProcess...121
C. LicensingEfficiencyandTransparency...123
1. MusicData...123
a. LackofReliablePublicData...123
b. Parties’Views...126
2. UsageandPaymentTransparency...128
a. AdvancesandEquityDeals...128
b. PRODistributions...130
c. “Pass‐Through”Licensing...131
IV. ANALYSISANDRECOMMENDATIONS...133
A. GuidingPrinciples...134
B. LicensingParityandFairCompensation...134
1. EquitableTreatmentofRightsandUses...135
a. MusicalWorksVersusSoundRecordings ...135
b. TerrestrialRadio...138
c. Pre‐1972SoundRecordings...140
2. ConsistentRatesettingStandards...142
C. RoleofGovernmentinMusicLicensing...145
1. AntitrustConsiderations...146
2. ThePROsandtheConsentDecrees...150
a. Pandora Analysis...151
PublisherWithdrawals...151
AvailabilityofSongData...155
b. PRORatesettingProcess...155
MigratetoCopyrightRoyaltyBoard ...155
Section114(i)...157
InterimFees ...157
c. PartialWithdrawalofRights...158
d. BundledLicensing...160
3. MechanicalLicensingandSection115...162
a. FreeMarketNegotiationVersusCollectiveAdministration...162
PublisherOpt‐OutRight...164
FullMarketCoverage...165
CoverRecordings...166
AudiovisualUses...167
b. ShifttoBlanketLicensing...169
c. Ratesetting ...170
“As‐Needed”Ratesetting...171
UseofBenchmarks...172
InterimRates...173
d. AuditRight...173
e. SunsetofExistingSection115Licenses...174
4. Section112and114Licenses...175
a. ScopeofLicenses...176
AdjusttoIncludeTerrestrial...176
QualifyingVersusNonqualifyingServices...177
b. Ratesetting ...179
c. ProducerPayments...180
d. TerminationProvision...181
5. PublicandNoncommercialBroadcasting...181
D. LicensingEfficiencyandTransparency...183
1. IndustryData ...183
a. PubliclyAccessibleDatabase...183
b. AdoptionofDataStandards...184
2. FairReportingandPayment...186
a. WriterandArtistShares ...186
b. BestPracticesforTransparency...189
E. AnUpdatedMusicLicensingSystem...189
1. MROs...190
2. TheGMRO...192
a. Data‐RelatedResponsibilities ...193
b. DefaultLicensingandPayment...194
c. ResourcesandFunding...196
3. TheCRB ...197
b. All‐InRatesforNoninteractiveStreaming...198
c. GMROSurcharge...199
d. ProceduralImprovements...199
4. RegulatoryImplementation...201
5. FurtherEvaluation...202 APPENDICES
AppendixA: FederalRegisterNotices
AppendixB: CommentingPartiesandRoundtableParticipants
AppendixC: Abbreviations
Executive
Summary
TheUnitedStateshasthemostinnovativeandinfluentialmusiccultureintheworld,
butmuchofthelegalframeworkforlicensingofmusicdatesbacktotheearlypartofthe
twentiethcentury,longbeforethedigitalrevolutioninmusic. Ourlicensingsystemis
foundedonaviewthatthemusicmarketplacerequiresauniquelevelofgovernment
regulation,muchofitreflectedinstatutorylicensingprovisionsoftheCopyrightAct.
TheCopyrightOfficebelievesthatthetimeisripetoquestiontheexistingparadigmfor
thelicensingofmusicalworksandsoundrecordingsandconsidermeaningfulchange.
Thereisawidespreadperceptionthatourlicensingsystemisbroken. Songwritersand
recordingartistsareconcernedthattheycannotmakealivingundertheexisting
structure,whichraisesseriousandsystemicconcernsforthefuture. Musicpublishers
andperformancerightsorganizationsarefrustratedthatsomuchoftheirlicensing
activityissubjecttogovernmentcontrol,sotheyareconstrainedinthemarketplace.
Recordlabelsanddigitalservicescomplainthatthelicensingprocessisburdensomeand
inefficient,makingitdifficulttoinnovate.
Whilethereisgeneralconsensusthatthesystemneedsattention,thereislessagreement
astowhatshouldbedone. Inthisreport,afterreviewingtheexistingframeworkand
stakeholders’views,theCopyrightOfficeoffersaseriesofguidingprinciplesand
preliminaryrecommendationsforchange. TheOffice’sproposalsaremeanttobe
contemplatedtogether,ratherthanindividually. Withthisapproach,theOfficeseeksto
presentaseriesofbalancedtradeoffsamongtheinterestedpartiestocreateafairer,
moreefficient,andmorerationalsystemforall.
A. GuidingPrinciples
TheCopyrightOffice’sstudyrevealedbroadconsensusamongstudyparticipantson
fourkeyprinciples:
Musiccreatorsshouldbefairlycompensatedfortheircontributions.
Thelicensingprocessshouldbemoreefficient.
Marketparticipantsshouldhaveaccesstoauthoritativedatatoidentifyand
licensesoundrecordingsandmusicalworks.
Usageandpaymentinformationshouldbetransparentandaccessibleto
Inadditiontotheabove,basedontherecordintheproceeding,theOfficehasidentified
severaladditionalprinciplesthatitbelievesshouldalsoguideanyprocessofreform.
Theseare:
Governmentlicensingprocessesshouldaspiretotreatlikeusesofmusicalike.
Governmentsupervisionshouldenablevoluntarytransactionswhilestill
supportingcollectivesolutions.
Ratesettingandenforcementofantitrustlawsshouldbeseparatelymanagedand
addressed.
Asingle,market‐orientedratesettingstandardshouldapplytoallmusicuses
understatutorylicenses.
TheOfficewasguidedbyalloftheaboveprinciplesindevelopingitsrecommendations,
whicharesummarizedbelow.
B. LicensingParityandFairCompensation
Questionsoflicensingparityandfaircompensationarecloselytiedtotherelative
treatmentofmusicrightsandrightsholdersunderthelaw. TheCopyrightOffice
believesthatanyoverhaulofourmusiclicensingsystemshouldstrivetoachievegreater
consistencyinthewayitregulates(ordoesnotregulate)analogousplatformsanduses.
Withthatgoalinmind,theOfficerecommendsthefollowing:
Regulatemusicalworksandsoundrecordingsinaconsistentmanner. The
Officebelievesthat,atleastinthedigitalrealm,soundrecordingsandthe
underlyingmusicalworksshouldstandonmoreequalfooting. TheCopyright
Office’sapproachwouldofferafreemarketalternativetomusicalworkowners,
intheformofanopt‐outrighttowithdrawspecificcategoriesofrightsfrom
governmentoversightinkeyareaswheresoundrecordingownersenjoysuch
benefits—namely,interactivestreamingusesanddownloads.
Extendthepublicperformancerightinsoundrecordingstoterrestrialradio
broadcasts. AstheCopyrightOfficehasstatedrepeatedlyformanyyears,the
UnitedStatesshouldadoptaterrestrialperformancerightforsoundrecordings.
Apartfrombeinginequitabletorightsholders—includingbycurtailingthe
reciprocalflowofroyaltiesintotheUnitedStates—theexemptionofterrestrial
radiofromroyaltyobligationsharmscompetingsatelliteandinternetradio
providerswhomustpayfortheuseofsoundrecordings. AssumingCongress
adoptsaterrestrialperformanceright,itwouldseemonlylogicalthatterrestrial
usesshouldbeincludedunderthesection112and114licensesthatgovern
Fullyfederalizepre‐1972soundrecordings. Asitconcludedinits2011reporton
thetopic,theCopyrightOfficebelievesthatpre‐1972recordings—currently
protectedonlyunderstatelaw—shouldbebroughtwithinthescopeoffederal
copyrightlaw,withthesamerights,exceptions,andlimitationsasmorerecently
createdsoundrecordings. Thelackoffederalprotectionforpre‐1972sound
recordingsimpedesafairmarketplace. Recordlabelsandartistsarenotpaidfor
performancesoftheseworksbydigitalservices,which(atleastuntilrecentcourt
rulingsunderstatelaw)wereconsideredfreefromcopyrightliabilityonthe
soundrecordingside. Atthesametime,theownersofthemusicalworks
embodiedinthesesoundrecordingsarepaidforthesameuses.
Adoptauniformmarket‐basedratesettingstandardforallgovernmentrates.
Whileinsomecasesthelawprovidesthattheratesettingauthorityshould
attempttoemulateafreemarket,inothercasesitimposesamorepolicy‐
orientedapproachthathasledtobelow‐marketrates. Thereisnopolicy
justificationforastandardthatrequiresmusiccreatorstosubsidizethosewho
seektoprofitfromtheirworks. Accordingly,theOfficecallsforadoptionofa
singleratestandard—whetherdenominated“willingbuyer/willingseller”or
“fairmarketvalue”—thatisdesignedtoachieveratesthatwouldbenegotiated
inanunconstrainedmarket.
C. Government’sRoleinMusicLicensing
Thegovernment’sinvolvementinthemusicmarketplaceisunusualandexpansive
relativetootherkindsofworkscreatedanddisseminatedundertheCopyrightAct. In
manycases,itcompelscopyrightownerstolicensetheirworksatgovernment‐setrates.
Regulationofmusicpublishersandsongwritersisparticularlypervasive:thetwomost
significantareasoftheirmarket(mechanicalandperformancelicensing)aresubjectto
mandatorylicensingandratesetting. Antitrustconcernshavebeenthetraditional
rationaleforgovernmentintervention. Tobesure,whereparticularactorsengagein
anticompetitiveconductinviolationofantitrustlaws,thatconductshouldbeaddressed.
Butcompulsorylicensingdoesmorethanthat—itremoveschoiceandcontrolfromall
copyrightownersthatseektoprotectandmaximizethevalueoftheirassets.
Regardlessofthehistoricaljustificationsforgovernmentintervention,theCopyright
Officebelievesthatintoday’sworld,certainaspectsofthecompulsorylicensing
processescanandshouldberelaxed. Thebelowrecommendationsoffersomeideasfor
howthatmightbeaccomplishedinthevariousareasofthemarketwherethereis
governmentinvolvement.
Performing Rights Organizations (“PROs”) and the Consent Decrees
ManyimportantissueshavebeenraisedintheDepartmentofJustice’s(“DOJ’s”)
parallelconsiderationoftheAmericanSocietyofComposers,AuthorsandPublishers
review,and—inlightofthesignificantimpactofthedecreesintoday’sperformance‐
drivenmusicmarket—hopesitwillresultinaproductivereconsiderationofthe75‐year‐
olddecrees. Atthesametime,theCopyrightOfficeobservesthatitisCongress,notthe
DOJ,thathastheabilitytoaddressthefullrangeofissuesthatencumberourmusic
licensingsystem,whichgofarbeyondtheconsentdecrees. Intheareaofperformance
rights,theOfficeoffersthefollowingrecommendations:
MigrateallratesettingtotheCopyrightRoyaltyBoard(“CRB”). TheCopyright
Officebelievesthatallegationsofanticompetitiveconductareworthyof
evaluation(and,ifappropriate,remedialaction)separateandapartfromthe
determinationoffairratesformusicalworks. Eachofthesetwocriticalpolicy
objectivesmeritsgovernmentattentioninitsownright. Accordingly,theOffice
proposesthatthefunctionofestablishingratesforthepublicperformanceof
musicalworks—currentlytheprovinceoffederaldistrictcourtsunderthe
consentdecrees—bemigratedtotheCRB. Industryratesettingis,ofcourse,a
primaryfunctionoftheCRB,andtheCRBhasthebenefitofexperienceassessing
abroaderspectrumofrate‐relatedquestionsthanthefederalratecourts,aswell
asspecificexpertiseincopyrightlawandeconomics.
Repealsection114(i). RegardlessofwhetherPROratesettingismigratedtothe
CRB,asfurtherdiscussedbelow,theCopyrightOfficeendorsestheproposalthat
theprohibitioninsection114(i)thatcurrentlypreventsratesettingtribunalsfrom
consideringsoundrecordingperformanceroyaltiesbeeliminated. Originally
designedasaprotectivemeasuretobenefitsongwritersandpublishers,it
appearstobehavingtheoppositeeffect.
Streamlineinterimratesettingandrequireimmediatepaymentofroyalties.
Undertheconsentdecrees,anyonewhoappliesforalicensehastherightto
performmusicalworksinaPRO’srepertoire—withoutpayingthePROany
compensation—pendingthecompletionofnegotiationsorratecourtproceedings
resultinginaninterimorfinalfee. Theproblemisexacerbatedbythesubstantial
burdenandexpenseoflitigatingevenaninterimrateinfederalcourt. The
CopyrightOfficebelievesthattotheextentalicensingentityisrequiredtogrant
alicenseuponrequest,thereshouldbeastreamlinedmechanismtosetan
interimroyaltyrate,andthatthelicenseeshouldhavetostartpaying
immediately.
Permitopt‐outfromPROsforinteractivestreaming. TheOfficebelievesthat
musicpublishersshouldbeabletowithdrawspecificcategoriesoflicensing
rightsfromtheirauthorizationstothePROs. Atleastfornow,theOfficebelieves
thatwithdrawalofperformancerightsshouldbelimitedtodigitalrights
equivalenttothosethattherecordlabelsarefreetonegotiateoutsideofsections
112and114—essentially,interactivestreamingrightsfordigitalservices.
withdrawnworksandotherpertinentinformationtoacentralsource,suchasthe
generalmusicrightsorganization(“GMRO”)discussedbelow. Inaddition,the
Officebelievesthatsongwritersaffiliatedwiththatpublishershouldretainthe
optionofreceivingtheirwriter’sshareofroyaltiesdirectlythroughtheirchosen
licensingcollective.
Allowbundledlicensingofmechanicalandperformancerights. Industry
participantssupportincreasedbundlingofrights—i.e.,reproduction,
distribution,andperformancerights—inunifiedlicensestofacilitategreater
licensingefficiency. Althoughbundlingofsoundrecordingrightsoccursasa
matterofcourse,variouslegalrestrictionshavepreventedthatsame
developmentonthemusicalworkside. TheOfficebelievesthatthegovernment
shouldpursueappropriatechangestothelegalframeworktoencouragebundled
licensing,whichcouldeliminateredundantresourcesonthepartofboth
licensorsandlicensees. ThiscouldincludeallowingthePROsandotherentities
tobecomemusicrightsorganizations(“MROs”),whichwouldbeauthorizedto
licensebothperformanceandmechanicalrights.
Mechanical Licensing and Section 115
Studyparticipantshighlightedtheseriousshortcomingsofthe106‐yearoldcompulsory
licensefor“mechanical”reproductionsofmusicalworks(e.g.,CDs,vinylrecordsand
downloads)insection115. Onthecopyrightownerside,partiescomplainedthatthe
mandatorynatureofthelicensedoesnotpermitthemtocontroltheirworksorseek
higherroyalties. Onthelicenseeside,partiescriticizedsection115’srequirementof
song‐by‐songlicensing,adauntingtaskinaworldwhereonlineprovidersseeklicenses
formillionsofworks. Inlightoftheseconcerns,theOfficeoffersthefollowing
recommendations:
Permitcollectivelicensingofmechanicalrightsbutwithanopt‐outrightfor
interactivestreaminganddownloaduses. TheOfficeissympathetictomusic
publishers’argumentsforeliminationofthecompulsorylicenseinsection115in
favoroffreemarketnegotiations. Butinlightofthediffuseownershipof
musicalworks,itseemsclearthatsomesortofcollectivesystemwouldbe
necessaryeveninsection115’sabsence. TheOfficethusbelievesthat,ratherthan
eliminatingsection115altogether,section115shouldinsteadbecomethebasisof
amoreflexiblecollectivelicensingsystemthatwillpresumptivelycoverall
mechanicalusesexcepttotheextentindividualmusicpublisherschoosetoopt
out. Atleastinitially,themechanicalopt‐outrightwouldextendtointeractive
streamingrightsanddownloadingactivities—useswheresoundrecording
ownersoperateinthefreemarket(butnotphysicalgoods,whichhavesomewhat
distinctlicensingpractices). AsenvisionedbytheOffice,thecollectivesystem
wouldincludeMROs(asnoted,withtheabilitytorepresentbothperformance
representedbyanMROorcoveredbyadirectdeal),andindividualpublishers
thatchoosetooptout. Licenseescouldthusachieveend‐to‐endcoverage
throughthecombinationofMROs,theGMRO,anddirectlicensors.
Establishblanketlicensingfordigitalusesundersection115. Tofurtherfacilitate
therightsclearanceprocessandeliminateuserconcernsaboutliabilityto
unknownrightsowners,theOfficebelievesthatmechanicallicensing,like
performancelicensing,shouldbeofferedonablanketbasisbythosethat
administerit. Thiswouldmeanthatalicenseewouldneedonlytofileasingle
noticewithanMROtoobtainarepertoire‐wideperformanceandmechanical
licensefromthatlicensingentity. Themovetoablanketsystemwouldallow
marketplaceentrantstolaunchtheirservices—andbeginpayingroyalties—more
quickly.
CRBratesettingonan“as‐needed”basis. TheOfficebelievesthattheCRB
shouldcontinuetosetratesunderthesection115license,thoughwithan
importantmodification:asisnowthecasewithperformancerights,ratherthan
establishratesacrosstheboardeveryfiveyears,theCRBwouldsetratesfor
particularusesonlyonanas‐neededbasiswhenanMROandlicenseewere
unsuccessfulinreachingagreement. Otherinterestedparties(suchasother
MROsandotherusers)couldchoosetojointherelevantproceeding,inwhich
casethosepartieswouldbeboundbytheCRB‐determinedrate.
Ensurecopyrightownerspossessauditrights. Publishershavelongcomplained
aboutthelackofanauditrightundersection115. Inthatregard,section115is
anoutlier—suchauditrightshavebeenrecognizedunderotherstatutory
licenses. TheOfficebelievesthatthemechanicallicensingsystemshouldbe
amendedtoprovideforanexpressauditright,withtheparticularlogisticstobe
implementedthroughregulation.
Maintainaudiovisualusesinthefreemarket. Recordcompaniesproposed
extendingcompulsoryblanketlicensingtocertainconsumeraudiovisual
products—suchasmusicvideos,albumcovervideos,andlyricvideos—usesthat
havetraditionallyrequiredasynchronizationlicensenegotiatedinthefree
market. TheOfficeissympathetictothelabels’concerns,butcannotatthistime
recommendthatconsumersynchusesbeincorporatedintoagovernment‐
supervisedlicensingregime. TheOfficedoesnotperceiveamarketfailurethat
justifiescreationofanewcompulsorylicense,andthemarketappearstobe
respondingtolicensingneedsforconsumeraudiovisualproducts.
Section 112 and 114 Licenses
Oneofthefewthingsthatseemstobeworkingreasonablywellinourlicensingsystem
isthestatutorylicenseregimeundersections112and114,whichpermitsqualifying
otherwiseagreed)rate. Althoughthedifferingratesettingstandardsfortheselicenses—
aswellassomeoftheratesestablishedunderthosestandards—havebeenasourceof
controversy,fromtherecordinthisstudy,thelicensingframeworkitselfisgenerally
wellregarded. Notwithstandingthecomparativelypositivereviewsofthesection112
and114licenses,thereareafewrelativelyminorimprovementsthattheOfficebelieves
shouldbeconsidered:
Considerratesettingdistinctionbetweencustomandnoncustomradio. In2009,
theSecondCircuitruledthatpersonalizedradioservicesareeligibleforthe
section112and114licenses. AlthoughtheOfficehassomereservationsabout
thatinterpretation,thereappearstobenooverwhelmingcalltoremovecustom
radiofromthestatutoryregime. Nonetheless,withinthatregime,itmaybe
appropriatetodistinguishbetweencustomandnoncustomradio,asthe
substitutionaleffectofpersonalizedradioonpotentiallycompetinginteractive
streamingservicesmaybegreaterthanthatofservicesofferingacompletely
noncustomizedexperience. Whiletheissuecouldbeaddressedlegislatively,this
doesnotappeartobenecessary,astheCRBhasthediscretiontosetdifferentrate
tierstodaywhentherecordsupportssuchanoutcome.
Allowfine‐tuningoftechnicalaspectsofthelicensethroughtheexerciseof
regulatoryauthority. Internetserviceshavecriticizedanumberofthedetailed
limitationsthatsection114imposesoncompulsorylicensees. Theseincludethe
so‐called“soundrecordingperformancecomplement,”arestrictionthatlimits
thefrequencywithwhichsongsfromthesamealbumorbythesameartistmay
beplayedbytheservice,aswellasaprohibitionagainstannouncingupcoming
selections. Butforthefactthattheyappearinthestatuteitself,suchdetails
wouldseemtobemoreappropriatelytheprovinceofregulation. Assuggested
moregenerallybelow,Congressmaywishtocommitnuancesliketheseto
administrativeoversightbytheCopyrightOffice.
ConsiderpermittingSoundExchangetoprocessrecordproducerpayments.
Recordproducers—whomakevaluablecreativecontributionstosound
recordings—arenotamongthepartiesentitledbystatutetodirectpaymentby
SoundExchange. Insomecases,anartistmayprovidealetterofdirection
requestingSoundExchangetopaytheproducer’sshareofincomefromtheartist
royaltiescollectedbySoundExchange,whichSoundExchangewillhonor. Ithas
beensuggestedthatthisinformalpracticeberecognizedthroughastatutory
amendment. Thoughitwouldbebeneficialtohearmorefromartistsonthis
issue,theOfficeagreesthatinmanyinstancesproducersareintegralcreators
andthattheproposalthereforemeritsconsideration.
AllowSoundExchangetoterminatenoncompliantlicensees. Unlikesection115,
sections112and114donotincludearighttoterminatealicenseethatfailsto
continuedlicensingofauserthatisnotmeetingitsobligations,andagreesthat
thesection112and114statutorylicensesshouldbeamendedtoincludea
terminationprovisionakintothatinsection115.
Public Broadcaster Statutory License
Createaunifiedstatutorylicensingschemeforpublicbroadcasters. Public
broadcastersmustengageinamultitudeofnegotiationsandratesetting
proceedingsindifferentforatoclearrightsfortheirover‐the‐airandonline
activities. Especiallyinlightoftherelativelylowroyaltyratespaidbypublic
broadcasters,Officesuggeststhattheratesettingprocessesapplicabletopublic
broadcastersbeconsolidatedwithinaunifiedlicensestructureundersection118
undertheauspicesoftheCRB,wheretheywouldlikelybemuchmoreefficiently
resolved.
D. LicensingEfficiencyandTransparency
TheOfficebelievesthataccurate,comprehensive,andaccessibledata,andincreased
transparency,areessentialtoabetterfunctioningmusiclicensingsystem. Authoritative
datawouldbenefitallparticipantsinthemarketplaceforsoundrecordingsandmusical
works,andfacilitateamoreefficientsystem. Inaddition,itisessentialtomakereliable
usageandpaymentinformationavailabletorightsholders. Toachievethesetwingoals,
theOfficeoffersthefollowingrecommendations:
Establishincentivesthroughthestatutorylicensingschemeforexistingmarket
playerstocreateanauthoritativepublicdatabase. TheCopyrightOfficebelieves
thatanysolutiontothemusicdataproblemshouldnotbebuiltbythe
governmentbutshouldinsteadleverageexistingindustryresources.
Accordingly,theOfficerecommendsthatthegovernmentestablishincentives
throughthestatutorylicensingregimetoencourageprivateactorstocoordinate
theireffortsandcontributetoapubliclyaccessibleandauthoritativedatabase,
includingbyencouragingtheadoptionanddisseminationofuniversaldata
standards. Tofacilitatethisprocess,theCopyrightOfficeshouldprovide
regulatoryoversightregardingstandardsandgoals.
Establishtransparencyindirectdeals. Throughoutthestudy,aparamount
concernofsongwritersandrecordingartistshasbeentransparencyinthe
reportingandpaymentofwriterandartistsharesofroyalties,especiallyinthe
contextofdirectdealsnegotiatedbypublishersandlabelsoutsideofthePROs
andSoundExchange,whichmayinvolvesubstantialadvancesorequity
arrangements. Theseconcernsshouldbeaddressedaspartofanyupdated
licensingframework,especiallyonethatallowspublisherstooptoutofthe
statutorylicensingsystemandpursuedirectnegotiations. Inthecaseofdirect
allowingsongwritersandartiststoelecttoreceivetheirsharesofroyaltiesfrom
thelicenseethroughtheirchosenlicensingentity.
E. AnUpdatedMusicLicensingSystem
Toimplementtheprinciplesandrecommendationslaidoutabove,theCopyrightOffice
isproposinganupdatedframeworkforthelicensingofmusicalworks. Thebasic
componentsofthisproposalareasfollows:
MROs. UndertheOffice’sproposal,excepttotheextenttheychosetooptoutof
theblanketstatutorysystem,publishersandsongwriterswouldlicensetheir
publicperformanceandmechanicalrightsthroughMROs.
o AnMROcouldbeanyentityrepresentingthemusicalworksof
publishersandsongwriterswithamarketshareinthemechanicaland/or
performancemarketaboveacertainminimumthreshold,forexample,
5%. Existingrightsorganizations,suchasASCAP,BMI,HFAandothers,
couldthusqualifyasMROs.
o EachMROwouldenjoyanantitrustexemptiontonegotiateperformance
andmechanicallicensescollectivelyonbehalfofitsmembers—aswould
licenseegroupsnegotiatingwiththeMROs—withtheCRBavailableto
establisharateincaseofadispute. ButMROscouldnotcoordinatewith
oneanotherandwouldbesubjecttoatleastroutineantitrustoversight.
o EachMROwouldberequiredtosupplyacompletelistofthepublishers,
works,percentagesharesandrightsitrepresented,aswellastheMRO’s
licensingcontactinformation,totheGMRO,andwouldbeobligatedto
keepthatinformationcurrent. MROswouldnothavetosharealloftheir
dataforpurposesofthepublicdatabase. Forexample,therewouldbeno
needforanMROtoprovidecontactinformationforitsmembers(other
thanthosethatoptedout)sincetheMROwouldberesponsiblefor
distributingroyaltiesunderthelicensesitissued.
o MROswouldalsoberesponsiblefornotifyingtheGMROofany
membersthathadexercisedopt‐outrightsbyprovidingtherelevantopt‐
outinformation,includingwhereadirectlicensemightbesought,so
potentiallicenseeswouldknowwheretogoforlicenseauthority.
GMRO. EventhoughmostlicensingactivitywouldbecarriedoutbytheMROs
anddirectlylicensingpublishers,thehubofthenewlicensingstructurewould
bethe“general”MROorGMRO. TheGMROwouldhavecertainimportant
responsibilities:
o First,theGMROwouldberesponsibleformaintainingapublicly
wouldincorporatedatasuppliedbytheMROsandotherauthoritative
sources. TheGMROwouldactivelygathermissingdata,reconcile
conflictingdata,andcorrectflaweddata,andwouldalsoprovidea
processtohandlecompetingownershipclaims. Inadditiontomusical
workdata,theGMROwouldalsoincorporatesoundrecordingdata—
presumablyfromSoundExchange—intothepublicdatabase,andbe
responsiblefordevelopingadditionaldatathatmatchedsound
recordingswithmusicalworkstofacilitatemoreefficientlicensing.
o Second,theGMROwouldalsoserveasthedefaultlicensingand
collectionagentformusicalworks(orsharesofworks)thatlicensees
wereunabletoassociatewithanMROoropt‐outpublisher. Services
withusage‐basedpaymentobligationswouldtransmitrecordsofusefor
unmatchedworks,alongwithassociatedpaymentsandanadministrative
fee,totheGMRO. TheGMROwouldthenattempttoidentifytheMRO
orindividualcopyrightownersand,ifsuccessful,paytheroyaltiesout. If
unsuccessful,theGMROwouldaddtheusagerecordtoapublic
unclaimedroyaltieslistandholdthefundsforsomeperiodoftime—e.g.,
threeyears—toseeifaclaimantcameforward. Asisthecasewith
SoundExchange,afterthatperiod,theGMROcoulduseanyremaining
unclaimedfundstohelpoffsetthecostsofitsoperations.
GMROfundingandresources. TheCopyrightOfficebelievesthatboth
copyrightownersandusersshouldprovidesupportfortheGMRO,asboth
groupswillbenefitfromitsactivities. UndertheOffice’sproposal,everyMRO,
aswellasSoundExchange,wouldberequiredtocontributekeyelementsofdata
tocreateandmaintainacentralizedmusicdatabase. MROswouldbe
responsibleforallocatinganddistributingthevastmajorityofroyalties. In
exchangeforthesecontributionsonthepartofcopyrightowners,theOffice
believesthatmostdirectfinancialsupportfortheGMROshouldcomefromfees
chargedtousersofthesection112,114and115licenses. Thus,although
licenseeswouldbepayingroyaltiestoMROsandindividualpublishers
directly—andSoundExchangeaswell—theywouldhaveaseparateobligationto
payalicensingsurchargetotheGMRO. Thesurchargetobepaidbystatutory
licenseescouldbedeterminedbytheCRBbasedontheGMRO’scosts(and
withoutconsiderationofroyaltyrates)throughaseparateadministrative
process. Thesurchargewouldbeoffsetbyadministrativefeesandothersources
ofincomefortheGMRO,includingany“blackbox”fundsunclaimedby
copyrightowners.
CopyrightRoyaltyBoardimprovements. UndertheCopyrightOffice’sproposal,
ratesettingbytheCRBwouldshiftfromafive‐yearcycletoasystemunder
whichtheCRBwouldstepinonlyasnecessarywhenanMROor
createopportunitiesforcombinedratesettingproceedingsfornoninteractive
services(e.g.,internet,terrestrial,andsatelliteradio)encompassingbothsound
recordingsandmusicalworks. TheOfficerecommendsotherprocedural
adjustmentstotheCRBaswell—includingadjustmentstothestatutorily
prescribedlitigationprocessanditssettlementprocedures. Itwouldalsobe
worthwhiletoremoveunnecessaryproceduraldetailsinthestatutethatare
betterlefttoregulationbytheCRB.
Regulatoryimplementation. TheCopyrightOfficerecommendsthatifCongress
actstorestructurethemusiclicensingsystem,itwouldbemostproductivefor
thelegislationtosetouttheessentialelementsoftheupdatedsystembutleave
thedetailstobeimplementedthroughregulationbytheCopyrightOfficeand,in
ratesettingmatters,theCRB. Suchaconstructwouldlikelybemorerealisticto
enactthanahighlydetailedstatutoryprescription—especiallyinthecaseof
musiclicensing,wheretheparticularscanbeoverwhelming.
Furtherevaluation. ShouldCongresschoosetoembarkuponaseriesofchanges
tothelicensingsystemasdescribedabove,theOfficerecommendsthatthenew
systembeevaluatedbytheCopyrightOfficeafterithasbeeninoperationfora
periodofseveralyears. Assumingthenewlicensingframeworkincludesanopt‐
outmechanism,theefficacyofthatprocesswouldbeofparticularinterest.
I.
Introduction
TheUnitedStateshasthemostinnovativeandinfluentialmusiccultureintheworld,
butoursystemforenablingthepaiduseofmusic—andensuringcompensationforits
creators—lagsfarbehind. Thestructuresthatevolvedinthepreviouscenturyto
facilitatethelawfulexploitationofmusicalworksandsoundrecordings,whileperhaps
adequatefortheeraofdiscsandtapes,areundersignificantstress. Fromacopyright
perspective,wearetryingtodeliverbitsandbytesthroughaVictrola.
Itisatestamenttotheirresistiblepowerofmusicthatindustryandmarketparticipants
havedonetheirbesttoadapttheoldmethods,includingpre‐digitalgovernment
policies,toembracecurrenttechnologiesandconsumerexpectations. Butthecostsof
failingtoupdateouroutmodedlicensingmethodsareescalating. Evenwhen
distributorsareperfectlywillingtopaylicensingfees,theymayfinditdifficultto
identifytheownersofthemusictheyuse. Thoseseekingtolaunchnewdelivery
platformsareconstrained—andsometimesevendefeated—bythecomplexitiesand
expenseofconvolutedclearanceprocesses. Perhapsmostconcerningisthatmany
deeplytalentedsongwritersanddevelopingartistsnowquestionwhetheracareerin
musicisrealisticunderthecurrentregime.
Asmightbeexpected,manyoftheissuesraisedbytheparticipantsinthisstudyofthe
musicmarketplacerevolvedaroundgovernmentmandates,inparticulartheroleofthe
antitrustconsentdecreesgoverningthelicensingofperformancerightsinmusicalworks
byperformingrightsorganizations(“PROs”),thesection115“mechanical”licensefor
thereproductionanddistributionofmusicalworks,andthesection112and114licenses
forthedigitalperformanceofsoundrecordings.
Thereisaprofoundconvictiononthepartofmusicpublishersandsongwritersthat
governmentregulationoftheratesforthereproduction,distribution,andpublic
performanceofmusicalworkshassignificantlydepressedtheratesthatwould
otherwisebepaidforthoseusesinanunrestrictedmarketplace. Thestandards
employedforthesection115andPROratesettingproceedings—section801(b)(1)’sfour‐
factortestformechanicalusesandthe“reasonablefee”standardoftheconsentdecrees
(whichcannottakeintoaccountsoundrecordingperformancerates)—areperceivedas
producingbelow‐marketrates,especiallywhencomparedtoratespaidforanalogous
usesofsoundrecordings. Ontheothersideofthefence,licenseesurgethatgovernment
oversightisessentialtoforestallallegedmonopolisticpracticesonthepartofthePROs
andlargemusicpublishers.
ThePROsareviewedasbothasablessingandathreat. Licenseeslaudtheefficiencies
oftheblanketlicensestheyofferwhileatthesametimebemoaningthesocieties’
perceivedbargainingpositionasaresultofthatverybreadth. Songwriters,fortheir
payment,shouldmajorpublishersopttowithdrawfromthePROsandlicense
performancerightsdirectly—assomepublishershavesuggestedtheymaydoinaquest
forhigherratesthanthosesetbytheratecourtsundertheconsentdecrees.
Withrespecttothesection112and114licensesfortheperformanceofsoundrecordings,
thedebatehascenteredonthedisparateratestandardsfordifferingclassesofdigital
users—themoremalleable801(b)(1)standardthatisappliedtosatelliteradioversusthe
willingbuyer/willingsellerstandardforcompetingonlineradioservices—aswellasthe
overallburdenandexpenseoftheCRBratesettingprocess. Internetradioproviders
complainthattheCRBprocesshasyieldedratesthathaverequiredthemtoseek
congressionalintervention.
Therearedifferingopinionsastohowtohandlepre‐1972soundrecordings,whichare
currentlyoutsideoftheambitoffederalcopyrightlawbutprotectedinvaryingdegrees
underdifferingstateregimes. SomeconcurwiththeCopyrightOffice’s2011
recommendationthatpre‐1972recordingsshouldbebroughtfullywithinthescopeof
federalcopyrightprotection,butothersargueforamorelimitedfixornofixatall.
Meanwhile,sincetheinceptionofthestudy,threecourtshaveheldthatthepublic
performanceofpre‐1972recordingsissubjecttoprotectionunderapplicablestatelaw,
furthercomplicatingthelicensinglandscape.
Andlastbutnotleastisthelongstandingissueofwhetherterrestrialradiobroadcasters
shouldcontinuetobeexemptedundertheCopyrightActfrompayingroyaltiesforthe
performancesofsoundrecordingsthatdrivetheirmultibilliondollarindustry—adebate
thathasbeensharpenedasonlineradioservicesseektocompetewiththeirterrestrial
counterparts.
Atthesametime,stakeholderswidelyacknowledgethatthereisaneedforuniversal
datastandardstofacilitatetheidentificationofmusicalworksandsoundrecordings,
andthelicensingprocessgenerally. Inparticular,thereisbroadrecognitionofthe
necessityforreliabledatatomatchsoundrecordingstothemusicalworkstheyembody.
Butthereisdiscordastohowtoaddresstheseproblems. Somemarketparticipantsare
willingtosharethedatatheyaccumulatewiththeworld,whileothersarereluctantto
doso.
Despitethewiderangeofviewpointsexpressedinthecourseofthisstudy,theOffice’s
reviewoftheissueshasconfirmedoneoverarchingpoint:thatourmusiclicensing
systemisinneedofrepair. Thequestion,then,ishowtofixit,inlightoftheoften
conflictingobjectivesoflongtimeindustryparticipantswithvestedinterestsin
traditionalbusinessmodelsandinfrastructure;digitaldistributorsthatdonotproduce
orownmusicandforwhichmusicrepresentsmerelyacostofdoingbusiness;
consumerswhoseappetiteformusicthroughvariedplatformsanddevicesonly
continuestogrow;andindividualcreatorswhoseverylivelihoodsareatstake. This
Giventheircomplexityandsignificance,manyoftheissuesaddressedbelowwould
themselvesbeworthyofaseparatereport. Butinsteadoffocusingoneachparticular
licensingprocessasanisolatedproblem,thegoalofthisstudyistoilluminatethe
systemasawhole—includinginterrelatedissuesandconcerns—toseeiftheremaybea
balancedsetofchangesthatcouldprovidebenefitstoall. Ratherthanpresentadetailed
legislativeproposal,then,withalloftheintricacythatwouldentail,thereportinstead
suggestssomekeyprinciplesandmodificationsthattheCopyrightOfficebelieves
wouldbeusefulinframingabettersystem.
Theideasdescribedbelowarethusintendedtoserveasausefulframeworkfor
continuingdiscussionofhowwemightreinventourmusiclicensingsystem,ratherthan
afullydevelopedanswer. AsCongressconsidersarangeofpotentialamendmentsto
ourcopyrightlaws,theOfficehopesthatinterestedpartieswilltakeadvantageofthis
uniqueopportunitytoimproveourmusiclicensingprocessforthedigitalage.
A.
Study
History
InApril2013,Congress,ledbytheHouseJudiciaryCommittee,beganacomprehensive
reviewofthenation’scopyrightlawstoevaluate“whetherthelawsarestillworkingin
thedigitalage.”1 Themyriadissuesaffectingthemusicindustryhavebeenasignificant
focusofthatreview.2
TheOfficeinitiatedthisstudytoilluminatecriticalconcernsofthemusicmarketplace
andtoidentifypotentialavenuesforchange. OnMarch17,2014,theOfficepublished
aninitialNoticeofInquiryintheFederalRegister(the“FirstNotice”)requestingpublic
commentontwenty‐foursubjectsaffectingtheexistingmusiclicensingenvironment.3
1 PressRelease,H.Comm.ontheJudiciary,ChairmanGoodlatteAnnouncesComprehensive
ReviewofCopyrightLaws(Apr.24,2013),http://judiciary.house.gov/index.cfm/2013/4/
chairmangoodlatteannouncescomprehensivereviewofcopyrightlaw.
2 Oftheseventeenhearingsthathavebeenheldsofaraspartofthecongressionalreview,two
werespecificallydedicatedtomusiclicensing. Music Licensing Under Title 17 (Part I & II): Hearing Before the Subcomm. on Courts, Intell. Prop., and the Internet of the H. Comm. on the Judiciary,113th Cong.(2014)(“Music Licensing Hearings”). Musicindustryrepresentativesalsoparticipatedina numberofotherhearings. See, e.g.,Moral Rights, Termination Rights, Resale Royalty, and Copyright Term: Hearing Before the Subcomm. on Courts, Intell. Prop. and the Internet of the H. Comm. on the Judiciary,113thCong.(2014);Section 512 of Title 17: Hearing Before the Subcomm. on Courts, Intell. Prop. and the Internet of the H. Comm. on the Judiciary,113thCong.(2014);The Scope of Fair Use: Hearing Before the Subcomm. on Courts, Intell. Prop. and the Internet of the H. Comm. on the Judiciary, 113thCong.(2014).
3 MusicLicensingStudy:NoticeandRequestforPublicComment,78Fed.Reg.14,739(Mar.17,
2014). ThisNoticeofInquiry,alongwiththeOffice’ssecondNoticeofInquiryandNoticeof
TheOfficereceived84writtencommentsinresponsetoitsnotice,spanningabroad
spectrumofinterestedparties,includingmusicindustryassociations,serviceproviders
andtechnologycompanies,legalscholars,publicinterestgroups,andindividualartists
andcreators.4
InJune2014,theOfficeconductedthreetwo‐daypublicroundtablesinNashville,Los
Angeles,andNewYorkCity.5 Theroundtablesprovidedparticipantswiththe
opportunitytosharetheirviewsonthetopicsidentifiedintheFirstNoticeandother
issuespertainingtoourmusiclicensingsystemandhowitmightbeimproved.
Inaddition,onJuly23,2014,theOfficepublishedasecondNoticeofInquiry(“Second
Notice”)requestingfurthercommentsonanumberofsignificantissuesraisedinearlier
commentsanddiscussedattheroundtables.6 TheOfficereceived51substantivewritten
commentsinresponsetotheSecondNotice,againrepresentingawidevarietyof
viewpoints,onthesesubjects.7
B.
Licensing
and
Ratesetting
Charts
TheOfficehaspreparedaseriesofchartstoillustrateourcurrentsystemsforlicensing
ofmusicalworksandsoundrecordingsandtheratesettingproceduresundertheseveral
statutorylicenses,aswellashowthoseprocesseswouldbealteredasaresultofthe
modificationsproposedbytheOffice. Theseappearatthebackofthestudyin
AppendixD. TheOfficehopesthatthesechartswillprovehelpfultoreadersasthey
maketheirwaythroughthisreport.
Office’sNoticesofInquiry,alongwithalistofparticipantsintheOffice’spublicroundtables,is
attachedasAppendixB.
4 ThecommentsreceivedinresponsetotheFirstNoticeareavailableontheCopyrightOffice
websiteathttp://copyright.gov/docs/musiclicensingstudy/comments/Docket2014_3/index.html.
Referencestothesecommentsinthisdocumentarebypartyname(abbreviatedwhere
appropriate)followedby“FirstNoticeComments”(e.g.,“DiMAFirstNoticeComments”).
5 See MusicLicensingStudy,79Fed.Reg.25,626(May5,2014). Transcriptsoftheproceedingsat
eachofthethreeroundtablesareavailableontheCopyrightOfficewebsiteathttp://copyright. gov/docs/musiclicensingstudy/transcripts/.
6 MusicLicensingStudy:SecondRequestforComments,79Fed.Reg.42,833(July23,2014).
7 ThecommentsreceivedinresponsetotheSecondNoticeareavailableontheCopyrightOffice
websiteathttp://copyright.gov/docs/musiclicensingstudy/comments/Docket2014_3/
extension_comments/. Referencestothesecommentsinthisdocumentarebypartyname
(abbreviatedwhereappropriate)followedby“SecondNoticeComments”(e.g.,“RIAASecond
II.
Music
Licensing
Landscape
Ourrulesformusiclicensingarecomplexanddauntingevenforthosefamiliarwiththe
terrain. Tobeginwith,ourlicensingstructuresmustaddresstwodifferentspeciesof
copyright—thesoundrecordingandthemusicalwork—residinginasingleproduct.
Eachoftheseseparatecopyrights,inturn,itselfrepresentsseveraldifferentexclusive
rightsthatmaybeseparatelylicensed,includingtherightsofreproduction,distribution,
publicperformance,aswellastherighttosynchronizeworkswithvisualcontent.
Thesituationisfurthercomplicatedbythefactthatmanylicensingtransactionsare
regulatedbythegovernment. Butthegovernmentruleshavenotbeenimplementedin
aunifiedorsystematicfashion. Instead,theyrepresentaseriesofstatutoryandjudicial
mandatesthatcameintoeffectatvariouspointsduringthelastcenturytoaddress
particularconcernsoftheday. Andstillmorechallengingisthatnotalllicensingis
conductedaccordingtothesegovernment‐mandatedprotocols. Somelicensingis
permittedtotranspireintheprivatemarketplacewithoutgovernmentoversight. In
addition,therearevoluntaryworkaroundstothegovernmentprocesses—moreefficient
alternativesthathavegrownupliketreesaroundthegovernmentrulesandarenow
deeplyrooted.
Thissectionprovidesanintroductiontoourmusiclicensingsystemandthosewho
participateinit.8 Beforeturningtothechallengeswefaceandhowtheymightbe
addressed,itisimportanttounderstandwhereweareandhowwegothere.
A.
Copyright
Overview
1.
Brief
History
of
Copyright
Protection
for
Music
Congresspassedthefirstfederalcopyrightactin1790.9 Thatactdidnotprovideexpress
protectionformusicalcompositions(or“musicalworks”intheparlanceofthecurrent
CopyrightAct),thoughsuchworkscouldberegisteredas“books.”10 Then,in1831,
Congressamendedthelawtoprovideexpresslythatmusicalworksweresubjectto
federalcopyrightprotection.11
8 Asnotedabove,theOfficehasincludedchartsinAppendixDofthisreportthatprovidea
bird’s‐eyeviewofthelicensingandratesettingsystemsformusic. Thechartsareintendedas high‐levelreferencesanddonotcaptureeverynuanceorquirkofthesystem. Alistof
abbreviationsusedinthereportisincludedasAppendixC.
9 ActofMay31,1790,ch.15,1Stat.124.
10 See Clayton v. Stone,5F.Cas.999,1000(C.C.S.D.N.Y.1829)(No.2872);I.TrotterHardy,
Copyright and New Use Technologies,23NOVAL.REV.659,664(1999).