Copyright Office: Change is Needed to Bring Music Marketplace Into Digital Era

copyright-symbol-smallBy Hannah Fields

The Copyright Office recently released a report, advocating for the music licensing system to better meet the demands of the digital era. This report, released February 5, 2015, recognizes many shortcomings of the current music licensing system and offers solutions for improving the music marketplace, which include changing how licensing fees are paid for copyrighted works.

Music is protected by two different copyrights: one in the composition and one in the sound recording. This is because there are two distinct works of artistic expression that exist in one song. First, the musical composition is the arrangement of notes, chords, and lyrics. This can be thought of as what you see expressed in sheet music, even though you don’t need to compose with sheet music to receive this type of copyright protection. Second, the sound recording, or the performance of a composition on a particular recording, is a work protected separately.

Because many songs are written by one artist and performed by another, individual songs can have the music composition copyright held by one person and the sound recording rights held by another. Copyright protection for sound recordings, however, did not exist until 1972. Because the law was not applied retroactively, there is currently no federal copyright protection for sound recordings created before 1972.

This makes the copyright system in the United States more complex. Part of that complexity is the problem of clarifying which artist is owed a licensing fee when the song is played on different types of radio.

For example, when terrestrial (AM and FM) radio stations play a song they are only required to pay a fee to the holder of the music composition copyright. These stations are exempted from paying artist royalties for the use of sound recordings, but satellite and Internet radio services must pay both the music composition and sound recording rights holders. The Copyright Office report says that this is shortchanging rights-holders and harming the satellite and Internet radio services that compete with terrestrial radio.

When Counting Crows’ cover of “Big Yellow Taxi” is played on the radio, Joni Mitchell (the original artist) is compensated but Counting Crows are not. On the other hand, when you hear the same song on Internet radio, via a webcast, or on a cable music station, both Joni Mitchell and Counting Crows are compensated. This is an example of how terrestrial broadcasters in the U.S. are exempt from paying a public performance right for sound recordings.

The report points out that the United States is one of the “few remaining industrialized countries that does not recognize terrestrial-radio performance rights.” While some artists have successfully won the right to be compensated for state law copyrights to their pre-1972 sound recordings, such as the 60s psychedelic pop band The Turtles did in their recent case, Flo & Eddie, Inc. v. Siruis XM Radio, 2014, there is still no federal copyright protection for pre-1972 sound recordings. The report advocates for a federal compensation mechanism with special provisions to address ownership, re-registration issues, and terms of protection.

The report is critical of the way licensing rates have been established for satellite radio, cable TV services, and performing rights organizations. It advocates for the government to adopt a single standard for rate-setting processes.

The report stresses that “ultimately it is in the interests of music owners, as well as licensees, to improve the licensing process so it is not an obstacle for paying services.” To learn more, or to read the full report, please visit: http://copyright.gov/docs/musiclicensingstudy/copyright-and-the-music-marketplace.pdf.

An executive summary of the report can be also be found at: http://copyright.gov/docs/musiclicensingstudy/executive-summary.pdf.

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