Copyright Rights Demystified: A Practical Guide to Copyright Licensing, Part Trés

Ok, my soon-to-be copyright gurus, we’re half way through our riveting discussion of the separate rights that come with each copyright!  Today’s amazing break down covers a right that is fairly new to the Copyright Act: the right to public performance via digital transmission. 

Though a newer addition to our law, since this new rights initial inception into the Act in the 1990’s, it has been the subject of constant debate.  The most memorable recent debate is one most of the public is actually familiar with; the settlement between webcasters and the RIAA.  Just in case you’re not into reading Congressional rulings, here’s the skinny: fees for public performance were wiping out webcasters left and right, basically making it impossible for them to exist profitably as a business.  This was because, before the settlement, a webcaster had to pay a fee each time a song was played, and for each user that was playing it.  Although that fee was mere hundredths of a penny, it adds up FAST.  Let’s do a quick math problem: 15 songs per hour (approx 4 minutes/song), and let’s say 100,000 people are listening to a webcasted station at a given moment.  I can’t remember the exact old fee, but let’s say it is .007 cents.  That’s a whopping $10,500 PER HOUR for a webcaster!!  Hell, even if I completely off and it is $1,500, that’s still astronomical.  According to this article, under the old fee arrangement, even giants like Pandora were sending about 75% of their revenue straight out the door for this licensing fee.  And to add insult to injury, we’ve officially approached a time in history where no one wants to pay anything for music, leaving webcasters to rely solely on advertising income to stay afloat.  The system was clearly broken.

Luckily, after years of negotiation, a settlement was reached.  I won’t get into the nitty gritty of the exact figures (truth be told, I’m having a bit of trouble finding them online), but the fees are now structured around a percentage of revenues that increases with revenue size (i.e. Pandora pays more than your local radio station that simultaneously webcasts).  Also, content providers should not that subscription stations have different rates – in fact, there are quite a few different rates based on the type of digital broadcast you’re providing.  I would highly recommend spending some time on Sound Exchange, particularly in the FAQ (for both content providers and content owners) and in the Service Provider and Owner sections, respectively. 

Besides the fees themselves, the most important thing to ask is: Who is getting paid?  Well, this particular right belongs to the owners of sound recordings – not the owners of the songs themselves, who get paid under the Public Performance Rights that we discussed last time.  Thus, it’s mostly record labels that are seeing the benefit of this moolah, although there are some artists that have retained the rights to their sound recordings, particularly in the hip hop industry.  Sound Exchange is basically the “PRO” of sound recordings; much like ASCAP, BMI and SESAC oversee payment directly to publishers and songwriters, so Sound Exchange oversees the payment of royalties to the owners of sound recordings. 

PLEASE NOTE: if you are an artist and your own your own recordings (most likely where you are NOT signed to a label), you should register with Sound Exchange here.  Much like the PROs, Sound Exchange has a complex system for tracking plays of recordings and may have money for you!!  So get on the ball, people.

As a final note, I would like to briefly address the Performance Rights Act, which would essentially extend the “digital” rights to terrestrial radio… aka “regular” radio.  It is currently stalled up Capital Hill.  You may have heard some PSAs (Public Service Announcements) regarding this possible amendment, which essentially threaten to start charging people for radio and incorrectly label it a “tax” on radio.  I am not taking an official position on this, but you should note two bias things here: 1) these commercials were paid for by the broadcast industry, who are the direct targets of these new proposed fees; 2) the original proposal regarding payment on sound recordings was meant to encompass both analogue and digital broadcasts, but as a result of a tremendous lobbying effort by the broadcasters, it was limited to “digital” transmissions.  On the flip side of the coin, here is an article opposing the Act, and some perfectly logical reason supporting the proposition.

So there’s your crash course in digital transmissions.  Hopefully I’ll be able to button it all up real nice for you later this week when we round out with the last two rights: public display and derivative works.  As always, please feel free to email me directly @ shannon@newleaflegal.com

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Greed or Fairness?: Collecting Royalties on 30-second Clips

Hello readers! After a restful vacation in Florida, I am back and ready to take my rightful place on the self-proclaimed soap box that is my blog. Today's topic covers a post on Mashable written by Barb Dybwad entitled "Greed: Music Industry Wants Royalties on 30-Second Previews and TV Downloads." I would invite you to read her article for her take on the situation, but one of the questions presented it whether an MP3 is a "performance" of a song for licensing purposes. Now, I can't help but read in between the lines at the more equitable question presented as well: is it "fair" for PROs (Performance Rights Organizations) to ask for licensing monies for "preview" clips?

First and foremost, I'll get my opinion about performances out of the way, which will probably piss some folks off. I do believe that 30-second clips are streaming, as as any MP3s. From a legal point of view, there is no difference between me clicking "play" on iTunes (or Napster, to which I'm a long-time subscriber) or turning on the radio. If anything, it's MORE of a performance because I'm dictating what gets performed. I may be sitting alone in my office, but iTunes and other download/streaming services offer those songs to the public. Each time one is played, it's a performance.

That being said, I don't think royalties for MP3 (or clips) should be handled the same way that traditional performance royalties are handled (namely, broadcast and live venue performances). The cost is simply too prohibitive for companies to pay each time one of their users downloads or streams a song. Sure, maybe iTunes can pay, but isn't free market about allowing other companies a chance too? Smaller digital distributors simply cannot afford these fees, and it effectively keeps them out of the market. That shouldn't be the case. Copyright reform in this area is certainly making progress, but I don't know that we're 100% there yet.

Related to this, I believe there's a public policy balance between copyright rights/law and the public enjoyment of music. You don't have to pay to test drive a car, but you certainly can't drive it home without paying for it. You don't have to pay to try on clothes, but you certainly can't walk out of the store with them on. Similarly, isn't there a crossroads where the right to get compensated has to bend to the right of the public to "try before you buy"? I believe that point is here @ the 30-second clip mark. I sincerely believe that most performing artists feel this way; they WANT people to hear their music! Should they get paid for that music? Of course. But licensing companies, especially PROs that supposedly have the interests of artists in mind, should recognize when the need to get compensated is overshadowing the greater good (and potentially bigger profits for artists in the long run).