The House of Representatives Judiciary Committee last week finished its second hearing on music licensing (written witness statements and a link to the webcast can be found here). Congressional hearings usually are not in-depth proceedings looking to establish detailed facts as done in a hearing in a court proceeding. Instead, they are formalized proceedings where parties get to make their canned statements setting out positions on issues. Congressional representatives themselves make statements setting out their positions on the issues, and ask pointed questions to selected witnesses to reinforce those positions. Minds are rarely changed, and the truly undecided are rarely illuminated on the issues. But the hearings do serve to set out the issues that are going to be considered by the Committee in ultimately crafting legislation. And last week’s hearing did just that – highlighting the issues likely to be considered in legislation promised by the Committee Chair,Representative Goodlatte, who promised an omnibus bill on music licensing, dubbed the “Music Bus,” to address the many issues on the table.
Note that any bill that is ultimately introduced will address many seemingly minor issues – details of process and procedure that don’t make the headlines. But the big issues are the ones that will cause the most industry argument before the lawyers work out the details. It’s also important to note that it is very late in the legislative calendar right now, with the Senate not putting the same emphasis on copyright issues as it the House. With elections coming up in the Fall, and scheduled upcoming summer recess, Congress has much must-pass legislation that will fill up their legislative days before the next Congress is sworn in in January. The start of a new Congress means that all legislation will have a fresh start. Thus, any Omnibus bill that is introduced this year will most likely not become law, but instead will set the agenda for discussions for next year in the new Congress. Certainly, there may be more limited bills that sponsors may try to get stuck on other legislation that must move before the end of the Congressional session, so interested parties will remain vigilant during the final days of this session of Congress. But what are the issues that are on the table for inclusion in any Music Bus?
The issues are many, and they are being considered all over Washington in diverse agencies and other forums, as we wrote in our first Summer of Copyright articles here. But some of the issues have arisen consistently in all of the different venues that are considering these issues. So here is a list of the issues that appear to be priorities of certain players in the music universe and of some of the Congressmen on the Committee:
- The broadcast performance royalty is not dead – and was the topic that many on the committee harped on in last week’s hearing, claiming that it is unfair for broadcasters to not pay artists and labels for the public performance of music when all of the digital music companies do. While broadcasters have been successful in keeping this issue off the table so far, it is not an issue that is likely to disappear soon as the music industry continues to push for it. Broadcasters must remain vigilant on this issue. For background on this issue, see some of our articles, here.
- As we wrote last week, songwriters and music publishers want a bigger share of the royalty pie given how much the artists and labels receive in royalties from digital media companies (also see our article on the Songwriters Equity Act, here). One big part of that push is potential change in the consent decrees that bind ASCAP and BMI. We’ll write more about that issue in our next article on the Summer of Copyright – but ASCAP and BMI are looking at changes in the way that their rates are set, changes that allow big publishers to withdraw their rights from the PROs for certain licensing efforts (like licensing big digital music companies), and the right to license more than simply the public performance rights so that they could offer, for instance, synch and reproduction rights to their customers.
- The songwriters are also looking to change Section 115, which gives record companies and digital music companies a compulsory license for the reproduction of musical compositions (the “mechanical royalty“) – used by record companies in making physical copies of songs that their artists record, and by digital music companies that sell downloads or on-demand streams. Songwriters would like to abolish the compulsory license altogether or, absent that, change the way that it works so that they get more favorable treatment in the rates that are set. We have written about these royalties before including here and here.
- The question of standards for determining royalty rates is another big issue, for both copyright holders and users. We’ve written about the conflicts between the use of the 801(b) standard that takes into account public interest and industry stability issues as well as marketplace issues, and the “willing buyer willing seller” standard that is used for Internet radio. Generally, copyright holders are looking for the willing buyer willing seller standard, contending that it is more of a marketplace rate. Users believe that the 801(b) standard is fairer, and less likely to weird interpretations of what a marketplace rate is based on one-off deals negotiated in the shadow of the rate-making proceeding by services with unique needs that are used by regulators to set the “benchmark” as to the rates to which a willing buyer and willing seller would agree.
- Pre-1972 sound recordings is a very specific issue that deals with whether digital music services should pay royalties for songs that were copyrighted in the US prior to 1972. Those sound recordings are not covered by Federal law, and thus are not covered by the Federal performance royalty. We have written about that issue before. It has again become a big issue as the RESPECT Act – a stand-alone piece of legislation to create a Federal performance right for these songs, has been introduced in Congress. Digital services contend that the songs should not be Federalized just for performance rights purposes, when they are otherwise not covered by Federal law (e.g. for fair use purposes, and, according to arguments made by the record labels in various lawsuits, by the DMCA safe-harbor provisions dealing with user-generated content). We will write more about this issue soon.
A couple of other issues raised by panelists are worth mentioning, though seemingly less likely to make it into Congressional legislation. A representative of independent music labels complained about the dominance of the big record labels, and suggested that there be a compulsory license for the use of sound recordings by interactive music services – seemingly as some of these services negotiate deals with big labels and offer the indies a lesser take-it-or-leave it royalty rates for those services. Having one rate would force all labels to agree on the same royalty, so that the big guys don’t get an advantage. See our article here on the impact that a lack of a compulsory license for interactive services has on the availability of music to those services.
Both radio and TV representatives have suggested the SESAC be brought under the same consent decrees as ASCAP and BMI. Member of both the TV Music Licensing Committee and the Radio Music Licensing Committees have filed antitrust lawsuits to accomplish this end (see our article here). Whether Congress will take up this issue is questionable, as it is being fought in the courts. But it has been mentioned in the hearings.
Finally, tracking systems to determine what songs have been played by a music service, and who should get a royalty for that play, is another issue that has come up many times, but is one that may be difficult to legislate. Seemingly, the stakeholders themselves need to get together to agree on a universal standard that everyone will use – and it must be easy enough that parties will in fact use it. As some parties may see a competitive advantage in not making all information about copyright ownership and representation for licensing purposes available to all, this may not be an issue on which consensus can be as easy to reach as it might seem. The cost considerations of building a universal, accessible and accurate database are also not insubstantial. But as artists complain about the accuracy of their royalty payments, there may be some push to do something on this issue as well.
There will no doubt be many other issues as well, but these are the big issues most likely to be covered by legislation. Obviously, these are significant issues that affect all of the music industry. And they are issues that are not easily resolved, as many stakeholders have differing and sometimes inconsistent and contradictory positions on these issues. Watch as these make their way through Congressional committees this year, and likely in the coming years as well.