What They'll Never Tell You About the Music Business

by Peter M Thall

  When a music publisher denies a license for whatever reason (for example, the publisher is nervous about technological advances), or asks for so much money that its demand destroys a carefully negotiated most-favored-nation rate among many other copyright owners, is it merely exercising its near-holy property rights, or is it conducting itself in a way that violates the express intentions of the Constitution and the copyright law? And if the latter, what can be done about it? Can its copyright be invalidated? Should it? These are questions that will be raised and pursued in the future. The trend is anticopyright, and I agree with David Israelite, the CEO of the National Music Publishers Association (NMPA), that if the music publishers that control most of the copyrights in the world today do not address these issues themselves, and soon, they will run into a wall of US Representatives and Senators whose constituencies are, collectively, a lot more powerful than publishers who want to maintain the status quo.

  SOME SUGGESTED SOLUTIONS

  How can the industry solve these problems themselves before the anticopyright forces prevail? Following are a few suggestions.

  Expanding the Function of Societies or Agencies

  In many countries outside of the United States, the performing and mechanical rights societies, working together, have managed to create either a blanket license for users of music or a composite license in situations, such as those described earlier, where many different rights under copyright are implicated: a kind of one-stop shopping. The United States has neither. There are moves afoot among private organizations and the government to rectify the situation among frustrated users of music. The Harry Fox Agency, the three performing rights societies, NMPA, digital rights companies, the Songwriters Guild of America (SGA), the Recording Artists’ Coalition, the National Academy of Recording Arts and Sciences (NARAS, the GRAMMY organization), the Nashville Songwriter’s Association, and RIAA are all trying to figure out how to do this—either by industry consensus or by lobbying strongly for appropriate legislation. Reforming the licensing of intellectual property is high on Congress’s agenda, and it will make changes in what it considers to be an outdated system of clearing rights. The compulsory license provision of Section 115 of the copyright law is no longer viable; it will be changed. The only question is when, how much, and to what extent will the copyright owners (and controllers) themselves have a say in the change. Mr. Israelite has it right when he says that the greatest fear of the copyright owners is that a bill that they can live with will be bound together with a bill they cannot live with.

  The “21st Century Music Licensing Reform Act”

  Just when the private institutions representing copyright interests are beginning to recognize the problem and are trying to fix it, the US Copyright Office has preempted them by proposing a significant change in the copyright law. While in many ways the proposed revision reflects the thinking of a large number of foreign countries in dealing with the complexities of Internet licensing, it is revolutionary for the United States. It is not useful to explain in any detail the nature of the draft legislation presented by Marybeth Peters, the register of copyright, in 2005, as any eventual bill will undergo significant changes before it is passed. But something will eventually pass. Following are some initiatives that have already taken effect, or are likely to take effect in the future.

  Section 115

  Section 115 of copyright law, the compulsory license provision, which has for almost a hundred years established a right to record a cover version of a musical composition already licensed at least once, for a fee (the statutory rate), and which set the maximum rate for such a right, will be eliminated.

  Multiple-Use Licenses

  The performing rights societies in the United States will have the authority to grant multiple-use licenses, which will include licenses for mechanical and synchronization reproduction.

  The Harry Fox Agency’s Role

  The Harry Fox Agency, which, as stated earlier, is not a society, but a corporation owned and governed for most of its existence by America’s largest music publishers, and sold in 2015 to SESAC, the United States’ third performing rights society. Now SESAC will be able to bundle licensing for interactive digital services that require both performance and mechanical licenses. Theoretically, it will also allow the Harry Fox Agency to more accurately track uses by digital services because it will have both mechanical and performance sets of data.

  The Formation of New Societies

  There already exists a proliferation of societies or agencies representing rights owners. The European Union has blocked efforts by the large performing and mechanical rights societies to work together to solve the problems created by their very numbers. As more rights are discovered, or created, the proliferation will continue, putting the eventual user back into the soup insofar as knowing where to go to clear rights and being able to estimate costs. A positive development occurred in 2006 when the British corporate regulator, the Office of Fair Trading, proposed the merger of three collecting societies representing performers: the Association of United Recording Artists (AURA) and the Performing Artists’ Media Rights Association Limited (PAMRA) will be merged into Phonographic Performance Ltd. (PPL), the goal being “distribution of equitable remuneration due to performers from the broadcast and public performance of sound recordings on which they have performed.” It’s a start.

  The Creative Commons License

  As noted earlier, Creative Commons has offered a solution to the “clearance culture trap”: its own license (see above, this page), which invites the public to use what otherwise would have been protected intellectual property as if it were not protected at all.

  Documentaries

  Special rules will apply to documentary specials. As stated earlier in the chapter, impossibly high clearance fees are making it difficult if not impossible to complete documentary films. In some cases, filmmakers have actually falsified footage rather than discard years’ worth of work.

  A group of documentary filmmakers have gotten together to encourage the passage of federal legislation that will protect documentary filmmakers from these problems. (One of them refers to the proposed legislation as the “Michael Moore Protection Act.”) The makers of documentaries are what the name suggests: they document—create a permanent record of—aspects of the social-political-cultural milieu around them. Filmmakers believe that in-context use of images that advance their cultural function should be permitted without cost, or at a set rate. At this writing, their most visible action has been to develop a “statement of best practices” (drafted by the Association of Independent Video and Filmmakers, the Independent Feature Project, the International Documentary Association, the National Alliance for Media Arts and Culture, and Women in Film and Video), which honest filmmakers would adhere to. This would establish signatories as companies that have agreed not to abuse their authorization to utilize intellectual property. While this would not have the force of law, it would afford some insulation from the likelihood of lawsuits, even if what the company was doing technically violated one right or another. The uses that would be freed up include name and likeness rights—which, alone, can destroy a documentary if not granted.

  The filmmakers who sign the statement of best practices would be deemed good-faith users of intellectual property, and copyright owners—film and television companies; music companies; and actors, artists, and musicians’ unions; among others—would “recognize” them by not trying to stop them from using materials for which others would have to seek authorization. Documentary filmmakers want to protect and preserve our culture. This mechanism would seem to be a good way to go about permitting them to do so. Whether E&O companies will insure productions on the fairly flimsy basis that the filmmakers have signed a statement of best practices and belong to the estimable club of good-faith makers of documentaries remains to be seen.

  Section 118

  Section 118 of the copyright law authorizes, among other things, the performance of music by a non
commercial educational broadcast station (for example, public television) of “published nondramatic musical works” pursuant to voluntarily negotiated terms that are reviewed and renegotiated every five years. The problem is that the authorization is in effect for only a week. After that, the film, or video, designed for broadcast will require clearance from all of the music rights holders for all uses: continued public television runs, free television, cable and satellite transmissions, Internet transmission, videocassettes and DVDs, and all other manifestations of technology now or hereafter created. Broadcasting on PBS is a privilege, but the broadcasts reach relatively few people, and Section 118 is no substitute for a broad rights license—which puts us back to square one when it comes to the clearance issues described in this chapter. Expanding its coverage, or creating a central clearing house such as exists in England for music used on television, would, if nothing else, go a long way toward removing the obstacle that exists for producers whose modest use of music should not be so costly as to be prohibitive.

  Orphan Songs

  At a time when registrations were necessary to renew copyrights, and thereby maintain them as proprietary assets, an incredible number of copyrights, some say as much as 95% of all copyrights secured in the United States were abandoned and thus entered the public domain. Most registration requirements were withdrawn in 1978, and even renewal registrations were made automatic in 1993; subsequently, all of those works that under prior law would have entered the public domain remain in copyright. All of them! Part of the clearance nightmare for potential users of these copyrights is locating their owners. As this is often an impossible task, the alternatives are to abandon any intention to use the works or to pirate them, hoping to avoid discovery. This is obviously an unenviable situation for a film or record company that merely wishes to reproduce a musical composition in ways other than would be permitted by Section 115, the compulsory license (itself at risk of being discarded in the near future). These works have come to be known as orphan works. Their owners cannot be found. The paper trail by which civilization traces back a title to its owner has disappeared.

  Most of the master recordings currently identified as orphan works were produced prior to legislation investing sound recordings for the first time with federal copyright protection on February 15, 1972. It is estimated that ownership of up to 25% of these recordings cannot be traced. But ever since registration requirements lapsed according to the Copyright Act of 1976 (which became effective on January 1, 1978), the number of musical compositions suffering this fate has become astronomical. Many music interests have been working with the Copyright Office and the House Judiciary Subcommittee involved with intellectual property issues. Their efforts resulted in the January 2005 “Report on Orphan Networks,” which proposes legislation to relieve a company of liability if it can show that it tried in good faith to identify the owner of a work. Marybeth Peters, the register of copyrights, is working closely with rights owners such as the Association of American Publishers, as well as many music business organizations, to prevent Congress from pursuing the ever-present panacea loved by content users and abhorred by content owners: a compulsory license automatically relieving a user of any liability provided a minimum fee is paid for the use. The salutary effects of Congress passing a reasonable law based on the Copyright Office report go beyond those connected with predictable and ordinary commercial uses of these works; the entire industry of rediscovering, restoring, and redistributing (if only for archival purposes via museums such as the Smithsonian) these reminders of our cultural heritage will benefit from such a law.

  Registration Requirements: Bring Them On (Again)

  Registration of claims to copyright used to be the sine qua non of maintaining ownership lest the copyright fall into the public domain. This requirement was done away in 1978 with the advent of the Copyright Act of 1976. Remember, federal copyright protection now vests on creation. Registration is still useful to establish a record of the existence of a work on a particular date, and it is still required for such things as enforcing statutory damages, compulsory licenses, litigating in the federal courts, etc. But for all intents and purposes, registration for the purpose of establishing or maintaining copyright ownership no longer exists in America. Any change in that status would violate the Bern Convention absent an amendment to the contrary. And the other countries that have adhered to the Bern Convention never had, and would likely never permit, such a requirement for ownership as registration. Nevertheless, Creative Commons has suggested a registration regime in order to maintain copyright ownership after a number of years. In Lawrence Lessig’s opinion, “copyrights that are doing nothing except blocking access and the spread of knowledge” are harming culture and commerce—both of which are supposed to be enhanced by copyright. His concept works best in the situation of orphan works, but he also recommends establishing a copyright owners’ list for public dissemination, with the burden of keeping it up to date the copyright owner’s responsibility. Once such a list no longer reflected the correct address or contact information for the owner of a work, a potential user of presumably copyrighted material, stymied by being unable to clear the rights being sought, would be able to use the material without fear of legal action.

  Lessig is not alone in encouraging establishment of a central registry. Many musicians and copyright owners, in fact, feel that registration requirements, like state car title registration requirements, both authenticate ownership and make a statement that the copyright owner intends to continue to claim an interest in his or her copyrights. According to Lessig, a registration requirement, fifty years after the commencement of a copyright term, would result in 98% of copyrights entering the public domain—copyrights which are lying moribund, copyrights that even the owners are unaware of. How can anyone argue against an easy system for locating a copyright owner? How can anyone justify “life plus seventy” copyright protection when the commercial life of so many works has long ago expired?

  Many organizations representing rights owners point to the cost of creating a registry. Other countries subsidize or even fully pay for the cost of registries—whether for music, or visual arts, or other areas within the protection of copyright laws. They also point out that shifting the burden of diligence (for example, registering claims to copyright with a central registry) from users to copyright owners flies in the face of the most fundamental guarantee afforded creators by the Copyright Act: the exclusive right to authorize or withhold reproduction, display, or performance rights, as well as the exclusive right to create derivative works. Stay tuned.

  25 • SOLVING PIRACY IN THE 21ST CENTURY

  How to Avoid a Greek Tragedy

  Originally presented at the Institute for Cultural and Media Management—University of Hamburg, Germany

  Back before the Internet, we had a name for people who bought a single copy of our books and lent them to all their friends without charging: we called them “librarians.”

  —CHARLES STROSS

  What do you want to be a sailor for? There are greater storms in the music business than you will ever find at sea. Piracy, broadsides, blood on the decks. You will find them all in the music business.

  —PARAPHRASING DAVID LLOYD GEORGE

  The music industry is in a mess. Some would say this is a problem of its own making and that it continues to make things worse, what with its lawsuits against college kids (the Recording Industry Association of America [RIAA] has reported on its website that it has instituted more than 35,000 such lawsuits), its bludgeoning (their word, not mine) of companies, Girl Scout camps, and performing venues for performance fees, and generally with all of the negative press it has received. I don’t think it would be inaccurate to say that the music industry (and by implication, intellectual property generally) faces the most intensive attacks from anticopyright interests our society has ever known—attacks that find themselves on the front pages of our newspapers and among the lead stories on our electronic media, SOPA and PIPA (
see this page). Whether as intellectual property lawyers or entrepreneurs, we can either continue to move blindly forward justly enforcing our rights, or stop and reflect on what we are trying to accomplish, the reasons we are not succeeding, and the ways in which we can fix the problem.

  There are actually a multitude of problems facing the music industry today. I will address two of these: first, illegal downloading by consumers; and second, the self-destructive behavior by copyright owners themselves arising out of the way they have chosen to exercise their monopoly. Even though I am a practicing attorney in the intellectual property field, it is my belief that we are going nowhere by following the advice of contemporary legal sages. So I thought a better solution to this problem might be achieved with a little help from the ancient Greeks.