Terrestrial, Digital Broadcasters Find Agreement on Consent Decree, Disagree on Performance Right, at FCBA
Copyright experts attempted to make sense of the complex music licensing regime currently under review on Capitol Hill, at the Justice Department and in the courts, during a FCBA event Thursday. Digital and terrestrial radio advocates warned of any overhaul to the current consent decree system for performance rights organizations, which DOJ is currently examining (see 1503030027). SoundExchange General Counsel Colin Rushing made the case for terrestrial broadcasters to pay a performance right.
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The music licensing system is “crazy,” said Sy Damle, U.S. Copyright Office deputy general counsel. Licensing of musical compositions is particularly “problematic,” he said, saying the music industry has probably never “changed so rapidly” due to the growth of streaming services.
The Digital Media Association (DiMA) remains “very concerned” by many of the demands publishers are advocating for DOJ’s consent review, including the elimination of rate courts, General Counsel Greg Barnes said. “What’s really troubling songwriters” is that many digital services pay “a lot more for sound recordings than compositions,” he said. But what songwriters don’t mention is that they have “various revenue streams” and can “make more than performers,” Barnes said.
Performance rights organizations (PROs) “bring together owners of separately owned works, pool those works together,” develop a price structure and “try to sell the works,” said Curtis LeGeyt, NAB senior vice president-public policy. “In any other industry, that’s a per se violation of the antitrust laws,” he said, referring to the American Society of Composers, Authors and Publishers, and Broadcast Music Inc. Consent decrees are "a lifeline” to allow the PROs to operate without violating antitrust laws, LeGeyt said. The behavior of the Society of European Stage Actors, Authors and Composers (SESAC), which doesn’t operate under consent decrees, “serves a warning sign” to the broadcast industry, he said. NAB took SESAC to court over alleged antitrust violations, resulting in a court-ordered “construct” similar to the consent decrees for ASCAP and BMI, LeGeyt said.
Publishers’ threat for complete catalog withdrawals from PROs “concerned” the Copyright Office, Damle said. That scenario “gave us significant pause,” and many in the music licensing industry said that would be “chaotic,” he said. Damle said he wasn’t sure if the office is “as concerned” about partial withdrawals. For licensees, complete withdrawal is the “absolute worst case scenario,” LeGeyt said.
SoundExchange's Rushing outlined the legislative history of sound recordings, including pre-1972 recordings, a key music licensing issue both in the courts and on Capitol Hill (see 1502050055). For decades, the “primary business” of the record industry was “selling records,” which meant the “main right that mattered” was the reproduction right, he said. When Congress tried to federalize protection of sound recordings in 1972, the recordings were given prospective “reproduction and distribution” rights, Rushing said. In the mid-1990s, Congress passed a “limited performance right” for sound recordings after the emergence of the Internet, he said. But that performance right applies only to many digital broadcasters and on-demand services, Rushing said. “There’s a growing recognition that radio is just another way” to access music, and yet terrestrial radio “doesn’t have an obligation” to pay the performance right, he said. “No one makes more money distributing recorded music than radio stations.”
Part of the terrestrial performance right exemption is related to its “promotional value,” LeGeyt said. Digital radio isn’t “nearly the promotional tool” that terrestrial is, because of digital’s “one to one” delivery, he said. Another factor is that terrestrial is “completely free,” unlike many digital services, LeGeyt said. “This rights structure may not be consistent, it may not make sense, but … the U.S. recording industry is the envy of the world in terms of size and scope,” he said. If Congress is going to address pre-1972 sound recordings, it should take a “holistic view” of the entire music licensing industry, as suggested in the Copyright Office’s recent music licensing study, he said.
Applying a pre-1972 performance right to digital services would be an “unexpected expenditure” for services that have relied on venture funding, Barnes said. It’s a “big concern” that the current debate over pre-1972’s applies only to digital broadcasters, which already pay performance royalties for post-1972 recordings, even though terrestrial doesn’t pay performance royalties at all, he said. “It adds another burden to our unwanted expenses.”