What’s Shakin On The Hill: Part 3
Staying in tune with Washington has never been as important for songwriters and musicians. Here’s a run down of noteworthy issues & how you can get involved:
Congressional Activity
Now that all the dust has cleared and leadership has transferred from the Republicans to the Democrats, Members of Congress from both parties have begun to revisit the unresolved copyright issues from the 2006 term.
Music licensing reform, the treatment of works for which copyright owners are not able to be located, and the implementation of a broadcast audio flag to limit the rebroadcast, redistribution, and copying of music transmitted digitally, are among the issues that likely will be considered in the new Congress.
PERFORM Act
Shortly after the new term began, Senator Dianne Feinstein (D-CA) reintroduced the "Platform Equality and Remedies for Rights Holders in Music Act" (PERFORM Act) in the Senate Judiciary Committee.
The Issue
Currently, there is a compulsory license available for the sound recording that services transmit digitally over the Internet or through satellite transmissions. The compulsory license rates are determined based on the type of transmission and when the service launched - satellite radio and webcasters, for example, pay different rates from each other for music they digitally transmitted, as do terrestrial radio stations that simulcast on the Internet.
What This Means To You
The PERFORM Act would level the playing field among different platforms through which music is offered in a manner similar to traditional broadcast radio. Money would hopefully be easier to collect from music services, which means performers and record labels would earn from the performance of music in all digital and satellite mediums.
The license would only be available to services where the interaction between listener and music provider remains passive like listening to the radio. Services that allow listeners to cherry pick songs by programming a device to record songs by a particular artist or otherwise choosing works to be recorded will not qualify for the common rate.
Status:
As of January 16, 2007, the PERFORM Act has been submitted to the Senate Judiciary Committee.
Orphan Works
The Issue:
It is likely that Congress will also revisit the treatment of works for which the owner of the copyright can neither be located nor identified ("orphan works") early in the new term.
What This Means To You:
While no proposed legislation has been introduced, certain elements of the last version of the bill should concern musicians and songwriters. Specifically, an owner of a copyright would not be entitled to require the user to cease the use of the work under any circumstances. Therefore, if a song has been synchronized to a video that offends the songwriter, the only remedy available would be reasonable license fees.
The Copyright Office
More than just a registry, the Copyright Office of the Library of Congress has the ability to significantly impact the rights of musicians and songwriters as they are often called upon to prepare reports and propose legislative language for Congress. In fact, senior staff at the Copyright Office drafted the original Orphan Works Act considered by Congress last year.
Though roundtables with copyright-related industries had been held, and comments accepted from the public, many found the legislation the Copyright Office proposed to be detrimental to the rights of creators.
Photographers and illustrators led the opposition to the legislation and presented their concerns directly to Members of Congress. Though Congress continued to consider orphan works legislation in 2006, the opposition was effective in having the language of the bill redrafted to lessen the impact on the rights of creators.
The Copyright Office has authority to determine how copyright law applies in certain circumstances. For example, in 2006, the Copyright Office determined that the underlying musical works in the sound recording used for ringtones are generally subject to a compulsory license similar to the mechanical license.
Historically, a ringtone required a separately negotiated license for both the musical composition and corresponding sound recording. As a result of the Copyright Office’s declaration that a ringtone is subject to a compulsory license, companies offering ringtones will only have to negotiate with the owners of the copyright in the sound recording. The owner of the copyright in the musical composition will be entitled to the statutory compulsory license rate, which is nine cents ($.09) through the end of 2007.
The Rate for the Compulsory Mechanical License
The History
The compulsory license for musical compositions dates back to the Copyright Act of 1909 and the player piano. When Congress revised the copyright laws in 1909 there was a great concern that the largest manufacturer of player piano rolls would exercise monopoly power to exclude competitors from obtaining music.
To prevent such anti-competitive behavior, Congress created a compulsory license that provided any piano player roll manufacturer the ability to license any musical composition that had previously been published for a penny rate per roll manufactured. The initial penny rate was $.02!
The rate adopted in 1909 remained in effect, and was expanded to cover phonorecords, until the Copyright Act was revised in 1976 to increase the rate and establish methods and procedures to increase the rate in a more regular and timely fashion. Through either industry negotiations or contested proceedings, the rate has been revisited every ten years since 1976.
The Current Proceeding
The Copyright Royalty Board (“CRB”) of the Library of Congress has jurisdiction to establish the rates for all compulsory licenses provided in the Copyright Act.
This year it will hold proceedings to determine a new range of rates for the mechanical licenses for musical compositions.
In addition to the rate for a physical phonorecords, the CRB will establish rates for permanent digital downloads, ringtones, and other digital uses of music, including interactive streams.
Representing copyright owners are the National Music Publisher Association, the Songwriters Guild of America and Nashville Songwriters Association International have proposed penny rates for physical phonorecords (12.5 cents per song or 2.4 cents per minute of playing time) and permanent downloads (15 cents per song or 2.9 cents per minute of playing time).
The justification of a higher rate for a permanent download, according to a statement filed with the CRB, is that the majority of digitally downloaded music is done so as a single, compared to the album sales that account for the majority of music sold as physical product.
The NMPA, SGA and NSAI also proposed that the rate for tethered downloads, interactive streaming and ringtones be the greater of (1) a percentage of revenue, (2) percentage of the costs paid for the sound recording, or (3) a penny rate.
On behalf of sound recording owners (record labels) the Recording Industry Association of America has proposed that the penny rate method be abolished for all uses of musical compositions. They have proposed that the value of the musical composition is 7.8% of revenues directly attributable to sound recordings for permanent downloads as well as physical phonorecords, temporary downloads, and ringtones.
The RIAA has also proposed that the value of the underlying musical composition in interactive streams would be 9.6% of the applicable performance royalty rate payable to the performance royalty organizations (ASCAP, BMI and SESAC).
To further complicate the matter, a third party is also participating in the royalty rate-setting proceedings. Representing digital music services such as Yahoo, Napster, and Apple, the Digital Media Association (DiMA) has proposed a royalty rate for permanent digital downloads of 4.1% of applicable revenue and 4% of applicable revenue for tethered downloads.
DiMA has proposed that the royalty rate cover "all reproductions necessary to engage in activities covered by the license," including server copies and reproductions made "by and for the end user." They did not offer a rate for interactive streams.
The Process
The CRB royalty rate setting is a closed, quasi-judicial proceeding. The board members will read the statements, review evidence and take testimony on the issue over the course of the year. It is anticipated that a rate will be set during 2007. There are a number of appeals available, which will likely be pursued by any of the parties who are dissatisfied with the outcome.
Stay Informed and Get Involved
While the proceedings at the Copyright Royalty Board are closed, all of the activities pending in Congress are open to artists’ participation. We have provided links to the committees with jurisdiction over copyright and related issues.
Contrary to popular belief, contacting Members of Congress can make a difference. On matters such as Orphan Works and licensing, they need to hear directly from artists and musicians to understand the impact their decisions may have on your livelihood and future.
Email your Representative or Senators and tell them what you think of issues. Their staffs do tally the sentiments of emails and may even share the body of an email with their boss.
In the next column we will tell you how to arrange visits with Members of Congress or their staffs, and, of course keep you updated on pending legislation and issues you need to know.
Nancy Prager is a corporate and intellectual property attorney in Washington, DC. Her music industry clients include, or have included, managers, independent music labels, as well as music destination and delivery services. Nancy can be reached at nprager@pragerlaw.us and at http://www.myspace.com/nancyprager
(c) Copyright 2007 The Musician’s Atlas. All rights reserved. No portion of this article can be reprinted in any form without the written consent of the publishers.