U.S. Copyright Office Recommends Major Reform

On Thursday (Feb. 5), the U.S. Copyright office drew to a close an extensive music licensing review with the release of the 245-page study Copyright and the Music Marketplace: A Report of the Register of Copyrights. The full report is available here.

“Few would dispute that music is culturally essential and economically important to the world we live in,” said Maria A. Pallante, Register of Copyrights, “but the reality is that both music creators and the innovators who support them are increasingly doing business in legal quicksand. As this report makes clear, this state of affairs neither furthers the copyright law nor befits a nation as creative as the United States.”

The study revealed broad consensus among study participants on four key principles:
1) fair compensation to music creators for their contributions
2) the need for a more efficient licensing process
3) access to authoritative data for identifying and licensing sound recordings and musical works
4) more transparent usage and payment information that is accessible to rights owners

The office identified principles it believes should guide any reformation processes:
1) government licensing processes should aspire to treat like uses of music alike
2) government supervision should enable voluntary transactions while supporting collective solutions
3) rate-setting and enforcement of antitrust laws should be separately managed and addressed
4) a single, market-oriented rate-setting standard should apply to all music uses under statutory licenses

The Copyright office made an array of recommendations, including extending the public performance right in sound recordings to terrestrial radio broadcasts. It also recommended bringing pre-1972 recordings, which are currently protected only under state law, fully under the federal scope with the same rights, limitations, and scope of more recent recordings.

The report supported reconsidering ASCAP and BMI’s 75-year-old antitrust decrees, though the Copyright office acknowledged in the report that Congress, not the Department of Justice, would have the ability to address the full range of issues that impact the music licensing system. The report recommended giving rights owners (including publishers) the ability to withdraw streaming rights. The Copyright office believes the government should pursue changes that would encourage bundled licensing, which would eliminate redundant resources from licensors and licensees. This move would allow organizations such as BMI, ASCAP, HFA, and other entities to become music rights organizations (MROs), which would be authorized to license both performance and mechanical rights.

The recommendations include allowing SoundExchange to administer record producer payments, and allowing music industry members to create a public database of music data.

Under the Copyright Office’s proposal, rate-setting by the Copyright Royalty Board would shift from a five?year cycle to a system under which the CRB would step in only as necessary when an MRO or SoundExchange, and a licensee could not agree on a rate. The new model would create opportunities for combined rate-setting proceedings for non-interactive services, including both sound recordings and musical works.

Several organizations have commented on the report.

ASCAP President Paul Williams:

With its report today, the US Copyright Office was clear: the current music licensing system needs reform and fast. The report emphasizes how the current system undervalues musical works—something many of our members experience daily. The many proposed updates—particularly recommendations intended to make the system more equitable for songwriters—underscore yet again the inefficiency of the current system for music fans and creators alike. As outlined in the report, the current marketplace is strained by the 70-year old consent decree regime and is not appropriately responsive to the free market, particularly in our new digital world. As we continue to advocate for our members in Washington, today’s report is an important step towards meaningful reform.

National Music Publishers Association President and CEO David Israelite:

We appreciate the Copyright Office’s in-depth review of issues so important to the American songwriter. The report bolsters much of what the publishing and songwriting industries have long said, that the legal framework devised over 100 years ago should not be applied to the music licensing landscape of today. We applaud the recognition that music creators should be fairly compensated. However, while there is much to like in this report, we hope that Congress rejects any further regulation of songwriters. It is critical that songwriters are given the freedom of other intellectual property owners—to sell their creations in a free market. Until they can do so, they will continue to be treated unfairly by the very industry they fuel.

American Association of Independent Music (A2IM) President Rich Bengloff:

We at A2IM, the American Association of Independent Music, would like to thank Register Maria Pallante and her colleagues at the U.S. Copyright Office for their “Copyright and the Music Marketplace” report which covers many issues of importance to our Independent music label community of Small and Medium-Sized businesses (SMEs). Our community of sound recording owners invests in the creation of music and collectively, per Billboard Magazine, comprised over 35% of recorded music industry copyright ownership sales revenues in 2014. We agree and support the Copyright Office’s copyright revision recommendations in almost all areas, especially related to licensing rate parity for all creators and users, thus eliminating “breakage” and ensuring greater licensing transparency, as well as, the enactment of Performance Right legislation so that sound recording creators are compensated for their investments in music by AM/FM Terrestrial radio and the federalization of Pre-1972 copyrights, among many other important recommendations crucial to the financial well-being of our SME creator community. We note numerous references to A2IM’s filings and A2IM member discussion comments in the Register’s report and we thank the Register’s Office for listening. We look forward to having an ongoing dialogue as Congress moves forward to create pro-creator revisions to music copyright law.