On Tuesday the U.S House Judiciary Committee held the first of two hearings in its review of music licensing. These two hearings (the second is on June 25), potentially affect all stakeholders: radio stations, online music services, webcasters, performers, and creators.
Members of the Subcommittee on Courts, Intellectual Property and the Internet faced a panel of music industry experts and executives. Each panel member read a prepared statement (the formal testimony), each one being a position paper on how the laws regulating music licensing should be changed, or not.
Many complaints were surfaced, but no consensus was reached about how to simplify, change, or leave unchanged the complex tangle of music-licensing regulations.
Setting the tone
Congressman Jerrold Nadler from New York started things off with his own statement, a progressive call for change. “It is often said that if we started from scratch, nobody would write the law the way it stands today. Music copyright and licensing is a patchwork of reactions to changing technologies. From the development of player pianos and phonograph records to the advent of radio and the Internet, the law is constantly playing catch up, and quite often failing.”
Nadler called out “inconsistent rules that place new technologies at a disadvantage against their competitors, and inequities that deny fair compensation to music creators” — summarizing the focus of the day’s statements and debates.
Rep. Nadler saved his most pointed remarks for broadcast radio’s exemption from paying royalties to artists and labels. “This is incredibly unjust. The bottom line is that terrestrial radio profits from the intellectual property of recording artists for free.” Nadler compared the U.S. to China, Iran, and North Korea in this respect.
Neil Portnow, President of The Recording Academy, echoed Nadler’s call for radio to emerge from its royalty shelter. His testimony also invoked China and North Korea, as well as a call-and-answer Myth/Fact debunking of arguments for keeping radio exempt.
Nobody from the broadcast radio industry was on the panel in this hearing, so radio took a defenseless beating. Charles Warfield, board chair of the National Association of Broadcasters (NAB), will be in the June 25 hearing.
Four issues
Radio’s royalty exemption was one of four music licensing issues spotlighted during the hearing. Uneven payments was another — the fact that artists and labels receive much high royalty rates in digital music services than songwriters and composers. Again and again the panelists and committee members debated “the split.”
Also on the hearing table: pre-1972 records which fall outside of the U.S. Copyright Act, are therefore unprotected, and mostly unpaid-for by all forms of radio that play oldies. (Nadler hit that point, too, in his comprehensive criticism of existing law.)
Two music publishing representatives were on the panel, and the subject of Consent Decrees was a major touchstone of the day. Consent Decrees are laws that enable compulsory licenses at a government-set price, instituted decades ago to regulate the activities of ASCAP and BMI, the two largest rights organizations that collect and distribute royalties to songwriters and composers.
Consent Decrees enable music services (including radio) to quickly gain access to underlying works — the created music — as separate from the recorded works (the records). As such, the Consent Decrees and compulsory licensing enable business startups to organize large catalogs of music under a single licenses. Efficient yes, but from ASCAP and BMI’s perspective, also constraining.
“America’s smallest small business”
BMI head Michael O’Neill was on the panel. His testimony advocated modernizing the consent decree governing his organization by enabling publishers to withdraw their consent to bulk licenses, and by giving BMI broader power to license parallel rights (e.g. lyrics or synchronization with video).
Lee Miller, president of Nashville Songwriters Association International, linked his testimony to personal experience as a music creator, with a folksy style that clearly appealed to the congressional committee members. “I grew up on a small tobacco farm in Jessamine County, Kentucky,” Miller’s statement began. “I started playing piano by ear when I was 11. By age 15 I was writing bad songs and playing them with my even worse band.”
Miller launched a personal attack on standardized licensing governed by the Consent Decrees: ” The current system is unjust and must be changed. Rules established in 1909, largely to prevent one player piano roll company from becoming a monopoly, require me to grant a compulsory license paying 9.1 cents for the sale of a song, which I split with my co-writers and our music publishers, regardless of what the marketplace might say my song is worth. That’s not much of a pay raise from the original two cents paid in 1909.”
“I am America’s smallest small business,” Miller said at one point. “I sit down and make stuff up.”
It’s all about information
Panelist Jim Griffin, Managing Director of OneHouse, represented himself as the only “technologist” in the room, and he avoided any stance on royalty rates or changes to current law in his testimony. Griffin was there to advocate for the creation of a comprehensive global music registry as a precursor of any licensing change.
Griffin spoke with RAIN after the hearing by phone, and remarked, “There’s really no market” without the registry, which ideally would identify all rights-holders for every piece of created and recorded music, each with a global identifier that Griffin compares to the VIN number of a car.
“By focusing on the technology piece of building a registry, I think that’s where we can make a great deal of difference,” Griffin told us. “By focusing there like a laser beam, I sought to deal with the predicate for licensing, which is information. You can’t get a license if you don’t know where to ask.”
Griffin told the House committee that such a registry database could be largely created in a year.
The year of change … maybe
It is well known that law does not move at the pace of technology or business. 2014 is a testing year for that principle.
The Judiciary Committee hearings represent one of three government actions currently in motion, related to how music is licensed — and by extension, how online music services model their businesses and face the future.
Department of Justice has launched a review process specifically of the Consent Decrees — that is where the arguments that yesterday’s hearing touched on will get their full, excruciatingly detailed expression.
At the same time, the Copyright Royalty Board has accepted written arguments in its process of rate-setting for the use of recordings, for the five-year royalty period of 2016-2020. The submission of arguments from broadcast and online radio companies is the start of a two-year, combative lead-up to the royalty period.
Yesterday, Rep. Zoe Lofgren of California seemed pleased with the proceeding. “This is one of the best panels we’ve had. Even if we don’t have the answers, we understand the questions,” she effused. That’s a start. But there’s a lot of law that could be changed and simplified. Every change brings disruption that hurts somebody. Time will tell whether inertia or momentum wins the arguments of 2014.