New Music Copyright Legislation

In the early 20th century, you could only listen to music by attending live performances. Then you could listen to it on recordings. Then radio, vinyl, 8-tracks, cassettes, CDs, Napster iTunes and now through various streaming services like Pandora, Rdio, and Spotify.

If the technology to record and listen to music evolves so rapidly, why can’t our copyright laws keep up? The Information Technology and Innovation Foundation (ITIF) is trying to ameliorate our obsolete laws to better reflect the digital era.

I recently spoke with Alan McQuinn, Research Assistant at ITIF and co-author of a recent letter to the DOJ, about the comments urging action regarding music copyright law.

The ITIF filed comments with the Department of Justice (DOJ) to address the consent decrees of Performance Right Organizations (PROs) such as the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc. (BMI). They argue the DOJ should rework these decrees to modernize the way music copyrights are licensed in the digital age. *

“We saw an opportunity to comment on the music licensing system that governs the PROs,” said McQuinn. “It’s an opportunity to make system more dynamic, transparent and open. Then we’ll have the ability to promote innovation and new services.”

The paper urges more transparency by “creating an open database for all performance rights licensing.” It’s a wonder that with all of the information available today, there isn’t already a database to search for song performance rights.

“Right now it’s a quagmire to figure out how to license things,” said McQuinn. “We’re trying to bring all of the systems together and push the record labels into the same system in order to streamline the licensing process. Then we can introduce innovation on the edges if we bring down the barriers to the licensing process.”

One of their most compelling arguments is a push to change the ‘one-size-fits-all’ approach to royalty rates and instead allow the copyright owners themselves to determine their own rates.

“One rate for all music system was a historical necessity in the pre-computer age,” said McQuinn. “Dynamic pricing would allow more competition in the marketplace and ensure a diversity of music.”

The open competition would create means by which smaller artists could get better compensated for their works through the publishers. The more popular artists could charge more because of their wider audience.

“A Lady Gaga, who is in far more demand than a small songwriter, should be able to charge a different rate for her rights, just like her concert tickets,” said McQuinn.

McQuinn asserts that impartial research will lead to a mutual benefit between the songwriters and the distributors. “We’re trying to take a neutral approach by making a technologically neutral suggestion,” said McQuinn.

“If Congress doesn’t lobby for a more open music copyright licensing system then we could see fewer channels available to stream music and artists struggle to profit,” McQuinn said.

“Almost 60% of Spotify’s revenue goes to their royalties,” said McQuinn. “The barrier to entry for these streaming services is very hard in the U.S.”

There is also significant discrepancy between royalties distributed between radio and digital plays.

According to Time, “Spotify doesn’t pay on a ‘per song stream’ model, exactly: the total royalty pie is split among all rights holders based on the percentage of total Spotify streams their songs garner. But the company estimates that the average song generates between $0.006 and $0.0084 per stream in royalties. This may seem like a pittance, but Spotify’s data shows that the numbers add up, at least for big artists.”

Radio play is even more convoluted. The ASCAP website lists an arduous process where they calculate royalties based on a system of ‘credits.’ It looks something like a long algebra problem:

Use weight x Licensee weight x “Follow the dollar” weight x “Time of day” weight x “General licensing allocation” + Any radio feature premium credits (bonus credits for top played songs that reach a specific threshold within a quarter) = Total number of credits

It seems that ITIF is onto something when they claim the process is overly complicated.

McQuinn summarizes his goal with ITIF’s recent paper.

“Our approach is to create a system that’s more flexible to change,” he said. “We want introduce more competition, better courts resolving disputes faster, and simplify the system. Our suggestions can make the system much more malleable.”

The music industry has proven to be dynamic. We commend those who try and keep government operations on the same path.

*Taken from ITIF’s website, found here

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