United States: Proposed Reforms to Rules for Licensing Musical Works and Sound Recordings.

United States

Proposed Reforms to Rules for Licensing Musical Works and Sound Recordings.

In February, the U.S. Copyright Office issued a two-hundred page report on proposed reforms to the outdated rules for licensing of musical works and sound recordings in the United States.  The report, Copyright and the Music Marketplace, made a number of recommendations to streamline the process of licensing songs and sound recordings in a similar and consistent manner.  The recommendations are:

 

  1. Extend the public performance right in sound recordings to terrestrial radio stations (like satellite and internet radio providers, which pay to broadcast sound recordings).
  2. Fully federalize pre-1972 sound recordings, which are currently only protected under state laws.  The U.S. Copyright Act currently does not recognize federal copyright in pre-1972 sound recordings. The report recommends that federal copyright protection apply to pre-1972 sound recordings in the same manner as it extends to copyrights in musical compositions.
  3. Adopt a uniform, market-based rate setting standard for government-set performance and mechanical royalty rates.  Licensing terms and rates would be set on a fair market basis, not policy basis (e.g., the anti-trust policies that govern licensing by the performing rights societies BMI and ASCAP), to avoid creators subsidizing companies seeking to profit from their works.
  4. Mechanical and performance licensing rates are now mandatory. The report recommends that mandatory licensing be relaxed:
  • Public Performance Licensing: The report suggests reconsideration of the ASCAP and BMI consent decrees. These performing rights societies currently avoid anti-trust claims by decree, but must grant a license to anyone who requests one.
  1. All performance rate setting would be migrated to the Copyright Royalty Board (CRB), including sound recordings;
  2. For any performing rights society required to grant a license, there would be a streamlined mechanism for setting an interim rate starting immediately to be paid by licensees, pending determination of the final rate;
  3. Music publishers could opt out of performing rights society licensing for interactive streaming rights for digital services;
  4. Licensing of mechanical and performance rights could be bundled; a performing rights society would be permitted to become an “MRO” (Music Rights Organization), for both public performance and mechanical licensing.  Currently, licensees must obtain separate licenses for performance and mechanical rights.
  • Mechanical Licensing:
  1. Music publishers want to control the use of their works and seek higher royalties than is possible under the current statutory compulsory mandates for mechanical licensing, and licensees want collective, not song by song, licenses. Collective licensing of mechanical rights would be permitted, but with an opt-out for interactive streaming and download. There would be no opt-out for physical uses;
  2. Blanket licensing for digital uses would be permitted, similar to performing rights society blanket licensing;
  3. The CRB would set rates “as needed”, not every five years or on another fixed timetable, and only when an MRO and a licensee couldn’t agree. CRB rates would govern when an MRO and a licensee could not agree;
  4. Compulsory licensors would have audit rights for statutory licenses.
  • Synchronization and Print Licensing: The Copyright Office does not recommend extending compulsory blanket licensing to synchronization and print rights, despite record labels and film and television studios and producers who would welcome it.

 

  1. The report recommends that Sound Exchange (the society that currently pays artists and sound recording owners for digital performance rights) pay producers of sound recordings directly. The report also suggests Sound Exchange have the right to terminate non-compliant licensees.