Music Licensing – The Good, the Bad, and the Ugly

music licensing good bad ugly Only one thing is impossible for God: to find any sense in any copyright law on the planet. Mark Twain

Historically, technology has acted as a catalyst for changes to copyright laws as new formats for original works were developed. The fee structure for virtually live performances is still under development. By Teddi Shamrock

Despite Samuel Clemens’ disdain for copyright law, most understand that original musical works–such as a composition or lyric–are property that can be owned, and therefore, bought and sold.  Copyrights grant the owner the exclusive “right to copy,” in essence to reproduce, distribute, and, perform or display their work; including performing the work publicly by means of digital audio transmissions; or to license others to do so on their behalf.

That’s the good.

The bad?

While the concept of music licensing is firmly established, the implementation details can be daunting especially for the entrepreneurial and fledgling, Internet-enabled, virtually live performance era.  New technology, however, is not the villain here.  In fact, historically technology has acted as a catalyst for changes to copyright laws as new formats for original works were developed.

copyright_chart This was true from the very beginning of U.S. copyright laws which were established based on the technological impact of the printing press.  Signed into law by George Washington in 1790, maps, charts and books could be protected for a limited time, providing a financial incentive to authors while also stimulating the advancement of science and useful arts by allowing for public access.

Just over a century later, in 1909, in addition to doubling the term of copyright protection to 28 years, the United States Congress greatly expanded copyright to include all works of authorship–including music–just as reproduction technologies were coming into their own, including the phonograph and motion pictures.

Congress specifically tried to balance the public interest with copyright protections:  “The main object to be desired in expanding copyright protection accorded to music has been to give the composer an adequate return for the value of his composition, and it has been a serious and difficult task to combine the protection of the composer with the protection of the public, and to so frame an act that it would accomplish the double purpose of securing to the composer an adequate return for all use made of his composition and at the same time prevent the formation of oppressive monopolies, which might be founded upon the very rights granted to the composer for the purpose of protecting his interests.” (H.R. Rep. No. 2222, 60th Cong., 2nd Sess., p. 7 [1909]).

New audio reproduction technologies meant many more musicians were able to share their music, and the industry flourished.  Artists quickly banded together to create the first, and still largest, performing rights organization (PRO).  The American Society of Composers, Authors and Publishers, or ASCAP, was formed in 1914, to protect original creative rights by collecting royalties and license fees. Instead of each artist collecting individually, ASCAP would act on behalf of many artists and help manage the payment streams, distributing payments back to specific member artists for the use of their original music works, so they could stay focused on their craft.

In 1930 the Society of European Stage Authors and Composers, now known as SEASAC Inc., was founded.  It remains the smallest of the three licensing collectives in the United States, but now includes many musical composers.  Finally, broadcasters banded together to protect their rights in 1940, forming BMI, or Broadcasters Music Inc.  While the broadcasters were buying ASCAP licenses, they felt ASCAP was not serving their interests and had concerns that the needs of new genres, such as the blues, country and rock were not being met by ASCAP.

With the invention of the television, and the proliferation of radio stations across the country, blanket licensing arrangements were developed by the PROs to efficiently compensate music authors and performers for the use of their property in a way that was also relatively easy to communicate to broadcasters, venue operators, and artists.  The blanket license is a single transaction that covers all copyright materials for member artists for a year.

Performing rights licensing collectives and blanket licensing were elegant solutions for the time, and still remain attractive based on the simplicity of these arrangements.

And now for the ugly.

Unlike other countries, the United States has three performing rights organizations–none of which are regulated.  Redundant overhead costs should be a concern to represented artists for whom royalties and licensing fees are intended, but music licensing has become a mega business unto itself.  The very monopolistic impact that Congress feared in 1909 sadly seems to be alive and well, as demonstrated by copyright infringement suits being filed against major cell phone carriers by ASCAP in 2009 looking for a live performance payment every time a ring tone sounded.

Thankfully the judge in the case sided with common sense, noting that copyright payments are made every time a ringtone is sold, and that such use is exempt because there was no purpose of direct or indirect commercial advantage anytime a cell phone rings.  This was a deep pockets suit. The case was brought against AT&T and Verizon, and driven more by the potential dollars involved, than the desire to ensure that artists are compensated fairly for the use of their original works.

The PROs have been instrumental in lobbying for increases to the time limits for copyright protection.  The original time limits were set specifically to protect the public interest, but it is unclear how these expanded time limits (now life of the author plus 70 years) actually serve the public interest, though there is no doubt that this furthers the lifetime value of copyrights.

Additionally, there is good cause for concern for how blanket licensing is calculated at the venue level.  Physical venues pay a fee for a variety of value added features associated with music such as television, radio, juke box, and dancing, as well as a fee for the number of days face to face music is featured.  The fees are added together then multiplied by the fire rated capacity for the venue. Thus, physical venues pay for every single seat even though every seat may not be filled, and even when they have hired artists who are not represented by ASCAP, BMI or SEASAC, or represented artists who have specifically waived additional compensation since they are earning a live performance fee directly for the show.

Physical venues have very narrow margins and most cannot afford to host live music events due to the added cost of music licensing fees since they are also paying the artists hired to perform. Yet live music at intimate local venues is where new talent is developed.  Non-stage venues–a venue who’s primary purpose is not music, but food or beverage service–don’t make money directly from music.  Even if they charge a cover, most if not all of those proceeds go to the band. Live music does contribute to these businesses, however, because it may encourage patrons to linger giving them opportunity to order more food and beverages.  Virtual venues struggle with music licensing fees too–not because they don’t want to compensate artists–but it’s harder to determine ways to make the music equation work without food and beverage or other primary sales. The licensing framework for this new era needs to recognize these nuances.

Virtual venues are looking for creative ways to support copyrights, as well as avoid the one size fits all legacy licensing systems. One approach many virtual venues use is to only allow original works to be performed, so they can deal directly with the artists and not the music licensing collectives. They also expect copyright liabilities, if any, be paid by the artists.

What the PROs want–on behalf of their artist members, of course–is a cut of every direct and indirect revenue stream associated with every physical and virtual music venue.  Like every other business, music licensing organizations are looking for revenue growth too. They’ve successfully lengthened the copyright time limits.  While they missed with cell phone ringtone “performances,” they will try again and again. They have the money to ruthlessly pursue every option. The little entrepreneur has little chance to meet the financial resources and legal intimidation the PROs exude.

The little guy has to dance with the elephants–that goes for the local pub, and for the young artist just starting out.

Most physical venues do not pick the play list of the artists they hire to perform.  Nor do they choose the types of nails a carpenter might use on a repair job they’ve hired a vendor to complete.  Yet the copyright use liability is levied on the venue and not the artist, who is really a music-focused business in his or her own right too.

The fee structure for virtually live performances promises to be different and is still under development. ASCAP has no information on their website for new media and internet licensing, providing only a form to initiate direct contact.  BMI has some general information, and contact information for a a live representative who was very helpful in reviewing the differences between licensing a physical venue and a virtual venue.

In tandem with the Internet, it has never been easier to create and share original music, and it has also never been easier to pirate original music.  The final ugly that must be addressed is how copyright payments are distributed to artists.  The technology now exists to distribute on a very exacting accounting without averages or limited scans that can result in an inaccurate payment distribution that hurts new artists the most.  While all venues can reasonably be expected to pay, not all artists get paid for legitimately earned royalties by the licensing collectives.

The music industry in total has greatly benefited from changing technologies, creating ever more cost effective ways to reproduce and distribute music, and a LOT of money is made from performance royalties.  Similarly the sheer volume of original music performances is staggering.  Can the old ways of trying to ensure music authors and performers are fairly compensated work for the expected explosion in virtually live performances?  Or will new technology need to be developed and deployed to create the means for assessing and tracking performances and the resulting license fees and royalty payments in a way that is more transparent to all involved, and where all artists are equally represented?

Copyright Chart Source: Wikipedia, “Copyright act of 1790”

Posted in Music. 2 Comments »

2 Responses to “Music Licensing – The Good, the Bad, and the Ugly”

  1. Komuso Tokugawa/Paul Cohen Says:

    I checked this out a couple of years ago it’s quite a grey area, but the closest area that covers it under existing laws (RIAA/BMI/PRA/JASRAC etc) is the webcasting provisions:

    However, it gets even murkier when you look at an international license, which given the 24×7 global nature of the virtual music performance space is the real issue.

    Theoretically the national organisations collaborate/operate together under an international umbrella but it was a mess as far as I could see…so I would not hold your breath.

    Artists who want to steer a clear path could just play public domain, traditional, and original music and go Creative Commons (which is actually based on standard copyright).

    Beats playing Karaoke and cover tunes!

  2. Get Spotified | Digital Tracks Says:

    […] the total and complete mess that is music digital rights, you can read this article (short) or this article (long) for background.  In short, its a local problem and you have to do deals all over the world […]

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: