[This blog entry was co-written by Liz Allen, Adam Holofcener and Scott Oranburg]
Last week David Israelite, president and CEO of the National Music Publisher’s Association, voiced support for a new licensing system that could fundamentally change how music is distributed and rightsholders compensated. (Billboard has the report.)
On the surface, the proposal — which is still pretty vague at this point — would appear to simplify licensing in the digital environment. Israelite describes a “blanket license” to cover the mechanical and synchronization rights for music offered online. The latter would conceivably streamline the licensing process for popular video services like YouTube. If properly implemented, it may also help publishers and songwriters get paid for uses that have thus far been resistant to easy licensing solutions.
So, how would it work?
Remember, there are two copyrights in music: the musical composition (think notes and lyrics) and the sound copyright (think music captured on tape or hard drive). This post will largely concentrate on the former.
Also, keep in mind that the blanket license described is just a concept at this point, not a law or a business practice. If it were to come to fruition, however, it might resemble the “public performance” system already in place for broadcasters. Radio stations, online radio, restaurants, clubs and bars pay blanket licenses to Performance Rights Organizations (PROs) such as ASCAP, BMI and SESAC, who in turn compensate publishers, songwriters and composers. In exchange for these payments, the broadcasters and venues are granted the right to publicly “perform” music belonging to these rightsholders. This arrangement does not extend to downloads or “synchronizations” — music that accompanies video (like songs heard on TV, in movies or on YouTube).
Whether this new system would work within the existing public performance right or be an entirely new license remains to be seen. The following is what we’ve been able to glean from Israelite’s comments.
The proposed arrangement would cover synch rights, making it possible for websites such as YouTube — and its users — to legally offer video that’s paired with copyrighted music. You may recall that Viacom recently brought a costly suit against YouTube for infringing its copyrights. Rather than relying solely on “safe harbor” provisions in US Copyright Law — which protect certain online services from infringement claims if they comply with “notice and takedown” requirements — a blanket synch license could provide a way to avoid expensive litigation while making it easier to compensate rightsholders.
It appears that this blanket license for synch would only apply to online services and not to TV and movie licenses, which would still be negotiated individually. Also, it’s important to note that publishers and other rightsholders could still set prices above or below whatever the blanket rate might be, or make individual deals with service providers.
Israelite is concerned that the absence of a simple licensing solution for the publishing/songwriting copyright may prevent the industry from exploring new business models as technology evolves. “If you look at the challenges of the industry, the way we license doesn’t work: it is broken,” he says. If YouTube tried to license all the content that appears on its site under the current system, it would need to negotiate a synch license with each individual copyright owner. This can be time consuming and expensive. Furthermore, the ease and predictability of a blanket license may even encourage further innovation (and theoretically, more opportunities for compensation).
The other part of Israelite’s proposal concerns “mechanical rights.” In the digital space, this means the amount of money labels are required to pay publishers and songwriters for every download (or interactive stream). The current statutory rate for downloads is 9.1 cents per copy for songs 5 minutes or less or, for songs over 5 minutes, 1.75 cents per minute. (The amount for interactive streams are determined by a different formula; more info here.) Israelite seems to be advocating for a change in this system, as well, which would definitely be a huge shift in how the recorded music industries do business.
Many people have proposed blanket licensing for digital music for years (and not just the composition copyright). In fact, we’ve had visionaries talk about the concept at Future of Music Policy Summits going back to the beginning of the last decade. So, while Israelite’s statements are certainly significant, the idea is hardly a new one.
So is it any closer to a reality?
Israelite says that NMPA is currently working with record labels and digital companies to determine the best way to draft this legislation. However, he says that there isn’t anything “on paper” yet, and the industry won’t approach Congress until it arrives at a consensus. This means that a full-blown law for blanket licenses isn’t even on the radar. Yet some suggest that a blanket license could be implemented without legislation. Basically, the existing PROs (ASCAP, SESAC, BMI) could decide to provide blanket licenses on their own through contractual agreements with individual members. Such an approach might move faster than anything in Congress, but it could also also create its own concerns (like antitrust issues).
Even though we think a blanket license system for mechanical and synch licenses could be workable, it does raise a few issues. With blanket synch licenses for example, we wonder about the incentive of companies to pay. Although YouTube does license music from rightsholders, it also receives immunity from certain types of infringement in the aforementioned “safe harbor” provisions in the Digital Millenium Copyright Act. Surely some of these uses would be covered under the safe harbors. On the other hand, such services may prefer the ease of licensing as opposed to court challenges and having to comply with numerous takedown requests.
If a blanket license for synch and mechanical rights were enacted, we’d want it to cover — and benefit — as many artists as possible. This will likely require improved technological standards to assist whatever entity responsible for paying to do so efficiently and equitably. It’s supremely important to make sure that independent and unafillited artists are able to get paid when their music is downloaded or used in synch-based services. We think that there are ways to do this efficiently, but it will require oversight and a strong committment to creator compensation.
The next logical step is to consider what a blanket digital license would mean for the sound recording copyright, something that the major labels have historically opposed. But with music publishers entertaining the idea, and CD sales continuing to plummet, anything is possible. If we’ve learned one thing from our 11 years of observing the digital music space, it’s that hard and fast predictions are futile.
Still, it will be interesting to see whether the blanket license concept for the publishing becomes a reality, and what it might mean for songwriters and composers. We’ll be watching this one closely.