Copyright and the Music Marketplace � a Report of the Register of Copyrights February 2015 U N I T E D S T a T E S C O P Y R I G H T O F F I C E
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u n i t e d s t a t e s c o p y r i g h t o f f i c e Copyright and the Music Marketplace � a report of the register of copyrights february 2015 u n i t e d s t a t e s c o p y r i g h t o f f i c e Copyright and the Music Marketplace � a report of the register of copyrights february 2015 Second printing (May 2016) For a list of corrections from initial printing, see http://www.copyright.gov/policy/musiclicensingstudy/errata.pdf. U.S. Copyright Office Copyright and the Music Marketplace Preface Few would dispute that music is culturally essential and economically important to the world we live in, but the reality is that both music creators and the innovators that support them are increasingly doing business in legal quicksand. As this report makes clear, this state of affairs neither furthers the copyright law nor befits a nation as creative as the United States. The Copyright Office has previously highlighted the outmoded rules for the licensing of musical works and sound recordings as an area in significant need of reform.1 Moreover, the Office has underscored the need for a comprehensive approach to copyright review and revision generally.2 This is especially true in the case of music licensing—the problems in the music marketplace need to be evaluated as a whole, rather than as isolated or individual concerns of particular stakeholders. While this view is hardly a surprising one for the U.S. Copyright Office, it is no simple matter to get one’s arms around our complex system of music licensing, or to formulate potential avenues for change. For this reason, in early 2014, the Office undertook this study—with all industry participants invited to participate—to broadly consider the existing music marketplace.3 This report is the result of that effort. In addition to identifying the shortcomings of the current methods of licensing music in the United States, it offers an in-depth analysis of the law and industry practices, as well as a series of balanced recommendations to improve the music marketplace. Acknowledgments This report was prepared by the Office of the General Counsel, U.S. Copyright Office, following an exhaustive analysis of industry practices and considerable dialogue with music creators and the businesses that represent and invest in their interests, as well as music services and distributors and other interested parties. I am indebted to the staff who worked so tirelessly and thoughtfully to see the report to fruition and am confident that it will be a major resource for both Congress and the public. 1 See Maria A. Pallante, The Next Great Copyright Act, 36 COLUM. J.L. & ARTS 315, 334-35 (2013) (“To make a long story short, Congress could make a real difference regarding gridlock in the music marketplace.”). 2 See The Register’s Call for Updates to U.S. Copyright Law: Hearing Before the Subcomm. on Courts, Intell. Prop. and the Internet of the H. Comm. on the Judiciary, 113th Cong. 6 (2013) (statement of Maria A. Pallante, Register of Copyrights). 3 See 17 U.S.C. § 701(b)(4) (noting that the Register of Copyrights shall conduct studies regarding copyright and other matters arising under Title 17 or the administration of the Copyright Office). U.S. Copyright Office Copyright and the Music Marketplace I doubt the report would have been possible without Jacqueline C. Charlesworth, General Counsel and Associate Register, who oversaw the complex research, public hearings, writing, and recommendations. It is difficult to say with certainty whether it is Jacqueline’s outstanding skill set as a lawyer or her extensive background in the music industry that proved most valuable for this project, but either way she has produced a report that is fair, rational, and forward-thinking, a fitting framework for a field as culturally beloved and economically important as music is to the United States. I am similarly indebted to Sarang (Sy) Damle, Deputy General Counsel, who provided additional leadership and numerous critical contributions, including deft drafting, dispassionate analysis, and deep regard for the intersection of music and technology. I am very grateful as well for the contributions of Regan Smith, Assistant General Counsel, who oversaw the editing process and the final production of the report. Assistant General Counsel Steve Ruwe helped with the hearings and provided substantial research and analysis, especially in the area of statutory licensing. Likewise, Attorney-Advisors Rick Marshall and John Riley assisted with hearings, research and writing; John also prepared the helpful and impressive charts on the licensing and ratesetting processes that are included in the report. I also wish to recognize Michelle Choe, who is with the Copyright Office as a Barbara A. Ringer Honors Program Fellow, for her substantial research and writing efforts. Donald Stevens, also a Ringer Fellow, assisted with particular questions of international law, and Law Clerks Andrew Moore, Kyle Petersen, Maryna Koberidze, and Megan Hartnett provided valuable research support, for which I am thankful. As always, the Copyright Office received significant and timely support from colleagues outside of Washington, D.C. I so appreciate Professor Rush Hicks and Luke Gilfeather of the Mike Curb College of Entertainment and Music Business at Belmont University for facilitating the roundtable held in historic Columbia Studio A on Music Row in Nashville. My thanks and appreciation, as well, to Professors David Nimmer and Neil Netanel of the UCLA School of Law for helping to facilitate the Los Angeles roundtable, and Professor Barton Beebe of NYU School of Law for his assistance with the New York City roundtable. I would particularly like to acknowledge Representative Jerrold Nadler, who visited the New York roundtable to share his views about the importance of these issues. Last but not least, I am indebted to the many organizations and individuals who provided written commentary and shared their frustrations, insights, and experiences in the roundtable discussions. I hope this report helps. Maria A. Pallante Register of Copyrights and Director U.S. Copyright Office U.S. Copyright Office Copyright and the Music Marketplace TABLE OF CONTENTS EXECUTIVE SUMMARY ............................................................................................................. 1 I. INTRODUCTION .............................................................................................................. 12 A. Study History .......................................................................................................... 14 B. Licensing and Ratesetting Charts ......................................................................... 15 II. MUSIC LICENSING LANDSCAPE ................................................................................ 16 A. Copyright Overview ............................................................................................... 16 1. Brief History of Copyright Protection for Music ...................................... 16 2. Musical Works Versus Sound Recordings ................................................. 18 3. Key Players in the Music Marketplace ....................................................... 18 a. Songwriters .......................................................................................... 18 b. Music Publishers ................................................................................. 19 c. Performing Rights Organizations (“PROs”) .................................... 20 d. Mechanical Rights Administrators ................................................... 21 e. Recording Artists and Producers ...................................................... 21 f. Record Companies .............................................................................. 22 g. Music Providers ................................................................................... 23 h. Consumers ............................................................................................ 24 B. Licensing Musical Works ....................................................................................... 25 1. Exclusive Rights in Musical Works ............................................................ 25 2. Reproduction and Distribution Rights ....................................................... 26 a. Historical Background ........................................................................ 26 b. Mechanical Rights Licensing ............................................................. 28 Statutory Licensing ............................................................................. 28 Voluntary Licenses .............................................................................. 30 Recent Reform Efforts ......................................................................... 31 3. Public Performance Rights ........................................................................... 32 a. The PROs .............................................................................................. 32 b. Antitrust Oversight ............................................................................. 34 Department of Justice Consent Decrees ........................................... 35 Key Antitrust Cases ............................................................................. 38 c. Consent Decree Procedures ............................................................... 40 4. Statutory License for Public and Noncommercial Broadcasting ............ 42 C. Licensing Sound Recordings ................................................................................