Navigating the Tangled Web of Webcasting Royalties

To make matters more complicated, Navigating the Tangled Web most recorded songs also have multiple copyright owners. Songwriters, compos- of Webcasting Royalties ers, and publishers of a musical composi- tion (a “song”) have rights in the song. BY CYDNEY A. TUNE AND CHRISTOPHER R. LOCKARD For example, these owners have the right to receive royalties every time a copy of the song is sold in sheet music form or ver since Napster launched to Services such as iTunes sell permanent as part of an album, as well as when the enormous popularity in 1999 and downloads and ringtones that consum- song is broadcast over the radio, the In- Edrew the ire of heavy metal band ers download to their computers and ternet, speakers in a restaurant, or when Metallica, the record industry has looked cell phones. Other companies, such as it is performed in a concert. Addition- at online music with a highly suspicious Amazon.com, sell physical phonorecords ally, artists who perform on a recorded and combative eye. The last decade has (like records and CDs). Music is also version of a song (a “sound recording”), seen record labels fight numerous Web contained in other online content, such and the owner of the copyrights in that sites and software makers that have fa- as podcasts, commercials, and videos car- sound recording (generally the record cilitated the distribution of online music ried on Web sites like YouTube. Finally, label), also have the right to receive and even individuals who simply shared thousands of Web sites, known as web- royalties for sales of that sound recording or downloaded music. But while some casters, stream music over the Internet and for the digital transmissions of that companies have attempted to distribute to listeners. Each of these uses implicates sound recording. music without obtaining licenses or pay- different licensing and royalty schemes. ing royalties, many other Web sites sim- The term “webcasting” generally refers PERFORMANCE RIGHTS ply want to distribute or perform music to the distribution of an audio or video The right to perform music publicly legally within the confines of copyright file over the Internet using streaming impacts webcasters most significantly. law. However, such companies have en- media technology. Some webcasters are Traditional radio station broadcasters ob- countered a confusing, impractical, and companies that operate Federal Commu- tain licenses from the performance rights intimidating maze of laws and regulations nications Commission (“FCC”)-licensed organizations—the American Society governing music copyrights. radio stations that stream their over-the- of Composers, Authors and Publishers The last several years have seen both air programming simultaneously on the (“ASCAP”), Broadcast Music, Inc., and enormous growth in the number of Web Internet. Other companies deliver their SESAC (collectively, the “PROs”)—that sites seeking to capitalize on online mu- programming solely over the Internet. together represent virtually all songwrit- sic and tremendous controversy over the Even in this latter category, there is a wide ers, composers, and music publishers in amount of royalties owed to copyright range of businesses. Some webcasters offer the United States for purposes of licens- owners by Web sites that broadcast, or a format similar to traditional radio, where ing and collecting royalties from any webcast, music online. These webcasters all listeners hear the same preprogrammed public performance of a song. However, have struggled in the face of ever-chang- set of songs at the same time. Other when music is broadcast over the Inter- ing rules and resistance from the record webcasters have developed technology net, the Digital Millennium Copyright industry. Over the last year, however, that allows users to create their own chan- Act (“DMCA”) requires both traditional copyright owners and webcasters have nels by rating songs, artists, or genres that broadcasters and Internet-only webcast- negotiated compromises on many of their they do or do not like. Still other webcasters to obtain additional licenses from, differences, bringing some clarity to this ers offer subscription services that allow and pay additional royalties to, the complicated framework. users to select music on demand. Some owners of the copyrights in the sound Those wanting to take advantage of webcasters are even expanding into new recordings and the performers featured in the exciting opportunities associated forms of delivery—for instance, Pandora the sound recording. with online music must understand what music streams now can be listened to via music licenses are required for different iPhones and some Blu-ray players. Song Licenses and Royalties media and methods of distribution, how Under U.S. copyright law, the owner Over-the-air radio station broadcast- these licenses are obtained, and what of a copyrighted work, such as a song, has ers obtain licenses from and pay royal- royalties will need to be paid. These the exclusive right to make copies of the ties to the PROs for use of songs, which complexities are not insurmountable, and work, prepare derivative works based on compensate the composers and copyright an understanding of the various licenses the copyrighted work, distribute copies of owners of songs that are broadcast by and royalty obligations is essential in the work, and display or perform the work these traditional radio stations. When today’s webcasting environment. This publicly, including, in the case of a sound the signal of an over-the-air radio sta- article is intended as a guide through that recording, by means of a digital audio tion is simulcast over the Internet on a tangled legal web. transmission. Webcasters’ use of music nonsubscription basis, the fees for such may implicate three of these rights—the use are generally covered by the music OVERVIEW right to reproduce the work, the right licenses that have already been obtained There are myriad ways that music is to distribute the work, and the right to from the PROs. However, if the broad- used and distributed on the Internet. perform the work publicly. caster is operating an Internet station Published in Entertainment and Sports Lawyer, Volume 27, Number 3, Fall 2009. © 2009 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. that is not also being broadcast simulta- license must be obtained and royalties that implies an association between the neously over the air, or if the over-the- negotiated directly from the sound re- music and the product is prohibited. The air license does not cover a simulcast, a cording copyright owner, who has discre- compulsory license only applies to record- separate Internet-only license must be tion over whether to give such a license ings lawfully made, so webcasters may not obtained from the PROs. and over what fees to charge. lawfully play unauthorized bootlegs. To Webcasters whose streaming of music SoundExchange is a nonprofit make it more difficult for members of the is not connected to a radio broadcast organization that was established by public to record music from the streams station must also obtain a license from, the Recording Industry Association of that are being transmitted, there are also and pay royalties to, the PROs for the use America (“RIAA”) and designated by various antipiracy efforts with which web- of their songs. Each PRO uses different the U.S. Copyright Office to administer casters are required to cooperate. licenses and royalty rates, although all the compulsory licenses for digital perfor- Webcasters that offer interactive charge a minimum royalty. In addition, services or features, such as temporary or they include royalties that are based permanent downloads, cannot obtain a either on revenues or on Web site usage. Section 114 license and thus must negoti- Fees may also vary based on the type of ate a performance rights license directly service. For example, ASCAP charges a with the record company that owns the higher fee for interactive Web sites that WHEN A WEBCASTER copyrights in that sound recording. If a we- let users select specific songs on demand STREAMS MUSIC bcaster does not have either a direct license or create highly customized playlists. or a compulsory license, that webcaster is OVER THE INTERNET, potentially liable for copyright infringe- Sound Recording Licenses and ment and, as such, can be subject to dam- Royalties THIS ACTION ages and penalties. It is therefore important The DMCA requirement that to comply fully with all of the requirements royalties be paid to performers and the ALSO IMPLICATES of the law, including the following. copyright owners of sound recordings should not be overlooked. These per- ANOTHER IMPORTANT Registration With the Copyright Office formance royalties are not applicable to To obtain a compulsory license for over-the-air broadcasts, because such RIGHT MENTIONED sound recordings, a webcaster must first radio stations had historically been register with the Copyright Office by fil- viewed as providing a substantial, in- PREVIOUSLY—THE ing a Notice of Use of Sound Recordings kind promotional consideration to the Under Statutory License and pay a filing record labels and performers. However, RIGHT TO COPY A fee before the digital transmission of mu- this long-standing regime is the subject sic begins. When filing a Notice of Use of legislation currently working its way WORK. form, webcasters need to obtain both a through Congress (H.R. 848 and S. 379, Section 112 and a Section 114 license. A introduced February 4, 2009). If enacted Section 114 license grants the webcaster into law, terrestrial broadcasters would, the right to perform the sound recording, for the first time, be required to obtain li- while a Section 112 license grants it the censes for the airing of sound recordings.

Load more