Okay, I'll admit it: the movie Almost Famous brought out myweepy, nostalgic side. I remember when making music was simple— I'm talking about the '70s. You'd practice in the basement,load your gear into the step van, play weekend gigs at the areabars, save enough money to record in the local studio, and begstores to carry your album (my parents still have boxes of mine intheir basement).
These days, though, music delivery is headed out of recordstores and onto the Internet. That means you have a lot moredistribution options. For example, you can distribute your music ina limited sense by simply posting songs on your Web site. Butonline music distribution involves licenses — and not justany licenses. Wild, new, and crazy, these licenses are steeped inlaws complicated enough to make you want to change professions.Just ask the folks at Napster.
The laws surrounding online music licensing are extremelycomplex and, for the most part, have not been interpreted by thecourts. That doesn't excuse you from familiarizing yourself withthe basics of those laws if you plan to offer any music online. Itis critical to consult a knowledgeable attorney if you becomeinvolved in online music.
The physical medium on which a song is recorded, or fixed, isknown legally as a phonorecord (think CD). Each phonorecord maycontain one or more songs. Each song on a phonorecord embodies twoseparate and distinct works of art that are protected by U.S.copyright law. The musical work copyright protects the composition,including musical notes and lyrics created by the composer.Ownership of a musical work copyright may be divided among varioussecondary composers, lyricists, arrangers, editors, andtranslators, as well as publishers, who usually gain ownershipshares in exchange for promotion of the work. When the song isrecorded, it qualifies for separate copyright protection as a soundrecording. A sound recording's copyright ownership may be dividedamong performers, record producers, sound engineers, and othersresponsible for capturing, editing, and mixing the sounds in therecording.
Say, for instance, that you wrote a song, transcribed it ontopaper, and copyrighted it. As the composer of the song, you own themusical work copyright. If you record the song in your home studio,you gain ownership of the sound recording copyright, which protectsthe recording. If you write a song and record it without firstputting it on paper, you gain ownership of both copyrights becausethe composition and the recording are fixed onto the recordingmedium at the same time.
Copyright owners are afforded a bundle of exclusive rights intheir musical works and sound recordings, which lets them controland receive compensation for the use of those works. The exclusiverights include the right to reproduce the work, distribute copiesof it, and perform the piece publicly. The public performance rightis enjoyed by musical work copyright owners but does not extend tosound recording copyright owners. For example, when a radio stationplays a CD selection, the owner of the musical work copyright iscompensated for the performance, but the owner of the soundrecording copyright is not.
Typically, exclusive rights are managed directly by thecopyright owner through contractual mechanisms called licenses,which let third parties reproduce, sell, or perform the work inreturn for money. Compulsory licenses, also known as statutorylicenses, are licenses by which the copyright owner cannot preventa third party from using the work as long as the third party pays aspecified royalty rate and adheres to other statutoryrequirements.
For sound recording copyright owners, the reproduction anddistribution rights are freely negotiated. For example, a soundrecording copyright owner could provide a downloadabledigital-audio file of his or her recording on a Web site and sellcopies directly to consumers. For musical work copyright owners,royalties on phonorecord sales of their compositions are handledthrough a mechanical licensing scheme. A mechanical license is acompulsory license through which owners of copyrights in musicalworks are paid for the reproduction and distribution of theircompositions' phonorecords. Once a musical work copyright ownerauthorizes a phonorecord's public distribution, any third party mayreproduce and distribute phonorecords of the composition providedthat the party pays the compulsory license fee.
Sound recording copyright owners historically have not enjoyed apublic performance right. However, for musical work copyrightowners, the public performance right was and is important yetdifficult to manage. Most owners cannot enforce their publicperformance rights on every broadcaster or nightclub owner whoplays their songs.
An enforcement scheme known as blanket licensing was thereforedeveloped. In this arrangement, performing rights organizations(PROs), such as ASCAP, BMI, and SESAC, issue blanket licenses thatallow licensees to play any song in the PRO's repertoire. The PROthen collects and distributes royalties for those performances onbehalf of musical work copyright owners. Royalty payments arecalculated by surveying and sampling broadcasts.
Sound complicated? Those are just the basic laws that have beenaround for nearly a century. The fun, cutting-edge stuff liesahead.
THE NEW LAW
In 1995 Congress passed the Digital Performance Rights in SoundRecordings Act (later amended by the Digital Millennium CopyrightAct), which provides sound recording copyright owners with theexclusive right to “perform their works publicly by means ofa digital-audio transmission.” That means sound recordingcopyright owners finally can be compensated, in the form of afreely negotiated license, for public performances of theirrecordings under certain conditions. Although certainly a boon forthose owners, the act's language imposes several limitations onthis new public performance right.
First, the right applies to transmissions only. It does notcover live performances or CDs that are played in restaurants,concert halls, or hotels. Second, it only applies to digitaltransmissions, not analog transmissions such as AM or FM radio.Third, it only applies to digital transmissions of soundrecordings; it doesn't apply to digital transmissions of, say, amovie. Finally, it only applies to digital-audio transmissions thatare publicly performed; it does not apply to an audio filetransmitted to a friend.
The act provides exemptions for various types of digital-audiotransmissions, including broadcast transmissions,“incidental” transmissions (such as the programmingfeed of an exempt transmission from a remote truck), andtransmissions of digital music to business establishments forordinary business use (for example, Muzak transmitted to a clothingstore for background music).
The act also imposes a compulsory license on certain types ofdigital-audio transmissions, including “subscription”transmissions — in which the transmission recipient pays forthe service (such as the commercial-free digital music that comeswith your cable) — and Webcasts. Notably, the new publicperformance right expressly applies to “interactive”digital-audio transmissions, in which the transmitted song isselected by or on behalf of the recipient.
Musical work copyright owners continue to enjoy theirpreexisting public performance right, payable through blanketlicenses managed by PROs. Sound recording copyright owners gain apublic performance right for any sound recording publicly performedby means of digital-audio transmission, payable through freelynegotiated licenses or compulsory licenses.
The act also addresses the reproduction and distribution rightsinvolved in digital phonorecord deliveries. Digital phonorecorddeliveries are digital-audio transmissions that result in a“specifically identifiable” (replayable) reproductionof the transmitted sound recording. Essentially, the act recognizesthat the preexisting mechanical compulsory license for reproducingand distributing phonorecords of musical works applies to digitalphonorecord deliveries and traditional record store — typemusic distributions.
The act not only extends the compulsory license to musical worksthat are made and distributed through digital-audio transmissionbut also makes clear that such transmissions are functionallyequivalent to physical reproductions and distributions. Thatdevelopment impacts sound recording and musical work copyrightowners. Those who transmit digital phonorecord deliveries mustsatisfy the compulsory licensing requirements for the delivery ofthe musical work and obtain a voluntary license for the delivery ofthe sound recording.
So how does all this legalese apply to a musician who wants totransmit or receive digital copies of songs? When this new body oflaw is synthesized with the traditional compensation scheme,figuring out who needs to be paid what can generally be analyzedthrough a series of fairly simple questions.
Public performance rights analysis: is there a transmission?
The act is only concerned with transmissions; other performancetypes, such as live performances, have no potential liability.
Is the transmission digital?
The act covers only digital transmissions. Analog transmissionsare not addressed.
Is the digital transmission a sound recording?
The act only deals with digital transmissions of soundrecordings. Other transmission types are not potentiallyliable.
Is the digital-audio transmission a public performance?
When a digital-audio transmission is classified as a publicperformance, the transmitter is responsible for obtaining licensesfor both the musical work and the sound recording. Licenses forpublic performances of musical works are generally obtained from aPRO; the type of license available under the new sound recordingpublic performance right depends on how the transmission iscategorized. Digital-audio transmissions that are not publicperformances do not implicate the preexisting public performanceright of musical work copyright owners or the new publicperformance right for sound recording copyright owners.
Is the digital-audio transmission exempt?
Certain types of digital-audio transmissions are exempt. Exemptdigital-audio transmissions do not trigger the new publicperformance right for sound recording copyright owners. However,the preexisting public performance right of musical work copyrightowners is still in effect; the blanket license must still be paidto the PRO. If the digital-audio transmission in question is notexempt, it must be further analyzed.
Is the digital-audio transmission an interactivetransmission?
Regarding public performance rights, nonexempt digital-audiotransmissions are either part of an interactive service or not. Asfor musical works, whether the transmission is interactive isirrelevant; if the transmission constitutes a public performance, ablanket license must be obtained through a PRO. For soundrecordings, interactive transmissions implicate the new publicperformance right, and voluntary licenses must be negotiated withthe sound recording copyright owners. Digital-audio transmissionsthat are not part of an interactive service are subject toadditional scrutiny.
Does the digital-audio transmission qualify for the compulsorylicense?
Noninteractive digital-audio transmissions are divided into twosubcategories: those that qualify for the compulsory license andthose that do not qualify. Regarding musical works, whether thetransmission qualifies does not matter; if the transmissionconstitutes a public performance, a blanket license must beobtained. Qualifying and nonqualifying transmissions of soundrecordings trigger the new public performance right but are treateddifferently. Qualifying transmissions, such as Webcasts orsubscription transmissions, are eligible for a compulsory license.Nonqualifying transmissions aren't eligible for a compulsorylicense; therefore, voluntary licenses must be negotiated with thesound recording copyright owners.
Reproduction and distribution rights analysis: is thedigital-audio transmission a digital phonorecord delivery?
In terms of reproduction and distribution rights, digital-audiotransmissions fall into two subcategories: transmissions thatresult in a specifically identified reproduction of the transmittedphonorecord (digital phonorecord deliveries) and those that do not.Digital phonorecord deliveries, as the functional equivalent ofphysical phonorecord deliveries, implicate the reproduction anddistribution rights of the musical work and sound recordingcopyright owners. The standard mechanical compulsory license isavailable for digital deliveries of musical works, but a voluntarylicense must be negotiated with the owners of sound recordingcopyrights. If a transmission does not constitute a digitalphonorecord delivery, no reproduction or distribution rights areinvoked.
The analyses of public performance rights and reproduction anddistribution rights are separate and distinct. A singletransmission should be analyzed regarding the implication of thepublic performance rights and the reproduction and distributionrights in both the sound recording and musical work. For the mostpart, online music is still separated into two categories:streaming and downloadable files. By applying the analysis model,you can see what licenses are potentially involved.
Streaming. Analysis here is problematic not only because of thelaw's complexity but also because of interpretation issues and thepace at which technology evolves. Two streaming types are common onthe Internet: Webcasting, which is essentially Internet radio, andposting, which lets Web site visitors hear a posted audio file byopening it. Posting is generally used to preview music forpromotional purposes. For example, a Web site selling downloadabledigital-audio files will often let you hear part of the song beforeyou download it.
Both streaming types qualify as digital transmissions of anytransmitted sound recordings. Does streaming a song qualify as apublic performance? According to the statutory language, it appearsso. However, limiting access of a streaming file to a singleindividual, for example, may not constitute a publicperformance.
Webcasting, the most common type of streaming audio, is likelynot exempt. Although Webcasters could argue that their services arevirtually the same as exempt broadcasters', they simply do notqualify according to statutory language. Webcasting is probably notconsidered interactive because Webcasters, like broadcasters,typically do not create programs specifically upon request.However, Webcasts likely qualify for the new digital performanceright compulsory license. If not, the transmitter must obtainvoluntary licenses from the transmitted sound recordings' copyrightowners to satisfy the new digital performance right.
A posted streaming file is also not exempt but does appear to beinteractive: when Web site visitors open a posted streaming audiofile, they initiate a transmission of a particular sound recording.Therefore, the transmitter must obtain a voluntary license from thesound recording copyright owner to accommodate the new digitalperformance right. For both types of streaming, the transmittermust obtain licenses from a PRO for the public performances of themusical works.
The digital phonorecord delivery status of streaming audioremains unresolved. Webcasting does not seem to create aspecifically identifiable reproduction of the song on therecipient's computer, but the opinion within the industry is thatall digital transmissions are digital phonorecord deliveries.Posted streaming files may also qualify as digital phonorecorddeliveries because those files are usually small enough to make aspecifically recognizable reproduction possible. In that case, thetransmitter must pay the incidental compulsory license fee forreproduction and distribution of the musical work and the voluntarylicense fee for the sound recording's reproduction anddistribution.
Downloadable files. Downloadable files are digital-audio filesposted on a Web site and available for downloading by the public,often for a fee. Thus they qualify as digital-audio transmissionswhen downloaded. An important question is whether downloading adigital-audio file constitutes a public performance.
From a practical standpoint, paying to download a digital-audiofile seems too analogous to a traditional phonorecord sale to beconsidered a public performance and should be treated solely as adigital phonorecord delivery. That argument sounds reasonable; itdoes not seem fair to subject download transmitters to both publicperformance and reproduction and distribution fees. It can beargued that when the transmitter's computer responds to a downloadrequest for a digital-audio file, it is “performing”the work embodied in the file “publicly.” That positionappears to have support within the act's legislative history.
However, it can also be argued that the transmission is not aperformance at all because neither the musical work nor the soundrecording can be perceived during transmission. The song is beingdelivered rather than performed, in the classic sense of the word;the works are not “performed” until the recipient playsand hears the digital-audio file, in which case the performance inmost instances would not be considered public.
If downloadable audio files are not considered publicperformances, neither the new digital performance right in soundrecordings nor the preexisting public performance right in musicalworks is implicated. But if those files are considered publicperformances, they would be classified as interactive transmissionsbecause a downloadable file is a transmission of a sound recordingthat is selected by or on behalf of the recipient. Therefore, thetransmitter must obtain voluntary licenses from the owners of thesound recording copyrights to satisfy the new digital performanceright, and the transmitter is also responsible for obtaininglicenses from the appropriate PROs for the public performances ofthe musical works.
Furthermore, downloadable audio files probably qualify asdigital phonorecord deliveries, being the functional equivalent ofphysical phonorecord deliveries. Thus, the transmitter must obtainvoluntary licenses for the reproduction and distribution of thesound recordings and must pay the mechanical compulsory licensefees for the reproduction and distribution of the musicalworks.
A TANGLED WEB
As you can see, this is not your parents' music business. Musiclicensing, particularly online music licensing, is complicatedstuff. Take a little time to understand the basics — it willbe worth it in the long run. Someday you will have your catalogonline, and you may want to know where your money is comingfrom.
Eric Leach is an intellectual property law attorney with Goodman& Leach. He has authored several technical and legal articlesrelated to the music business, including Everything You AlwaysWanted to Know About Digital Performance Rights but Were Afraid toAsk, recently published in the Journal of the Copyright Society ofthe U.S.A. He can be contacted at (714) 836-0200 or email@example.com.
LICENSING ON THE WEB
To learn more about the laws and other details involved indelivering or broadcasting music over the Internet, check out theresources listed below.
ASCAP's site offers a host of information and resources formembers and nonmembers alike, including its “RateCalc”program for calculating licensing fees and a FAQ about Internetlicensing.
BMI's site, like ASCAP's, has a comprehensive selection of factsand resources regarding music licensing. You can peruse thedifferent license agreements, calculate rates, and license musicthrough the site by using the “Klik Thru”system.
Kohn on Music Licensing (www.kohnmusic.com)
Visitors to this site can find extensive legal information aboutcopyright law and music licensing specifically relating to musicdelivery on the Internet. The site also has a question-and-answerboard and offers various links to resources around the world.
Legal Information Institute
This link takes you to a page that BREAKs down the copyright lawinto 14 sections, so you can easily find a particular part of thelaw. Other legal resources can be accessed from the site's mainpage.
National Association of Broadcasters (NAB; www.nab.org)
NAB's site has all the latest news and laws that affect the Web,radio, and television.
Recording Industry Association of America
Be sure to go to these pages on the RIAA site: Copyright Basics,Music and the Internet, Audio Technologies, and Licensing andRoyalties. The site are also has sections about Webcasting and theRIAA's dispute with Napster.
The SESAC site offers online song registration for members aswell as online licensing of music from the PRO's repertoire.Visitors can also read about licensing agreements and the latestnews and laws.
United States Copyright Office (www.loc.gov/copyright)
Get all the copyright law you can handle from these new pages:Webcasting, the Digital Millennium Copyright Act, Napster, andDigital Transmissions.