The United States Copyright Office has announced the initiation of a study of the effectiveness of existing methods of music licensing. Three types of licenses were mentioned in the announcement: (1) compulsory licenses for the reproduction and distribution of musical compositions; (2) licenses for the public performance of compositions through ASCAP and BMI; and (3) licenses for the relatively new right in the digital public performance of sound recordings.

Among the issues that will be considered are:

Compulsory Licenses for Reproducing and Distributing Musical Compositions

The owner of a musical composition has a “mechanical” right, which is the exclusive right to make and distribute copies of the composition (including records, CDs, digital downloads, etc.). This right is subject to a compulsory licensing scheme set forth in 17 U.S.C. § 115. In practical terms, this means that if you are a musician who wants to record and sell a version of a song someone else composed and published, you have to get a license from that composer. Licenses have to be obtained on a song-by-song basis, and the rates are set by the Copyright Royalty Board. The Copyright Office intends to assess the “current need for and effectiveness” of this system, including whether the marketplace would be better off with blanket licenses instead of song-by-song licenses, particularly in the case of online music services.

Public Performance of Musical Compositions

The owner of a musical composition also holds an exclusive right to the public performance of the work, for example on radio and television. These rights are generally administered by three Performance Rights Organizations (PROs) — ASCAP, BMI and SESAC — which issue blanket licenses to broadcasters and others covering the performance of all music in their repertories. These PRO licenses are not compulsory, but they are generally subject to antitrust considerations, including consent decrees with the Department of Justice (a topic we recently addressed in more detail here). The Copyright Office will be considering whether the current system is effective, and whether the consent decrees (originally established in 1941) are still serving their intended purpose.

Digital Transmission of Sound Recordings

In 1995, Congress enacted the Digital Performance Right in Sound Recordings Act (DPRSRA). The DPRSRA granted the creators of sound recordings (as distinct from composers of the underlying musical composition) a limited exclusive right to the digital transmission of a sound recordings, for example through an online radio service. This right is subject to statutory licensing and rate setting by the Copyright Royalty Board, pursuant to 17 U.S.C. § 112 and § 114. As recently discussed at great length by the Southern District of New York in In re Petition of Pandora Media, Inc., the result of this legislation is that online music services such as Pandora have to obtain both a mechanical reproduction license from the owner of the composition and a digital public performance license from the owner of the recording. The Copyright Office intends to study the effectiveness of this regime, including:

Whether the disparate forms of and systems for licensing mechanical rights and performance rights is effective, or whether the two types of licenses should be more unified in their form or availability.

The impact of 17 U.S.C. § 114(i), which requires that, in any judicial or administrative proceeding to set the mechanical license rates, the amount the licensee is already paying for the public performance right (to ASCAP, BMI, etc.) “shall not be taken into account.” As described by the court in the Pandora matter, Pandora pays over half of its revenues to record companies for the sound recording right alone, but these payments cannot be considered by any adjudicator setting the rate for the mechanical right.

matter, Pandora pays over half of its revenues to record companies for the sound recording right alone, but these payments cannot be considered by any adjudicator setting the rate for the mechanical right. Whether this digital public performance right should be extended to pre-1972 sound recordings. For more on this issue, see our recent blog post here.

Written comments on these and other issues are due by May 16, 2014.