As the New Year gets underway, opportunities have opened for Congress to make needed reforms regarding copyright protections in music. A broad consensus has emerged in support of a trio of music-related copyright bills that would improve the ability of recording artists, producers, and songwriters to exercise their rights in copyrighted music or at least to enjoy the financial rewards for their efforts. In 2018, Congress should promptly take up the CLASSICS Act, the AMP Act, and the Music Modernization Act.
Music copyright is grounded in the U.S. Constitution. Article I, Section 8, Clause 8 – the “Copyright Clause” – confers on Congress the power “[t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” As Free State Foundation President Randolph J. May and I explain in our book, The Constitutional Foundations of Intellectual Property: A Natural Rights Perspective (2015), copyright is a unique private property right, rooted in an author’s natural right to enjoy the fruits of his or her creative labor. Federal copyright protections in music help ensure that copyright holders, including creative artists, enjoy exclusive rights to the potential proceeds from their musical labors.
Copyright protections provide an important economic incentive for the work and expense of new creative works. The International Intellectual Property Alliance’s report, “Copyright Industries in the U.S. Economy,” found that “core copyright industries” generated $1.2 trillion in economic activity and employed 5.5 million workers in the U.S. in 2015. Sound recordings and musical compositions are extraordinary sources of value. A report by Recording Industry Association of America’s Joshua P. Friedlander, cites $7.7 billion in 2016 U.S. retail revenues from recorded music.
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However, the Copyright Act is in need of comprehensive updating to address changes brought about by digital technologies and the Internet. Many provisions of copyright law that touch on sound recordings and musical compositions need to be reformed to better enable copyright owners to exercise their rights and to direct proceeds to their rightful recipients. The three bills now pending in Congress would, if enacted, provide targeted reforms to further those purposes:
(1) The CLASSICS Act -- H.R. 3301. Copyright holders do not have the same right under federal law to receive royalties for public performances of sound recordings fixed prior to 1972 that copyright holders of later recordings have. As a result, major digital music service providers, such as Pandora and Sirius XM, have publicly performed pre-72 sound recordings by digital audio transmission to their subscribers – without obtaining consent or paying royalties to the copyright owners of those sound recordings.
The Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act – or CLASSICS Act – would finally provide public performances of pre-72 sound recordings via digital audio transmission with the same federal protections that post-72 sound recordings receive. Copyright owners of pre-72 sound recordings would receive royalties based on rates established by the Copyright Royalty Board pursuant to its “willing buyer/willing seller” standard that seeks to approximate market prices for public performances of sound recordings via digital audio transmissions. And the CLASSICS Act would provide a streamlined resolution process for existing lawsuits involving state law claims regarding digital audio transmissions of pre-72 sound recordings. (See my July 2017 blog for more on the CLASSICS Act.)
(2) The AMP Act -- H.R. 881. Producers, mixers, and sound engineers serve important roles in the creation of sound recordings. Many sound recording artists and sound recording copyright owners desire to reward financially producers and others when their sound recordings are publicly performed through digital audio transmissions. Yet, existing law does not provide a streamlined statutory mechanism for creative artists to voluntarily direct portions of their own royalties for outright payments to producers, mixers, or engineers.
The Allocation for Music Producers Act – or AMP Act – would establish in the Copyright Act a process for producers, mixers, and sound engineers to directly receive royalty payments. Under the AMP Act, sound recording artists and other copyright owners of sound recordings could submit “letters of direction” to a collective entity – SoundExchange – authorizing direct distribution of such payments. Importantly, the AMP Act respects the exclusive rights of creative artists and other copyright holders by permitting letters of direction – not requiring any new subdivision of royalties. It does not undermine the liberty of creative artists and studios to negotiate contracts with producers, mixers, and engineers. Nor does the AMP Act give producers any kind of misguided “moral rights” against copyright owners of sound recordings.
(3) The Music Modernization Act -- H.R. 4706. Currently, songwriters sometimes fail to receive royalties in a timely fashion for digital audio transmissions of their songs by services like Spotify. Such services encounter difficulties in accurately locating songwriters. Among other things, the Music Modernization Act would establish a Mechanical Licensing Collective (MLC) to facilitate accurate royalties for songwriters by ensuring digital music services have correct information. Digital service providers would receive blanket usage licenses for copyrighted compositions.
Also, mechanical license royalties – revenues for songwriters when sound recordings of their compositions are recorded and copied – are subject to a rate standard that results in exceedingly low returns for songwriters. Under the Music Modernization Act, the Copyright Royalty Board would set mechanical licensing royalties for music compositions according a “willing buyer/willing seller” standard. Although rate controls are always less-than-desirable, where such controls do exist they should at least seek, to the extent possible, to mirror market prices. Rates established under the willing buyer/willing seller standard are intended to “most clearly represent the rates and terms that would have been negotiated in the marketplace” between willing parties.
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