Music Revenue Report Should Spur Congress to Secure Copyrights Fully

On March 26, the Recording Industry Association of America (RIAA) released its "Year-End 2023 RIAA Revenue Statistics." On the positive side for music sound recording artists and copyright owners, RIAA's report reveals annual increases in U.S. recorded music market revenues. But the report's release also ought to remind Congress that it ought to secure broader legal recognition of music copyrights and promote creative and economic opportunities by passing the American Music Fairness Act – S.253 and H.R. 791.

According to RIAA's report, total revenues retail for the U.S. sound recording grew 8% to $17.1 at retail estimated value, up from $15.9 billion in 2023. Revenues from paid subscriptions to streaming music services grew 9% last year $11.2 billion, amounting to 78% of streaming revenues and almost two-thirds of total revenues. Paid subscriptions to on-demand music services totaled 96.8 million, constituting an annual growth rate of 5.7%

 

Although annual revenues from digital downloads dropped again in 2023 – slipping to $434.1 million compared to nearly $495 million in 2023 – revenues from sales of physical copies of sound recordings rose again last year. In 2013, vinyl record sales revenues rose to $1.4 billion, up 11% compared to the year before, marking the seventeenth consecutive year of vinyl sales increases and the second consecutive year in which vinyl unit sales have exceeded CD unit sales. Last year, CD sales revenues also rose 11% to $537 million.

 

These positive annual revenue totals and trends reflect the high value and growth potential of copyrighted music. Copyrighted property deserves legal protections and a market environment favorable to creative and economic flourishing. As Free State Foundation President Randolph May and I observed in our book Modernizing Copyright Law: Constitutional Foundations for Reform (Carolina Academic Press, 2020), the American Founders believed that one of the key roles of government is to protect and promote the creation, acquisition, use, and value of private property. The U.S. Constitution's Article I, Section 8 Copyright Clause gives the federal government a direct charge to secure rights in creative works, declaring that Congress shall have power "To 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."

Congress should take action to promote creative and economic opportunity in the U.S. recorded music market. It should advance the American Music Fairness Act – S.253 and H.R. 791. 

The American Music Fairness Act would ensure equal legal treatment of different music distribution platforms and alleviate unfairness to copyrighted owners of recorded music who receive no compensation when their recorded songs are commercially by terrestrial AM/FM stations. Under current copyright law, terrestrial AM/FM radio stations have a special exemption from paying royalties to owners of copyrighted sound recordings when those stations play the music on the air. But S.253 and H.R. 791, would require AM/FM stations to pay royalties to owners of sound recordings for the use of their intellectual property just like online streaming services do.  

 

Under existing international agreements, foreign terrestrial AM/FM radio stations do not have to pay royalties for playing copyrighted music owned by Americans so long as domestic terrestrial AM/FM radio stations in the U.S. have no obligation to pay such royalties. Passage of the American Music Fairness Act would open up those foreign royalty streams to U.S. copyright owners. Importantly, the legislation is sensitive to the limited financial resources of smaller commercial and non-profit stations by treating them to a low, flat royalty rate. 

 

For further background on the American Music Fairness Act, see my February 2022 Perspectives from FSF Scholars, "American Music Fairness Act Would Secure Copyrights in Sound Recordings."

FSF Submits Comments to the FCC Opposing a So-called "Amnesty"

 

Today, Free State Foundation President Randolph May and Senior Fellow Andrew Long submitted comments to the FCC opposing a so-called "amnesty" window during which winners of auctions to award government subsidies from the Rural Digital Opportunity Fund could back out of their commitments to construct broadband infrastructure without meaningful consequence.

Here are key sentences from the top of the comments:

"Granting this request would further delay the connection of unserved households. It would unjustly favor certain auction participants – a privileged group that seemingly includes government-owned and government-affiliated networks already unduly advantaged by their government status – over others. And by creating a classic 'moral hazard,' it would encourage irresponsible behavior that threatens the efficacy of reverse auctions generally. The WCB therefore must deny this request.”

Report Ranks Maryland Highest in Mortgage Debt

A March 21 report by WalletHub financial writer Adam McMann ranks Maryland as the top state for mortgage debt increases. The report, "States Adding the Most Mortgage Debt,” is based on WalletHub's comparison of proprietary data for the 50 states from the third to the fourth quarters of 2023.

According to the WalletHub report, Maryland had the largest increase in average monthly mortgage between the third and fourth quarters of last year. During that time span, the average mortgage debt balance in Maryland rose 1.23% to $283,092. Underscoring the significance of that mortgage debt increase, is the report's finding that "no other state had an increase above 1%" and average mortgage debt actually decreased in 17 states during the fourth quarter of 2023.

 

The report states that “Maryland residents also have one of the biggest mortgage balances in general" and that "[t]heir average monthly payment is very high as a result, $2,145." On top of very high monthly mortgage debt, the report points out that "Maryland residents also have to deal with a relatively high property tax rate on their homes." A February 2024 ranking of state property tax rates by WalletHub found that Maryland had an effective real estate tax rate of 1.02%.

 

One common-sense takeaway from Maryland's high average monthly mortgage debt and its real estate tax burden is that Maryland's legislature should resist any future real estate tax rate hikes and it should instead consider providing real estate tax relief for Maryland residents.  

Maryland House of Delegates, Senate Approve Data Privacy Bills

On Saturday – just ahead of yesterday's "crossover day" deadline – the Maryland House of Delegates voted 105-32 to approve HB-567, comprehensive data privacy legislation. The cross-filed Senate bill, SB-541, passed unanimously last Thursday.

Should the Maryland Online Data Privacy Act of 2024, which has been referred to conference, become law, it would represent the sixteenth contribution to the state-level "patchwork" of comprehensive data privacy laws that has emerged in the face of Congress's continuing failure to act.

For an overview of the law's specific provisions, please see "Free State Lawmakers Debate Data Privacy Legislation," a February 2024 post to the FSF Blog.

Joint Resolution in Senate Would Repeal FCC's Digital Discrimination Rule

On March 14, Sen. Ted Cruz introduced S.J.Res. 64, Congressional Review Act (CRA) joint resolution of disapproval to overturn the FCC's digital discrimination regulation. By a 3-2 vote, the Commission adopted a November 2023 Order to implement the Infrastructure Investment and Jobs Act's directive that the Commission facilitate equal broadband access insofar as it is technically and economically feasible.

The Infrastructure Act requires the Commission to adopt rules prohibiting intentional digital discrimination of access against individuals of protected classes such as race, religion, ethnicity, and income level. However, the Commission exceeded its statutory mandate by imposing unintentional disparate impact liability on broadband Internet service providers (ISPs) and subjecting nearly every facet of broadband network operations and business to agency scrutiny without clear safe harbors. 

 

A similar CRA joint resolution of disapproval – H.Res.107 – was introduced by Reps. Earl L. "Buddy" Carter and Andrew Clyde back on January 30 of this year. That resolution was the subject of a February 6 blog post. If passed by Congress and signed into law, the CRA would result in the repeal of the FCC's digital discrimination rule. As observed in a February 14 blog post, the FCC's November 2023 Order is also the subject of consolidated litigation that is pending in the U.S. Court of Appeals for the Eighth Circuit. 

 

The FCC's digital discrimination proceeding is ongoing. In its November 2023 further notice of proposed rulemaking, the Commission proposed additional "affirmative obligations" for reporting and internal compliance program requirements. The Commission also has proposed the creation of a Civil Rights Office with a roving mandate to police digital discrimination. But as Free State Foundation President Randolph May and I explained in our March 4, 2024, public comments, the record shows no evidence that digital discrimination is taking place. The agency's proposals, if adopted, would not confer any real benefit on Americans of any class but would instead amount to an unjustified further expansion of agency power over the private marketplace. 

 

Notably, the FCC's digital discrimination rule was a subject of discussion and debate at the Free State Foundation's Sixteenth Annual Policy Conference – #FSFConf16 – held on March 12, 2024. For more, check out the video of the hot topics communications law and policy panel, as well as the video of the inaugural TMR vidcast hosted by former FCC Commissioner Michael O'Rielly: 

State Court Rules that USAC is Tax-Immune in Lifeline Case

On March 7, the Washington State Supreme Court issued its decision in Assurance Wireless USA, LP v. State of Washington Department of Revenue (2024). At issue in the case is whether funds received by telecommunications carriers participating in the federal Lifeline program are subject to Washington's retail sales tax. In a unanimous 9-0 decision, the Washington Supreme Court concluded that because the Universal Service Administrative Company (USAC) operates as an instrumentality of the federal government, imposition of the retail sales tax violates the intergovernmental tax immunity doctrine. The effect of the court's decision is that it ensures that tax burdens are not saddled on Lifeline program providers and low-income beneficiaries.

The USAC is the FCC's appointed non-profit entity for administering the Universal Service Fund and the Lifeline program. The Washington Supreme Court determined that the USAC is the "buyer" from whom telecommunications carrier and Lifeline program participating provider Assurance Wireless should have been collecting the tax. That is to say, the court determined that the incidence of the state retail sales tax falls on the USAC.

Under the intergovernmental immunity doctrine, the federal government and instrumentalities closely connected to it are immune from all forms of taxation absent express Congressional waiver of immunity. The Washington Supreme Court determined that provisions contained in Section 254(e) and 254(f) of the Communications Act do not constitute Congressional waivers. Looking to factors identified in U.S. Supreme Court jurisprudence for determining whether an instrumentality is closely related to governmental activity and therefore tax-immune, the Washington Supreme Court wrote: 

Weighing all the factors, we conclude that USAC is an instrumentality of the federal government. It exists solely to carry out the FCC's mission of advancing universal service, which includes the Lifeline program, and USAC pursues no independent business objectives. Congress has acknowledged the FCC's reliance on USAC and approved of their relationship as the means of implementing universal service programs. Further, although USAC is nominally an independent nonprofit, the FCC's regulatory control over USAC's operations, leadership composition, and finances have produced an entity so closely related to the FCC that we conclude it operates as an instrumentality of the federal government for purposes of the intergovernmental tax immunity doctrine. 

In a November 9, 2024 FSF Blog post, "State Court Weighing USAC on Tax Immunity for Lifeline," I previewed this case. I suggested that Assurance Wireless USA had a stronger position on the tax immunity of the USAC. Former FCC Commissioners Robert McDowell and Mignon Clyburn were among those who filed amicus curiae briefs favoring tax immunity for the USAC. The effect of such immunity is that it better enables Lifeline to serve its programmatic purpose of providing telecommunications services to qualifying low-income individuals. 

 

Universal service reform and the Lifeline program were topics for discussion during the hot topics in communications law and policy panel at the Free State Foundation's 16th Annual Policy Conference held on March 12.

 

 

Video of that panel and former FCC Commissioner Mignon Clyburn in discussion with former Commissioner Mike O’Rielly and two current Commission members can be found on FSF's video web page. 

Divided FCC Imposes New Pricing Requirements on Legacy Video Providers

At its Open Meeting on Thursday, the FCC voted along party lines to require facilities-based video distributors – that is, cable and direct broadcast satellite (DBS) providers, but not upstart competitors that stream their content over the public Internet – to present an "all-in" price on their customer bills and in advertising materials. Republican Commissioners Brendan Carr and Nathan Simington issued Dissenting Statements exposing the agency's general lack of statutory authority to impose such obligations.

The Commission's pending proceeding exclusively targeting cable and DBS billing practices, in which Free State Foundation President Randolph J. May and I filed comments and reply comments, similarly singles out traditional multichannel video programming distributors (MVPDs) for additional regulatory burdens wholly lacking statutory authority even as they struggle to compete with streaming services like Netflix, Hulu, YouTube, Amazon Prime Video, and Disney Plus, among many others.

Commissioner Simington in his Dissenting Statement emphasizes this concern, writing that:

[W]e are yet again adding additional regulatory burden and complexity on an industry that is shedding customers by the millions. Traditional linear video is on the way out, but we don't have to shoo them away like the last guest who hasn't gotten the hint that the party's over. For every mote of regulatory complexity we add to legacy providers, unregulated online video providers become more nimble by comparison.

Commissioner Simington also finds fault with each source of statutory authority relied upon by the majority in the as-yet-unreleased Order. Notably, he calls out the fact that (1) the FCC's limited power pursuant to Section 632 to impose customer service requirements not only presupposes the existence of a provider-customer relationship (and thus does not extend to promotional materials targeting potential customers) but also is constrained heavily by the Television Viewer Protection Act of 2019, and (2) Section 335(a) – incidentally, the same DBS-specific provision relied upon in the billing practices NPRM referenced above – "relates essentially to the provision of political programming."

In his Dissenting Statement, Commissioner Carr similarly questions the agency's statutory authority to act, conceding that "[o]nly in the case of cable billing does that authority arguably exist." And where Commissioner Simington characterized the majority's misguided reliance upon Section 4(i) ancillary authority as "[t]he authority of the gunslinger," Comissioner Carr describes it as a "Hail Mary [that] falls incomplete."

Videos from #FSFConf16 Released!

Videos from #FSFConf16 Released!

#FSFConf16

 

The Free State Foundation's 16th Annual Policy Conference was held on March 12 in Washington, DC. Videos for the Conference are now available online. 

 

Welcome and Introduction by Randolph May 

President, The Free State Foundation

 

Other conference videos, including discussions of hot topics in communications law and policy and lighting round of analyst insights, and can be found on online on FSF's YouTube page. For informative discussion and even debate on net neutrality regulation, digital discrimination rules, USF reform, spectrum policy, broadband investment, and more, be sure to check them out!

NTIA Spectrum Strategy Implementation Plan Announced at FSF Policy Conference

At Free State Foundation's 16th Annual Policy Conference held on March 12, the NTIA's Senior Spectrum Advisor Scott Blake Harris announced the release of the its National Spectrum Strategy Implementation Plan.

The Plan and an accompanying press release briefly summarizing it are available at the NTIA's website. Video of Mr. Blake's keynote address is available online. If Mr. Blake's prepared remarks at FSF's Annual Policy Conference become available, we will post them. FSF appreciates Mr. Blake's appearance at the Conference.

 

On January 2 of this year, FSF President Randolph May and Senior Fellow Andrew Long filed comments with the NTIA on the implementation of the National Spectrum Strategy. In those comments, FSF President May and Mr. Long emphasized the crisis of the empty spectrum pipeline and the need to take action to repurpose mid-band spectrum for commercial use. Stay tuned for more from FSF Scholars on the NTIA's Implementation Plan, spectrum policy, and the 17th Annual Policy Conference.
 

(*This post was updated on 3/15/2024 with information and links to the video of Mr. Blake's address at #FSFConf16.)

MEDIA ADVISORY: Reaction to Cruz-Thune "Spectrum Pipeline Act of 2024"

 

Regarding the introduction of the proposed “Spectrum Pipeline Act of 2024” by Senators Ted Cruz and John Thune, the following statement may be attributed to Free State Foundation President Randolph May:

“While the Free State Foundation doesn’t support or oppose specific legislation, I applaud Senators Cruz and Thune for introducing their spectrum bill. It has important features that, if adopted, will help ensure the United States does not lose its leadership position in wireless, especially in 5G. Today, spectrum is a key part of the nation’s broadband infrastructure — just like cables and wires. The Cruz-Thune bill would reestablish the FCC’s lapsed auction authority, and it would require that a considerable amount of mid-band spectrum be reallocated for commercial use and be made available by specific dates. The pipeline established would include a much-needed supply of licensed spectrum, while not ignoring the need for more unlicensed spectrum, which also is an increasingly important part of the broadband infrastructure.

No doubt there may be different views regarding the specific dates and amounts identified for reallocation contained in the bill. But there should be widespread agreement that it provides a good basis for moving forward promptly to develop a bipartisan, bicameral plan to address the nation’s now-lagging spectrum efforts."   

Sen. Ted Cruz Offers Eight Principles for USF Reform

On March 6, Sen. Ted Cruz released a white paper, "Protecting Americans from Hidden FCC Tax Hikes: A Blueprint for Universal Service Fund Reform." Credit due to Sen. Cruz for addressing the need for reforming the USF Program. The white paper puts forth Sen. Cruz's priorities for overhauling and updating the USF system to work more efficiently at connecting those who need it while protecting consumers from over taxation and wasteful spending. Sen. Cruz's white paper includes a list of eight principles to guide USF reform that merit careful attention. Those principles also are provided in a press release:

1. Put Congress back in the driver’s seat;
2. Move social welfare spending on-budget;
3. Eliminate program duplication;
4. Stop subsidizing networks that face unsubsidized competition;
5. Do not subsidize Infrastructure Investment and Jobs Act-funded (IIJA) networks’ ongoing operational costs;
6. Target low-income subsidies to those who truly need them;
7. Ensure E-Rate is truly improving education and not aggravating kids’ screen addictions;
8. Establish better controls to stop waste, fraud, and abuse.

Among other things, Sen. Cruz's white paper insists that USF distribution reform should come before contribution reform, or else the program will continue to expand and further burden consumers. It also addresses the FCC's recent expansion of the Lifeline program to include subsidies for Wi-Fi equipment on public school buses. Free State Foundation President Randolph May and I address this subject in our February 2024 Perspectives from FSF Scholars, "FCC's School Bus Wi-Fi Subsidy Lacks Statutory Support."

 

USF reform will be one of the topics to be discussed at FSF's Sixteenth Annual Policy Conference – #FSFConf16 – which will take place in Washington DC on March 12. There still is time to register online. 

One week from today! #FSFConf16! Register Now!

FREE STATE FOUNDATION Sixteenth Annual Policy Conference

One of the nation's premier policy conferences!   REGISTER NOW! This Keynote Session Will Become  the Inaugural Videocast of  "TMT With Mike O’Rielly"!

WHAT: FSF's Sixteenth Annual Policy Conference

 

WHERE: National Press Club, Washington, DC

 

WHEN: March 12, 2024 – 9:00 AM - 2:30 PM

 

The Free State Foundation will hold its Sixteenth Annual Policy Conference on March 12, 2024, at the National Press Club in Washington, DC. This annual conference is widely acknowledged to be one of the nation's premier law and policy events.

 

As always, a truly outstanding lineup of senior officials and prominent experts from the FCC, other government agencies, industry, academia, and think tanks will discuss and debate the most important communications and Internet policy issues of the day. Topics will include net neutrality, broadband subsidies, ACP extension, USF reform, spectrum reform, the First Amendment and free speech, AI, and more!

Confirmed Speakers Include:

Robert Branson – President and CEO, Multicultural Media, Telecom and Internet Council (MMTC)

Brendan Carr – Commissioner, Federal Communications Commission

David Chorzempa - Vice President & Associate General Counsel, AT&T

Mignon Clyburn - Former Commissioner, Federal Communications Commission, and Principal, MLC Strategies, LLC

Michelle Connolly - Professor of the Practice, Economics Department, Duke University, and member of the Board of Academic Advisors of the Free State Foundation

Seth Cooper – Director of Policy Studies and Senior Fellow, Free State Foundation

David Don - Senior Vice President, Public Policy, Comcast Corporation

Paul Gallant - TD Cowen’s TMT Policy Analyst

Scott Harris – Senior Spectrum Advisor, National Telecommunications and Information Administration (NTIA)

Blair Levin – Non-Resident Senior Fellow, Brookings Metro, and Policy Analyst, New Street Research

Andrew Long – Senior Fellow, Free State Foundation

Randolph May – President, Free State Foundation

Michael O’Rielly – Former Commissioner, Federal Communications Commission, and Adjunct Senior Fellow, Free State Foundation

Jeffrey Rosen - Former Acting Attorney General and Deputy Attorney General of the United States

Nathan Simington – Commissioner, Federal Communications Commission

 

Registration is complimentary, including continental breakfast and lunch. But space is always limited. You must register to attend!

 

This is an in-person event only!

 

Register Now!

 

#FSFConf16