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Money for Something: Music Licensing in the 21st Century

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Money for Something: Music Licensing in the 21st Century

January 29, 2016April 6, 2018 (R43984)
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Contents

Summary

Taylor Swift made headlines around the world when she pulled her entire catalog of recorded music from the digital steaming service Spotify in November 2014. She reportedly felt that Spotify devalued her music by making her entire albums available on its free service. As a songwriter, a composer, and a singer, Ms. Swift is entitled

Summary

Songwriters and recording artists are legally permitted to get paid for (1) reproductions and public performances of the notes and lyrics she createsthey create (the musical works), as well as (2) reproductions, distributions, and certain digital performances of the recorded sound of her voicetheir voices combined with the instruments (the sound recordings). The amount Ms. Swift gets paid for her musical works and sound recordingsthey get paid, as well as their control over their music, depends on market forces, contracts among a variety of private-sector entities, and federal laws governing copyright and competition policy.

The laws that determine who pays whom in the digital world were written, by and large, at a time when music was primarily performed via radio broadcasts orCongress first enacted laws governing music licensing in 1909, when music was primarily distributed through physical media (such as sheet music and phonograph records), and when each of these forms of music delivery represented a distinct channel with unique characteristics. With the emergence of the Internet, Congress updated some copyright laws in the 1990s. It applied one set of legal provisions to digital services it viewed as akin to radio broadcasts and another set to digital services it viewed as akin to physical media. Since that time consumers have increasingly been consuming music via digital services that incorporate attributes of both radio and physical media. However, companies that compete in enabling consumers to access music may face very different costs to license music, depending on the technology they use and the features they offer. These differences in technology and features also affect the amount of money received by songwriters, performers, music publishers, and record companies.

U.S. copyright law allows performers and record labels to collectively designate an agent to receive payments and to negotiate the licensing fees that certain types of digital music services must pay to stream music to their customers. Groups representing public radio and educational stations reached voluntary agreements with the agent, SoundExchange, in 2015. Rates paid by parties that do not reach voluntary agreements with SoundExchange during a limited negotiation period are instead set by the Copyright Royalty Board (CRB), a panel of three judges appointed by the Librarian of Congress.

On December 16, 2015, the CRB set rates for online music streaming services for the period 2016 through 2020. For nonsubscription services, the CRB reduced the per-stream rate it had set in the previous rate proceeding, but the costs paid by several "small" music streaming services are likely to increase. Advocates of the small streaming services have launched a petition asking Congress to either allow their previous agreements to continue indefinitely or discontinue the requirement that small streaming services pay royalties to performers and record labels. SoundExchange has objected that the rates set by the CRB do not provide adequate compensation to performers and record labels.

Members have introduced several bills in the 114th Congress that would change the amounts various participants in the music industry pay or receive in royalties. These bills are controversial, as they could alter the cost structures and revenues of broadcast radio stations, songwriters, performers, and others at a time when the music industry's overall revenues are not growing. At the same time, the U.S. Department of Justice (DOJ) is continuing a review of consent decrees it entered into with music publishers in the 1940s. The outcome could affect the extent to which songwriters can control the use of their works.

Money for Something: Music Licensing in the 21st Century

Introduction

Taylor Swift made headlines around the world when she, in conjunction with other holders of rights to her music, pulled her entire catalog of music from the digital steaming service Spotify in November 2014.1 As a songwriter, a composer, and a singer, Ms. Swift is entitled under federal law to get paid for (1) reproductions, distributions, and performances of the notes and lyrics she creates (musical works), as well as (2) reproductions, distributions, and certain digital performances of the recorded sound of her voice combined with the instruments (sound recordings). Reportedly, Spotify and Ms. Swift reached an impasse when Spotify declined to prevent listeners to its free, advertising-supported service from accessing her music, while still making Ms. Swift's music available to the paying subscribers of its Spotify Premium Service.2

Yet Ms. Swift does not have total control over her music. For example, a version of her album 1989 recorded by the artist Ryan Adams can be heard on Spotify, because copyright law allows Mr. Adams to reproduce and distribute Ms. Swift's musical works under certain conditions as long he pays Ms. Swift a royalty.3 Thus, as a singer who owns the rights to her sound recordings, Ms. Swift can withdraw her own recorded music from Spotify, but as a songwriter she cannot dictate how the music service uses other recorded versions of her musical works.

The amount Ms. Swift gets paid for both her musical works and such as sheet music and phonograph records. At the time, some Members of Congress expressed concerns that absent a statutory requirement to make musical works widely available, licensees could use exclusive access to musical works to thwart competition. The U.S. Department of Justice (DOJ) expressed similar concerns in the 1940s, when it entered into consent decrees requiring music publishers to license music to radio broadcast stations.

As technological changes made it possible to reproduce sound recordings on tape cassettes in the late 1960s and in the form of digital computer files in the 1990s, Congress extended exclusive reproduction and performance rights to sound recordings as well. Many of the laws resulted from compromises between those who own the rights to music and those who license those rights from copyright holders. In some cases, the government sets the rates for music licensing, and the standards that it uses reflect those compromises among interested parties.

As consumers have purchased fewer albums over the last 20 years, overall spending on music has declined. Nevertheless, as streaming services that incorporate attributes of both radio and physical media have entered the market, consumer spending has increased during the last two years. In 2016, for the first time ever, streaming and other digital music services represented the majority of the recorded music industry's revenues. As these services have proliferated and the number of songs released has increased, it has become more difficult to ensure that the various copyright holders are paid for their musical works and their sound recordings. Performers, songwriters, producers, and others have complained that in some cases current copyright laws make it difficult to earn enough money to support their livelihoods and create new music. In addition, several songwriters and publishers have sued music streaming services, claiming that the services have streamed their songs while making little effort to locate and pay the rights holders.

Several bills related to music licensing are pending in the 115th Congress. Among the goals of these various bills is to make it easier for licensees to locate and pay music rights holders, to reduce the licensees' risk of being sued for unauthorized uses of songs, to make it less expensive for rights holders to sue for minor claims of infringement, and to revise the criteria the government uses to set royalty rates.

Money for Something: Music Licensing in the 21st Century

Introduction

Songwriters are legally permitted to get paid for reproductions and public performances1 of the notes and lyrics they create (the musical works). Recording artists are legally permitted to get paid for reproductions, distributions, and certain digital performances of the recorded sound of their voices combined with instruments in some sort of medium, such as a digital file, record, or compact disc (the sound recordings).

Yet these copyright holders do not have total control over their music. For example, although Taylor Swift and her record label, Big Machine, withdrew her music from the music streaming service Spotify in 2014,2 a cover version of her album 1989 recorded by the artist Ryan Adams could be heard on the service.3 Copyright law allows Mr. Adams to perform, reproduce, and distribute Ms. Swift's musical works under certain conditions as long as he pays Ms. Swift a royalty.4 Thus, as a singer who owns the rights to her sound recordings, Ms. Swift can withdraw her own recorded music from Spotify, but as a songwriter who owns the rights to her musical works, she cannot dictate how the music service uses other recorded versions of her musical works.

The amount Ms. Swift gets paid for both her musical works and her sound recordings depends on market forces, contracts among a variety of private-sector entities, and federal laws governing copyright and competition policy. Congress wrote these laws, by and large, at a time when consumers primarily accessed music via radio broadcasts or physical media, such as sheet music and phonograph records, and when each medium offered consumers a distinct degree of control over which songs they could hear next.

With the emergence of music distribution on the Internetinternet, Congress updated some copyright laws in the 1990s. It attempted to strike a balance between combattingcombating unauthorized use of copyrighted content—a practice some refer to as "piracy"—and protecting the revenue sources of the various playersparticipants in the music industry. It applied one set of copyright provisions to digital services it viewed as akin to radio broadcasts, and another set of laws to digital services it viewed as akin to physical media. Since that time, however, music distribution has changed further, as online streaming of radio broadcasts and downloading of recorded albums have been joined by services that stream individual songs to subscribers under a variety of business modelscontinued to evolve. In addition to streaming radio broadcasts ("webcasting") and downloading recorded albums or songs, consumers can stream individual songs on demand via music streaming services. The result, as the U.S. Copyright Office has noted, has been a "blurring of the traditional lines of exploitation."4 In the meantime, the courts have been interpreting how to apply 20th-century copyright laws to a 21st-century music marketplace.

These controversies have arisen in an environment of declining consumer spending on music. Since 1999, when the Napster file-sharing service was introduced, annual spending on music by U.S. consumers, adjusted for inflation, has fallen by two-thirds (see Figure 1).5 Consumers are substituting the purchasing of albums and songs with the streaming of subscription and free online music services. Sorting out who is owed what money has become increasingly complex, and increasingly critical to performers, songwriters, record companies, and music publishers in a generally difficult business environment5 Figure 1 illustrates the evolution of music consumption over the last 40 years. In 1999, recording industry revenues reached their peak of $21.3 billion. That same year, the free Napster peer-to-peer file-sharing service was introduced.6

In 2003, after negotiating licensing agreements with all of the major record labels, Apple launched the iTunes Music Store to provide consumers a legal option for purchasing individual songs online.7 The year 2012 marked the first time the recording industry earned more from retail sales of digital downloads ($3.2 billion) than from physical media such as compact discs, cassettes, and vinyl records ($3.0 billion).8 Apple had approximately a 65% market share of digital music downloads.9

After peaking in 2012, however, sales from digital downloads began to decline, as streaming services such as Spotify, which entered the U.S. market in 2011, became more popular.10 Facing a mounting threat to its iTunes store, Apple launched its own subscription streaming music service, Apple Music, in 2015.11

The popularity of these two subscription music services has significantly altered music consumption patterns. According to the Recording Industry Association of America (RIAA), the proportion of total U.S. recording industry retail spending coming from webcasting, satellite digital audio radio services and cable services (digital subscriptions), and streaming music services increased from about 9% in 2011 (out of $7.6 billion total) to about 67% in 2017 (out of $8.5 billion total). After 11 consecutive years of declining revenues, consumer spending on music was flat between 2014 and 2015, grew 10% between 2015 and 2016, and grew 14% between 2016 and 2017.12 Nevertheless, annual spending on music by U.S. consumers, adjusted for inflation, is still nearly two-thirds below its 1999 peak.13 These changing consumption patterns affect how much performers, songwriters, record companies, and music publishers get paid for the rights to their music.

Figure 1. Trends in Consumer Spending on Music

Source: CRS analysis of Recording Industry Association of America Shipment Database.

Notes: Inflation adjustments based on U.S. Bureau of Labor Statistics Consumer Price Index. Figures do not include consumer spending on live concerts. Revenues from digital subscriptions and streaming include wholesale revenues earned by record labels and artists from licensing, rather than retail consumer spending.

Overview of Legal Framework

Under copyright law, creators of musical works, and artists who record them,musical works have certain legal rights to their works. They typically license those rights to third parties, which, subject to contracts, may exercise the rights on behalf of the composer, songwriter, or performer.

Reproduction and Distribution Rights

Owners of musical works and owners of certain sound recordings possess, and may authorize others to exploit, several exclusive rights under the Copyright Act, including the following:6

  • 14the right to reproduce the work (e.g., make multiple copies of sheet music or digital files) (17 U.S.C. §106(1))
  • the right to distribute copies of the work to the public by sale or rental (e.g., sell copies of sheet music in stores, or sell copies of digital files on iTunes or Google Play) (17 U.S.C. §106(3))

In the context of music publishing, the combination of reproduction and distribution rights is known as a "mechanical right."15 This term dates back to the 1909 Copyright LawAct, when Congress required manufacturers of piano rolls and records to pay music publishing companies for the right to mechanically reproduce musical compositions.716 As a result, music publishers began issuing "mechanical licenses" to, and collecting mechanical royalties from, piano-roll and record manufacturers.817 While the means of transmittingreproducing music have gone through numerous changes since, including the production of vinyl records, cassette tapes, and compact discs (CDs), and digital copies of songs, the term "mechanical rights" has stuck. For sound recordings, reproductions18 For sound recordings, federal copyright protection of reproduction and distribution rights applyapplies only to recordings originally made permanent, or "fixed,"919 after February 15, 1972.20 Works that were fixed prior to this date are protected, if at all, pursuant to a patchwork of state laws and court cases.10 In 2015, the Recording Industry Association of America reached agreements with Pandora Media, Inc. (which operates the Pandora online music service) and Sirius XM Holdings Inc. (which operates the SiriusXM satellite service) on fees for their use of pre-1972 sound recordings.11

until February 15, 2067,21 but some music services have voluntarily negotiated agreements to pay royalties for use of sound recordings fixed prior to 1972.22

Public Performance Rights

The Copyright Act also gives owners of musical works and owners of sound recordings the right to "perform" works publicly (17 U.S.C. §106(4) and 17 U.S.C. §106(6), respectively). However, for sound recordings, this right applies only to digital audio transmissions. Examples of digital audio transmission services include the SiriusXM satellite service,webcasting, digital subscription services (the SiriusXM satellite digital radio service and the Music Choice cable network), and onlinemusic streaming services such as Pandora and Spotify.

Rights Required

Who pays whom in the digital world depends in part on the means by which people consume As with sound recording reproduction and distribution rights, federal copyright laws for sound recording performance rights apply only to recordings fixed after February 15, 1972.23 Rights Required Who pays whom, as well as who can sue whom for copyright infringement, depends in part on the mode of listening to music. Consumers of compact discs purchase the rights to listen to each song on the disc as often as they wish (in a private setting). Rights owners of sound recordings (record labels and artists) must) pay music publishers for the right to record and distribute theirthe publishers' musical works in a physical format (such as a CD or vinyl record) or digital download.12 Retail outlets that sell CDs or digital files of sound recordings pay record labels for distribution rights, and the record labels in turn pay the music publishers fees based on retail sales.13

24 Retail outlets that sell digital files or physical copies of sound recordings pay the distribution subsidiaries of major record labels, which act as wholesalers.25

Radio listeners have less control over when and where they listen to a song than they would if they purchased the song outright. The Copyright Act does not require broadcast radio stations to pay public performance royalties to record labels and artists, but it does require them to pay public performance royalties to music publishers and songwriters for notes and lyrics in broadcast music.14 As described below in "Broadcast Radio Exception," Congress appears to have concluded in 1995 that the promotional value of broadcast radio airplay outweighs any revenue lost by record labels and artists. (See also "Webcaster Settlement Acts.")

Digital services need tomust pay record labels as well as music publishers for public performance rights. In practice, artists and record labels get most of the performance royalty from digital services, while music publishers and songwriters get only a small fraction.15

Users of an "on demand," or "interactive," digital radioBoth traditional broadcast radio stations and music streaming services that limit the ability of users to choose which songs they hear next (noninteractive services) make temporary copies of songs in the normal course of transmitting music to listeners.26 These temporary copies, known as "ephemeral recordings," fall under 17 U.S.C. Section 112. (For more on ephemeral recordings, see "Reproduction and Distribution Licenses.") Users of an "on demand," or "interactive," music streaming service can listen to songs upon request, an experience similar in some ways to playing a CD and in other ways to listening to a radio broadcast. To enable multiple listeners to select songs, the service reproduces digital files on its servers. It pays royalties to music publishers/songwriters for the right to reproduce and distribute the musical works and royalties to record labels/artists for the right to make temporary reproductions of sound recordings.16 In addition, interactive digital services must services download digital files to consumers' devices. These digital reproductions are known as "conditional downloads," because consumers' ability to listen to them upon request is conditioned upon remaining subscribers to the interactive services.27 The services pay royalties to music publishers/songwriters for the right to publicly "perform"reproduce and distribute the musical works and royalties to record labels/artists for the right to publicly performmake reproductions of sound recordings.

28

How the Industry Works

From the viewpoint of copyright law, theThe music industry comprises three distinct groupscategories of interests: (1) songwriters and music publishers; (2) recording artists and record labels; and (3) the music licensees who obtain the right to reproduce, distribute, or publicly perform music. Examples of music royalty payers include broadcast radio stations; music retailers; digital music streaming services; bars, restaurants, and general retailers; and concert venues and promotersSome entities may fall into multiple categories.

Songwriters and Music Publishers

Music publishers work for songwritersMany songwriters, lyricists, and composers (referred to collectively as "songwriters" in this report). They are responsible for licensing the intellectual property of their clients and ensuring that royalties are collected. Songwriters often contract with publishing companies to administer their musical work copyrights. For example, as a songwriter and composer, Ms. Swift has a contract with a music publisher (Sony/ATV Music Publishing),17 with which she shares the rights to her musical works.

work with music publishers.29 On behalf of songwriters, music publishers promote songs to record labels and others who use music.30 They are also responsible for licensing the intellectual property of their clients and ensuring that royalties are collected. Under agreements between a songwriter and a publisher, the publisher may pay an advance to the songwriter against future royalty collections to help finance the songwriter's compositions. In exchange, the songwriter assigns a portion of the copyright in the compositions he or she writes during the term of the contract. The publisher's role is to monitor, promote, and generate revenuesrevenue from the use of music in formats that require mechanical licensing rights, including sheet music, compact discs, digital downloads, ringtones, interactive streaming services, and broadcast radio. Publishers often contract with performing rights organizations to license and collect payment for public performances on their behalf. (See "ASCAP and BMI Consent Decree Reviews.")

Songwriters and publishers derive royalty income at each step, but may need to share this income with sub-publisherssubpublishers and coauthors. For songwriters who are entering the music industry, the contract terms are generally standardized, with about a 50-50 division of income between the publisher and songwriter. Some songs have multiple songwriters, each with his or her own publisher, complicating the division of money.18

Within the United States, the music publishing industry earned about $4.3 billion in revenues and $628.6 million in profits during 2015, according to IBIS, a research firm. Three firms account for about 37.4% of the publishing industry's revenues: (1) Sony/ATV Music Publishing (19.231

Music publishers fall into four general categories:32

1. Major Publishers. The three major publishing firms account for about 53.2% of U.S. music publishing revenue: (1) Sony/ATV Music Publishing (25.5%), (2) Universal Music Publishing Group (12.222.4%), and (3) Warner Music Group (5.03%).33
  • 2. Major Affiliates. These independent publishing companies handle the creative aspects of songwriting management (matching writers with performing artists and record labels and helping them fine-tune their skills), while affiliating with a major publisher to handle the administration of royalties.
  • 3. Independent Publishers. These firms administer their own catalogs of music, and are not affiliated with major publishers.
  • 4. Writer-Publishers. Some songwriters control their own publishing rights. Examples are well-established songwriters who do not need help marketing their songs to performers and record labels, and songwriters who perform their own works. Writer-publishers may hire individuals, in lieu of companies, to administer their royalties.
    • Recording Artists and Record Labels

    Record labels are responsible for finding musical talent, recording their work, and promoting the artists and their work. In addition, the parent companies of the three largest record labels (known as "majors") reproduce and distribute physical copies of sound recordings (compact discs and vinyl records) as well as electronic copies (MP3 files).34 The major labels have large distribution networks. Traditionally, these networks moved physical recordings from manufacturing plants into retail outlets.35

    The distribution role of record labels is changing. Although the decline in consumption of physical recordings has alleviated the need to operate warehouses, the labels perform many functions with respect to selling digital copies of songs. Such functions include adding data to each recording to identify the parties entitled to royalties and keeping track of payments. In addition, they negotiate with the streaming services for the rights to use the sound recordings and monitor the sales and streaming of songs.

    Similar to songwriters, recording artists may contract with a record label or retain their copyrights and distribute their own sound recordings. Recording contracts    %).19 After several years of growth, revenues of the music publishing industry declined between 2008 and 2010, and have been relatively flat since then (see Figure 2).

    Figure 2. U.S. Music Publishing Industry Revenue Trends

    Source: 2015 IBISWorld Music Publishing Report.

    Note: Figures not adjusted for inflation.

    IBIS predicts that over the next five years, as digital distribution becomes more prevalent, established songwriters may find it unnecessary to remain aligned with music publishers, and newer songwriters may be reluctant to sign long-term publishing contracts.20

    Recording Artists and Record Labels

    Record labels are responsible for finding musical talent, recording their work, and promoting the artists and their work. For example, as a performer, Ms. Swift has a contract with a record label (Big Machine Records, which has a partnership with Universal Music Group),21 with which she shares the rights to her sound recordings.

    Recording contracts (especially with the major labels—Sony Corporation, Warner Music Group, and Universal Music Group) generally require recording artists to transfer their copyrights to the record label for defined periods of time and defined geographic regions.2236 In return, the recording artist receives a share of royalties from sales and licenses of the sound recording. Record companies also finance recordings of music, lend and advance artists funds foradvance funds to artists to cover expenses, and attempt to guide the artists' careers.23 The record companies earn most of their profits from sales of a relatively small number of hit recordings.

    37 Major stars who have proven their earning potential may be able to negotiate full ownership of copyrights to future sound recordings.38

    Recording artists also work with independent producers to select material and a musical style.24and record material.39 Independent producers and independent labels often work with artists as subcontractors for major record companies under a variety of financial arrangements.2540 Technological innovations have enabled producers to "play with" and reimagine songs written by others, leading to a blurring of the lines between producers and traditional composers.26 41 (For information about proposed legislation addressing how producers get compensated for their work, see "Bills Introduced in the 114th115th Congress."

    )

    The three major record labels earned about 4265% of the industry's revenuesU.S. revenue: (1) Sony Corporation (1114.4%), (2) Universal Music Group (12.829.4%), and (3) Warner Music Group (17.5%).27 These companies collectively earned about $6.9 billion in revenues and $397.8 million in profits from their recording businesses during 2015.28 While there are many smaller record labels, few are truly independent, because they often rely on larger record companies for initial financing, manufacturing (at least of CDs), and distribution of sound recordings.29

    Music Licensees

    A very large number of entities, from neighborhood bars to broadcast radio stations, "perform" copyrighted musical works for the public. Such entities must pay royalties to copyright holders. The types of royalty payments owed and the way those payments are determined vary considerably, depending mainly upon the way a particular entity is treated under copyright law.

    How Copyright Works

    Songwriters and Music Publishers

    Reproduction and Distribution Licenses (Mechanical Licenses)

    Congress passed the first federal copyright act in 1790.30 The act did not expressly protect musical compositions ("musical works"), but composers and songwriters could protect their works by registering them as "books." In 1831 Congress amended the law to expressly protect musical works printed and sold as sheet music.31 With the 1909 Copyright Act, Congress added an exclusive right to make "mechanical" reproductions of songs in "phonorecords."32 At the time, this exclusive right of mechanical reproduction applied to music in player pianos.

    By 1909, however, Congress was concerned about allegations that one player piano manufacturer—the Aeolian Company—was seeking to create a monopoly by buying up exclusive rights from music publishers.33 To address this concern, Congress established the first compulsory license in U.S. copyright law,34 requiring music publishers to make mechanical reproductions of their works available to all piano player manufacturers at 2 cents per "part manufactured," regardless of how many piano rolls were actually sold.

    As technology developed, both mechanical rights and this rate of 2 cents per record subsequently applied to music distributed via vinyl records, cassette tapes, and compact discs. Prior to Congress's adoption of the 1976 Copyright Act, the Register of Copyrights had proposed eliminating the compulsory license, but record companies, which pay music publishing companies for the right to reproduce the musical works in physical (and now digital) media, opposed the proposal. They argued that recording artists needed unhampered access to musical material on nondiscriminatory terms, and that repeal would result in a great upheaval in the sound recording industry with no benefit to the public. The music publishers countered that the compulsory licensing scheme was no longer necessary to meet the antitrust problems that existed in 1909. While they much preferred outright repeal of a compulsory license, they were willing to compromise by accepting a higher royalty rate in lieu of repeal.35

    Congress ultimately concluded in 1976 that the compulsory licensing system was still warranted, but, based on the prevalence of records that offered multiple songs (i.e., albums), directed the Copyright Office to apply the rate on a per-song basis instead of a per-record basis.36 This enabled music publishers to earn more money from each record sale. Although Congress has amended the law several times, this compulsory license remains in effect today. In the Copyright Act of 1976, Congress recodified the compulsory license in 17 U.S.C. Section 115. The 1976 Copyright Act raised the statutory rate, which had originally been set in 1909, from $0.02 per record37 to the greater of (a) $0.275 per song embedded in each record or (b) $0.005 cents per minute of playing time, or fraction thereof.38 The increase became effective on January 1, 1978. Congress also created a tribunal (consisting of five commissioners appointed by the President) to adjust the royalty rates thereafter.39 After replacing the tribunal with an arbitration panel in 1993, Congress established the Copyright Royalty Board (CRB) in 2004.40

    The CRB, which is composed of three administrative judges appointed by the Librarian of Congress, establishes the royalty rates that licensees pay publishers and songwriters for the mechanical rights to their works, unless such rates are voluntarily negotiated between a copyright owner and a user.41 The CRB sets rates every five years for Section 115 licenses, as required by the Copyright Act.42 While copyright owners and users are free to negotiate voluntary licenses that depart from the statutory rates and terms, the CRB‐set rate effectively acts as a ceiling for what the owner may charge.43 The CRB establishes rates for Section 115 licenses based on policy objectives set forth in Section 801(b)(1) of the 1976 Copyright Act.44

    In 1995, Congress enacted the Digital Performance Rights in Sound Recordings Act (DPRSRA).45 Among other provisions, this act amended 17 U.S.C. §115 to expressly cover the reproduction and distribution of musical works by digital transmission (digital phonorecord deliveries, or DPDs).46 Congress directed that rates and terms for DPDs should distinguish between "(i) digital phonorecord deliveries where the reproduction or distribution of a phonorecord is incidental to the transmission which constitutes the digital phonorecord delivery, and (ii) digital phonorecord deliveries in general."47 This distinction prompted an extensive debate about what constitutes an "incidental DPD." For several years, the Copyright Office deferred moving forward on a rulemaking, urging that Congress resolve the matter. In July 2008 the Copyright Office proposed new rules, determining that "[while] it seems unlikely that Congress will resolve these issues in the foreseeable future ... the Office believes resolution is crucial in order for the music industry to survive in the 21st Century."48

    In November 2008, the Copyright Office, recognizing that streaming services make and store reproductions of musical works on computer servers to facilitate streaming, concluded that these services could utilize the Section 115 compulsory licensing process.49 The Copyright Office declined to specify whether the temporary reproductions of musical works were an interim step in public performances (making some streaming services akin to noninteractive digital services described in Section 112), or a reproduction and distribution that required mechanical licenses (making some streaming services akin to compact discs and permanent digital downloads).

    In 2009 and again in 2013, the CRB established the statutory rates and terms that interactive streaming services must pay for mechanical licensing based on an agreement negotiated among representatives of music publishers and songwriters, record labels, and the streaming services.50

    The CRB rate proceedings for setting royalty fees for mechanical licenses of musical works are separate from those for public performance licenses of sound recordings. When Congress originally established compulsory license rate proceedings in 1976, the House Judiciary Committee explained that it chose to stagger the various rate-setting proceedings in order to balance the workload of (what is now) the CRB.51

    Interactive streaming services, including Spotify, obtain both mechanical and privately negotiated public performance licenses (described in "Musical Work Public Performance Royalties") for the musical works they use. Noninteractive services such as Pandora, however, do not pay mechanical royalties to music publishers. In its annual report for 2014, Pandora Media, Inc. stated the following:

    We do not currently pay so-called "mechanical royalties" to music publishers for the reproduction and distribution of musical works embodied in server copies or transitory copies used to make streams audible to our listeners. Although not currently a matter of dispute, if music publishers were to retreat from the publicly stated position of their trade association that non-interactive streaming does not require the payment of a mechanical royalties, and a court entered final judgment requiring that payment, our royalty obligations could increase significantly, which would increase our operating expenses and harm our business and financial conditions.52

    According to the Copyright Office, interactive streaming services represent only a small percentage of mechanical royalties received by music publishers.53

    Table 1 describes the rates that manufacturers and distributors of different types of media pay music publishers for mechanical rights. There are currently 17 distinct categories of media and services under the Section 115 license, each with its own specific rate. Under the current regime, at the outset of a rate-setting proceeding, parties must identify every "business model" that might be relevant in the next five years so the CRB can establish a rate for that use. The rates that interactive services pay the publishers are tied to the rates that the services pay record labels for performance rights, which are negotiated in the free market. According to National Music Publishers Association president David Israelite, "If they get a better deal, we get a better deal."54

    21.2%).42 Each of these labels shares a corporate parent with one of the major music publishers described in "Songwriters and Music Publishers" (Sony Corporation, Vivendi SA, and Access Industries, respectively). The publishing and recording divisions of parent companies may not necessarily both publish and record the same song.

    While there are many smaller record labels specializing in genres such as country or jazz, few are truly independent, because they often rely on major record labels for the distribution of sound recordings.43 For example, Ms. Swift has a recording contract with an independent record label, Big Machine Records, which in turn has a distribution agreement with Universal Music Group.44

    One recording artist who retains his copyrights and successfully distributes his own music, without signing a contract with the record label, is Chance the Rapper. Generally, instead of selling his music, Chance gives it away for free and earns money from touring and selling merchandise.45 The music streaming service Apple Music reportedly paid him $500,000 in exchange for being the exclusive outlet for his streaming-only album, Coloring Book.46 In May 2016, it became the first streaming-only album to rank among the 10 most popular U.S. albums during a week, as ranked by the trade publication Billboard.47

    How Copyright Works Songwriters and Music Publishers Reproduction and Distribution Licenses (Mechanical Licenses)

    With the 1909 Copyright Act, Congress specifically recognized the exclusive right of the copyright owner to make mechanical reproductions of music.48 The 1909 Copyright Act applied to musical works published and copyrighted after the law went into effect.

    A mechanical license is a license that permits (1) the audio-only reproduction of music in copies that may be heard with the aid of "mechanical" devices such as a player piano, a phonograph record, a CD player, or a smartphone, among other devices; and (2) the distribution of such copies to the public for private use.49

    When Congress considered the 1909 Copyright Act, some Members expressed concern about allegations that a large player-piano manufacturer, the Aeolian Company, was seeking to create a monopoly by buying up exclusive rights from music publishers.50 Aeolian's piano rolls did not work with the player pianos of Aeolian's competitors. Therefore, in order to be able to listen to most popular music, consumers would have to purchase Aeolian player pianos.

    To address this concern, Congress established the first compulsory license in U.S. copyright law.51 A music publisher/songwriter may withhold the right to reproduce a musical work altogether. However, once a sound recording (or player-piano roll) is distributed to the public, a publisher/songwriter must allow others to make similar use of it upon payment of a specified royalty.52 Thus, in 2015, when Ryan Adams recorded a cover version of Taylor Swift's album 1989, Mr. Adams and his record label Pax-Americana Recording Company did not need to seek her permission. Instead, they paid her the rate set by the government for a compulsory mechanical license.53

    The 1909 Copyright Act set the royalty rate at $0.02 per "part manufactured."54 The rate remained in place for nearly 70 years.55 Technological changes during the first half of the 20th century enabled record manufacturers to extend the amount of music on each side of a record from 5 minutes56 to more than 20 minutes,57 the number of songs per record increased, and record labels began paying mechanical royalty rates on a "per song" basis rather than per "part manufactured."58

    Congress revisited the mechanical license in the Copyright Act of 1976, codifying the compulsory license as 17 U.S.C. Section 115. Congress specified that the rates would be payable for each record made and distributed [emphasis added], rather than each record manufactured.59 The 1976 Copyright Act defines the term "phonorecord" to refer to audio-only recordings.60 Since then, Congress has amended the law several times and changed the statutory rate-setting process.

    Notice of Intention (NOI)

    The 1976 Copyright Act also set forth procedures, codified in regulations promulgated by the Register of Copyrights, for licensees of music to obtain mechanical licenses. The licensee must serve a notice of intention (NOI) to license the music on the copyright owner, or, if the copyright owner's address is unknown, the Copyright Office.61 The licensee must file the NOI within 30 days of making the new recording or before distributing it. Licensees that cannot locate copyright owners set aside a pool of money owed until they can locate and pay the owners.62

    The 1976 Copyright Act made it easier for copyright owners to sue in the following two respects:

    • 1. It removed any limitation on liability and provided that a potential licensee who fails to provide the required NOI is ineligible for a compulsory license. If the potential licensee fails to obtain a negotiated license, its making and distribution of records of musical works is infringement under 17 U.S.C. Section 501 and subject to remedies provided by Sections 502-506.63
    • 2. It removed the requirement that copyright holders file a "notice of use" in the Copyright Office in order to recover against an unauthorized record manufacturer.64 Instead, a copyright holder's failure to identify itself to the Copyright Office precludes the holder only from receiving royalties under a compulsory license.65 Thus, under current law, there may be no public record of the fact that the copyright owner made and distributed a copyrighted work and thereby triggered the NOI requirements.66

    In contrast to the performance rights licenses, reproduction and distribution licenses are not issued on a blanket basis.67 As discussed in "Developments and Issues," NOIs and the Copyright Office's present database of musical works have led to controversy between rights holders and licensees.

    Copyright Royalty Board and Ratesetting

    In their 1982 article reviewing the history of the mechanical royalty, Frederick F. Greenman Jr. and Alvin Deutsch state that the idea of adjusting the statutory mechanical royalty rate periodically stemmed from a suggestion by a representative of the National Music Publishers Association (NMPA) in a 1967 hearing, who added that such adjustments should reflect the "accepted standards of statutory ratemaking."68 In testimony in 1975, then Register of Copyrights Barbara Ringer suggested that the complexity of administering the proposed compulsory licenses in addition to the mechanical license could be simplified by establishing a separate royalty tribunal, which would use standards established by Congress to set royalty rates.69

    Congress created such a tribunal, consisting of five commissioners appointed by the President, in the 1976 Copyright Act.70 It also set forth in 17 U.S.C. Section 801(b)(1) four policy objectives for the tribunal to consider when determining the rates for mechanical licenses. These objectives include

    • 1. maximizing the availability of public works to the public,
    • 2. affording copyright owners a fair return on their creative works and copyright users a fair income under existing economic conditions,
    • 3. reflecting the relative contributions of the copyright owners and users in making products available to the public, and
    • 4. minimizing any disruptive impact on the structure of the industries involved and on generally prevailing industry practices.71

    After replacing the tribunal with an arbitration panel in 1993, Congress established the Copyright Royalty Board (CRB) in 2004.72 The CRB, composed of three administrative judges appointed by the Librarian of Congress, sets rates every five years.73 While copyright owners and users are free to negotiate voluntary licenses that depart from the statutory rates and terms, the CRB‐set rate effectively acts as a ceiling for what an owner may charge.74

    Digital Copies and Streaming Services

    In 1995, Congress passed the Digital Performance Right in Sound Recordings Act (DPRA).75 Among other provisions, this act amended 17 U.S.C. Section 115 to expressly cover the reproduction and distribution of musical works by digital transmission (digital phonorecord deliveries, or DPDs).76 Congress directed that rates and terms for DPDs should distinguish between "(i) digital phonorecord deliveries where the reproduction or distribution of a phonorecord is incidental to the transmission which constitutes the digital phonorecord delivery, and (ii) digital phonorecord deliveries in general."77 This distinction prompted an extensive debate about what constitutes an "incidental DPD." For several years, the Copyright Office deferred moving forward on a rulemaking, urging that Congress resolve the matter. In July 2008, the Copyright Office proposed new rules, determining that "[while] it seems unlikely that Congress will resolve these issues in the foreseeable future ... the Office believes resolution is crucial in order for the music industry to survive in the 21st Century."78

    CRB Rates

    In September 2008, after nearly seven years of administrative hearings and litigation, groups representing music publishers, the recording industry, songwriters, and music streaming services reached a landmark agreement regarding the applicability of mechanical licenses to streaming.79 Music publishers had feared that as consumers shifted from purchasing music to streaming music on-demand, the revenues they received from mechanical royalties would decline.80 Based on the agreement, in the form of draft regulations to the CRB, music streaming services would pay publishers a percentage of their revenues for interactive streams and limited downloads. In addition, pursuant to the agreement, noninteractive, audio-only streaming services (e.g., Pandora) would not need to obtain mechanical licenses. The CRB adopted a modified version of this agreement in 2009, to apply through 2012.81

    In 2012, groups representing music publishers, the recording industry, songwriters, and online music services reached a new agreement, subject to formal approval by the CRB, setting mechanical royalty rates and standards for five additional categories of music streaming services.82 The CRB subsequently adopted the terms of the agreement to cover rates from 2013 through 2017.83

    In January 2018, the CRB issued its initial determination of mechanical royalty rates and terms for the 2018-2022 period.84 For physical phonorecord deliveries (e.g., compact discs and vinyl records) and permanent digital downloads, licensees pay a flat rate (e.g., either 9.1 cents per song or 1.75 cents per minute of playing time or fraction thereof, whichever amount is larger).85

    For interactive streaming, the rates are based on a set of formulas, taking into account the music service's revenues or total costs of licensing content (including the cost of licensing sound recording). Using the formulas, the services calculate the pool of money available for distribution to publishers for mechanical royalty payments. The amount of money each publisher receives for each song is based on another set of formulas. The rate formulas also set minimum per-subscriber payments, depending on the category of interactive music service. During free trial periods (e.g., during a three-month trial subscription to Apple Music), the mechanical royalty rate is zero. Harry Fox Agency and Music Reports, Inc.

    In the United States, music publishers collect mechanical royalties from recorded music companies and streaming services via third-party administrators. The two major administrators are the Harry Fox Agency, a nonexclusive licensing agent, and Music Reports, Inc. After charging an administrative fee, these agencies distribute the mechanical royalties to the publishers, which in turn distribute them to songwriters. In September 2015, the performing rights organization Society of European Stage Authors and Composers (SESAC) acquired the Harry Fox Agency from the National Music Publishers Association trade organization.5586 (For a description of SESAC and other performing rights organizations, see "Musical Work Public Performance Royalties.") Music publishers may also issue and administer mechanical licenses themselves.56

    87 Musical Work Public Performance Royalties

    Depending on who collects public performance royalties on behalf of publishers and songwriters, the rates are either subject to oversight by the U.S. District Court for the Southern District of New York or are based on marketplace negotiations between the publishers and licensees.

    Congress granted songwriters the exclusive right to publicly perform their works in 1897.88 Thus, in order to legally publicly perform songwriters' works, establishments that featured orchestras and bands, operas, concerts, and musical comedies needed to obtain permission from songwriters and/or publishers.89 While this right represented a way for copyright owners to profit from their musical works, the sheer number and fleeting nature of public performances made it impossible for copyright owners to individually negotiate with each user for every use or to detect every case of infringement.90

    To address the logistical issue of how to license and collect payment for public performances in a wide range of settings, several composers formed the American Society of Composers, Authors and Publishers (ASCAP) in 1914.91 ASCAP is known as a performance rights organization (PRO). Songwriters and publishers assign PROs the public performance rights secured by copyright law; the PROs in turn issue public performance licenses on behalf of songwriters and publishers.92 Most commonly, licensees obtain a blanket license, which allows the licensee to publicly perform any of the musical works in a PRO's catalog for a flat fee or a percentage of total revenues. After charging an administrative fee, PROs split the public performance royalties they collect among the publishers and songwriters.

    In 1930, an immigrant musician founded a competing PRO, SESAC (originally called the Society of European Stage Authors and Composers), to help European publishers and writers collect royalties from U.S. licensees.93 As broadcast radio grew more popular in the United States, SESAC expanded its representation to include U.S. composers as well.

    Growth in radio, as well as declining sales in sheet music and other traditional revenue sources for publishers, also prompted action from ASCAP.94 In 1932, ASCAP negotiated a public performance license with radio broadcasters that, for the first time, established rates based on a percentage of each station's advertising revenues.95 To strengthen their bargaining power vis-à-vis ASCAP, broadcasters in 1939 founded and financed a third PRO, Broadcast Music, Inc. (BMI), with the goal of attracting new composers as members and securing copyrights of new songs.96 In addition, BMI successfully convinced publishers previously affiliated with ASCAP to switch.97 [A fourth PRO, Global Music Rights [GMR], was established in 2013.)

    ASCAP and BMI originally acquired the exclusive right to negotiate on behalf of their members (music publishers and songwriters) and forbade members from entering into direct licensing agreements.98 Both offered music services only blanket licenses covering all songs in their respective catalogs. When the five-year licensing agreement between ASCAP and radio stations affiliated with the CBS and NBC radio networks expired in December 1940, three-quarters of the 800 radio stations then in existence adopted a policy prohibiting the broadcast of songs by composers affiliated with ASCAP due to disagreement over royalty rates.99

    DOJ Consent Decrees

    The dispute between the broadcast stations and the PROs led the U.S. Department of Justice (DOJ) to investigate whether the PROs were violating antitrust laws.100 To avert an antitrust lawsuit threatened by DOJ, BMI agreed to enter a consent decree in 1941.101 After DOJ filed an antitrust lawsuit against ASCAP, ASCAP also agreed to enter a consent decree in 1941.102

    Although the ASCAP and BMI consent decrees are not identical, they share many of the same features. Among those features are requirements that the PROs may acquire only nonexclusive rights to license members' public performance rights; must grant a license to any user that applies on terms that do not discriminate against similarly situated licensees; and must accept any songwriter or music publisher that applies to be a member, as long as the writer or publisher meets certain minimum standards. ASCAP and BMI are also required to offer alternative licenses to the blanket license. Prospective licensees that are unable to agree to a royalty rate with ASCAP or BMI may seek a determination of a reasonable license fee from one of two federal district court judges in the Southern District of New York.

    In contrast to the mechanical right, the public performance of musical works is not bound by compulsory licensing under the Copyright Act. While the rates charged by ASCAP and BMI are subject to oversight by the federal district court judges, pursuant to their respective consent decrees, the rates charged by SESAC and GMR are based on marketplace negotiations.

    When approving of rates charged by ASCAP and BMI, the federal district court must determine that the PROs have demonstrated that the rates are "reasonable."103 According to the U.S. Court of Appeals for the Second Circuit, the federal district court must also consider that ASCAP and BMI exercise "disproportionate power over the market for music rights."104

    Current law, 17 U.S.C. Section 114(i), prohibits the judges from considering rates paid by digital services to record labels and artists for public performances of sound recordings when setting or adjusting public performance rates payable to music publishers and songwriters. This provision was included when Congress created a public performance right for sound recordings transmitted by digital services with the 1995 passage of the DPRA. (See "Sound Recording Public Performance Royalties.")105 According to a report of the House Judiciary Committee, Congress sought to "dispel the fear that license fees for sound recordings may adversely affect music performance royalties."106 Billboard magazine described the concern among writers and publishers as the "pie theory": once digital services began to pay a public performance licensing fee for sound recordings, they might claim that they have less money available to pay for public performances of musical works.107

    Since entering into these consent decrees, DOJ has periodically reviewed their operation and effectiveness. The ASCAP consent decree was last amended in 2001, and the BMI consent decree was last amended in 1994. As described in "ASCAP and BMI Consent Decree Reviews," DOJ completed a review of the consent decrees in 2016. In 2017, the Second Circuit Court of Appeals upheld BMI's challenge to DOJ's interpretation of the consent decrees.

    Recording Artists and Record Labels Reproduction and Distribution Licenses

    Congress first created copyright laws that specifically applied to sound recordings with enactment of the 1971 Sound Recording Act, P.L. 92-140. The prevalence of audiotapes and audiotape recorders in the 1960s made it easier for the public to create and sell unauthorized duplications of sound recordings.108 According to the House Judiciary Committee report, the best solution for combating the trend was to amend federal copyright laws.109

    The 1971 Sound Recording Act applied to sound recordings fixed on or after February 15, 1972. The following year, the U.S. Supreme Court held that neither federal copyright law nor the Constitution preempted California's record piracy law, as it applied to pre-1972 sound recordings.110 Subsequently, several states passed their own antipiracy laws. In 1975, in a hearing leading up to passage of the 1976 Copyright Act, the U.S. Department of Justice recommended that federal copyright laws exclude pre-1972 sound recordings to preserve the antipiracy laws then in effect.111 The House Judiciary Committee also noted that absent such exclusion, many works would have automatically come into the "public domain." A work of authorship is in the "public domain" if it is no longer under copyright protection and therefore may be used freely without the permission of the former copyright owner.

    The 1976 Copyright Revision Act preempted state laws that provided rights equivalent to copyright, but exempted the pre-1972 works from federal protection.112 States may continue to protect pre-1972 sound recordings until 2067, at which time all state protection is to be preempted by federal law and pre-1972 sound recordings are to enter the public domain.

    Recognizing that noninteractive digital services may need to make ephemeral server reproductions of sound recordings, in 1998 Congress established a related license under Section 112 of the Copyright Act specifically to authorize the creation of these copies. The rules governing licenses for temporary reproductions of sound recordings are somewhat analogous to those governing incidental reproduction and distribution of musical works described in Section 115(c)(3)(C)(i).113 The rates and terms of the Section 112 license are established by the CRB. Through SoundExchange, described below in "Sound Recording Public Performance Royalties," copyright owners of sound recordings (usually the record labels) receive Section 112 fees. Recording artists who do not own the copyrights, however, do not.114

    Sound Recording Public Performance Royalties
    Noninteractive Services

    Until the 1990s, the Copyright Act did not afford public performance rights to record labels and recording artists for their sound recordings. Record labels and artists primarily earned income from retail sales of physical products such as CDs. With the inception and public use of the internet in the early 1990s, the recording industry once again became concerned that existing copyright law was insufficient to protect the industry from music piracy.115 Two amendments to the Copyright Act, the Digital Performance Right in Sound Recordings Act (DPRA) in 1995 and the Digital Millennium Copyright Act (DMCA) in 1998, addressed this concern.116

    In the DPRA, Congress granted record labels and recording artists an exclusive public performance right for their sound recordings, but limited this right to certain digital audio services. The DPRA also created a compulsory license that compelled copyright owners to license sound recordings for certain subscription services (e.g., Music Choice's music channels available to cable television subscribers).117 According to Billboard magazine, music publishers and writers were apprehensive that if record companies had the ability to withhold licenses of sound recordings from multiple outlets, they could effectively thwart the ability of publishers and writers to earn their own public performance royalties.118 The provision thus represented a compromise between trade groups representing music publishers and record labels.119

    Within two years after the DRPA's enactment, the Recording Industry Association of America and nonsubscription, advertising-supported, noninteractive streaming service providers debated whether or not (1) the compulsory license applied to those services, and (2) whether the services were obligated to pay public performance royalties for sound recordings.120 After RIAA and a group representing digital music services, Digital Music Association, reached a compromise, Congress adopted the DMCA.

    The DMCA expanded the statutory licensing provisions in Section 114 to cover noninteractive online music services.121 It also set up the following bifurcated system of rate-setting standards for the CRB:

    • Services that existed as of July 31, 1998, prior to the enactment of the DMCA (SiriusXM satellite digital radio service as well as the Music Choice and Muzak subscription services), remained subject to the Section 801(b)(1) standard.
    • Webcasters and other noninteractive music streaming services (including both subscription and advertising-supported music streaming services) that entered the music marketplace after July 31, 1998, are subject to rates and terms "that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller."122

    One key difference between the two rate-setting standards is the Section 801(b)(1) standard's inclusion of the policy goal of "minimizing any disruptive impact on the structure of the industries involved and on generally prevailing industry practices." According to a 2010 report from the Government Accountability Office, this standard led to lower copyright royalty rates in one proceeding, but the overall effect is generally difficult to predict.123 The conference report stated the purpose of applying the Section 801(b)(1) rate-setting standard services in existence prior to July 31, 1998, was to prevent disruption of the services' existing operations.124

    Interactive Services

    The DPRA enabled owners of the rights to sound recordings to negotiate directly with interactive music streaming services for public performance rights at marketplace-determined rates. The term "interactive service" covers only services that enable an individual to arrange for the transmission or retransmission of a specific recording.

    The Senate Judiciary Committee in 1995 explained that

    [C]ertain types of subscription and interactive audio services might adversely affect sales of sound recordings and erode copyright owners' ability to control and be paid for use of their work.... Of all of the new forms of digital transmission services, interactive services are the most likely to have a significant impact on traditional record sales, and therefore pose the greatest threat to the livelihoods of those whose income depends on revenues derived from traditional record sales.125

    Broadcast Radio Exception

    Congress does not require broadcast radio stations to obtain public performance licenses from owners of sound recordings. The Senate Judiciary Committee explained in 1995 that it was attempting to strike a balance among many interested parties. Specifically, the committee stated that

    the sale of many sound recordings and the careers of many performers have benefitted considerably from airplay and other promotional activities provided by ... free over-the-air broadcast ... [and] the radio industry has grown and prospered with the availability and use of prerecorded music. This legislation should do nothing to change or jeopardize [these industries'] mutually beneficial relationship.126

    The Senate Judiciary Committee further distinguished broadcast radio from other services by stating that "free over-the-air broadcasts ... provide a mix of entertainment and non-entertainment programming and other public interest activities to local communities to fulfill a condition of the broadcasters' licenses."127

    Copyright Royalty Board Rate Proceedings

    The CRB sets statutory rates through rate determination proceedings.128 Participants generally include copyright users, copyright holders, and trade or other groups representing their respective interests.129 The proceedings include an initial three-month period during which parties may engage in voluntary negotiations. In the absence of an agreement during that period, participants submit written statements, conduct discovery, and attempt again to reach a negotiated settlement.

    At any time during the rate-setting proceeding, some or all participants may reach agreements regarding what they consider to be appropriate statutory rates. They then submit the proposed rates to the CRB, which in turn publishes the proposed rates to allow potentially affected parties to comment. The CRB may adopt and codify the proposed rates but also has the option to "decline to adopt the agreement as a basis for statutory terms and rates for participants that are not parties to the agreement."130

    If the parties do not reach an agreement, the CRB generally hears live testimony at an evidentiary hearing, and subsequently issues a determination published in the Federal Register. Participants who disagree with the outcome can request a rehearing, which the CRB may choose to grant or deny. In addition, participants may challenge CRB determinations through an appeal filed with the U.S. Court of Appeals for the District of Columbia Circuit.

    SoundExchange

    Congress provided antitrust exemptions to statutory licensees and to copyright owners of sound recordings, such as record labels, so that they could designate common agents to negotiate collectively with webcasters, SiriusXM, pre-existing subscription services, and noninteractive streaming services over royalty rates for public performance rights.131 RIAA established SoundExchange as a designated common agent for the record labels in 2000 and spun it off in 2003 as an independent entity. In 2015, SoundExchange reached agreements with public radio stations and college radio stations covering the rates paid to webcast. The CRB approved the agreements and made them binding on all copyright owners and performers, including those that are not SoundExchange members.132 Prior to distributing royalty payments, SoundExchange deducts costs incurred in carrying out its responsibilities.

    Webcaster Settlement Acts

    In general, using the "willing buyer-willing seller" standard, the CRB has adopted "per‐performance" rates for public performances of sound recordings by online music services. In contrast, using the Section 801(b)(1) standard, the CRB has adopted percentage‐of‐revenue rates for public performances of sound recordings by pre-existing subscription services (Music Choice and Muzak) and satellite digital audio services (SiriusXM).133

    Following complaints by some music streaming services and webcasters that the per‐performance rates ordered by the CRB were excessive, Congress has repeatedly passed legislation (collectively, the "Webcaster Settlement Acts") giving SoundExchange temporary authority to negotiate alternative royalty schemes binding on all copyright owners in lieu of the CRB‐set rates.134 The agreements enabled the music streaming services to pay royalties based on a percentage of their revenue in lieu of a "per-performance" rate. The most recent agreements reached pursuant to this temporary negotiating authority expired on December 31, 2015.135

    CRB Rates

    In April 2015, the CRB began the hearing phase of its proceeding to set the royalty rates paid by noninteractive music streaming services for the years 2016-2020.136 In 17 U.S.C. Section 114(f)(5)(C), the CRB was barred from taking into consideration the provisions of agreements negotiated pursuant to the Webcaster Settlement Acts. During the CRB's rate proceeding, questions arose about the proper interpretation of this provision. Pandora Media, Inc., Clear Channel (now known as iHeartMedia, Inc.), and SoundExchange disagreed over whether the direct agreements, which were based in part on the Pureplay settlement, could be introduced as evidence in the CRB rate proceeding. SoundExchange argued that Congress enacted a "very broad rule of exclusion" to prevent the terms of a Webcaster Settlement Act agreement from being used against a settling party in subsequent proceedings. Pandora Media and Clear Channel contended that SoundExchange's interpretation would require disregarding every benchmark agreement proposed by parties, as all agreements are to some degree affected by the prevailing rates and terms negotiated pursuant to the 2009 Webcaster Settlement Act agreement.137 The CRB determined that these questions were novel material questions of substantive law and, as required by the Copyright Act, referred them to the Register of Copyrights for resolution.138 In September 2015, the Register ruled that the CRB may consider directly negotiated licenses that incorporate or otherwise reflect provisions in a Webcaster Settlement Act agreement.139

    On December 16, 2015, the CRB issued its decision regarding rates for the 2016-2020 period.140 For 2016, streaming services (including those of broadcast radio stations as well as Pandora) must pay $0.17 per 100 streams on nonsubscription services.141 In a break from its past practice of setting rate increases in advance, the CRB tied the annual rate increases from 2017 through 2020 to the Consumer Price Index. Rather than setting forth ephemeral recording fees separately, the CRB includes them with the Section 114 royalties. For the 2016-2020 period, the CRB set ephemeral royalties fees at 5% of the total Section 114 royalties paid by streaming services.

    On December 14, 2017, the CRB issued its rate decision for pre-existing digital subscription services and satellite digital audio radio services covering the 2018-2022 period.142 Table 1 describes how public performance rates vary, depending on the type of music service and when it began operating, and the rate-setting standard used by CRB. Table 1. Royalty Rates Payable to Record Labels for Public Performance Rights

    Applies to Selected Digital Noninteractive Music Services

    Music Service Type

    % or Flat Fees

    Monthly Fees

    Notes

    Preexisting subscription service as of July 31, 1998 (Music Choice and Muzak)

    7.5% of gross revenues

    Not applicable

    Rate set by CRB based on 17 U.S.C. §801(b)(1) standard.

    Rate effective as of January 1, 2018.

    Preexisting satellite digital audio radio service as of July 31, 1998 (SiriusXM)

    15.5% of gross revenues

    Not applicable

    Rate set by CRB based on 17 U.S.C. §801(b)(1) standard.

    Rate effective as of January 1, 2018.

    Services providing audio-only digital music programming via residential televisions using cable or satellite television providers in operation after 1998

    Annual minimum fee = $100,000

    Services operating with stand-alone contracts: $0.019 per subscriber

    Services operating with bundled contracts with cable or satellite operator: $0.0317 per subscriber

    Rate set by CRB based on willing seller/willing buyer standard.

    Rate effective as of January 1, 2018.

    Commercial webcasters (including broadcasters simulcasting an AM or FM transmission and/or "internet-only" webcasters)

    Minimum fee of $500 per channel or station, with maximum aggregate minimum fee of $50,000

    Ephemeral reproduction rates = 5% of total fee payable

    $0.0018 per performance for nonsubscription services; $0.0023 per performance for subscription services

    Rate set by CRB based on willing seller/willing buyer standard.

    CRB bases royalty fees increases from 2017 through 2020 on the Consumer price Index.

    Rate effective as of January 1, 2018.

    Table 1. Compulsory Royalty Rates for Mechanical Rights

    Applies to Physical Media, Digital Download Services, Digital Interactive, Interactive Streaming

    Medium

    Description

    Amount

    Notes

    CDs, LPs, cassettes, and other recordings embodied in a physical medium

    Payable royalty is linked to the number of copies made and distributed

    $0.091 per song

    Songs > 5 minutes in length have a rate of $0.0175 per minute or fraction thereof.

    Record labels pay music publishers for these rights.

    Permanent digital downloads (e.g., iTunes)

    Payable royalty is linked to the number of copies made and distributed

    $0.091 per song

    Songs > 5 minutes in length have a rate of $0.0175 per minute or fraction thereof.

    Record labels pay music publishers for these rights.

    Ringtones

    Payable royalty is linked to the number of copies made and distributed

    $0.24 per ringtone

    Prior to 2006, music publishers negotiated for ringtone rates directly. Publishers introduced these rates to the CRB as benchmarks, resulting in higher rates for ringtones than for full-length songs.

    Record labels pay music publishers for these rights.

    Interactive subscription streaming services (e.g., Spotify's $4.99/month service for personal computers only)

    A formula based on

    (1) an "all-in" royalty pool (payable to music publishers for performance and mechanical rights);

    (2) a calculation of the payable mechanical royalty pool (after deducting public performance royalties);

    (3) an allocation based on the total number of plays on the streaming service

    The total amount of royalties payable to music publishers is

    (1) at least 10.5% of the music service's revenue;

    (2) tied to terms of negotiated agreements between interactive subscription streaming services and record labels

    Payments to each songwriter based on the total number of song's monthly plays

    Formula adopted by CRB pursuant to 2008 and 2013 settlements reached by trade associations representing music publishers, record labels, songwriters, and digital streaming services. Codified in 37 C.F.R. 385 (Subpart B).

    Streaming services pay music publishers for these rights.

    Free interactive nonsubscription, advertising-supported services (e.g., Spotify's advertising-supported service)

    Same as above.

    Similar to above.

    Same as above.

    Source: 37 C.F.R. §§358.3(a)-(b), §§385.12-385.14, §385.23, Harry Fox Agency, "Rate Charts," https://www.harryfox.com/find_out/rate_charts.html; 2015 Copyright Office Report, p. 30. Ari Herstand, "Why Exactly is Spotify Being Sued and What Does This Mean?," Digital Music News, December 30, 2016, http://www.digitalmusicnews.com/2015/12/30/why-exactly-is-spotify-being-sued-and-what-does-this-mean/.

    Musical Work Public Performance Royalties

    Depending on who collects public performance royalties on behalf of publishers and songwriters, the rates are either subject to oversight by the federal district courts in New York City or are based on marketplace negotiations between the publishers and licensees.

    Congress granted songwriters the exclusive right to publicly perform their works in 1897.57 While this right represents a way for copyright owners to profit from their musical works, the sheer number and fleeting nature of public performances make it impossible for copyright owners to individually negotiate with each user for every use, or detect every case of infringement.58 Performing rights organizations (PROs) address the logistical issue of how to license and collect payment for public performances in a wide range of settings.59 The American Society of Composers, Authors and Publishers (ASCAP) was formed in 1914, SESAC was founded in 1930, Broadcast Music, Inc. (BMI) was founded in 1939, and Global Music Rights (GMR) was established in 2013. After charging an administrative fee, the PROs split the public performance royalties among the publishers and songwriters.

    In contrast to the mechanical right, the public performance of musical works is not bound by compulsory licensing under the Copyright Act. As described in "ASCAP and BMI Consent Decree Reviews," ASCAP and BMI are subject to government antitrust regulation through long-standing consent decrees. Music publishers may affiliate with multiple PROs; songwriters, however, may choose only one.60

    Entities that "publicly perform" a musical work—including terrestrial, satellite and Internet radio stations, broadcast and cable television stations, online services, bars, restaurants, and live performance venues—may obtain a license from a songwriter or publisher through a PRO.61 Most commonly, licensees obtain a blanket license, which allows the licensee to publicly perform any of the musical works in a PRO's catalog for a flat fee or a percentage of total revenues. Broadcast radio stations, negotiating through the Radio Music License Committee (RMLC), obtain blanket licenses from a PRO representing songwriters and publishers. In 2012, RMLC reached settlements with ASCAP and BMI on the amounts that radio stations pay to these two PROS for the use of music through the end of 2016.62 The settlements encompass the stations' traditional radio broadcast service as well as their noninteractive streaming services.

    The U.S. District Court for the Southern District of New York, acting as the rate court, approved these settlements. After Pandora Media, Inc. filed a motion claiming that the ASCAP settlement with the RMLC violated the terms of the ASCAP antitrust consent decree, a judge ruled, and in May 2015 the U.S. Court of Appeals for the Second Circuit affirmed, that Pandora Media, Inc. should pay ASCAP 1.85% of the revenues of its Pandora service.63 This is less than the 3% of revenues ASCAP originally demanded, but more than the 1.7% paid by radio broadcast stations for right to perform the musical works their terrestrial broadcasts, online simulcasts, and separate online streaming services. In recent years several broadcast radio group owners have launched such services (see Table 2). In 2015, Pandora Media, Inc. completed the purchase of KXMZ-FM in Rapid City, SD, so it, too, could be covered by the terms of the RMLC settlements.64

    Table 2. Online Radio Services Owned/Operated by Selected Broadcast Radio Groups

    Broadcast Radio Group

    Broadcast Radio Stations Owned and Operated

    Online Radio Service

    Notes

    iHeartMedia, Inc.

    781

    iHeart Radio

    Free ad-supported service. Offers live streaming of broadcast radio stations and personalized stations, based on artist or genre.

    CBS Corporation

    113

    Last.fm

    Free ad-supported service. Offers live streaming of broadcast radio stations and personalized stations, based on artist or genre.

    Univision Communications Inc.

    60

    Uforia Musica

    Free ad-supported service. Offers live streaming of broadcast radio stations and personalized stations, based on artist or genre.

    Pandora Media, Inc.a

    1

    Pandora (free) and Pandora One (subscription)

    Free ad-supported service; offers personalized stations, based on artist or genre. Premium tier service for $4.99 per month or $54.89 per year (ad-free, more skips, fewer timeouts, premium quality audio).

    Source: SNL Kagan; Robin Flynn et al., Economics of Internet Music and Radio, 2015 Edition; Pandora.

    a. In November 2015, Pandora Media, Inc. purchased the assets of the streaming media service Rdio, in which the radio broadcasting company Cumulus had a partial ownership interest. Pandora subsequently shut down the Rdio service.

    Current law, 17 U.S.C. Section 114(i), prohibits judges or other government officials from considering rates paid to record labels and artists for public performances of sound recordings when setting or adjusting public performance rates payable to music publishers and songwriters. This provision was included when Congress created a public performance right for sound recordings with the 1995 enactment of the DPRSRA.

    Figure 3 represents how the different sources of royalties contribute to music publishers' revenues.65

    Figure 3. Breakout of Music Publishers' U.S. Revenues, by Type of Royalty

    Source: IBISWORLD.com, 2015 IBISWorld Music Publishing Report; 2014 IBISWorld Music Publishing Report; Broadcast Music, Inc., "Broadcast Music, Inc. Reports Record-Breaking Revenues of $977 Million," press release, September 18, 2014, http://www.bmi.com/news/entry/broadcast_music_inc._reports_record_breaking_revenues_of_977_million; American Society of Composers, Authors and Publishers, "ASCAP Is the First PRO in the World to Report $1 Billion in Revenues," press release, March 13, 2015, http://www.ascap.com/press/2015/0302-ascap-hits-a-high-note-in-its-100th-year.aspx.

    Notes: Synchronization refers to the use of music incorporated in audiovisual works, such as movies, television programs, and video games. In 2014, songwriters, composers, and music publishers collectively received $840 million from BMI and $883 million from ASCAP in performance royalties. Assuming standard contractual terms applied, publishers received about 50% of each distribution.

    Record Labels and Recording Artists

    Reproduction and Distribution Licenses

    Congress did not recognize sound recordings as a distinct class of copyrighted works until 1971, when it adopted the 1971 Sound Recording Amendment.66 This law granted sound recordings made after its effective date a reproduction right analogous to that provided for other works of authorship.67 The effective date of the Sound Recording Amendment was February 15, 1972, four months after Congress passed it. Today, copyright protection of pre-1972 sound recordings remains governed by a patchwork of state and common law.

    Recognizing that noninteractive digital services (including SiriusXM satellite service, Music Choice, and Pandora) may need to make ephemeral server reproductions of sound recordings, in 1998 Congress established a related license under Section 112 of the Copyright Act specifically to authorize the creation of these copies. The rules governing licenses for temporary reproductions of sound recordings are somewhat analogous to those governing incidental reproduction and distribution of musical works described in Section 115(c)(3)(C)(i).68 The rates and terms of the Section 112 license are established by the CRB. Through SoundExchange, described below in "Sound Recording Public Performance Royalties," copyright owners of sound recordings (usually the record labels) receive Section 112 fees. Recording artists who do not own the copyrights, however, do not.69

    With the limited exception described above, Congress did not empower the government to oversee the rates that record labels and artists may charge for the reproduction and distribution rights to sound recordings (i.e., to manufacture and distribute CDs, sell digital downloads of music and ringtones, or operate an interactive music service). Instead, these rates are subject to private negotiations in the marketplace.

    Sound Recording Public Performance Royalties

    Noninteractive Services

    Until 1995, the Copyright Act did not afford public performance rights to record labels and recording artists for their sound recordings. Record labels and artists primarily earned income from reproduction and distribution royalties based on retail sales of physical products such as CDs. With the inception and public use of the Internet in the early 1990s, the recording industry became concerned that existing copyright law was insufficient to protect the industry from music piracy.70 Two amendments to the Copyright Act, the Digital Performance Rights in Sound Recordings Act (DPRSRA) in 1995 and the Digital Millennium Copyright Act (DMCA) in 1998, addressed this concern.71

    In the DPRSRA, Congress granted record labels and recording artists an exclusive public performance right for their sound recordings, but limited this right to digital audio transmissions. Congress made noninteractive subscription services, specifically satellite and cable radio (Music Choice and Muzak) services, eligible for compulsory licensing under Section 114.72 The CRB applies the same four-factor policy-oriented standards described in Section 801(b)(1) of the 1976 Copyright Act that have applied to music publishers' licensing of mechanical rights.

    The DMCA expanded the statutory licensing provisions in Section 114 to cover noninteractive online radio services.73 The law set up a bifurcated system of rate-setting standards for the CRB:

    • Services that existed as of July 31, 1998, prior to the enactment of the DMCA (i.e., SiriusXM satellite service as well as the Music Choice and Muzak subscription services), remained subject to the Section 801(b)(1) standard.
    • Online radio and other digital music services (including both subscription and advertising-supported music streaming services) that entered the music marketplace after July 31, 1998, are subject to rates and terms "that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller."74

    The CRB administers the ratemaking proceedings for (1) satellite digital audio radio services (which it terms the "SR" rate proceeding); (2) "preexisting" subscription services (which it terms the "PSS" rate proceeding), and (3) online radio and digital music services (which it terms the "Webcaster" or "Web" rate proceedings).75

    SoundExchange also administers the Section 114 fees that noninteractive digital services pay record labels for public performance rights. The Copyright Act specifies how record labels and recording artists divide the public performances they receive from noninteractive digital music services via SoundExchange.76 As discussed in "CRB Rates for 2016-2020," CRB's use of privately negotiated agreements as benchmarks for setting industrywide rates has been controversial.

    Interactive Services

    The DPRSRA enabled owners of the rights to sound recordings to negotiate directly with interactive digital transmission services for public performance rights at marketplace-determined rates. The term "interactive service" covers only services in which an individual can arrange for the transmission or retransmission of a specific recording.77

    The Senate Judiciary Committee in 1995 explained that

    [C]ertain types of subscription and interactive audio services might adversely affect sales of sound recordings and erode copyright owners' ability to control and be paid for use of their work.... Of all of the new forms of digital transmission services, interactive services are the most likely to have a significant impact on traditional record sales, and therefore pose the greatest threat to the livelihoods of those whose income depends on revenues derived from traditional record sales.78

    Thus, while Taylor Swift and her record label have the legal right to withdraw her catalog from an interactive service such as Spotify, they cannot, pursuant to the compulsory license exemptions set forth in Section 114, refuse to allow the use of her recordings by noninteractive services such as Pandora.

    Broadcast Radio Exception

    Congress does not require broadcast radio stations to obtain public performance licenses from owners of sound recordings. The Senate Judiciary Committee explained in 1995 that it was attempting to strike a balance among many interested parties. Specifically, the committee stated:

    the sale of many sound recordings and the careers of many performers have benefitted considerably from airplay and other promotional activities provided by ... free over-the-air broadcast ... [and] the radio industry has grown and prospered with the availability and use of prerecorded music. This legislation should do nothing to change or jeopardize [these industries'] mutually beneficial relationship.79

    The Senate Judiciary Committee further distinguished broadcast radio from other services by stating that "[F]ree over-the-air broadcasts ... provide a mix of entertainment and non-entertainment programming and other public interest activities to local communities to fulfill a condition of the broadcasters' licenses."80

    In addition to maintaining that artists continue to benefit from the promotional value of broadcast radio airplay, broadcasters assert that a performance royalty fee would hurt them financially, and effectively force them to subsidize the recording industry.81 Representatives of recording artists and record labels argue that they are the ones subsidizing the broadcast radio industry, because they are prohibited from exercising their property rights.82 A 2010 report published by the Government Accountability Office "found the relationship between radio airplay and music sales to be unclear."83 Pandora Media, Inc. claims that its advertising-supported service is similar to broadcast radio service, and that the requirement that it pay record labels and artists for each "stream," while services owned by broadcast radio operators do not, represents an unfair legal disparity.84

    Members of the band Pink Floyd have countered that in order to increase parity with broadcast radio, legally requiring broadcast radio stations to pay royalties would be more beneficial to artists.85 The Copyright Office supports such a requirement, arguing that adding this requirement would enable U.S. artists and record labels to collect performance royalties from foreign radio broadcasts. The Copyright Office states that most countries condition payment of such royalties on reciprocity. The National Association of Broadcasters contends that an expansion of performance rights will be insufficient to invoke copyright reciprocity from other nations.86 For information about bills that would address this exception, see "Bills Introduced in the 114th Congress."

    SoundExchange

    Congress intended the rate-setting process to permit voluntary industry agreements when possible. Congress provided antitrust exemptions to statutory licensees and copyright owners of sound recordings so that they could designate common agents to collectively negotiate with digital radio services and agree upon royalty rates for public performance rights.87 The Recording Industry Association of America (RIAA) established SoundExchange as a designated common agent for the record labels in 2000 and spun it off in 2003 as an independent entity. In 2015, SoundExchange, reached agreements with public radio stations and college radio stations covering the rates paid to stream recordings online. The CRB approved the settlement agreements, and made them binding on all copyright owners and performers, including those that are not SoundExchange members.88

    The Copyright Act does not include record producers in the statutorily defined split of royalties for public performances of sound recordings by digital noninteractive services. As a result, record producers must rely on contracts with one of the parties specified in the statute, often the featured recording artist, in order to receive royalties from digital performances.

    In general, the CRB has adopted "per‐performance" rates for public performances of sound recordings for online music services, rather than the percentage‐of‐revenue rates typically charged by PROs to license public performances of musical works.89 That per‐performance approach has proven controversial.90

    Webcaster Settlement Acts

    Following complaints by some online streaming services and radio broadcasters that the per‐performance rates ordered by the CRB were excessive, Congress has repeatedly passed legislation (collectively, the "Webcaster Settlement Acts") giving SoundExchange temporary authority to negotiate alternative royalty schemes binding on all copyright owners in lieu of the CRB‐set rates.91 The most recent agreements reached under SoundExchange's authority to do this expired at the end of 2015, pursuant to 17 U.S.C. §114(f)(5)(A).

    The Webcaster Settlement Act of 2008 ("2008 WSA") gave SoundExchange temporary authority (which expired on February 15, 2009), to negotiate directly with services that stream music over the Internet ("webcasters"). The law prohibited the agreements from extending beyond December 31, 2015. Broadcast radio stations that stream their stations over the Internet (represented by the National Association of Broadcasters) and "small webcasters" reached privately negotiated agreements with SoundExchange at the deadline.92 Small webcasters transmitting less than 5 million hours of music programming per month could pay the greater of

    • 1. 10% of the small webcaster's first $250,000 gross revenues, and 12% of gross revenues in excess of $250,000 during the applicable year, or
    • 2. 7% of the small webcaster's expenses during the applicable year.93

    The Webcaster Settlement Act of 2009 ("2009 WSA") reinstated SoundExchange's authority to negotiate settlement agreements for a 30-day period starting on July 1, 2009. SoundExchange reached agreements with several webcasters prior to the deadline. One of the agreements is commonly known as the "Pureplay Settlement."94 Any qualifying noninteractive streaming service could avail itself of the rates and terms of the agreement by filing an initial notice of election with SoundExchange, followed by annual notices, through 2015. Pandora chose this option.95 Pandora agreed to pay the greater of 25% of the service's gross revenues or $0.14 per 100 streams. Had Pandora not selected this option, it would have paid a higher default rate set by the CRB.

    iHeart Media, Inc. and Pandora Media, Inc. subsequently reached directly negotiated licensing agreements with individual labels (direct agreements) rather than with SoundExchange. In 2012, iHeart Radio's parent company, then known as Clear Channel, reached an agreement with Big Machine Label Group whereby it would pay performance rights for performances on its broadcast radio stations as well as its streaming services.96 In 2013, Clear Channel struck an agreement with Warner Music Group that also included fees for performances on all of Clear Channel's assets, including broadcast radio stations.97 In 2014, Pandora Media, Inc. reached an agreement with Merlin, a coalition representing independent labels, in which Pandora agreed to "steer" listeners of its online service toward Merlin-label recordings in exchange for discounted rates.98

    CRB Rates for 2016-2020

    In April 2015, the CRB began the hearing phase of its proceeding to set the royalty rates paid by noninteractive online music services for the years 2016-2020.99 17 U.S.C. Section 114(f)(5)(C) barred the CRB from taking into consideration the provisions of the Pureplay Settlement. During the CRB's rate proceeding, questions arose about the proper interpretation of this provision. Pandora Media, Inc., Clear Channel, and SoundExchange disagreed over whether the direct agreements, which were based in part on the Pureplay settlement, could be introduced as evidence in the CRB rate proceeding. SoundExchange argued that Congress enacted a "very broad rule of exclusion" to prevent the terms of a WSA agreement from being used against a settling party in subsequent proceedings. Pandora Media and Clear Channel contended that SoundExchange's interpretation would require disregarding every benchmark agreement proposed by parties, as all agreements are to some degree impacted by the prevailing rates and terms negotiated pursuant to the 2009 WSA.100 The CRB determined that these questions were novel material questions of substantive law and, as required by the Copyright Act, referred them to the Register of Copyrights for resolution.101 In September 2015, the Register ruled that the CRB may consider directly negotiated licenses that incorporate or otherwise reflect provisions in a WSA agreement.102

    On December 16, 2015, the CRB issued its decision regarding rates for the 2016-2020 period.103 For 2016, streaming services (including those of broadcast radio stations as well as Pandora) must pay $0.17 per 100 streams on nonsubscription services.104 In a break from its past practice of setting rate increases in advance, CRB tied the annual rate increases from 2017 through 2020 to the Consumer Price Index. Rather than setting forth ephemeral recording fees separately, the CRB includes them with the Section 114 royalties. For the 2016-2020 period, the CRB set ephemeral royalties fees at 5% of the total Section 114 royalties paid by streaming services.

    For nonsubscription services such as Pandora, the CRB reduced the per-performance rate it set in the previous rate proceeding: the 2016 per performance rate is $0.17 per 100 streams, while the 2015 per performance rates was $0.23 per 100 streams.105 Several music streaming services, including Pandora, welcomed the ruling,106 but others did not. Some "small" online music services may face increased royalty rates of 8 to 14 times what they had paid previously.107 Advocates representing the small webcasters have launched a campaign to petition Congress to make the 2008 WSA agreement permanent or discontinue the sound recording performance royalties altogether for small online services.108 Without such an action, the advocates claim, small webcasters may go out of business. In contrast, SoundExchange objected that the rates set by the CRB do not provide adequate compensation to performers and record labels and asserted that the rates did not reflect the market price of music.109

    The Copyright Act specifies how royalties collected under Section 114 are to be distributed: 50% goes to the copyright owner of the sound recording, typically a record label; 45% goes to the featured recording artist or artists; 2½% goes to an agent representing nonfeatured musicians; and 2½% goes to an agent representing nonfeatured vocalists.110 Prior to distributing royalty payments, SoundExchange deducts costs incurred in carrying out its responsibilities. In 2014, SoundExchange collected $773 million in statutory royalties, compared with $20 million in 2005 and $462 million in 2012.111 According to SoundExchange "this tremendous growth suggests that digital radio has become the fastest-growing segment of music consumption." Table 3 describes how public performance rates vary, depending on the type of music service and when it began operating.

    Table 3. Royalty Rates Payable to Record Labels for Public Performance Rights

    Applies to Selected Digital Noninteractive Music Services

    Music Service Type

    Fees

    Price per Performance

    Notes

    Preexisting subscription service as of July 31, 1998 (Music Choice, Muzak)

    8% of monthly gross revenue 2013; 8.5% monthly gross revenue 2014-2017

    Not applicable

    Rate set by CRB based on 17 U.S.C. §801(b)(1) factors.

    Preexisting satellite digital audio radio service as of July 31, 1998 (SiriusXM)

    9% of gross revenues in 2013; increasing by 0.5% annually until 11% in 2017

    Not applicable

    Rate set by CRB based on 17 U.S.C. §801(b)(1) rate standards.

    Licensed AM or FM broadcast radio stations that simulcast their terrestrial programming (e.g., via Radio.com; or iHeart Radio Live radio service; or channels broadcast with HD radio digital technology)

    Annual minimum fee: $500 per station or channel; maximum of $50,000 per year.

    CBS will base royalty fees increases between 2017-2020 on CPI

    $0.17 per 100 streams for nonsubscription services; $0.22 per 100 streams for subscription services

    Royalties for ephemeral recordings = 5% of total fee payable

    Rate set by CRB based on willing seller/willing buyer standard.

    Pursuant to 2008 WSA, NAB had reached a separate agreement with SoundExchange, which was effective through 2015.a 2015 rate was $0.25 per 100 streams.

    Webcasters (iHeart Radio and Pandora)

    Same as above

    Same as above

    Pursuant to 2009 WSA, Pandora opted in to the PurePlay settlement with Sound Exchange, which was effective through 2015.b 2015 rate for services earning more than $1.25 million annual revenue was greater of $0.14 per 100 streams or 25% of total annual gross revenues.

    "Small" Webcasters (defined by total amount of music programming hours transmitted to listeners) c

    Same as above

    Same as above

    Pursuant to 2008 WSA, several "small" webcasters reached a separate agreement with SoundExchange.a 2015 rates for services offering less than 5 million hours of music programming monthly were the greater of (a) 10% of first $250,000 annual revenues or 12% of revenues in excess of $250,000, or (b) 7% of webcaster's annual expense. Other services subject to CRB rates.

    Source: Music Choice v. Sources: 37 C.F.R. §380.10; Copyright Royalty Board, 774 F. 3d 1000 (District of Columbia 2014). SoundExchange, http://www.soundexchange.com/service-provider/rates/, http://www.soundexchange.com/artist-copyright-owner/digital-royalties/, http, "Current Developments," https://www.crb.gov/; SoundExchange, "Service Provider: 2018 Rates," https://www.soundexchange.com/service-provider/commercial-webcaster/; Radio.com, Listen Live, http://radio.com/ http://www.iheart.com/live/country/US/city/new-york-ny-159/; Kevin Goldberg, Library of Congress, Copyright Office, "Notification of Agreements Under the Webcaster Settlement Act of 2009," 74 Federal Register 40614, August 12, 2009, Appendix A (Agreement with Sirius XM Radio Inc.). 37 C.F.R. §382.

    a. Library of Congress, Copyright Office, "Notification of Agreements Under the Webcaster Settlement Act of 2008," 74 Federal Register 9293, Appendix B, March 3, 2009.

    b. Library of Congress, Copyright Office, "Notification of Agreements Under the Webcaster Settlement Act of 2009," 74 Federal Register 34796, Appendix A, July 9, 2009. Pandora Media, Inc., SEC Form 10-K, for the fiscal year ended January 31, 2013, p. 9.

    c. The formal definition of "aggregate tuning hours" is available at 37 C.F.R. §280.2.

    Industry service-provider/rates/.
    Allocation of Royalty Distributions

    The Copyright Act specifies how royalties collected under Section 114 are to be distributed: 50% goes to the copyright owner of the sound recording, typically a record label; 45% goes to the featured recording artist or artists; 2.5% goes to an agent representing nonfeatured musicians; and 2.5% goes to an agent representing nonfeatured vocalists.143

    The act does not, however, include record producers in the statutorily defined split of royalties for public performances of sound recordings by noninteractive digital services. As a result, record producers must rely on contracts with one of the parties specified in the statute, often the featured recording artist, in order to receive royalties from digital performances.

    Developments and Issues

    "Interactive" Versus "Noninteractive" Music Services

    The distinction between interactive and noninteractive services has been a matter of debate.112144 For the purposes of defining the process by which owners of sound recordings can set rates for public performance rights, 17 U.S.C. §Section 114 provides that an interactive service is one that enables a member of the public to receive either "a transmission of a program specially created for the recipient," or, "on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient."113145 As discussed in "Reproduction and Distribution Licenses (Mechanical Licenses)," 17 U.S.C. Section 115 does not distinguish between interactive and noninteractive services for the purposes of specifying when a digital service must obtain mechanical rights from music publishers. The CRB has adopted these distinctions in setting or approving rates for mechanical licenses.114

    146

    In 2009, the U.S. Court of Appeals for the Second Circuit ruled that a custom radio service—onemusic streaming service that relies on user feedback to play a personalized selection of songs that are within a particular genre or similar to a particular song or artist the user selects— is not an "interactive" service.115147 Noting that Congress's original intent in making the distinction was to protect sound recording copyright holders from cannibalization of their record sales, the court's decision rested on the following analysis:

    If a user has sufficient control over an interactive service such that she can predict the songs she will hear, much as she would if she owned the music herself and could play each song at will, she will have no need to purchase the music she wishes to hear. Therefore, part and parcel of the concern about a diminution in record sales is the concern that an interactive service provides a degree of predictability—based on choices made by the user—that approximates the predictability the music listener seeks when purchasing music.116

    148

    The court noted that the LAUNCHcast online radio service offered by the defendant, Launch Media, Inc., which at the time was owned by Yahoo!, Inc., created unique playlists for each of its users.117149 Nevertheless, the court reasoned that uniquely created playlists do not ensure predictability. Therefore, the court determined, LAUNCHcast was a noninteractive service.118

    150

    In addition, in order to be eligible for compulsory licensing, noninteractive services (other than broadcast radio, SiriusXM, Music Choice, and Muzak) must limit the features they offer consumers, pursuant to the Copyright Act. For example, these services are prohibited from announcing in advance when they will play a specific song, album, or artist.119 Another example is the "sound recording performance complement," which limits the number of tracks from a single album or by a particular artist that a service may play during a three‐hour period.120

    Free Versus Subscription Services

    151

    The Launch Media decision affirmed that personalized music streaming services such as Pandora and iHeartRadio could obtain statutory licenses as noninteractive services for their public performances of sound recordings.121152 The CRB‐established rates do not currently distinguish between such customized services and other services that simply transmit undifferentiated, radio‐style programming over the Internet. Because broadcast radio stations may not pay performance fees for over-the-air broadcasts, overall the royalties paid by companies that own several broadcast radio stations may be lower than those such as Pandora Media, Inc., which only owns one. (See "CRB Rates for 2016-2020.")

    internet.

    Spotify's services, on the other hand, allow users access to specific albums, songs, and artists on demand. For no charge, consumers can have limited access to songs if they use the site on their personal computers and see or hear an advertisement every few songs. In exchange for paying a monthly fee of about $10 per month, users can listen to songs without advertisement interruption, use Spotify on mobile devices as well as personal computers, or listen to music offline. Spotify also offers exclusive track-by-track commentaries by artists on select albums.122

    The songwriter and artist Jay Z operates, among other divisions, a record label and music publishing company through his company, Roc Nation. On March 30, 2015, he announced, together with 15 other musicians, the launch of a new music subscription service called TIDAL.123 TIDAL offers two subscription levels: $9.99 per month for standard music quality and $19.99 per month for music with a higher-quality sound.124 Artists on TIDAL will offer windows of limited exclusive access to their music. TIDAL has not revealed specifics about how the service will pay its owners or participating artists, except that it will pay more to artists than free advertising-supported services.125

    In June 2015, Apple launched a new subscription service called Apple Music.126 After a three-month free trial, users can pay a monthly fee of $9.99 (or $14.99 for a family subscription of up to six people) to access Apple's library of 30 million songs, recommended music curated to their tastes (by people rather than algorithms), and connect with artists through social networking features.127 Initially, Apple did not intend to compensate artists during the three month free trial. After Taylor Swift publicly requested that Apple change its policy, Apple reversed course.128 In December 2015, Ms. Swift and Apple announced that Apple Music would be the exclusive outlet for her 1989 World Tour LIVE Concert Film beginning December 20, 2015.129

    Division of Royalty Payments

    Noncash types of consideration may be involved as Equity Interests in Music Services Noncash considerations may be involved in determining the price interactive services pay for access to music. For example, the major labels acquired a reported combined 18% equity stake in Spotify in a transaction that reportedly hinged on their willingness to grant Spotify rights to use their sound recordings on its service.130 The record labels have also reportedly bought minority stakes in the music streaming service TIDAL.131

    153 When Spotify began trading its shares on the New York Stock Exchange in April 2018, Sony sold a portion of its stake, and announced that it would share a portion of its proceeds with artists and the independent labels whose music Sony distributes.154

    As described in "Reproduction and Distribution Licenses (Mechanical Licenses)," the rates that interactive services pay music labelspublishers are tied to the rates that the services pay record labels for performance rights, which are negotiated in the free market. This means that if a record label's deal includes an equity stake in an interactive digital music service provider or a guaranteed allotment of advertising revenues, those items are assigned a value when estimating the total cost, thereby enabling music publishers to participate in such deals when negotiating for mechanical royalties.132

    The Copyright Office recommends that Congress require greater transparency regarding how such equity deals are reported to songwriters and artists, and how such deals impact royalty distribution. 155 In contrast, copyright law prohibits rates paid for public performances of musical works from being tied to rates paid for public performances of sound recordings (see "DOJ Consent Decrees"). Organizations representing songwriters and recording artists have expressed concern that payments received by music publishers and record labels from digital music services as part of direct deals are not being shared fairly, potentially resulting in lower payments than they might receive under statutory licensing schemes.133

    Policy Developments and Issues

    156

    ASCAP and BMI Consent Decree Reviews

    Together, ASCAP and BMI, which operate on a not-for-profit basis, represent about 90% of songs available for licensing in the United States.134157 SESAC appears to have about a 5% share of songs, but it may be higher. GMR, established in 2013,Global Music Rights handles performance rights licensing for a limited number of songwriters.135 When ASCAP and BMI originally formed (in 1914 and 1939, respectively), they acquired the exclusive right to negotiate on behalf of their members (music publishers and songwriters) and forbade members from entering into direct licensing agreements.136 Both offered music services only blanket licenses covering all songs in their respective catalogs.

    In the 1930s, the Department of Justice (DOJ) Antitrust Division investigated ASCAP for anticompetitive conduct—specifically, whether ASCAP's licensing arrangements constituted price‐fixing and/or unlawful tying. The government subsequently filed federal court actions, arguing that the exclusive blanket license—as the only license offered at the time—was an unlawful restraint of trade, and that ASCAP was charging arbitrary prices. It pursued antitrust claims against BMI as well. The government settled with both ASCAP and BMI by entering into consent decrees in 1941.

    Since entering into these consent decrees, the Antitrust Division has periodically reviewed their operation and effectiveness. The ASCAP consent decree was last amended in 2001, and the BMI consent decree was last amended in 1994.

    Although the ASCAP and BMI consent decrees are not identical, they share many of the same features. Among those features are requirements that the PROs may acquire only nonexclusive rights to license members' public performance rights; must grant a license to any user that applies on terms that do not discriminate against similarly situated licensees; and must accept any songwriter or music publisher that applies to be a member, as long as the writer or publisher meets certain minimum standards. ASCAP and BMI are also required to offer alternative licenses to the blanket license. Prospective licensees that are unable to agree to a royalty rate with ASCAP or BMI may seek a determination of a reasonable license fee from one of two federal district court judges in the Southern District of New York.

    Publishers allege that they are not receiving158 Music publishers may affiliate with multiple PROs; songwriters, however, may choose only one.159 Publishers have alleged that they have not received a fair share of the performance royalty revenues from streaming services, pointing to a 12-to-1 royalty ratio weighted toward record labels and artists over songwriters and publishers.137 For example, Pandora Media, Inc. reported that in 2014, it paid 44% of its total revenues of $921 million to license sound recordings but 4% of its revenues to license musical works.138claiming that the ASCAP and BMI consent decrees (discussed in "DOJ Consent Decrees") inhibited their ability to negotiate market rates.160 Beginning in 2011, publishers began pressuring ASCAP and BMI to allow them to withdraw their digital rights from their blanket licenses so that they could negotiate direct dealsdeals directly with digital services.139

    161
    Attempts to Partially Withdraw Public Performance Rights

    In 2011 and 2013, respectively, ASCAP and BMI each responded by amending their rules to allow music publishers the right to license their public performance rights for "new media" uses—that is, both interactive and noninteractive digital streaming services, so they could negotiate with digital streaming services at market prices in lieu of rates subject to oversight by the federal district court. As a result, Pandora Media, Inc.—faced with a potential loss of PRO licensing authority for the major publishers' catalogs—proceeded to negotiate licenses directly with EMI Music Publishing Ltd., Sony/ATV, and Universal Music Publishing Group at rates that brought the publishers higher fees than they were receiving under the PRO system.140 Pandora Media, Inc., however, challenged the publishers' partial withdrawal of rights before both the ASCAP and BMI rate courts in the Southern District of New York. In each case—though applying slightly differing logic—the courtcourts ruled that under the terms of the consent decrees, music publishers could not withdraw selected rights; rather, a publisher's song catalog must be either "all in" or "all out" of the PRO.141

    The Antitrust Division announced in June 2014 that it would evaluate the consent decrees. It has solicited and received extensive public comments on whether and how to modify the consent decrees.142 162 After the rulings, the major music publishers and PROs asked the Department of Justice to join them in proposing modifications to the consent decrees.163 Specifically, both ASCAP and BMI seeksought to modify the consent decrees to permit partial grants of rights, to replace the current rate-setting process with expedited arbitration, and to allow ASCAP and BMI to provide bundled licenses that include multiple rights (e.g., mechanical as well as public performance in musical works). The DOJ has expressed its intent to "examine the operation and effectiveness of the Consent Decrees," particularly in light of the changes in the way music has been delivered and consumed.

    Although publishers covered by the current consent decrees cannot withdraw licenses for musical works as long as they are members of BMI or ASCAP, they can strike separate performance rights agreements. In November 2015, Pandora Media, Inc. reached an agreement with Sony/ATV, and in December 2015 it reached an agreement with Warner/Chappell Music.143 The multi-year agreements enable the streaming service to hedge against the possibility that the DOJ will permit members of ASCAP and BMI to withdraw digital performance rights.144

    The fact that many songs have several writers, each with his/her own publisher, can make the acquisition of performance rights complex. Industry practice has been that each publisher licenses only a portion of a song. For Spotify to include Ryan Adam's recorded version of Shake It Off in its catalog, it needed to pay both BMI (which collects royalties on behalf of Taylor Swift) and ASCAP (collects royalties on behalf of co-writer Max Martin and Shellback). Taylor Swift's publisher, Sony/ATV, and Max Martin and Shellback's publisher, Kobalt, are members of both ASCAP and BMI.145 One alternative to this process would be "100% licensing," in which any writer or rights holder of a musical work can issue a performance license without the consent of the other rights holders. Under 100% licensing, Pandora Media, Inc. might be able to obtain the performance rights to "Shake it Off" from ASCAP and pay Sony/ATV the compulsory rate set by the New York court rather than negotiating with Sony/ATV. Thus, 100% licensing would likely weaken music publishers' negotiating leverage.146 In 2015 the DOJ solicited comments about whether to modify the ASCAP and BMI consent decrees to permit or require this practice.147

    In December 2015, Pandora Media, Inc. reached separate direct multi-year licensing agreements with ASCAP and BMI for their combined catalogs of more than 20 million musical works. The terms are confidential. As part of the deal, Pandora agreed to withdraw its appeal of the 2015 order in the BMI rate case.148

    Bills Introduced in the 114th Congress

    Legislators have introduced several measures related to the music industry.

    In February 2015, Senators John Barrasso and Heidi Heitkamp introduced S.Con.Res. 4, and Representative Michael Conaway, along with dozens of cosponsors, introduced H.Con.Res. 17, supporting the Local Radio Freedom Act. The resolutions would direct Congress to refrain from imposingof musical works). DOJ announced in June 2014 that it would evaluate the consent decrees.

    As part of that review, it solicited comments in 2015 about "100% licensing" versus "fractional licensing."164 Industry practice has been that when a song has several writers, each writer's publisher licenses only a portion of a song, a practice known as "fractional licensing." If, as DOJ proposed, the consent decrees required 100% licensing, any writer or rights holder of a musical work could issue a performance license without the consent of the other rights holders.165

    DOJ Interpretation of Consent Decrees and Lawsuits

    On August 4, 2016, DOJ completed its review and announced that, pursuant to its interpretation, the consent decrees required the two PROs to issue 100% licenses to all of the songs in their catalogs.166 DOJ argued that this requirement promotes competition. It declined to propose modifications to the consent decrees, but called on Congress to reconsider how copyright law is applied to the music industry. It noted that the consent decrees are "limited in scope," and contended that "a more comprehensive legislative solution may be possible and preferable."167

    The same day that DOJ issued its interpretation, BMI filed a lawsuit in the Southern District of New York, where Judge Louis Stanton is on permanent assignment overseeing the BMI consent decree.168 In September 2017, Judge Stanton ruled that contrary to the DOJ's interpretation, BMI's consent decree permits fractional licensing. The U.S. Court of Appeals for the Second Circuit upheld Judge Stanton's decision in December 2017.169

    NOIs, Mechanical Licensing Databases, and Lawsuits As discussed in "Notice of Intention (NOI)," a licensee must serve an NOI to the copyright holder before or within 30 days after making, and before distributing, any phonorecords, and pay the applicable royalties.170 If the Copyright Office's records do not identify the copyright owner and include an address at which the NOI can be served, then filing the NOI with the Copyright Office is sufficient.

    On April 12, 2016, the Copyright Office announced new procedures to allow licensees to file Notices of Intention to reproduce and distribute musical works under Section 115 (NOIs) with the Copyright Office in bulk electronic form.171 By allowing licensees to file an NOI for up to 100 songs at once, the procedural change significantly reduced the filing costs (from $2 per song to $0.10 per song, in addition to an upfront fee of $75 for each NOI). 

    One week after the Copyright Office changed its NOI filing procedures, licensees, including Spotify, Amazon, and Google, began to file NOIs in bulk.172 In several NOIs, the licensees affirm that "with respect to the nondramatic musical work named in such row of this Notice of Intention, the registration records or other public records of the Copyright Office have been searched and found not to identify the name and address of the copyright owners of such work."

    According to the trade publication Billboard, digital music service companies contacted the U.S. Copyright Office in late 2015, arguing that digitizing the compulsory licensing process would ensure that songwriters and publishers receive proper compensation.173 Prior to that point, several songwriters and publishers filed lawsuits charging Spotify and other online music services with illegally streaming their copyrighted musical works.174 Some of these lawsuits have been settled; others remain pending.175

    Bills Introduced in the 115th Congress

    Legislators have introduced several measures related to the music industry.

    In January 2017, Senator John Barrasso introduced S.Con.Res. 6 and Representative Michael Conaway introduced H.Con.Res. 13, Supporting the Local Radio Freedom Act. The resolutions declare that Congress should not impose any new performance fee, tax, royalty, or other charge relating to the public performance of sound recordings on a local radio station for broadcasting sound recordings over the air, or on any business for such public performance of sound recordings.

    In February 2017, Representative Joseph Crowley

    In March 2015, Representatives Joe Crowley and Tom Rooney introduced the Allocation for Music Producers Act (AMP Act), H.R. 1457, with support from the Recording Academy and SoundExchange881. The AMP Act would grant producers the statutory right to seek payment of their royalties via a designated agent (such asi.e., SoundExchange) when they have a letter of direction from a featured artist. The bill has been referred to the House Committee on the Judiciary.

    Also in In March 2015, the Songwriter Equity Act of 2015 was introduced as S. 662 by Senator Orrin Hatch and H.R. 1283 by Representative Doug Collins. Among other provisions, the bills would require the CRB, when setting royalty rates under the compulsory license available for the reproduction and distribution of musical works, to establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and seller in lieu of the Section 801(b)(1) factors. Songwriters, publishers, and the Copyright Office support such a change.149 The bill would also repeal 17 U.S.C. §114(i), which prohibits judges or other government officials from considering rates paid to record labels and artists for public performances of sound recordings when setting or adjusting public performance rates payable to music publishers and songwriters. Songwriters, publishers, and the Copyright Office support such a change; streaming music services oppose repeal.

    In April 2015, Representatives Jerrold Nadler, John Conyers Jr., Marsha Blackburn, and Ted Deutch introduced the Fair Play Fair Pay Act of 2015, H.R. 1733. The bill would adopt several of the Copyright Office's proposals with respect to sound recording royalties. These provisions include (1) extending the public performance right in sound recordings to broadcast radio (with a cap on payments made by small broadcasters, public and educational radio, religious services, and incidental uses of music), (2) including sound recordings made prior to February 15, 1972, among the body of works requiring royalty payments under federal law (and continuing to rely on state law for copyright protection), and (3) directing the CRB to adopt a uniform market-based rate-setting standard for public performance rights for all types of radio services (i.e., eliminate the Section 801(b)(1) four factors test). In determining the rates, the CRB would have to consider whether the audio services would enhance or interfere with the copyright owner's other sources of revenue.

    Also in April 2015, Representatives Marcia Blackburn and Anna Eshoo introduced H.R. 1999, the Protecting the Rights of Musicians Act (PRMA). The bill would amend the Communications Act of 1934 by prohibiting companies that own both broadcast television and broadcast radio stations from seeking retransmission consent payments from multichannel programming distributors (i.e., cable and satellite operators) unless their radio stations pay performance royalties for sound recordings.150

    As discussed in "Broadcast Radio Exception," while music publishers and songwriters do receive a performance royalty for over-the-air radio broadcasts, record labels and artists do not. Therefore, if, Congress were to pass both the Fair Play Fair Pay Act and the Songwriter Equity Act, the New York district court could factor in performance royalties for over-the-air radio broadcasts paid to record labels and artists when setting rates payable to publishers and composers for licenses covered by BMI and ASCAP that remain subject to the consent decrees.

    Author Contact Information

    [author name scrubbed], Analyst in Telecommunications ([email address scrubbed], [phone number scrubbed])

    Footnotes

     17 U.S.C. §115. See also Adam Barnonsky, "Publishing Administration: Recording Covers and Mechanical Licenses," Symphonic Distribution, http://symphonicdistribution.com/recording-covers-mechanical-licenses/#.VqJPhlI3nxY. The musical notes and lyrics being covered must have already been recorded and distributed by the copyright owner, and the cover may not contain major changes to the underlying musical work.

    2015 U.S. Copyright Office Report. Additional exclusive rights, a detailed description of which is beyond the scope of this report, include the right to create derivative works (e.g., a new work based on an existing composition) (17 U.S.C. §106(2)) and the right to display the work publicly (e.g., by posting lyrics on a website) (17 U.S.C. §106(5)).

    19. 21. 24. 28. National Music Publishers Association, "Music Publishing 101," http://nmpa.org/about/.

    33. 36. 39. Act of March 4, 1909. See also 35 Stat. 1075. U.S. Congress, House Committee on Patents, To Amend and Consolidate the Acts Respecting Copyright, committee print, 60th Cong., 2nd sess., February 22, 1909, Rep. 2222, pp. 6-8.

    50. P.L. 94-553 (17 U.S.C. §115(c)(2)). According to the report of the House Judiciary Committee, " ... it is unjustified to require a compulsory licensee to pay licenses fees on records which merely go into inventory." 1976 House Judiciary Committee Report, p. 110. 115(c)(2). 17 U.S.C. §115(c)(2). The report from the House Judiciary Committee stated that "While upon initial review it might be assumed that the rate established in 1909 would not be reasonable at the present time, the committee believes that an increase in the mechanical royalty must be justified on the basis of economic conditions and not on the mere passage of 67 years." U.S. Congress, House Committee on the Judiciary, Copyright Law Revision, committee print, 94th Cong., 2nd sess., September 3, 1976, p. 111.

    72. 81. 86. 90. Maria A. Pallante, Register of Copyrights and Director et al., Federal Copyright Protection for Pre-1972 Sound Recordings, U.S. Copyright Office, December 2011, https://www.copyright.gov/docs/sound/ (2011 U.S. Copyright Office Report), pp. 10-11. 113. 122. 125. 131. David Oxenford, "Copyright Royalty Board Begins Hearings on Webcasting Royalty Rates for 2016-2020—When Will We See a Decision?. 144. 153. 165. Ed Christman, "Spotify Hit With $150 Million Class Action Over Unpaid Royalties," Billboard, December 29, 2015, http://www.billboard.com/biz/articles/news/legal-and-management/6828096/spotify-hit-with-150-million-class-action-over-unpaid; Eriq Gardner, "Spotify Hit with $1.6B Copyright Lawsuit Over Tom Petty, Weezer, Neil Young Songs," The Hollywood Reporter, January 2, 2018, https://www.hollywoodreporter.com/thr-esq/spotify-hit-16-billion-copyright-lawsuit-tom-petty-weezer-neil-young-songs-1070960.

    1.

    Eric Pfanner and Takashi Mochizuki, "Sony Re-Evaluates Support for Free Music Streaming: Move Prompted by Swift Pulling Music from Spotify," Wall Street Journal, November 14, 2014; Steve Knopper, "Spotify Founder to Taylor Swift: 'Our Interests Are Totally Aligned with Yours,'" Rolling Stone, November 12, 2014, http://www.rollingstone.com/music/news/spotify-founder-to-taylor-swift-our-interests-are-totally-aligned-with-yours-20141112.

    2.

    Andy Fixmer, "Taylor Swift Record Company Says Spotify Paid a Lot Less Than $6 Million," Mashable, November 12, 2014, http://mashable.com/2014/11/12/taylor-swift-spotify-payout/.

    3.

    17 U.S.C. §115. See also Adam Barnonsky, "Publishing Administration: Recording Covers and mechanical2017, Representative Jerrold Nadler introduced the Fair Play Fair Pay Act of 2017, H.R. 1836. The bill would adopt several of the Copyright Office's proposals with respect to sound recording royalties. These include (1) extending the public performance right in sound recordings to broadcast radio (with a cap on payments made by small broadcasters, public and educational radio, religious services, and incidental uses of music); (2) including sound recordings made prior to February 15, 1972, among the body of works requiring royalty payments under federal law (and continuing to rely on state law for copyright protection); and (3) directing the CRB to adopt a uniform market-based rate-setting standard for public performance rights for all types of music services (thus eliminating the §801(b)(1) four factors test). In determining the rates, the CRB would have to consider whether the audio services would enhance or interfere with the copyright owner's other sources of revenue.

    In April 2017, Representative Darrell Issa introduced the Performance Royalty Owners of Music Opportunity to Earn Act of 2017 (PROMOTE Act of 2017), H.R. 1914. The bill would give copyright owners of sound recordings the exclusive right to withdraw their music from broadcast radio stations. Broadcast radio stations may "perform" sound recordings without copyright owners' permission if (1) they pay royalties identical to those paid under the statutory license rates determined by the CRB for eligible nonsubscription transmission services that apply to digital internet radio streaming and webcasts; (2) the broadcast is of a religious service, by an educational terrestrial radio station, or by a low-power FM radio station; or (3) the broadcast is an incidental use.

    In July 2017, Representative Issa introduced the Compensating Legacy Artists for Their Songs, Service, and Important Contributions to Society (CLASSICS) Act, H.R. 3301. Senator Christopher Coons introduced an identical bill, S. 2393, in February 2018. The bills would ensure that copyright owners of sound recordings made prior to February 15, 1972, would receive the same federal copyright protection parity as copyright owners of sound recordings made after that date.

    Also in July 2017, Representative Jim Sensenbrenner introduced the Transparency in Music Licensing and Ownership Act, H.R. 3350. The bill would direct the Register of Copyrights to create and maintain a searchable database for musical works and sound recordings. The bill would also restrict remedies available to copyright owners if they fail to provide or maintain the minimum information required in the database.

    In October 2017, Representative Hakeem Jeffries introduced the Copyright Alternative in Small-Claims Enforcement (CASE) Act of 2017, H.R. 3945. The bill would establish a Copyright Claims Board, an alternative forum to U.S. district courts, for copyright owners to protect their work from infringement. Participation would be voluntary. The board would be housed within the Copyright Office with jurisdiction limited to civil copyright cases capped at $30,000 in damages.

    In December 2017, Representative Doug Collins introduced the Music Modernization Act of 2017, H.R. 4706. In January 2018, Senator Orrin Hatch introduced S. 2334. These bills would provide that online music services would pay for a broad blanket license that covers every song in a database entitled the "Mechanical Licensing Collective." The services would fund and publishers would administer the collective. In any lawsuit filed after January 1, 2018, against a complying service, plaintiffs could recover only royalties owed under the new system, not damages for infringement. In setting mechanical license royalty rates, the CRB would use the "willing buyer/willing seller" standard rather than the Section 801(b)(1) factors. Judges in the Southern District of New York, when setting rates for public performances of musical works, could consider rates for public performances of sound recordings. The bills would also change the current systems of assigning judges to oversee cases related to the ASCAP and BMI consent decrees. Currently one judge is permanently assigned to all ASCAP cases, and another is assigned to all BMI cases. The bills would require the cases to be assigned by lot to a judge according to the court's rules for the division of business among district judges.

    Author Contact Information

    [author name scrubbed], Specialist in Telecommunications Policy ([email address scrubbed], [phone number scrubbed])

    Footnotes

    1.

    A "public performance" right is the right to play music on the radio, through a streaming service, in concerts, or anywhere else music is heard publicly. Donald S. Passman, All You Need to Know About the Music Business, 9th ed. (New York: Simon and Schuster, 2015), p. 227. (Passman). See also 17 U.S.C. §101 ("The right of public performance means the exhibition, rendition, or playing of a copyrighted work, either directly or by means of any device or process") and §106 (granting copyright holders exclusive rights to control, among other things, the public performance of their copyrighted works).

    2.

    Steve Knopper, "Taylor Swift Pulled Music from Spotify for 'Superfan Who Wants to Invest,' Says Rep," Rolling Stone, November 8, 2014, http://www.rollingstone.com/music/news/taylor-swift-scott-borchetta-spotify-20141108. Reportedly, Spotify and Ms. Swift reached an impasse when Spotify wanted to include her music on its free, advertising-supported service as well as its subscription service. Ms. Swift later made her sound recordings available on Spotify. Micah Singleton, "The Armistice Between Taylor Swift and Spotify is Good for Everyone," The Verge, June 9, 2017, https://www.theverge.com/2017/6/9/15766804/taylor-swift-spotify-streaming-umg-catalog.
    3.

    Nate Scott, "Ryan Adams' '1989' is the Taylor Swift Dad-Rock Album We've Been Waiting For," USA Today, November 15, 2015, http://ftw.usatoday.com/2015/09/ryan-adams-1989-stream-taylor-swift-spotify-mp3.
    4.
    45.

    Maria A. Pallante, Register of Copyrights and Director et al., Copyright and the Music Marketplace, U.S. Copyright Office, February 2015, http://copyright.gov/docs/musiclicensingstudy/ (2015 U.S. Copyright Office Report), p. 25.
    56.

    John Seabrook, "Revenue Streams: Is Spotify the Music Industry's Friend or Foe?," The New Yorker, November 23, 2014, http://www.newyorker.com/magazine/2014/11/24/revenue-streams.

    6.

    2015 Copyright Office Report, p. 25Appellate courts subsequently ruled that Napster's service violated copyright laws. A&M Records, Inc. v. Napster, Inc., 114 F.Supp.2d 896 (N.D. Cal. 2000), affirmed 239 F.3d 1004 (9th Cir. 2001). Following a court order, Napster shut down its service in 2001. Richard Nieva, "Ashes to Ashes, Peer to Peer: An Oral History of Napster," Fortune, September 5, 2013, http://fortune.com/2013/09/05/ashes-to-ashes-peer-to-peer-an-oral-history-of-napster/.

    7.

    Walter Isaacson, Steve Jobs (New York: Simon & Schuster, 2011), pp. 394-403. In addition, Apple CEO Steve Jobs negotiated with nearly two dozen major artists who had the rights to personally control the digital distribution of their music.
    8.

    CRS analysis of Recording Industry Association of America database. Figures are adjusted for inflation in 2017 dollars.
    9.

    Glenn Peoples, "iTunes Tenth Anniversary: Leading from the Front," Billboard, April 23, 2013, http://www.billboard.com/biz/articles/news/1559893/itunes-10th-anniversary-leading-from-the-front.
    10.

    Record labels earned $3.1 billion in revenues from digital downloads in 2013, compared with $3.2 billion in 2012. Figures adjusted for inflation in 2017 dollars (RIAA database).
    11.

    Alex Webb, "Hey, Siri, How Will Apple Keep Up with Google and Amazon?" Bloomberg, June 10, 2016, https://www.bloomberg.com/news/articles/2016-06-10/hey-siri-how-is-apple-going-to-keep-up-with-google-and-amazon.
    12.

    Joshua P. Friedlander, News and Notes on 2017 RIAA Shipment and Revenue Statistics, RIAA, March 22, 2018, http://www.riaa.com/wp-content/uploads/2017/03/RIAA-2016-Year-End-News-Notes.pdf. At the wholesale level, record labels generated $5.9 billion of revenue in 2017.
    13.

    CRS analysis of RIAA database.
    14.
    715.

    A video demonstration of a player piano and mechanical roll in action is available at YouTube, "I'll See You in My Dreams—Lee Sims Piano Solo," published on August 14, 2010, https://www.youtube.com/watch?v=XauZT3GYbY8.

    8.

    Kevin Zimmerman, "Songwriter 101: Understanding Mechanical Royalties," BMI, March 27, 2005.
    9Petition of Pandora Media, Inc. Related to U.S. v. ASCAP, 6 F. Supp. 3d 317, 367 (2014).
    16.

    1909 Copyright Act, Act of March 19, 1909, Ch. 320, 35 Stat. 1075 (1909 Copyright Act).

    17.

    Kevin Zimmerman, "Songwriter 101: Understanding Mechanical Royalties," Broadcast Music, Inc., blog, March 28, 2005, https://www.bmi.com/news/entry/Understanding_MechanicalRoyalties.
    18.

    Al Kohn and Bob Kohn, Kohn on Music Licensing, 4th ed. (New York: Aspen Law & Business, 2010), p. 7. (Kohn)

    A fixed work is one "in a tangible medium of expression when its embodiment in a copy or phonorecord, by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced, or otherwise communicated for a period of more than transitory duration." 17 U.S.C. §101. Fixation is one of the many terms of art that the Copyright Act employs with meanings that differ from ordinary usage in everyday language.

    1020.

    17 U.S.C. §301(c).

    For an extensive discussion of lawsuits and state laws related to pre-1972 sound recordings, see CRS Report RL33631, Copyright Licensing in Music Distribution, Reproduction, and Public Performance, by [author name scrubbed], Copyright Licensing in Music Distribution, Reproduction, and Public Performance, by [author name scrubbed].

    11.

    "Pandora's $90 Million Settlement on Pre-1972 Sound Recordings Has National Implications," Warren's Washington Internet Daily, October 26, 2015.
    12.
    22.

    In 2015, RIAA reached agreements on behalf of record labels with Pandora Media, Inc. (which operates the Pandora online music service) and Sirius XM Holdings, Inc. (which operates the SiriusXM satellite service) with respect to fees for the services' uses of pre-1972 sound recordings.
    23.

    17 U.S.C. §301(c). State laws apply until February 15, 2067.

    Ari Herstand, "Why You Haven't Been Getting Your iTunes Match Mechanical Royalties," Digital Music News, October 14, 2014, http://www.digitalmusicnews.com/2014/10/09/havent-getting-itunes-match-mechanical-royalties/.

    These types of downloads are known as "permanent digital downloads."
    1325.

    2015 Copyright Office Report, pp. 131-132Passman, pp. 67-68.
    1426.

    The rates may be based on a percentage of a radio station's revenues or other factors, depending on terms set by the performing rights organizations.

    15.

    John Seabrook, "Revenue Streams: Is Spotify the Music Industry's Friend or Foe?," The New Yorker, November 23, 2014, http://www.newyorker.com/magazine/2014/11/24/revenue-streams.
    16Marshall A. Leaffer, "Ch. 8.07 Limitations to the Reproduction and Adaptation Rights: Ephemeral Recordings, §112," in Understanding Copyright Law, 9th ed. (New Providence, NJ: Matthew Bender & Company, Inc., 2014), pp. 317-318.
    27.

    Passman, p. 147.

    17 U.S.C. §106. See also Royalty Exchange, Mechanical and Performance Royalties: What's the Difference, https://www.royaltyexchange.com/learn/mechanical-and-performance-royalties-whats-the-difference/; Harry Fox Agency, "Frequently Asked Questions: Digital Definitions," https://www.harryfox.com/find_out/faq.php.
    1729.

    Ben Sisaro, "Sony Threatens to Bypass Licensers in Royalties Battle," New York Times, July 10, 2014, http://www.nytimes.com/2014/07/11/business/media/sony-threatens-to-bypass-licensers-in-royalties-battle.html?_r=0Passman, pp. 235-240.

    		30.
    1831.

    Ed Christman, "How 'Shake It Off' Ruled the Publishing Industry's Fourth Quarter in 2014," Billboard, February 20, 2015, http://www.billboard.com/articles/business/6480028/taylor-swift-shake-it-off-publishing-industry-fourth-quarter-2014.
    1932.

    Passman, pp. 239-240.

    Nick Petrillo, "Anthony Gambardella, Music Publishing in the US—Getting a Remix: Diversified Digital Media Outlets Have OpenedMay Open Up New Revenue Streams,," IBISWorld Industry Report 51223, October 2015, p. 4 (2015 IBISWorld Music Publishing Report).

    August 2017, p. 26.
    2034.

    Ibid., p. 21.

    21.

    Ed Christman, "Taylor Swift's Big Machine is Off the Market, Gets Republic Nashville," Billboard, July 2, 2015.
    22MP3 is an audio-compression format for the internet. It stands for Motion Picture Experts Group Layer-3. Harry Newton, Newton's Telecom Dictionary, ed. Steve Schoen, 26th ed. (New York: Flatiron Publishing, 2011), pp. 764-765.
    35.

    Passman, pp. 67-70.

    The question of whether or not recordings artists are "employees" of the labels, under the "work for hire" doctrine, and thereby sign over the rights to their music to the labels for 95 years after their initial release, instead of 35 years, has been the topic of considerable congressional debate. To the extent that sound recordings fall outside of the "work for hire" framework, recordings artists may terminate the assignment of their copyrights to the record labels. Melville B. Nimmer and David Nimmer, "Ch. 5.3 Works Made for Hire," in Nimmer on Copyright: A Treatise on the Law of Literary, Musical, and Artistic Property, and the Protection of Ideas, vol. 1 (New York: M. Bender, 2015). Matthew Bender & Company, Inc., 2015). (Nimmer). See also Jon Pareles, "Musicians Take Copyright Issue to Congress," New York Times, May 25, 2000, http://www.nytimes.com/2000/05/25/movies/musicians-take-copyright-issue-to-congress.html?pagewanted=all.
    2337.

    Harold L. Vogel, Entertainment Industry Economics, p. 280.

    : A Guide for Financial Analysis, 9th ed. (New York: Cambridge University Press, 2014), p. 280. (Vogel)
    2438.

    Ed Christman and Andrew Hampp, "What Will Upcoming Contract Negotiations Mean for Taylor Swift, Usher and Justin Timberlake?" Billboard, November 21, 2014, http://www.billboard.com/articles/business/6327443/taylor-swift-usher-justin-timberlake-label-contract-negotiations. Among newer acts, agreements with record labels to share revenue from touring, merchandise, and other fees are common.

    For example, Madonna, for her album Rebel Heart, worked with multiple producers. In describing the recording process, Madonna said, "I didn't know exactly what I signed on for, so a simple process became a very complex process. Everyone I worked with is tremendously talented, [but each producer]... has also agreed to work with 5,000 other people. I just had to get in where I could fit in." Jon Pareles, "Madonna on 'Rebel Heart,' Her Fall, and More," New York Times, March 5, 2015, http://www.nytimes.com/2015/03/06/arts/music/madonna-talks-about-rebel-heart-her-fall-and-more.html?_r=0.
    2540.

    For detailed descriptions of financial arrangements, see Vogel, Entertainment Industry Economics, pp. 280-281.
    2641.

    See, for example, Taige Jensen, Graham Roberts, Alicia Desantis and Yulia Parshina Kottas et al., "Bieber, Diplo and Skrillex Make a Hit," New York Times, August 25, 2015, http://www.nytimes.com/video/arts/music/100000003872410/bieber-diplo-and-skrillex-make-a-hit.html. The producers of "Where Are U Now," recorded by Justin Bieber, also received writing credits.
    2742.

    Nick Petrillo, "Anthony Gambardella, Major Music Label Production in the U.S., Low Note: The Internet Will Continue to Decrease Album Sales, Hurting Revenue,"Changing Its Tune: The Industry Is Adjusting Its Structure to Combat the Threat of Music Piracy, IBISWorld Industry Report 51222, October 2015, p. 4 (2015 IBISWorld Major Label Music Production Report). In 2013 Sony acquired EMI Group's publishing division in a partnership with private investors.

    28.

    Ibid., p. 4.
    29.

    Vogel, Entertainment Industry Economics, p. 281.
    30.

    Act of May 31, 1790, Ch. 15, Stat. 124.
    31.

    Act of Feb. 3, 1831, Ch. 16, 4 Stat. 436.
    32.

    August 2017, p. 26.

    43.

    Vogel, p. 281. See also Passman, pp. 68-69.
    44.

    Chris Willman, "Big Machine's Scott Borchetta on Taylor Swift, the Fight Against Free and Remaining 'Bold and Disruptive' on 10-Year Anniversary," Billboard, October 26, 2015, http://www.billboard.com/articles/business/6738578/scott-borchetta-big-machine-10-year-anniversary-interview.
    45.

    Abigail Hess, "How this Grammy-Winning Artist Made It Big by Giving His Work Away," CNBC, February 13, 2017, http://www.cnbc.com/2017/02/13/grammy-winning-artist-made-it-big-while-giving-his-work-away-for-free.html.
    46.

    Joe Coscarelli, "Chance the Rapper Says His Apple Music Deal Was Worth $500,000," New York Times, March 17, 2017, https://www.nytimes.com/2017/03/17/arts/music/chance-the-rapper-apple-deal.html.
    47.

    Keith Caulfield, "Chance the Rapper's 'Coloring Book' is First Streaming-Exclusive Album to Chart on the Billboard 200," Billboard, May 22, 2016, http://www.billboard.com/articles/columns/chart-beat/7378361/chance-the-rapper-coloring-book-first-streaming-exclusive.

    48.
    3349.

    Kohn, p. 719.

    U.S. Congress, House Committee on Patents, To Amend and Consolidate the Acts Respecting Copyright, committee print, 5960th Cong., 2nd sess., March 2, 1907, Rep. 7083, Part 2, Views of the Minority, p. 5February 22, 1900, Rep. 2222, pp. 7-8. See also Kohn, p. 733.
    3451.

    2015 U.S. Copyright Office Report, p. 26.
    3552.

    U.S. Congress, House Committee on the Judiciary, Copyright Law Revision, committee print, 83rd Cong., 2nd sess., March 8, 1967, H.Rept. 90-183, pp. 66-67.

    36.

    Ibid., U.S. Congress, House Committee on the Judiciary, Copyright Law Revision, committee print, 94th Cong., 2nd sess., September 3, 1976, pp. 110-111. See also Scott Thill, "1948: Columbia's Microgroove LP Makes Albums Sound Good," Wired, June 10, 2010, http://www.wired.com/2010/06/0621first-lp-released/.

    37According to the treatise Nimmer on Copyright, although Congress did not specifically grant a compulsory license to "make and distribute phonorecords" until 1976, the intent of Section 1(e) of the 1909 Copyright Act was the same. Nimmer, "Ch. 8.4 Limitations on the Reproduction Right—the Mechanical Compulsory License of Non-Dramatic Musical Works."
    53.

    Josh Dickey, "How Ryan Adams Was Allowed to Legally Cover an Entire Taylor Swift Album," Mashable, September 15, 2015, https://mashable.com/2015/09/22/ryan-adams-taylor-swift-album/#BwIIfmDrsPqp. Taylor Swift supported the endeavor. The GQ Editors, "Taylor Swift Gets Interviewed by Ryan Adams," GQ, October 15, 2015, https://www.gq.com/story/taylor-swift-ryan-adams-1989-interview.
    54.

    Copyright Act of 1909, P.L. 60‐349, §1(e), 35 Stat. 1075, 1075‐76. In a 1906 hearing, a representative of a piano roll manufacturer that competed with Aeolian proposed the rate of $0.02 as "some criterion to go by." U.S. Congress, Committees on Patents, Senate and House of Representatives, Conjointly, To Amend and Consolidate the Acts Respecting Copyright, Hearings on S. 6330 and H.R. 19853, 107th Cong., 1st sess., December 10, 1906 (Washington: GPO, 1906), pp. 298, 319.
    55.

    It changed in 1978, with the effective date of the Copyright Act of 1976. The report from the House Judiciary Committee stated, "While upon initial review it might be assumed that the rate established in 1909 would not be reasonable at the present time, the committee believes that an increase in the mechanical royalty must be justified on the basis of economic conditions and not on the mere passage of 67 years." U.S. Congress, House Committee on the Judiciary, Copyright Law Revision, committee print, 94th Cong., 2nd sess., September 3, 1976, p. 111. (1976 House Judiciary Committee Report)
    56.

    Yale University, Irving S. Gilmore Music Library, "The History of 78 RPM Recordings," http://web.library.yale.edu/cataloging/music/historyof78rpms.
    57.

    Scott Hill, "June 21, 1948: Columbia's Microgroove LP Makes Albums Sound Good," Wired, June 20, 2010, https://www.wired.com/2010/06/0621first-lp-released/.
    58.

    Frederick F. Greenman, Jr., and Alvin Deutsch, "The Copyright Royalty Tribunal and the Statutory Mechanical Royalty: History and Prospect," Cardozo Arts & Entertainment Law Journal, vol. 1, no. 1 (1982), pp. 1, 12, n. 50.
    59.

    Copyright Act of 1909, P.L. 60‐349, §1(e), 35 Stat. 1075, 1075‐76.
    3860.

    Copyright Act of 1976, P.L. 94-553, §101. 17 U.S.C. §101.

    61.

    17 U.S.C. §115(b)(1).
    62.

    Stuart Dredge, "Spotify Songwriter Lawsuits: What, Why and What Happens Next?" Music Ally blog, January 25, 2016, https://www.bmi.com/news/entry/Understanding_MechanicalRoyalties.
    63.

    U.S. Congress, Senate Committee on the Judiciary, Copyright Law Revision, report to accompany S. 22, 94th Cong., 1st sess., November 20, 1975, S. Rept. 94-473 (Washington: GPO, 1975), p. 90.
    64.

    Ibid. Nimmer, "Ch. 8.04(G)(3) The Effect of Failure of Notification by Both the Copyright Owner and Putative Licensee."
    65.
    39.

    P.L. 94-553, §§801-810.
    401).
    66.

    Nimmer, "Ch. 8.04(G)(2)(a) Notification by the Copyright Holder," n. 142.
    67.

    Richard D. Rose, "Connecting the Dots: Navigating the Laws and Licensing Requirements of the Internet Music Revolution," IDEA -- the Journal of Law and Technology, vol. 42, no. 3 (2002), pp. 313, 337.
    68.

    Frederick F. Greenman, Jr. and Alvin Deutsch, "The Copyright Royalty Tribunal and the Statutory Mechanical Royalty: History and Prospect," Cardozo Entertainment and Law Journal, vol. 1, no. 1 (1982), pp. 1, 21-22. (Greenman and Deutsch). See also Testimony of Executive Secretary of National Music Publishers Association Leonard Feist, in U.S. Congress, Senate Committee on the Judiciary, Subcommittee on Patents, Trademarks, and Copyrights, Copyright Law Revision, hearing on S. 597, 90th Cong., 1st sess., H. Rept. 2512, Part 2, March 20, 1967, (Washington, DC: GPO, 1967), pp. 373, 377.
    69.

    Testimony of Register of Copyrights Barbara Ringer, in U.S. Congress, House Committee on the Judiciary, Subcommittee on Courts, Civil Liberties, and the Administration of Justice, Copyright Law Revision, hearing on H.R. 2223, 94th Cong., 1st sess., H. Rept. 521-33, Part 3, December 4, 1975 (Washington, DC: GPO, 1976), pp. 1901, 1914.
    70.

    P.L. 94-553, §§801-810.
    71.

    17 U.S.C. §801(b)(1).

    17 U.S.C. §§801-805; Copyright Royalty and Distribution Reform Act of 2004, P.L. 108-419. See also Copyright Royalty Tribunal Reform Act of 1993, P.L. 103-198.
    41.

    17 U.S.C. §115(c)(3)(E)(i). Section 115 provides that voluntarily negotiated rates for mechanical licenses supersede those set by the CRB.
    4273.

    17 U.S.C. §§801(b)(1) and 804(b)(4).
    4374.

    According to the CRB, "virtually no one uses section 115 to license reproductions of musical works, yet the parties in this proceeding are willing to expend considerable time and expense to litigate its royalty rates and terms. The Judges are, therefore, seemingly tasked with setting rates and terms for a useless license. The testimony in this proceeding makes clear, however, that despite its disuse, the section 115 license exerts a ghost-in-the-attic like effect on all those who live below it." Copyright Royalty Board, Library of Congress, "Mechanical and Digital Phonorecord Delivery Rate Determination Proceeding," 74 Federal Register 4510, 4513, January, 26, 2009.
    44.

    These factors include (1) maximizing the availability of public works to the public, (2) affording copyright owners a fair return on their creative works and copyright users a fair income under existing economic conditions, (3) reflecting the relative contributions of the copyright owners and users in making products available to the public, and (4) minimizing any disruptive impact on the structure of the industries involved and on generally prevailing industry practices. 17 U.S.C. §801(b)(1).
    4575.

    P.L. 104-39.
    4676.

    U.S. Congress, Senate Committee on the Judiciary, Digital Performance Right in Sound Recordings Act of 1995, committee print, 104th Cong., 1st sess., August 4, 1995, S.Rept. 104-128 (Washington: GPO, 1995), p. 10.
    4777.

    17 U.S.C. §115(c)(3)(D).
    4878.

    2008 NPRM, p. 40806.
    4979.

    2008 Interim Rule, p. 66174.

    50National Music Publishers' Association, "Major Music Industry Groups Announce Breakthrough Agreement," press release, September 23, 2008, https://secure.harryfox.com/public/userfiles/file/PressReleases/RateAgreement9-23-08.pdf.
    80.

    Kohn, pp. 754-755.

    Copyright Royalty Board, Library of Congress, "Mechanical and Digital Phonorecord Delivery Rate Determination Proceeding; Review of Copyright Royalty Judges Determination; Final Rule and Notice," 74 Federal Register 4510, January, 26, 2009;. Copyright Royalty Board, Library of Congress, "Adjustment of Determination of Compulsory License Rates for Mechanical and Digital Phonorecords," 78 Federal Register 67938, November 13, 2013Mechanical and Digital Phonorecord Delivery Rate Determination Proceeding; Final Rule," 74 Federal Register 6832, February 11, 2009.
    5182.

    U.S. Congress, House Committee on the Judiciary, Copyright Law Revision, committee print, 94th Cong., 2nd sess., September 3, 1976, 94-1476, p. 173.

    52.

    Pandora Media, Inc. 2014 SEC Form 10-K, p. 13. See also Spotify Ltd., "Spotify Explained, Royalties: in Detail," http://www.spotifyartists.com/spotify-explained/#royalties-in-detail.
    53.

    2015 Copyright Office Report, p. 162.
    54.

    Ed Christman, "Copyright Royalty Board to Set Mechanical Royalty Rates for Digital Music Services," Billboard, April 12, 2012, http://www.billboard.com/biz/articles/news/publishing/1098005/copyright-royalty-board-to-set-mechanical-royalty-rates-for.
    55National Music Publishers' Association, "Major Music Industry Groups Reach Historic Agreement on Royalty Rates and Standards," press release, April 11, 2012, http://nmpa.org/press_release/major-music-industry-groups-reach-historic-agreement-on-royalty-rates-and-standards/.
    83.

    Copyright Royalty Board, Library of Congress, "Adjustment of Determination of Compulsory License Rates for Mechanical and Digital Phonorecords," 78 Federal Register 67938, November 13, 2013.
    84.

    Copyright Royalty Board, Library of Congress, Determination of Royalty Rates and Terms for Making and Distributing Phonorecords (Phonorecords III), March 19, 2018, https://www.crb.gov/. The determination is subject to statutory review by the Register of Copyrights. In addition, the judges have under advisement motions for rehearing and clarification of the initial determination.
    85.

    For ringtones, the rate is $0.24.

    The purchase enabled SESAC to become the first organization to handle both performing and mechanical licenses, giving it an advantage over rivals BMI and ASCAP. Nate Rau, "SESAC Shows the Way for Music Licensing, Music Row Land Use," The Tennessean, August 14, 2015, http://www.tennessean.com/story/entertainment/music/2015/08/14/sesac-shows-way-music-licensing-music-row-land-use/31742119/.
    5687.

    2015 Copyright Office Report, p. 21.
    5788.

    Act of March 3, 1897, Ch. 392, 29 Stat. 694. See also 2015 U.S. Copyright Office Report, p. 17. Congress declined to grant exclusive performance rights when it first amended copyright law to expressly protect musical works in 1831, because it considered performances as promotional vehicles to spur sales of sheet music. 2015 U.S. Copyright Office Report, p. 17.
    5889.

    Marcus Cohn, "Music, Radio Broadcasters and the Sherman Act," Georgetown Law Journal, vol. 29, no. 4 (January 1941), pp. 407, 410. (Cohn). The author wrote a major portion of the article as a thesis while earning his LLM at Harvard Law School. After working at the Federal Communications Commission in the 1940s, he subsequently became a founder of the law firm Cohn and Marks. Cohn & Marks LLP, http://www.cohnmarks.com/broadcast.htm.

    Broadcast Music, Inc., et al. v. Columbia Broadcasting System, Inc., et al., 441 U.S. 1, 4-5 (1979); see also Alden-Rochelle, Inc., et al. v. American Society of Composers, Authors and Publishers et al., F. Supp. 888, 891 (S.D.N.Y. 1948).
    5991.

    Ibid. and 2015 Copyright Office Report, p. 20.

    60.

    SESAC, "FAQs: Becoming a SESAC Affiliate," http://www.sesac.com/WritersPublishers/faq.aspxCohn, pp. 410-411; Library of Congress, "Great War & Jazz Age (1914-1928) http://www.americaslibrary.gov/jb/jazz/jb_jazz_ascap_1.html.
    6192.

    2015 Copyright Office Report, p. 33.
    6293.

    "Billboard Spotlight: SESAC," Billboard, November 6, 1976, pp. C-20.
    94.

    Cohn, p. 414.
    95.

    Kohn, pp. 14-15.
    96.

    Cohn, p. 420.

    97.

    Cohn, p. 421, n. 79.
    98.

    The following is a summary of the 2015 Copyright Office Report, pp. 35-42.
    99.

    Cohn, p. 407; "Radio Puts Ban on 1,500,000 Songs Tonight," New York Herald Tribune, December 31, 1941.
    100.

    "U.S. Will Sue ASCAP, BMI, N.B.C., C.B.S.," New York Herald Tribune, December 27, 1940. The Assistant Attorney General claimed that through BMI, the broadcast radio networks had adopted policies similar to those of ASCAP, with the goal of eliminating competition and creating a monopoly over the supply of pubic performance rights to musical compositions.
    101.

    "BMI Averts Suit by Consent Decree," New York Times, January 28, 1941, p. 22.
    102.

    "ASCAP Accepts Consent Decree, Clearing Path for Radio Peace," New York Herald Tribune, February 20, 1941, pp. 1, 10.
    103.

    ASCAP Consent Decree §IX; BMI Consent Decree §XIV.
    104.

    BMI v. DMX, 683 F. 3d 32, 45 (2d Cir. 2012).
    105.

    The DPRA used the §801(b)(1) standard exclusively to set sound recording public performance royalty rates.
    106.

    U.S. Congress, House Committee on the Judiciary, Digital Performance Right in Sound Recordings Act of 1995, report to accompany H.R. 1506, 104th Cong., 1st sess., October 11, 1995, H.Rept. 104-274 (Washington: GPO, 1995), p. 24.
    107.

    Peter L. Felcher, "Performance Right Protects Songwriters," Billboard, August 12, 1995, p. 6.

    108.
    109.

    U.S. Congress, House Committee on the Judiciary, Prohibiting Piracy of Sound Recordings, report to accompany S. 646, 92nd Cong., 1st sess., September 22, 1971, H. Rept. 92-487 (Washington: GPO, 1971), pp. 9-10.
    110.

    Goldstein v. California, 412 U.S. 546 (1973).
    111.

    U.S. Congress, House Committee on the Judiciary, Copyright Law Revision, committee print, prepared by Government Printing Office, 94th Cong., 2nd sess., September 3, 1976, 94-1476 (Washington: GPO, 1976), p. 133.
    112.

    The federal laws took effect in 1978. 1976 Copyright Act, §301 (17 U.S.C. §301).

    Radio Music License Committee, "Federal Court Approves Radio Industry Settlement with ASCAP," press release, January 27, 2012, http://www.radiomlc.org/pages/4795848.php; Radio Music License Committee, "Federal Court Approves Radio Industry Settlement with BMI," press release, August 12, 2012, http://www.radiomlc.org/pages/6282052.php. See also David Oxenford, "Details of the ASCAP Settlement with the Radio Industry—What Will Your Station Pay?," Broadcast Law Blog, January 30, 2012, http://www.broadcastlawblog.com/2012/01/articles/details-of-the-ascap-settlement-with-the-radio-industry-what-will-your-station-pay/.

    63.

    Ben Sisario, "Pandora Wins a Battle, but the War Over Royalties Continues," New York Times, March 20, 2014, http://www.nytimes.com/2014/03/21/business/media/pandora-wins-a-battle-but-the-war-over-royalties-continues.html?_r=0. Pandora Media, Inc. v. American Society of Composers, Authors and Publishers et al, Nos. 14-1158, 14-1161, 14-1246 (2nd Cir. May 6, 2015). Pandora is involved in a similar suit with BMI. Ed Christman, "Pandora Appeals BMI Rate Court Ruling," Billboard, October 20, 2015, http://www.billboard.com/articles/business/6737437/pandora-appeals-ruling-bmi-royalty-rate.
    64.

    Andrew Flanagan, "FCC Sweeps Aside a Final Obstacle to Pandora's Radio Station Buy," Billboard, September 17, 2015, http://www.billboard.com/articles/business/6700463/fcc-ascap-pandora-radio-station-south-dakota.
    65.

    Figures reported from the National Music Publishers Association (NMPA) for its members are lower than those reported by the research firm IBIS. NMPA reported that in 2014 its member organizations received a total of $2.1 billion in U.S. revenues, a decline from the $2.2 billion generated in 2013. Ed Christman, "Music Publishing Leader Says Revenues Down, Looks to Apple Music for Hope," Billboard, June 17, 2015,

    66.

    P.L. 92-140. See also Maria A. Pallante, Register of Copyrights and Director et al., Federal Copyright Protection for Pre-1972 Sound Recordings, U.S. Copyright Office, December 2011, http://copyright.gov/docs/sound/ (2011 Copyright Office Report).

    67.

    2011 Copyright Office Report.
    68.

    17 U.S.C. §112(e)(1); U.S. Congress, House Committee on the Judiciary, Digital Millennium Copyright Act, committee print, 106th Cong., 2nd sess., October 8, 1998, H.Rept. 105-796, pp. 89-90.
    69114.

    Copyright Office, Library of Congress, "Review of Copyright Royalty Judges Determination, Notice," 73 Federal Register 9143, 9146, February 19, 2008. This is in contrast to 17 U.S.C. §114(g), which specifically allocates 45% of performance royalties to recording artists, even when they are not the copyright holders.
    70115.

    Arista Records, LLC v. Launch Media, Inc., 578 F.3d 148, 153 (2d Cir. 2009), cert. denied, 559 U.S. 929 (2010). ("Launch Media").
    71116.

    Melville B. Nimmer and David Nimmer, "Ch. 8.21 Digital Performance," in Nimmer on Copyright: A Treatise on the Law of Literary, Musical, and Artistic Property, and the Protection of Ideas, vol. 2 (New York: M. Bender, 2015).

    72.

    17 U.S.C. §114(d)(2). 2015 Copyright Office Report, p. 49.
    73.

    P.L. 105-304.
    74."
    117.

    P.L. 104-39, §3(2).
    118.

    Peter Felcher, "Public Performance Right Protects Songwriters," Billboard, August 12, 1995, p. 6.
    119.

    Bill Holland, "Agreement Paves Way for Senate Perf. Right Bill," Billboard, July 8, 1995, p. 1.
    120.

    Brett Atwood, "Webcasters Face New Royalty," Billboard, May 17, 1997, p. 8.
    121.

    P.L. 105-304. Sound recording public performance royalty rates for interactive services such as Spotify and Apple Music remain subject to marketplace negotiations.

    17 U.S.C. §114(f)(2)(B).
    75.

    The CRB has termed the SR and PPS rate proceedings collectively for the 2018 – 2022 period as "SDARS III." Copryight Royalty Board, Library of Congress, "Determination of Rates and Terms for Satellite Radio and ''Preexsiting' Subscription Services (SDARS III)," 81 Federal Register 255, January 5, 2016.
    76.

    17 U.S.C. §114(g). See also U.S. Congress, House Committee on the Judiciary, Digital Performance Right in Sound Recordings Act of 1995, committee print, 104th Cong., 1st sess., October 11, 1995, 104-274, pp. 23-24. "In the absence of the work made for hire doctrine of the copyright law, record companies ... are joint authors of a sound recording. However, the work made for hire doctrine often applies to sound recordings. Under this doctrine, upon creation of the sound recording, record companies ... are the sole rightsholders.... The Committee intends the language of section 114(g) to ensure that a fair share of digital sound recordings goes to performers under the terms of their contracts."

    77123.

    U.S. Government Accountability Office, In a Previous Rate-Setting Proceeding for Some Sound Recordings, the Standard Addressing the Disruptive Impact of the Industries Contributed to a Lower Copyright Royalty Rate, but the Effect of Its Proposed Removal is Unclear, 10-828R, August 4, 2010, https://www.gao.gov/products/GAO-10-828R.
    124.

    U.S. Congress, House Committee on the Judiciary, Digital Millennium Copyright Act, Conference report to accompany H.R. 2281, 105th Cong., 2nd sess., October 8, 1998, H.Rept. 105-796 (Washington: GPO, 1998), pp. 80-81.

    U.S. Congress, Senate Committee on the Judiciary, Digital Performance Right in Sound Recordings Act of 1995, committee print, 104th Cong., 1st sess., August 4, 1995, S.Rept. 104-128, p. 18.

    78.

    Ibid., pp. 14-16pp. 14-16, 18.
    79126.

    U.S. Congress, Senate Committee on the Judiciary, Digital Performance Right in Sound Recordings Act of 1995, committee print, 104th Cong., 1st sess., August 4, 1995, S.Rept. 104-128, pp. 14-15.
    80127.

    Ibid., p. 15.
    81128.

    National Association of Broadcasters, "A Performance Tax Puts Local Jobs at Risk," http://nab.org/advocacy/issue.asp?id=1889&issueid=100217 U.S.C. §803.
    82129.

    John Villasenor, Digital Music Royalties: The Case for a Level Playing Field, Center for Technology Innovation at Brookings, Washington, DC, August 2012, pp. 5-6, https://www.brookings.edu/research/digital-music-broadcast-royalties-the-case-for-a-level-playing-field/. (Villasenor). The following discussion about rate proceedings is based in part on excerpts from this publication.
    130.

    17 U.S.C. §801(b)(7)(A)(ii).

    Music First, The Truth About Performance Rights, http://musicfirstcoalition.org/performancerights.
    83.

    U.S. Government Accountability Office, The Proposed Performance Rights Act Would Result in Additional Costs for Broadcast Radio Stations and Additional Revenue for Record Companies, Musicians, and Performers, 10-826, August 2010, p. 12, http://www.gao.gov/assets/310/308569.pdf.
    84.

    Tim Westergren, founder, Pandora, Pandora and Royalties (blog), June 26, 2013, http://blog.pandora.com/2013/06/26/pandora-and-royalties/.

    85.

    Roger Waters, David Gilmour, and Nick Mason, "Pink Floyd: Pandora's Internet Radio Ripoff," USA Today, June 25, 2013, http://www.usatoday.com/story/opinion/2013/06/23/pink-floyd-royalties-pandora-column/2447445/.

    86.

    2015 Copyright Office Report, pp. 89-90.
    87.

    17 U.S.C. §§112(e)(2), 114(e)(1), 115(c)(3)(B).
    88132.

    Copyright Royalty Board, Library of Congress, "Digital Performance Right in Sound Recordings and Ephemeral Recordings," 80 Federal Register 59588, October 2, 2015. Library of Congress, Copyright Royalty Board, "Digital Performance Right in Sound Recordings and Ephemeral Recordings," 80 Federal Register 58201, September 28, 2015. 17 U.S.C. §801(b)(7)(A) codifies the CRB's authority to do so.
    89133.

    "A key reason for rejecting the percentage-of-revenue approach was the Panel's determination that a per performance fee is directly tied to the right being licensed. The Panel also found that it was difficult to establish the proper percentage because business models varied widely in the industry, such that some services made extensive music offerings while others made minimal use of the sound recordings. The final reason and perhaps the most critical one for rejecting this model was the fact that many webcasters generate little revenue under their current business models. As the Panel noted, copyright owners should not be 'forced to allow extensive use of their property with little or no compensation.'" Copyright Office, Library of Congress, "Determination of Reasonable Rates, Final Rule and Order," 67 Federal Register 45240, 45249, July 8, 2002.
    90.

    2015 Copyright Office Report, pp. 51-52.
    91.

    P.L. 110-435. See also CRS Report RL34020, Statutory Royalty Rates for Digital Performance of Sound Recordings: Decision of the Copyright Royalty Board, by [author name scrubbed], Statutory Royalty Rates for Digital Performance of Sound Recordings: Decision of the Copyright Royalty Board, by [author name scrubbed]. Previously134. P.L. 110-435. Previously, Congress had passed the Small Webcaster Settlement Act of 2002, P.L. 107-321; the Webcaster Settlement Act (WSA) of 2008, P.L. 110-435,; and the Webcaster Settlement Act of 2009, P.L. 111-36. The 2009 WSA extended the window of time during which parties were authorized to reach settlements under the 2008 WSA.
    92135.

    17 U.S.C. §114(f)(5).

    		 136.

    Library of Congress, U.S. Copyright Office, "Notification of Agreements Under the Webcaster Settlement Act of 2008," 74 Federal Register 9293, March 3, 2009, The group of "small webcasters" that reached the agreement included Attention Span Radio; Blogmusik (Deezer.com); Born Again Radio; Christmas Music 24/7; Club 80's Internet Radio; Dark Horse Productions; Edgewater Radio; Forever Cool (Forevercool.us); Indiwaves (Set YourMusicFree.com); Lundlow Media (MandarinRadio.com); Musical Justice; My Jazz Network; PartiRadio; Playa Cofi Jukebox (Tropicalglen.com); Soulsville Online; taintradio; Voice of Country; and Window to the World Communications (WFMT.com). Ibid., p. 9294, n. 1.
    93.

    Ibid., p. 9303.
    94.

    Copyright Office, Library of Congress, "Notification of Agreements Under the Webcaster Settlement Agreement of 2009," 74 Federal Register 34796, July 19, 2009. In addition, SoundExchange reached webcasting agreements with Sirius XM Radio Inc. as well as the Corporation for Public Broadcasting and College Broadcasters, Inc. Copyright Office, Library of Congress, "Notification of Agreements Under the Webcaster Settlement Agreement of 2009," 74 Federal Register 40614, Aug. 12, 2009.
    95.

    Pandora Media, Inc., SEC Form 10-K, for the fiscal year ended January 31, 2013, p. 9.
    96.

    Clear Channel Media and Entertainment, "Big Machine Label Group and Clear Channel Announce Groundbreaking Agreement to Enable Record Company and Its Artists to Participate in All Radio Revenue Streams and Accelerate Growth of Digital Radio," press release, June 5, 2012, http://www.businesswire.com/news/home/20120605005867/en/Big-Machine-Label-Group-Clear-Channel-Announce#.VRxaMuHQJUE. In 2014 Clear Channel renamed itself iHeartMedia.

    97.

    Clear Channel Media and Entertainment, "Warner Music Group and Clear Channel Announce Landmark Music Partnership," press release, September 12, 2013, http://www.iheartmedia.com/pages/Warner-Music-Group-and-Clear-Channel-Announce-Landmark-Music-Partnership.aspx.
    98.

    Brad Hill, "Pandora Proposes Lowering Music Royalty Rates Based on 'Steering' in Merlin Agreement," Radio and Internet News, October 27, 2014, http://rainnews.com/pandora-proposes-lowered-music-royalty-rates-based-steering-merlin-agreement/.

    99.

    David Oxenford, "Copyright Royalty Board Begins Hearings on Webcasting Royalty Rates for 2016-2020—When Will We See a Decision?," Broadcast Law Blog, April 29, 2015, http://www.broadcastlawblog.com/2015/04/articles/copyright-royalty-board-begins-hearings-on-webcasting-royalty-rates-for-201-2020-when-will-we-see-a-decision/.
    100137.

    Maria A. Pallante, Register of the Copyrights and Director, "Determination of Royalty Rates and Terms for Ephemeral Recordings and Webcasting Digital Performance of Sound Recordings (Web IV)," U.S. Copyright Office, Library of Congress, Memorandum Opinion on Novel Material Questions of Law, September 18, 2015, ppp. 5, 8, http://www.loc.gov/crb/web-iv/memorandum-opinion-%20on-novel-material-questions-of-law.pdf. (2015 Copyright Office Web IV Memo)

    .
    101138.

    17 U.S.C. §802(f)(1)(b).

    Copyright Royalty Board, "Current Developments," https://www.crb.gov/rate/.
    102139.

    2015 Copyright Office Web IV Memo, p. 10.
    103140.

    Copyright Royalty Board, Web IV Determination, Exhibit A, December 16, 2015, http://www.loc.gov/crb/web-iv/web-iv-terms.pdf. The CRB subsequently amended the regulatory language codifying the terms of the decision. Copyright Royalty Board, Web IV Determination, Exhibit A, December 24, 2015, http://www.loc.gov/crb/web-iv/amended-web-iv-terms.pdf.

    See also 37 C.F.R. §380.10.
    104141.

    Although the awardrate is more than the $0.11 per 100 streams on its free service sought by Pandora, it is less than the $0.25 per 100 streams or 55% of Pandora's revenue, whichever was greater, sought by SoundExchange. In 2015, pursuant to the agreement it had reached with SoundExchange, Pandora paid the greater of $0.14 per 100 streams on free service or 25% of its revenue.
    105142.

    Library of Congress, Copyright Royalty Board, "Determination of Royalty Rates for Digital Performance Right in Sound Recordings and Ephemeral Recordings, Final Rule and Order" 79 Federal Register 23102, April 25, 2014. The CRB decision's in 2014 retroactively set rates for the 2011- 2015 period, because its original 2010 decision was subsequently ruled invalid. The U.S. Court of Appeals, D.C. Circuit, had determined that the CRB judges were acting as principal officers of the U.S. government in violation of the Appointments Clause of the U.S. Constitution, and that their decision therefore could not take effect. Intercollegiate Broadcasting Sys., Inc. v. Copyright Royalty Board, 684 3d 1332 (D.C. 2012), cert. denied 133 S. Ct. 2735 (2013).

    106.

    "CRB's 2016-2020 Webcasting Rate-setting Ruling Mainly Benefits Pandora and Broadcasters, Lawyers Say," Warren's Washington Internet Daily, December 18, 2015.
    107.

    Brad Hill, "CRB: Small Webcasters Face January 1 with Fear, Anger, Hope, and Strategies," RAIN News, December 28, 2015, http://rainnews.com/crb-small-webcasters-face-january-1-with-fear-anger-hope-and-strategies/.

    108.

    Savenetradio 3.0, "Save Net Radio! We Need Your Help to Petition Congress. 100,000+ Stations Will Perish" https://www.change.org/p/u-s-house-of-representatives-u-s-senate-save-net-radio-we-need-your-help-to-petition-congress-100-000-stations-will-perish.
    109.

    SoundExchange, "SoundExchange Statement on Web IV Rate Decision," press release, December 16, 2015, http://www.soundexchange.com/pr/soundexchange-statement-on-web-iv-rate-decision/.

    110.

    17 U.S.C. §114(g)(2). See also SoundExchange, Artist & Copyright Owner: About Digital Royalties, http://www.soundexchange.com/artist-copyright-owner/digital-royalties/.

    111.

    SoundExchange, SoundExchange Annual Report for 2014 Provided Pursuant to 37 C.F.R. §370.5(c), March 31, 2015, http://www.soundexchange.com/wp-content/uploads/2015/03/2014-SoundExchange-Fiscal-Report-_FINAL-REPORT_ISSUED_3-31-2015.pdf; Digital Radio Report, Q4 2014, http://digitalradioreport2014q4.soundexchange.com/.
    112Library of Congress, Rates and Terms for Transmissions of Sound Recordings by Preexisting Subscription Services and Preexisting Satellite Digital Audio Radio Services for the Making of Ephemeral Reproductions to Facilitate Those Transmissions, Appendix A, December 14, 2017, https://www.crb.gov/rate/.
    143.

    17 U.S.C. §114(g)(2). See also U.S. Congress, House Committee on the Judiciary, Digital Performance Right in Sound Recordings Act of 1995, committee print, 104th Cong., 1st sess., October 11, 1995, 104-274, pp. 23-24. "In the absence of the work made for hire doctrine of the copyright law, record companies ... are joint authors of a sound recording. However, the work made for hire doctrine often applies to sound recordings. Under this doctrine, upon creation of the sound recording, record companies ... are the sole rightsholders. ... The Committee intends the language of section 114(g) to ensure that a fair share of digital sound recordings goes to performers under the terms of their contracts."

    2015 Copyright Office Report, pp. 48-49.
    113145.

    17 U.S.C. §114(j)(7).
    114146.

    The Copyright Office has stated, however, that it "would not dispute a finding [from the CRB] that non-interactive and interactive streams have different economic value, or even that a rate of zero might be appropriate for [digital phonorecord deliveries] made in the course of non-interactive streams." Library of Congress, Copyright Royalty Board, "Adjustment of Determination of Compulsory License Rates for Mechanical and Digital Phonorecords," 78 Federal Register 63798, 63941, n.14, November 13, 2013.
    115147.

    Arista Records, LLC v. Launch Media, Inc., 578 F.3d 148, 153 (2d Cir. 2009), cert. denied, 559 U.S. 929 (2010).
    116148.

    Ibid., p. 164.
    117149.

    LAUNCHcast subsequently ceased operations.
    118150.

    Ibid., pp. 161-162, 164. "LAUNCHcast listeners do not even enjoy the limited predictability that once graced the AM airwaves on weekends in America when 'special requests' represented love-struck adolescents' attempts to communicate their feelings to 'that special friend.'"
    119.

    17 U.S.C. §114(d)(2)(B)-(C).
    120151.

    17 U.S.C. §114(d)(2)(B)(i), (d)(2)(C)(i), (j)(13). For a more detailed discussion, see Melville B. Nimmer and David Nimmer, "Ch. 5.03 Works Made for Hire," in Nimmer on Copyright: A Treatise on the Law of Literary, Musical, and Artistic Property, and the Protection of Ideas, vol. 2 (New York: M. Bender, 2015).

    ."
    121152.

    2015 Copyright Office Report, p. 164.

    2015 Copyright Office Report, p. 164.

    122.

    See, for example, Diego Planas Rego, Spotify, Ltd, M83 and Ringo Starr Album Commentaries and This Week's Music News (blog), Feb. 2, 2012, https://news.spotify.com/uk/2012/02/02/m83-and-ringo-starr-album-commentaries-and-this-weeks-music-news/.

    123.

    Andrew Flanagan and Andrew Hampp, "It's Official: Jay Z's Historic Tidal Launches with 16 Artist Stakeholders," Billboard, March 30, 2015, http://www.billboard.com/articles/news/6509498/jay-z-tidal-launch-artist-stakeholders.
    124.

    TIDAL, "Stream of Consciousness: How Does TIDAL Generate Revenues?," http://tidal.com/soc/.

    125.

    Ben Sisario, "Jay Z Enters Streaming Music with Artist-Owned Service," New York Times, March 31, 2015, http://www.nytimes.com/2015/03/31/business/media/jay-z-reveals-plans-for-tidal-a-streaming-music-service.html.
    126.

    Tom Huddleston, Jr., "Apple Music Could Catch Up to Spotify in 2016," Fortune, December 17, 2015, http://fortune.com/2015/12/17/apple-music-spotify-subscribers.
    127.

    Leah Yahmshon, "Apple Music FAQ: The Ins and Outs of Apple's New Streaming Music Service," MacWorld, September 27, 2015, http://www.macworld.com/article/2934744/software-music/apple-music-faq-the-ins-and-outs-of-apples-new-streaming-music-service.html.
    128.

    Josh Duboff, "Taylor Swift: Apple Crusader, #GirlSquad Captain, and the Most Infuential 25-Year Old in America," Vanity Fair, August 31, 2015, http://www.vanityfair.com/style/2015/08/taylor-swift-cover-mario-testino-apple-music.
    129.

    Mitchell Peters, "Taylor Swift '1989 World Tour Live' Concert Film Coming to Apple Music: Watch Trailer," Billboard, December 13, 2015; http://www.billboard.com/articles/columns/pop/6805739/taylor-swift-1989-world-tour-live-concert-film-apple-music-dec-20.
    130.

    Helienne Lindvall, "Behind the Music: The Real Reason Why the Major Labels Love Spotify," The Guardian, August 17, 2009, http://www.theguardian.com/music/musicblog/2009/aug/17/major-labels-spotify.
    131154.

    James Vincent, "Jay Z Takes on Spotify with $56 Million Purchase of Aspiro," The Verge, January 30, 2015, http://www.theverge.com/2015/1/30/7950317/Jay-z-buys-tidal-wimp-aspiro-to-take-on-spotifyBen Sisario, "As Spotify Goes Public, Sony Cashes In," New York Times, April 4, 2018, https://www.nytimes.com/2018/04/04/business/media/as-spotify-goes-public-sony-cashes-in.html.
    132155.

    In the settlement reached with record labels and digital services for mechanical license rates, music publishers reportedly negotiated a provision that enabled them to participate in equity stakes that record labels have with the digital services. Ed Christman, "Copyright Royalty Board To Set Mechanical Royalty Rates For Digital Music Services," Billboard, April 10, 2012, http://www.billboard.com/biz/articles/news/publishing/1098005/copyright-royalty-board-to-set-mechanical-royalty-rates-for.
    133156.

    2015 Copyright Office Report, pp. 128-130.
    134157.

    2015 Copyright Office ReportIbid., p. 33.
    135158.

    Ben Sisario, "New Venture Seeks Higher RoyalitesRoyalties for Songwriters," The New York Times, October 28, 2014, http://www.nytimes.com/2014/10/30/business/media/new-venture-seeks-higher-royalties-for-songwriters.html.
    136159.

    The following is a summary of the 2015 Copyright Office Report, pp. 35-42SESAC, "FAQs: Becoming a SESAC Affiliate," http://www.sesac.com/WritersPublishers/faq.aspx.
    137160.

    In contrast to record labels, however, publishers receive performance royalties from radio broadcasts.

    138.

    Pandora Media, Inc. 2014 SEC Form 10-K, pp. 12, 39, 48Billboard Staff, "Universal Music Publishing Plots Exit from ASCAP, BMI," Billboard, February 1, 2013.
    139161.

    Ed Christman, "Pandora vs. BMI's Court Battle Reveals Long-Term Strategies, Licensing Arms," Billboard, February 17, 2015, http://www.billboard.com/articles/business/6473027/pandora-vs-bmg-strategies-licensing-aims.
    140.

    Not long afterward, Sony/ATV bought EMI's music catalog.
    141162.

    Pandora Media, Inc. related to United States of America, v. American Society of Composers, Authors, and Publishers, 12 Civ. 8035 (S.D.N.Y. 2013), Pandora Media, Inc. related to United States of America, v. American Society of Composers, Authors, and Publishers, No. 41 Civ. 1395 (S.D.N.Y. 2013); BMI v. Pandora Media, Inc., No. 13 Civ. 4037 (LLS) (S.D.N.Y. 2013).
    142163.

    The U.S. Department of Justice, Antitrust Consent Decree Review: American Society of Composers, Authors and Publishers/Broadcast Music, Inc., http://www.justice.gov/atr/cases/ascap-bmi-decree-review.html.

    143.

    Paul Resnikoff, "Lawyers Profoundly Confused by 'Landmark' Pandora, Sony/ATV Licensing Deal," Digital Music News, November 5, 2015, http://www.digitalmusicnews.com/2015/11/05/lawyers-confused-by-landmark-pandora-sonyatv-licensing-deal/.

    144.

    Glenn Peoples, "Pandora and Sony/ATV Reach Multi-Year Agreement," Billboard, November 5, 2015. Pandora, "Warner/Chappell Music and Pandora Sign Licensing Agreement," press release, December 15, 2015, http://www.businesswire.com/news/home/20151215005433/en/WarnerChappell-Music-Pandora-Sign-Licensing-Agreement. Pandora Media, Inc. has also reached direct licensing agreements with independent publishers SONGS Music Publishing and Downtown Music Publishing in December 2015. Glenn Peoples, "Pandora's Latest Direct Deal Is With Downtown Music Publishing," Billboard, December 21, 2015, http://www.billboard.com/articles/business/6814194/pandora-direct-deal-downtown-music-publishing.
    145.

    Ed Christman, "How 'Shake It Off' Ruled the Publishing Industry's Fourth Quarter in 2014," Billboard, February 20, 2015, http://www.billboard.com/articles/business/6480028/taylor-swift-shake-it-off-publishing-industry-fourth-quarter-2014.
    146Ed Christman, "U.S. Department of Justice to Review ASCAP and BMI Consent Decrees," Billboard, June 4, 2014, https://www.billboard.com/biz/articles/news/legal-and-management/6106492/us-dept-of-justice-to-review-ascap-and-bmi-consent.
    164.

    U.S. Department of Justice, "ASCAP and BMI Consent Decree Review Requests for Comments 2015: Antitrust Division Requests Comments on PRO Licensing of Jointly Owned Works," http://www.justice.gov/atr/ASCAP-BMI-comments-2015. Specifically, the DOJ asked, "Assuming the Consent Decrees currently require ASCAP and BMI to offer full-work licenses, should the Consent Decrees be modified ... ?"

    Chris Cooke, "Sony/ATV Chief Writes to Nashville Songwriters About Tricky Development in Consent Decree Reform," Complete Music Update, September 9, 2015, http://www.completemusicupdate.com/article/sonyatv-chief-writes-to-nashville-songwriters-about-a-tricky-development-in-consent-decree-reform/.

    147166.

    U.S. Department of Justice, ASCAP and BMI Consent Decree Review Comments 2015, http://www.justice.gov/atr/ASCAP-BMI-comments-2015.

    148.

    ASCAP, "Pandora Signs Licensing Agreements with ASCAP and BMI," press release, December 22, 2015, http://www.ascap.com/press/2015/12-22-pandora-licenses-ascap-bmi.aspx?print=1.
    149.

    2015 Copyright Office Report, pp. 3, 153. Testimony of National Music Publishers' Association President and Chief Executive Officer David M. Israelite in U.S. Congress, House Committee on the Judiciary, Subcommittee on Courts, Intellectual Property, and the Internet, Music Licensing Under Title 17 (Part I & II), hearings, 113th Cong., 2nd sess., June 10 and June 25, 2014, H. Hrg. 113-105 (Washington, DC: GPO, 2014), p. 27. Testimony of National Songwriters President Lee Miller, Ibid., p. 16.
    150.

    For more information about retransmission consent, see CRS Report R43490, Reauthorization of the Satellite Television Extension and Localism Act (STELA), by [author name scrubbed], Reauthorization of the Satellite Television Extension and Localism Act (STELA), by [author name scrubbed] Statement of the Department of Justice on the Closing of the Antitrust Division's Review of the ASCAP and BMI Consent Decrees, August 4, 2016, https://www.justice.gov/atr/antitrust-consent-decree-review-ascap-and-bmi-2015.

    167.

    Ibid., p. 22.
    168.

    Paula Parisi, "BMI Battles Department of Justice Over Song Licensing," Variety, August 17, 2017, http://variety.com/2017/music/news/bmi-department-of-justice-brief-song-licensing-1202531666/.
    169.

    United States v. Broad. Music, Inc., No. 16-3830-cv, 2017 U.S. App. LEXIS 25545 (2d Cir. Dec. 19, 2017).

    170.

    17 U.S.C. §115(b).
    171.

    U.S. Copyright Office, "Section 115 NOIs May Now Be Filed With Office In Bulk Form," NewsNet Issue 618, April 13, 2016, https://www.copyright.gov/newsnet/2016/618.html.
    172.

    U.S. Copyright Office, "Section 115 NOIs Filed With the Copyright Office," https://www.copyright.gov/licensing/115/noi-submissions.html.
    173.

    Ed Christman, "Say You Want a Revolution? U.S. Copyright Office Modernizes Key Part of Digital Licensing," Billboard, June 24, 2016, http://www.billboard.com/articles/news/7416438/us-copyright-office-music-reports-compulsory-licensing-digital-notice-of-intent.
    174.

    Ethan Smith, "Songwriters Lose Out on Royalties," Wall Street Journal, October 14, 2015, https://www.wsj.com/articles/songwriters-lose-out-on-royalties-1444864895.
    175.