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  • Copyrights in music differ from copyrights

  • in literary and dramatic works in several ways.

  • Perhaps the most important is that there are

  • two different kinds of copyrights that involve music.

  • The more traditional of the two are copyrights in musical compositions.

  • As you can see, section 102 (a), refers to these

  • as copyrights in musical works, including any accompanying words.

  • These have been around for a very long time.

  • The second type, which was added to the federal copyright statute only in 1972,

  • consists of copyrights in sound recordings.

  • As I mentioned earlier, in most countries

  • legal rights to sound recordings are known as neighboring rights.

  • In the United States, however, they are referred to as copyrights.

  • The legal rights associated with these two types of copyrights

  • and the complex business models that capitalize on those rights

  • are perhaps best seen by tracing the life

  • history of a typical piece of popular music.

  • I'm going to tell this hypothetical story using a slide.

  • As you'll soon see, the narrative is complicated.

  • Don't be discouraged if not all features of the story are clear right now.

  • We'll return to it several times during this lecture series.

  • Imagine that I'm a pretty good composer, but not much of a musician.

  • I compose a song.

  • It has a memorable melody and some conventional sentimental lyrics.

  • I wrote it down on some sheet music, so I satisfy the fixation requirement.

  • I thereby, as you know, acquire a copyright in my composition.

  • I could if I wanted retain ownership of my copyright, but as a typical composer

  • I lack the business skills or time necessary to exploit it effectively.

  • So instead, as is now customary in the United States, I sign all of my rights

  • to a music publisher.

  • There are tens of thousands of these in this country.

  • From this point forward in the story, the publisher

  • will retain the copyright and the composition.

  • In other words, the publisher will not assign it further.

  • Rather, the publisher will make money for itself and for me

  • by issuing licenses to a variety of other organizations--

  • in other words, permissions to engage in activities

  • that otherwise would violate copyright.

  • The most important of these licenses consist

  • of the right to make so-called mechanical copies of the composition.

  • Typically such a mechanical license will be

  • issued to a record company, which is interested in making and selling

  • sound recordings of my composition.

  • The independent rights of the musician who actually makes that recording we'll

  • discuss in a minute.

  • Back to the narrative, the publisher could in principle

  • enter into such a license with the record company on its own,

  • but it's customary in the United States to use

  • the services of an intermediary, namely the Harry Fox Agency.

  • If the CD and other products embodying the recording of my song

  • is commercially successful, the music publisher, who as we saw now

  • holds the copyright in it, will begin to exploit other licensing opportunities.

  • For example, the publisher will likely issue a reproduction license

  • to one of the four major sheet music printers

  • in the United States, which will then print and sell

  • sheet music, which in turn will be purchased by amateur guitarists who

  • want to learn how to play my song.

  • If the song is sufficiently popular and evocative that a movie studio wants

  • to include in the soundtrack of a movie, then the music publisher and the studio

  • will negotiate a so-called synchronization, or sync, license.

  • If there's demand for my music in other countries,

  • the publisher will likely issue a so-called sub-publishing license

  • to a similar publisher in one or more other countries.

  • The terms of these several contracts will vary,

  • but it's typical for the music publisher to turn over to me half of the license

  • revenues it earns from these various sources,

  • keeping the remainder, of course, for itself.

  • So now let's return to the musician, the performer,

  • whose recorded rendition of my song is crucial to the success

  • of my composition.

  • As I mentioned earlier, the creative contributions of the performer

  • will generate a second independent copyright in the sound recording.

  • It's possible that the performer will have

  • to share that copyright with a sound engineer,

  • but we'll put that nuance to one side.

  • As was true of the composer, it would be possible for the performer

  • to retain that copyright, but at least until quite recently,

  • it was customary for performers to enter into so-called recording

  • contracts with record companies.

  • Such recording contracts also have many complex terms, some of which

  • are likely to be onerous which we'll discuss in a few weeks.

  • The central term, however, is straightforward.

  • The performer assigns his copyright in the sound recording

  • to the record company.

  • By now I hope the color scheme of this chart is apparent.

  • The blue figures represent artists, the people

  • who make creative contributions to the finished product.

  • These are the folks who, in the rhetoric of copyright law,

  • are commonly referred to as creators.

  • Red designates an assignee of a copyright.

  • Purple designates a licensee, and yellow designates an intermediary.

  • Arrows signify transfers of legal rights.

  • As you can see, the legal position of the record company is the most complex.

  • For the reasons I've sketched, the record companies

  • occupy two legal positions-- it's the assignee of the sound recording

  • copyright and one of the licensees of the musical composition copyright.

  • That's why it's shown in the chart as half red and half purple.

  • We're not done yet, however.

  • The music publisher, which to repeat holds the copyright

  • in the original composition, enjoys one additional valuable entitlement, namely

  • the exclusive right to authorize so-called quote,

  • public performances, end quote of the composition.

  • Such performances include playing the song at a park or a theater

  • and more importantly, broadcasts of recordings of the composition.

  • If the recording distributed by the record company is popular,

  • several companies are likely interested in making such public performances.

  • They include radio stations, perhaps television stations, restaurants

  • that play music in the background, and nowadays webcasters.

  • The publisher could in principle negotiate individual licenses

  • with these companies, but that would be time consuming and inefficient.

  • So instead, the publisher will almost certainly

  • use an intermediary to manage its public performance rights.

  • In most countries there's only one such intermediary, but in the United States

  • there happen to be three.

  • They are known as BMI, ASCAP, and SESAC.

  • They're called Performing Rights Organizations, or PROs.

  • Whichever PRO the publisher selects will issue so-called blanket licenses

  • to all of the companies that I mentioned earlier.

  • The reason these are called blanket licenses

  • is that instead of paying a small fee for each song it plays,

  • the licensee pays a flat fee-- typically a small percentage

  • of its gross revenues-- to perform any of the compositions in the PRO's

  • repertoire.

  • The PRO then pays to the music publisher a slice

  • of the total amount of the license fees it

  • collects, a slice roughly proportional to the relative frequency

  • with which my song is played.

  • And the publisher in turn gives half of that slice to me.

  • The net result-- the more popular a song,

  • the more money flows to the publisher and to the composer.

  • Notice again the color scheme.

  • Yellow indicates an intermediary.

  • Purple indicates a licensee.

  • Do the radio and television stations, restaurants, and webcasters

  • shown in the lower left of this chart have

  • to pay license fees not just to the music publisher at the top

  • but also to the record company in the bottom right?

  • In most countries, the answer would be yes.

  • After all a radio station when it plays a song

  • is performing not just the composition whose copyright

  • is held by the publisher, but also the recording of a particular rendition

  • of the song whose copyright, otherwise known as a neighboring right,

  • is owned by the record company.

  • It would seem to make sense for the radio station

  • to pay both copyright owners, and in most countries it must.

  • Nevertheless, in the United States radio stations

  • engaged in traditional analog broadcasting do not make such payments.

  • The reason is that in the United States, the owner

  • of a copyright in the sound recording, unlike the owners of copyrights

  • in other sorts of works, does not enjoy an exclusive right

  • of public performance.

  • You'll recall, I hope, that I discussed this unusual feature of US law

  • briefly in lecture number one and the tensions

  • it creates between the United States and the member countries of the Rome

  • Convention.

  • The principal reason for the anomalous position

  • of the United States on this issue is that in 1972, when

  • sound recordings were first given federal copyright protection,

  • broadcasters in the United States had considerable lobbying power,

  • and they successfully blocked adoption of a public performance right

  • for sound recordings.

  • That political explanation is buttressed by a plausible policy argument.

  • The broadcasters argue that they shouldn't

  • have to pay license fees to the record companies

  • because they argue broadcast of songs help the record companies by bringing

  • those songs to the attention of potential purchasers of records, CDs,

  • and so forth.

  • In other words, the promotional benefit of broadcast

  • substitutes for a license fee.

  • Record companies not surprisingly disagree.

  • In 1996 and 1998, the record companies succeeded

  • in obtaining from Congress a partial modification of this longstanding rule,

  • specifically by securing an amendment to the copyright statute that gave them

  • public performance rights for their sound recordings.

  • However, that amendment was limited to performances

  • that occurred in the form of a digital audio transmission.

  • The upshot is that today, when webcasters perform recorded music

  • digitally over the internet they must pay license fees to the record

  • companies.

  • How those license fees are calculated we'll discuss in lecture number eight.

  • For the time being, you need to know only that this legal relationship is

  • managed by yet another intermediary, the organization SoundExchange.

  • Record companies have not been satisfied by this adjustment to the statute.

  • They want full-blown public performance rights,

  • which would enable them to charge traditional radio

  • stations, large restaurants, and so forth who make use of their recordings.

  • Congressmen sympathetic to their position

  • periodically introduce bills that if adopted would have that effect.

  • The name of the most recent version of this proposed legislation

  • is the Performance Rights Act.

  • Shown on your screen is the press release

  • by the trade association of the recording companies welcoming

  • the introduction of this legislation.

  • Notice the reference to the difference between the situation in the United

  • States and the situation in most countries.

  • The broadcasters, for their part, continue to push back.

  • Set forth on screen is their own summary of their stance.

  • Notice that they continue to emphasize the quote, free promotion, that they're

  • providing record companies.

  • And notice also their strategic characterization

  • of the proposed legislation as a tax.

  • Finally, you'll see that they too have a group of sympathetic congressmen.

  • For better or worse, this is a reasonably good illustration

  • of the way in which lobbying over copyright typically works.

  • For more details concerning the still ongoing negotiation

  • over this particular issue, follow the link

  • shown on the left-hand side of these two slides.

  • So that in brief is the pattern of legal rights in the US recorded music

  • industry.

  • The arrows, as I've indicated, show transfers of legal entitlements.

  • For the most part, money flows between organizations through the channels

  • cut by the legal rights, with one exception.

  • For a long time, record companies have paid radio stations

  • significant amounts of money, known informally

  • as paola, to induce them to play the record company's

  • recordings over the airwaves, lending credence to the broadcasters'

  • contention that radio play serves as an effective form of advertising.

  • At its peak, roughly $100 million a year flow through this channel.

  • Legal impediments to such payments have been slowly increasing for decades,

  • and enforcement of those legal impediments has also been increasing.

  • For a while, record companies evaded these tightening rules

  • by using third-party intermediaries, known confusingly as indies,

  • to make their payments, but this loophole is also shrinking.

  • Today much

  • less money is flowing through this channel

  • than was true 40 or even 10 years ago, but the river

  • has not dried up completely.

  • One final dimension that this legal and financial system merits emphasis.

  • I mentioned earlier that the most important

  • of the licenses issued by the music publisher

  • is the so-called mechanical license that it grants to the record company.

  • Suppose, to return to our story, that the first commercial recording

  • of my song proved so popular that a second musician affiliated

  • with a different record company wants to do a cover of the song,

  • meaning a new rendition of it.

  • Does the second record company have to obtain a separate mechanical license

  • from the publisher?

  • The answer is, you might suppose, yes.

  • However, the second record company is not

  • obliged to negotiate a voluntary license with a music publisher.

  • Rather, so long as the second record company pays a modest fee just set

  • by the government, it's free to make and distribute a new recording,

  • and neither I nor the music publisher can object.

  • Currently that fee is about $0.09 per copy sold of the new recording, more

  • it's a long song.

  • Separate fees apply to ringtones and recordings delivered to customers

  • through interactive streaming.

  • This is the first example we've seen in this series of lectures

  • of a so-called quote, compulsory license.

  • We'll see several more in future lectures.

  • Not surprisingly, the central feature of a compulsory license