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>>The Copyright Office’s Music Licensing Study

The Copyright Office’s Music Licensing Study

Prof. Peter S. Menell, Koret Professor of Law and Director, Berkeley Center for Law & Technology, University of California at Berkeley School of Law
June 4, 2014

As part of Congress’s comprehensive review of the U.S. Copyright Act, the Copyright Office announced a broad-ranging study of music licensing on March 17, 2014.  The Office solicited comments on the effectiveness of existing rules, consent decrees, institutions for licensing musical compositions and sound recordings, the impact of varying statutory licenses on music licensing, market-based licensing platforms, the size and distribution of revenues, and incentives to invest in new creative projects and universal standards for music licensing.  The Copyright Office received 85 comments from a broad group of organizations and individuals.  The Copyright Office is convening public roundtables in Nashville (June 4-5, 2014), Los Angeles (June 16-17, 2014), and New York (June 23-24, 2014).

Drawing upon my recent scholarship, my comments focused on three areas: (I) establishing robust registries for licensing music; (II) promoting fair and balanced music streaming services; and (III) channeling mash-up creativity into authorized markets through a compulsory license.

Prefatory Remarks

Before turning to the specific enumerated questions posed in the Federal Register Notice, it will be useful to put the music licensing study in a broader perspective.  As I explored in the 42nd Annual Brace Lecture – This American Copyright Life: Reflections on Re-equilibrating Copyright Law for the Internet Age, Journal of the Copyright Society of the U.S.A. (forthcoming 2014) (hereinafter cited as “This American Copyright Life”) – the Internet has profoundly altered the functioning of the copyright system over the past 15 years.  Many of the substantial changes have occurred since the enactment of the Digital Millennium Copyright Act of 1998.  While the Internet’s capacity has substantially reduced the age-old costs of distributing works of authorship, the promiscuity of Internet distribution has produced unprecedented enforcement challenges.

These changes have had particularly significant impacts on the music marketplace.  While Internet functionality opened up new distribution modes (such as iTunes, Pandora, and Spotify), it also fueled rampant unauthorized distribution of copyrighted musical works and sound recordings.

As “This American Copyright Life” explains (pages 237-48), copyright law is but one component of society’s larger content governance ecosystem.  Technology, markets, and social norms also play important roles.  Whereas technological and legal protections effectively channeled consumers into markets for copyrighted works throughout much of copyright law’s history, file-sharing technologies have afforded Internet users easy access to all manner of copyrighted works without the need to go through market institutions.  Technology companies and copyright industries have sought to “compete” with such unauthorized access through new online services – such as iTunes, Vevo, Pandora, and Spotify – but with only limited success.  The level of unauthorized distribution of copyrighted works remains high.

Improving the functioning of music licensing markets is critical to the efficacy of the copyright system.  While digital rights management technologies have achieved some success in particular content marketplaces – such as Massively Multiplayer Online Role-Playing Game (MMORPG) platforms – the music marketplace has proven far more resistant to technological solutions.  See Peter S. Menell, Envisioning Copyright Law’s Digital Future, 46 N.Y.L. School L. Rev. 63, 121 n.168,165, 178-79 (2002-2003) (discussing the failure of the Secure Digital Music Initiative (SDMI)).  The carrot of robust, fairly priced music services will prove far more effective than the stick of costly, aggressive civil enforcement campaigns against end users in bringing many music fans back into authorized online music services.  See “This American Copyright Life” (pages 218-35, 325-37).

These considerations lead me to call attention to three areas of inquiry: (I) establishing robust registries for licensing music; (II) promoting fair and balanced music streaming services; and (III) channeling mash-up creativity into authorized markets.

I.  Copyright Notice as the Foundation for Music Licensing

The availability of transparent, accessible, and easily searchable registries of copyrightable works would provide a foundation for robust music licensing.  See generally Peter S. Menell & Michael J. Meurer, Notice Failure and Notice Externalities, 5 J. Legal Analysis 1 (2013).  Due to the lack of registration requirements and reliable databases for tracking music ownership, music services incur duplicative and high costs in efforts to build digital music markets.  They also face unnecessary liability for inadvertently distributing works without requisite authorization.  Copyright law and the Copyright Office can and should play a central role in supporting robust copyright licensing through registration and related services.  See “This American Copyright Life” at 310-12.  Databases should be standardized and easily accessible to the public.

II.  A Fair and Balanced Licensing Platform for Music Streaming Services

Digital and Internet technology have brought about the capacity to afford widespread access to the proverbial “celestial jukebox” – universal access to all sound recordings through convenient technologies.  Consumers are increasingly migrating from downloading music toward streaming services, such as Spotify, Pandora, and Beats.  It seems likely that this transition will continue.   Once consumers become accustomed to these services, their music listening habits adapt as they develop playlists and integrate music listening with social networking.  These services achieve many of the aspirations of music fans.

Yet the adoption of these services and their ability to promote musical creativity are hampered by distortions in the music marketplace.  Most music fans will not join a streaming service unless it offers a relatively broad catalog, including sound recordings controlled by the major record labels.  As I explain in “This American Copyright Life” (pages 258-63, 327-32), the major record labels have leveraged their control of the “legacy” catalog to disadvantage not only their own artists but also independent artists.  This equilibrium undermines artist and consumer support for an authorized celestial jukebox, the best antidote to music piracy.  More generally, it deprives future creators of the promise of earning an appropriate return on their creative efforts.  Addressing this fundamental distortion is critical to building a fair and balanced marketplace for creative musical artists in the Internet Age.

III.  Promoting Mash-Ups

Like rhythm and blues, rock ’n’ roll, rap, and hip hop, mash-ups of previously recorded music have emerged as the latest musical genre.  Yet this genre operates largely beyond any authorized marketplace.  The cost of negotiating the many licenses that would be needed to clear such works is prohibitive for many mash-ups.  See generally Kembrew McLeod & Peter DiCola, Creative License: The Law and Culture of Digital Sampling (2011).  Furthermore, just as consumers have the option of obtaining copyrighted works outside of legitimate channels in the Internet Age, they also have the ability to produce and distribute mash-ups.  Consequently, much of the mash-up culture flourishes through unauthorized channels.

While some have suggested that mash-ups do not require permission because they qualify for fair use treatment, such a legal interpretation would deprive the creators of the works being sampled any share of the social value that they create beyond possible modest promotional value.  I suggest in “This American Copyright Life” (pages 318-24) that there could be substantial value in developing a compulsory license for mash-ups.  By so doing, Congress would encourage younger generations to participate in authorized marketplaces for musical works.  The creators of such mash-ups could more easily derive income from their creative efforts while providing added value to creators of works that are sampled.  While such a regime would be more complicated than the present cover license and would authorize greater adaptation, failure to open up such a channel for this new and increasingly popular genre means that creators of the sampled works will see little if any income for such uses.  Developing a robust and flexible regime for mash-ups would, like the cover license, promote new forms of cumulative creativity while providing more appropriate encouragement and compensation to those whose works are sampled.

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