Posted: November 30, 2012 at 3:53 am
It seems as if everyone is weighing in on this controversial Internet Radio Bill. ASCAP, BMI, NSAI and SESAC have joined forces to speak out about the bill via an open letter to Congress to address the concerns of songwriters and composers who are being negatively affected by the bill. Below is the open letter.
Dear Chairman Goodlatte and Ranking Member Watt:
We are writing on behalf of the American Society of Composers, Authors and Publishers (“ASCAP”), Broadcast Music, Inc. (“BMI”) and SESAC, the three American performing rights organizations (collectively, the “PROs”) and the Nashville Songwriters Association International (NSAI), representing the public performing right in musical works of America’s songwriters, composers and music publishers. We understand that your Committee intends to hold a hearing focused on the “Internet Radio Fairness Act of 2012,” H.R. 6480 (“IRFA”), and in that regard we must voice our concerns regarding both the purported rationale behind IRFA and several of its key provisions. On a more global basis, the narrow focus of IRFA completely ignores a much greater problem in the online music licensing world: the undervaluation of the public performing right in musical works. This undervaluation of the public performing right runs contrary to global practices which often yield two times the fees generated by US license rates or more, when compared to equivalent economies, and represents a trend that is harmful to both America’s music creators and the larger economy. Any Congressional examination of online music licensing issues needs to address this serious issue to ensure that the interests of writers and publishers – the very foundation fueling the music industry – are not further deteriorated.
Before we address the substance of our thoughts and concerns, it would be useful to distinguish the separate and distinct copyrights that benefit different music rights owners, and which, as a group, are differentially impacted by H.R. 6480. To illustrate this distinction, consider the classic song, “Baby I Need Your Loving.” Most people know the song through the Four Tops’ recording of the work. However, the song itself – the words and music – were written by the songwriting team of Eddie Holland, Lamont Dozier and Brian Holland (known professionally as “Holland-Dozier- Holland”). Indeed, many hit songwriters focus on the craft of songwriting, never stepping on a stage.
As PROs, we represent songwriters, composers and music publishers who create and own the underlying musical works. In the case of “Baby I Need Your Loving,” the performing right organization representing the writer and publisher of the song (in the case of this song, BMI) licenses the public performance of the work – the performance of the Holland-Dozier-Holland-composed song
Letter to Hon. Goodlatte and Hon. Watt, November 19, 2012, page 2
(no matter who performs it) on radio, on television, on cable, on the internet, and in bars, restaurants and clubs, among many other places.1
By contrast, Motown Records, the owner of the specific Four Tops sound recording of “Baby I Need Your Loving,” licenses the public performance of the sound recording by digital transmission on a variety of online digital platforms through SoundExchange (or directly, if they choose to do so). For such performances of the sound recording, the owners of the sound recording and the performing artists– but not the separate musical work’s writers (here, Holland-Dozier-Holland) or publishers– are compensated through this type of license.
Or consider the eponymous theme to the new James Bond movie, “Skyfall.” The composition was written and performed by the well known British pop star, “Adele” (formally, Adele Laurie Blue Adkins) and co-written by Paul Richard Epworth, in this case an ASCAP writer. Mr. Epworth is not a performer, but he is a well-known music writer and producer, and a top Grammy winner. No matter whether Adele performs “Skyfall,” or some other performer goes on to perform it, as writers, Adele and Paul Richard Epworth, and their associated publishers, have the right to be compensated for the public performance of their musical work through licenses issued by their affiliated PROs (or directly if they choose to do so). Again, by contrast, the owners of the sound recording of “Skyfall” would in the U.S. license the public performance of the sound recording by digital transmission through SoundExchange (or directly, if they choose to do so), and compensation would flow as mentioned in the paragraph above.
It is important to keep these different rights in mind; while there may be a tendency to conclude that the interests of these separate rights holders would be identical, that is not the case.
The current bill under consideration, H.R. 6480, demonstrates the potential divergent interests as well as any example. Pandora, the online music service provider and one of the chief proponents of this bill, seeks to substantially lower the fees paid to SoundExchange for the digital transmission of sound recordings. However, any discussion of rate standards needs to address as well the remarkable disparity in license fees paid by webcasters to songwriters and publishers for the use of the underlying musical works (e.g., the compositions of Holland-Dozier-Holland, and Adele and Paul Richard Epworth, respectively) that are incorporated into the sound recordings performed (e.g., the Four Tops and Adele, respectively).
To further illustrate this point: Pandora’s 2012 annual report stated that it paid 49.7% of its revenue in royalties to SoundExchange, and 4.1% of its revenue in royalties to the US PROs, namely, ASCAP, SESAC, and BMI. In other words, from the total pool of monies paid for the performance of music and sound recordings, almost 92% of the money paid by internet radio flows to record labels and performing artists through SoundExchange, and only 8% of it is paid to songwriters and publishers. Another way to view this example is that the owners of the sound recording and the recording artists (e.g., the Four Tops and Adele, as performers, and their record labels) receive $92 out of every $100 in total music royalties paid by internet radio providers, with 50% of this $92 in sound recording fees going to the labels and 50% to the performers.2 The individual songwriters and publishers (e.g. Holland-Dozier-Holland, and Adele and Paul Richard Epworth as writers and their publishers), through the PROs, receive only a small fraction — $8 — of the total $100 paid by Pandora for its performance of music, with 50% of that $8 going to the writers and 50% to the publishers under normal US PRO distribution rules. This almost 12-to-1 disparity in SoundExchange and PRO
1 The separate consent decrees with the United States that govern the business practices of BMI and ASCAP each provide for a rate court through which the separate PROs and their music-using licensees can seek the determination of a reasonable license fee.
2 To be precise, of the 50% to performers, 5% is split between non-featured performers (such as background singers and musicians), and the remaining 45% is paid to the featured recording artist(s) on the sound recording. 17 U.S.C. (g)