Main Index : Writings of Marie A. D'Amico, Esq.

The Internet Muddles and Mystifies Music Licensing

Internet Music Stations are Here

The average digital wage earner spends two hours staring at an idle PC each workday. Idle PCs are fertile fields. Many startups and established companies are scrambling to satisfy idle PCs with the sweet sounds of music, through Internet-based music stations where consumers select songs or music categories (country, rhythm & blues, rock) that fit their fancy. Even using Progressive Networks’ RealAudio application, Internet music stations still sound like AM/FM radio. New technology, however, will probably provide Internet-based, CD-quality sound in a New York minute. Getting in this game now makes monetary sense if you can stomach the stormy seas.

Get Yourself an Internet Public Performance License

To perform music over the Internet, you contact ASCAP , BMI , and/or SESAC and obtain public performance licenses for their vast repertory of musical works. In exchange, you pay a royalty rate based upon your Internet service’s gross revenue. These societies administer and collect royalties for performance rights on behalf of record publishers, to whom songwriters have assigned their rights (in exchange for a percentage of the profits). The Copyright Act (17 U.S.C. ß101 et seq., ) did not, until this year, grant the recording artist any public performance rights (17 U.S.C. ß ß106, 114(a)). For example, to perform an Internet version of Van Halen ’s remake of "You Really Got Me," you need a license to the underlying song written by Ray Davies , not the Van Halen recording. ASCAP and BMI now both issue experimental licenses for public performances presented via the Internet. BMI, the second largest music performing rights society in the United States, says it has executed 50 such experimental licenses. SESAC has no Internet license yet, but is revising a draft.

Both ASCAP’s and BMI’s Internet public performances licenses are fraught with guesswork. ASCAP’s license prohibits you from permitting users the right to reproduce, copy, distribute, or download music you publicly perform. But, if some NWA (nerd with attitude) hacks your Internet jukebox and transforms it from a player to a copier, are you liable? Since no one can provide 100% protection from hacking, you should be free from liability if you’ve employed efforts to ensure hacking doesn’t happen. ASCAP’s license also doesn’t specifically say you may make multiple copies of the music you publicly perform over the Internet. Without an explicit license, such copies could violate the Copyright Act (17 U.S.C. ß ß106, 114(b)). Section 112 of the Copyright Act (17 U.S.C. ß112) supplies some assistance; enacted in 1976, but never considered by a court, it permits a transmitting entity with a public performance license to make one copy of the transmission. Transmission of anything over the Internet technically occurs by multiple copies being made, of the whole or the parts. Either the Copyright Act or ASCAP’s license should be amended to address the copying inherent in any Internet delivery.

More ominously, ASCAP’s license permits them to immediately terminate it if ASCAP experiences any "major interference with or substantial increase in the cost of" their "operation as a result of any law." After ASCAP executed some Internet license agreements, Congress enacted the Digital Performance Rights in Sound Recordings Act of 1995 , effective February 1, 1996. The Act amends the U.S. Copyright Statute and affects anyone who transmits music over the Internet. The Act is complex, convoluted, and no court or copyright arbitration panel has considered the provisions of the Act. Therefore, your ASCAP Internet performance license could be in peril.

BMI’s Internet public performance license is more expansive and explanatory than ASCAP’s, but still Swiss cheese. For example, BMI permits you to perform "a line-up of scheduled programming" using the Internet (but not commercial online services). This term is never defined, but I suspect it’s somehow similar to the phrase "sound recording performance complement" defined in the Act (and discussed below). BMI’s license does permit the performances licensed to originate anywhere and that clause may cloak you from any possible copyright infringement for the multiple copies of the music made in transmission from your Internet server to the user’s ears. BMI’s license does requires you to warrant your musical works have been "digitally encoded in software which will prevent the listener from digitally copying or transmitting the works to others" but BMI wouldn’t comment concerning how a 100% warranty for encryption can work in a world of hackers.

Does the New Digital Performance Law Confuse Everything?

If you think your ASCAP, BMI and/or SESAC Internet licenses are a panacea, think again. The Act specifies that unless your transmissions are exempt, you must also obtain Internet public performance licenses from the sound recording owners (17 U.S.C. ßß106(6), 114(a)-(b)). Unfortunately, the music performing societies don’t administer sound recording public performances, rather, the record companies themselves retain those rights, on behalf of their performers (like Van Halen). If your transmissions are non-subscription and non-interactive (described below), they are exempt from licensing (17 U.S.C. ß114(d)(1)). The Act defines subscription transmissions (17 U.S.C. ß114(j)(8)) as those which are "controlled and limited to particular recipients, and for which consideration is required to be paid or otherwise given by or on behalf of the recipient to receive the transmission." Some commentators argue a website which plays music for free (as most do) is still a subscription service because users accessing the site must pay for Internet connectivity through service providers. If your music-playing website is free, you can forego licensing and pray you’re exempt or, if you’re risk averse, attempt to secure a license.

If your transmissions are non-subscription or you’re unsure of their status, you can require the record companies to supply you with a license (called statutory licensing) if your transmissions fit five criteria (17 U.S.C. ß 114(d)(2)). If your transmissions are non-interactive, don’t exceed the sound recording performance complement, don’t publish the schedule of the specific sound recordings, don’t automatically switch from one program channel, e.g ., country music, to another channel, e.g ., rap music, and display data encoded in the sound recording, such as title and artist name, you are entitled to a statutory license. Non-interactive transmissions are ones which don’t allow the user to request a specific song to be played particularly for him (17 U.S.C. ß114(j)(4)). You can however, allow users to request songs which are then played to the listening public, similar to requests sent to radio stations. On March 6th, the Recording Industry Association of America (RIAA) , whose members control over 90 percent of all legitimate sounds recordings produced in the U.S., issued a cease and desist letter to AudioNet. AudioNet’s website allowed users to select specific songs to be played over the Internet; AudioNet had not secured sound recording public performance licenses. "AudioNet’s practice of allowing consumers to use the Internet as a ‘jukebox’ is not lawful," said the RIAA’s director of anti-piracy. AudioNet changed its website.

The sound recording performance complement means that within any three hour period, you can play three different cuts from a CD, if you don’t play more than two songs simultaneously, or four different cuts from the same recording artist or from any CD boxed set, if you don’t play more than three songs simultaneously (17 U.S.C. ß114(j)(7)). If you don’t follow the five criteria, you’re transmissions are interactive (17 U.S.C. ß114(d)(3)). You must then negotiate with each different record label for a license to the songs you want to stream onto the Internet. The new Act practically prohibits exclusive licenses, so even with interactive transmission licenses, you’ll be forced to fight against other Internet music stations. The Act allows record labels, under certain circumstances, to provide their Internet affiliated entities (and most have one) with more favorable license terms and conditions (17 U.S.C. ß114(h)), making competition for startups more difficult.

The significance of statutory licensing for transmissions which faithfully follow the five criteria cannot be overstated; it means the record companies cannot say "no." (17 U.S.C. ß114(e)(5)(A)). Everyone involved, from the record labels to the Internet music players, can voluntarily negotiate terms and royalty rates for statutory licenses (17 U.S.C. ß114(f)(1)). Barring voluntary agreement, the Librarian of Congress will convene a copyright arbitration royalty panel and determine a schedule of royalty rates and terms for statutory licensing for public performance of sound recordings on the Internet (17 U.S.C. ß114(e)(2)). Every five years rates will be renegotiated (17 U.S.C. ß 114(e)(4)). Rates haven’t been set, but it’s in the best interests of the record labels to act fast and avoid the copyright arbitration panel. This panel sets statutory royalty rates for mechanical licenses (to remake a song) and the rate is a ridiculously low $.0695 cents. This means Van Halen paid Ray Davies’ music publisher $.0695 for the right to cover his song and Davies likely got less than three cents per CD.

No One’s Talking

No organization or individual with whom I spoke for this feature would supply an official, on-the-record opinion or interpretation of the Act. Even the RIAA, who stopped AudioNet’s Internet jukebox, refused to reveal their position regarding provisions of the Act, such as the definition of "subscription transmissions" or "interactive transmissions." The Act has been signed into the Copyright Statute, the Internet radio stations are streaming songs, so the parties better postulate their positions before the courts or the copyright arbitration panel does it for them.

Resources:

Digital Performance Rights in Sound Recordings Act of 1995

Copyright Act

Internet Radio Stations:

AudioNet ,

Club iMusic

NetRadio , http://www.netradio.net

Music Performing Societies:

ASCAP (American Society of Composers, Authors, and Publishers)

BMI (Broadcast Music, Inc.)

SESAC (Society of European Authors and Composers

Music Publishers:

Atlantic Records

Capitol Nashville

Capitol Records

Elektra Records

EMI Records

MCA Records

Polygram Records

Sony Records

Warner Brothers