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May 27, 2014 | Music Notes Blog

Making It Work In the Digital Era: Why Modernizing the Licensing System For Musical Works Is A Must

If there’s one thing we know for certain about the music industry, it’s that licensing is uniquely complex. One example why? Two licenses are required for every track – the sound recording (the artist’s recorded performance of a song, usually owned by the label) and the underlying musical work (the songwriter’s music and lyrics, such as in sheet music, usually owned by the music publisher).

In the past, this didn’t matter much. Record labels got the musical work license they needed to create the sound recording that consumers wanted to buy. Retailers didn’t need to worry about getting two licenses – they just got the finished product from the record company. The system works the same way today for download services like iTunes.

But licensing is very different for other digital music services such as Spotify or Beats. Those services must obtain licenses to both the sound recording and the musical work. As if that’s not complicated enough, when it comes to musical works those services need licenses for more than one right (i.e., to make copies; to perform the music), and have to do so with different organizations representing each of those rights. This would be like Netflix having to negotiate not just with the motion picture company that created the film, but also with multiple representatives of the author of the book or screenplay. That’s inefficient and siphons away money that could be used to increase royalties for creators.

So, wouldn’t it make sense to simplify this complex system? Publishers and songwriters are unhappy with the current licensing system for musical works, calling the laws that govern it “outdated” and “antiquated.” We agree, so let’s get together and fix it. But let’s be bold. Tinkering around the edges won’t work to solve the problems and encourage more innovation in the music marketplace.

That’s why we proposed in our filing with the Copyright Office a new idea to compensate publishers and songwriters with rates that are negotiated and agreed to in the marketplace by industry partners rather than set by the presiding courts. Some of the potential advantages to such a licensing structure include 1) market rates for publishers and songwriters; 2) more consumer choice as simpler licensing procedures attract funding and development of innovative services; 3) more revenue for services and higher royalties for creators resulting from savings from simplified licensing and payment procedures; 4) improved accuracy of payments, transparency, and audit rights for publishers and songwriters; and 5) viability for ASCAP and BMI, which would, among other things, continue to license radio, TV and venues as they always have.

No system is perfect, and we don’t pretend to have all the answers. But we have some ideas and we’re eager to brainstorm with our industry partners on how to simplify the current musical work licensing system. We support publishers and songwriters in their quest for rates that are market-based, rather than the current court and royalty board structures. So let’s roll up our sleeves and get to work.

Steven Marks
Chief, Digital Business & General Counsel