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COPYRIGHT OFFICE VIEWS ON

MUSIC LICENSING REFORM

HEARING

BEFORE THE

SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED NINTH CONGRESS

FIRST SESSION

JUNE 21, 2005

Serial No. 109–28

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://www.house.gov/judiciary 
(II)

COMMITTEE ON THE JUDICIARY 

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

HENRY J. HYDE, Illinois 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

DANIEL E. LUNGREN, California 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

DARRELL ISSA, California 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TOM FEENEY, Florida 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California 

CHRIS VAN HOLLEN, Maryland 

DEBBIE WASSERMAN SCHULTZ, Florida

PHILIP G. KIKO, Chief of Staff-General Counsel 

PERRY H. APELBAUM, Minority Chief Counsel 

SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

LAMAR SMITH, Texas, Chairman

HENRY J. HYDE, Illinois 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

WILLIAM L. JENKINS, Tennessee 

SPENCER BACHUS, Alabama 

BOB INGLIS, South Carolina 

RIC KELLER, Florida 

DARRELL ISSA, California 

CHRIS CANNON, Utah 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

HOWARD L. BERMAN, California 

JOHN CONYERS, JR., Michigan 

RICK BOUCHER, Virginia 

ZOE LOFGREN, California 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

ROBERT WEXLER, Florida 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California

BLAINE MERRITT, Chief Counsel 

DAVID WHITNEY, Counsel 

JOE KEELEY, Counsel 

RYAN VISCO, Counsel 

SHANNA WINTERS, Minority Counsel 
(III)

C O N T E N T S 

JUNE 21, 2005

OPENING STATEMENT 

Page 

The Honorable Lamar Smith, a Representative in Congress from the State 

of Texas, and Chairman, Subcommittee on Courts, the Internet, and Intellectual Property .................................................................................................... 1

The Honorable Howard L. Berman, a Representative in Congress from the 

State of California, and Ranking Member, Subcommittee on Courts, the 

Internet, and Intellectual Property .................................................................... 2

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 3

WITNESSES 

The Honorable Marybeth Peters, Register of Copyrights, Copyright Office 

of the United States, the Library of Congress 

Oral Testimony ..................................................................................................... 4

Prepared Statement ............................................................................................. 7

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Howard Berman, a Representative 

in Congress from the State of California, and Ranking Member, Subcommittee on Courts, the Internet, and Intellectual Property ......................... 52

Prepared Statement of John Conyers, Jr. a Representative in Congress from 

the State of Michigan and Ranking Member of the Committee on the 

Judiciary ............................................................................................................... 55

Letter from Jonathan Potter, Executive Director, Digital Media Association 

to the HonorableLamar Smith, a Representative on Congress from the 

State of Texas, and Chairman, Subcommittee on Courts, the Internet, and 

Intellectual Property ............................................................................................ 56

Letter from Steven M. Marks, Recording Industry Association of America 

to the Honorable Lamar Smith, a Representative in Congress from the 

State of Texas, and Chairman, Subcommittee on Courts, the Internet, and 

Intellectual Property ............................................................................................ 59

Response from the National Music Publishers’ Association, Inc. in response 

to the testimony of the Honorable Marybeth Peters, Register of Copyrights . 62

Statement of Major Songwriting Organizations, the Songwriters Guild of 

America and the Nashville Songwriters Association International in response to the testimony of the Honorable Marybeth Peters, Register of 

Copyrights ............................................................................................................. 65

Statement of the Local Radio Internet Coalition in response to the testimony 

of the Honorable Marybeth Peters, Register of Copyrights .............................. 69

Statement of the Recording Artists’ Coalition in response to the testimony 

of the Honorable Marybeth Peters, Register of Copyrights .............................. 84

Statement of the Television Music License Committee and the Radio Music 

License Committee in response to the testimony of the Honorable Marybeth 

Peters, Register of Copyrights ............................................................................ 86
Page

IV

Letter to the Lamar Smith, a Representative in Congress from the State 

of Texas, and Chairman, Subcommittee on Courts, the Internet, and Intellectual Property and to the Honorable Howardd Berman, a Rrepresentative 

in Congress from the State of California and Ranking Member on the 

Subcommittee on Courts, the Internet, and Intellectual Property from Del 

R. Bryant, Broadcast Music Inc. ......................................................................... 88

Statement of SESAC, Inc. in response to the testimony of the Honorable 

Marybeth Peters, Register of Copyrights ........................................................... 93

Comments of the American Society of Composers, Authors and Publishers 

in response to the testimony of the Honorable Marybeth Peters, Register 

of Copyrights ........................................................................................................ 98

Letter from the Honorable Marybeth Peters, Register of Copyrights to the 

Honorable Lamar Smith, Chairman, Subcommittee on Courts, the Internet, 

and Intellectual Property, submitted July 19, 2005 .......................................... 101
(1)

COPYRIGHT OFFICE VIEWS ON

MUSIC LICENSING REFORM 

TUESDAY, JUNE 21, 2005

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY, COMMITTEE ON THE JUDICIARY, Washington, DC.

The Subcommittee met, pursuant to notice, at 10:04 a.m., in 

Room 2141, Rayburn House Office Building, the Honorable Lamar 

Smith (Chair of the Subcommittee) presiding. 

Mr. SMITH. The Subcommittee on the Courts, the Internet, and 

Intellectual Property will come to order. I am going to recognize 

myself for an opening statement, then the Ranking Member, then 

the Ranking Member of the full Committee. 

This is a wonderful turnout this morning. It’s nice to see a lot 

of familiar faces and a lot of new faces, as well, which is an indication, I think, of how important the subject at hand is. Let me recognize myself for an opening statement. 

Today, the Subcommittee continues its inquiry into issues surrounding music licensing. However, instead of identifying the problems in the music industry, you will hear about a possible solution 

that has been suggested by the Copyright Office. 

The music industry has evolved from simple business models focused around either the distribution of physical items, such as compact disks or broadcasts on the radio, to a dynamic digital marketplace where new business models evolve rapidly. The laws that set 

out the framework for the licensing of musical rights in this industry are outdated, and some say beyond repair. The Copyright Office’s idea, therefore, represents a creative way for how mechanical 

and performing rights would be administered in this country. 

Since the draft focuses on what the Copyright Office feels is the 

best approach to music licensing laws, it does not address any of 

the issues that would accompany the transition to such a system 

nor does it address the operation of the music industry before the 

enactment of such legislation, if that were to occur. The Copyright 

Office has not addressed such issues because it is more important 

to first determine whether the system suggested by the Copyright 

Office is worth considering than determining how best to accomplish the required transition. 

Some issues that the Subcommittee would need to resolve but 

that are not included in the draft include how to handle any rate 

disputes that may arise. Should copyright royalty judges’ decisions 

or other similar processes be used to settle rate disputes, or should 
2

a pure free market approach rule? We have already seen this issue 

arise in the context of the Television Music Licensing Committee’s 

dispute with SESAC that was debated during the Subcommittee’s 

Public Performing Rights Organization oversight hearing last 

month. 

Members of this Subcommittee have an open mind on how to reform American music licensing laws, but not on the need to do so. 

Music licensing reform is essential. If legal services are going to be 

able to compete with free, they must be able to quickly offer legal 

music. That does not mean that the music licensing laws should be 

written for the sole benefit of online services. 

For example, some music groups have suggested the creation of 

one super-agency to handle all music licensing. Others have suggested a direct negotiations approach. Whether or not it makes 

sense to create new entities will be considered as a part of the process of developing legislation. 

Finally, I would note that for the interested parties, following the 

testimony today, that there are seven calendar days to submit written testimony for the record commenting on the Copyright Office’s 

draft and their testimony given today and we very much encourage 

those comments just so we’ll have a feel for how everyone thinks 

about the subject. 

With that, I’ll recognize the Ranking Member, Mr. Berman, for 

his opening statement. 

Mr. BERMAN. Thank you very much, Mr. Chairman. Thank you 

for scheduling this hearing on what my at least preliminary look 

at is a very bold initiative by the Copyright Office. The Copyright 

Office continues to serve as a valuable resource on many different 

copyright issues, including section 115, and I’m especially interested in hearing its opinions on improving our current system of 

music licensing. 

In anticipation of the Grokster decision, I think it’s important to 

recognize that a problem of—the problem of rampant piracy over 

peer-to-peer networks serves as a reminder of the dire need to address digital music licensing reform. Piracy harms an industry that 

provides jobs throughout the country, including my district, from 

the recording artist to the sound engineer to the many businesses 

that support the full range of musical arts. In order to enable legitimate online music distributors to compete with the choice and 

ease of so-called free music provided by Internet pirates, we need 

to give users the ability to receive their share of music anytime, 

anyplace, and in any format while ensuring that the creator receives his or her rightful compensation. 

According to reports of the NDP group, legal online music 

sources have gained a solid foothold against file sharing networks. 

Though proliferation and success of new digital music services, 

such as the Apple iTunes download service, the recent launch of 

Rhapsody and Yahoo portable subscription services, and the recent 

success of new physical formats, such as dual-disk CD/DVD all 

speak to innovation in the distribution mechanisms for music content. However a fundamental question remains as to whether the 

current licensing system or the one being proposed gives these new 

music products and services a realistic opportunity to compete and 
3

overcome the free alternatives provided by the peer-to-peer networks. 

Rewards for innovation are hard enough to come by for the songwriters who oftentimes are the first to create but the last to be 

paid. But the unfettered distribution of music content over file 

swapping services prevents them from receiving a major source of 

potential revenue. Our focus must remain on providing rightful 

compensation to those that provide our music. 

Philosophically, the idea of repealing any of the compulsory licenses, 114 or 115, has great appeal and is, pardon the expression, 

music to my ears. The idea that the market would be required to 

yield fair value for a musical work has long been the hope of many 

copyright owners. However, at the same time, we need to be mindful of the consequences that a free marketplace may have on online 

music distribution services. They compete in a marketplace where 

the market price of the pirated music is free. Therefore, we must 

facilitate legitimate digital online music services in order to combat 

the pirates and reclaim the treasure. 

I look forward to hearing from the Register of Copyrights to provide further details of how this draft would address some of the 

practical issues, such as a transition period and creation of a fluid 

marketplace to begin leveling the playing field for music services 

with those of Grokster and Kazaa. 

Thank you very much, Mr. Chairman. I yield back. 

Mr. SMITH. Thank you, Mr. Berman. 

The gentleman from Michigan, Mr. Conyers, the Ranking Member of the Judiciary Committee, is recognized for an opening statement. 

Mr. CONYERS. Thank you, Mr. Chairman. I am happy to be here 

and to see our Register of Copyrights with us to make a major 

presentation this morning. 

I look out in the audience and the gang’s all here. This could be 

a potentially significant discussion that we have amongst ourselves, and so I’m happy you’re doing this. 

Could I just indicate for the record that I’m weighing in on the 

side of a narrow redrafting of section 115. It seems to me that the 

larger the proposals around this bill get, the more dangerous this 

is going to become to some of those who are in the music business. 

I raise a small flag of recognition to the songwriters in this music 

industry who are paid less than anybody else I know for their creative works and I am hoping that we will be able to retain the ability of these writers to negotiate a fair rate for their musical content. While a rate court would appease some seeking a quick resolution of royalty disputes, it seems to me that private negotiations 

are still the most appropriate forum for these circumstances, and 

so I am happy to add these comments and look forward to the 

witness’s contribution. Thank you. 

Mr. SMITH. Thank you, Mr. Conyers. 

With that introduction, other Members’ opening statements will 

be made a part of the record, and may I ask our witness to stand 

and be sworn in, please. Would you please raise your right hand. 

Do you swear that the testimony you are about to give is the 

truth, the whole truth, and nothing but the truth, so help you, 

God? 
4

Ms. PETERS. I do. 

Mr. SMITH. Thank you. Please be seated. 

Marybeth Peters became the United States Register of Copyrights in August 1994. From 1983 to 1994, she held the position 

of Policy Planning Advisor to the Register. She has also served as 

Acting General Counsel at the Copyright Office. Previously, Ms. 

Peters, from 1986 to 1995, was a lecturer in the Communications 

Law Institute of the Catholic University of America’s Law School, 

and previously served as Adjunct Professor of Copyright Law at the 

University of Miami School of Law and at the Georgetown University Law Center. 

Ms. Peters is the author of the General Guide to the Copyright 

Act of 1976. Ms. Peters received her undergraduate degree from 

Rhode Island College and her law degree with honors from the 

George Washington University Law School. 

Ms. Peters, we welcome you today. We look forward to your testimony, and as we discussed previously, because you are the only 

witness, please feel free to take more than the 5 minutes. We understand you’ll be somewhere between five and ten. That’ll be 

great. Whatever time you need, we’re interested to hear what you 

have to say, and please proceed. 

TESTIMONY OF THE HONORABLE MARYBETH PETERS, REGISTER OF COPYRIGHTS, COPYRIGHT OFFICE OF THE 

UNITED STATES, THE LIBRARY OF CONGRESS 

Ms. PETERS. Mr. Chairman, Mr. Berman, Members of the Subcommittee, thank you for asking me to testify on my recommendations on how to facilitate the licensing of music by reforming section 115 of the Copyright Act, the compulsory license for the making and distribution of physical phonorecords and digital phonorecord deliveries of nondramatic musical compositions. 

Let me start by contrasting how public performance rights and 

the reproduction and distribution rights of music are licensed. 

Songwriters and music publishers license public performances 

through three Performing Rights Organizations, PROs—ASCAP, 

BMI, and SESAC. Virtually every song that anyone could ever wish 

to license is in its repertoire, in the repertoire of one of the three, 

which offer blanket licenses for public performances of all of the 

songs in their repertoires. 

In contrast, a record company or digital music service that wishes to obtain a license to reproduce and distribute phonorecords of 

a musical work must obtain a separate license for each musical 

work it wishes to license. The license must be obtained directly 

from the music publisher or, in many cases, the agent, the Harry 

Fox Agency. 

Harry Fox claims that it licenses over 90 percent of the commercially significant music distributed in the United States, but the 

Digital Music Association claims that Harry Fox licenses only 

about 65 percent of, quote, ‘‘available music.’’ Whatever the figure 

may be, it seems clear that the Harry Fox Agency can license only 

a fraction of the works licensed by the PROs. 

Last year in its testimony, the National Music Publishers Association stated that Harry Fox’s available catalog is well in the hundreds of thousands of musical works. In contrast, at a hearing last 
5

month, BMI stated that it oversees a repertoire of more than 6.4 

million musical works. ASCAP testified that there are millions of 

millions and millions of works in its repertoire. 

Thus, it’s relatively easy for a digital music service to clear the 

rights to publicly perform any and all nondramatic musical works. 

It’s not quite one-stop shopping, but it literally is three-stop shopping. 

In contrast, it’s virtually impossible to clear the reproduction 

rights for all such works, no matter how many stops you make. Unlike the public performance right, the reproduction and distribution 

rights are subject to section 115’s compulsory license. As a practical 

matter, section 115 simply sets a ceiling on the rates that can be 

charged for the making and distribution of phonorecords and licenses are actually obtained from the music publisher, Harry Fox 

or another agent. 

These differences in the licensing regimes for public performances and for reproduction and distribution have only recently created difficulties due to the rise of digital music services, which aspire to be celestial jukeboxes that can provide you with performances or copies of any song you may wish to hear. Digital music 

services need to clear reproduction rights for all songs. While they 

can fairly easily obtain blanket licenses from PROs, obtaining the 

reproduction and distribution rights has proved to be extremely difficult. 

The second major hindrance to music licensing for digital transmission is that almost all—almost any kind of digital transmission 

of music involves the implication of both rights. PROs will assert 

a right to license and receive royalties for the performance right, 

and Harry Fox and music publishers will assert a right to license 

and receive royalties for the reproduction and distribution rights. 

And in many cases, both rights are, in fact, implicated. 

This is a problem because licensing of music is today divided into 

two separate markets, one for public performance, one for reproductions and distribution. This pits two different middlemen who 

represent the same copyright owner against each other. Each 

wants and demands a piece of the action. But whether or not two 

or more separate rights are truly implicated and deserving of compensation, it seems inefficient and unfair to require a licensee to 

seek out two separate licenses from two separate sources in order 

to compensate the same copyright owner for the right to engage in 

a single transmission of a single work. 

There are no such difficulties when it comes to the licensing of 

rights in sound recordings embodying the same musical work, and 

that’s because record companies, unlike music publishers, have not 

split up the rights and engaged separate middlemen to exploit separate rights. They issue a single license to cover everything. 

Because of this, section 115 needs to be reformed to ensure that 

our music industry can continue to flourish in the digital age. The 

question is not whether to reform section 115, but how. 

One solution would involve expansion of the compulsory license 

to cover all the rights necessary to make digital transmissions, and 

that is still worth exploring. But I am convinced that I was right 

last year when I told you that, as a matter of principle, I believe 

that the section 115 license should be repealed and that licensing 
6

of rights should be left to the marketplace, most likely by means 

of collective administration. 

The Copyright Office has long held that statutory licenses should 

be enacted only in exceptional cases, when the marketplace is incapable of working, and it is worth noting that the United States 

is virtually alone in having a compulsory license for phonorecords. 

The rest of the world has managed to resolve music licensing issues 

without compulsory licenses, and most frequently by collective licensing. 

We should do the same. We should let the licensing of reproduction and distribution rights take place, for the first time in our history, in the marketplace. We should do so by building on the strong 

record that our PROs have built in issuing blanket licenses for performance rights and allow the PROs to do the same for the reproduction and distribution rights. 

I don’t have time to describe all of the details in our proposal, 

but in my written testimony and in the accompanying draft legislative text with its section-by-section analysis, the details are provided. 

In a nutshell, my proposal would convert the PROs to MROs, 

Music Rights Organizations, and give them the right to license the 

reproduction and distribution rights. It would require them to offer 

what is, in effect, a uni-license, a unified license, a single blanket 

license for digital transmissions that cover all three rights—public 

performance, reproduction, and distribution of phonorecords. 

Thank you. 

Mr. SMITH. Thank you, Ms. Peters. 

[The prepared statement of Ms. Peters follows:]
7

PREPARED STATEMENT OF MARYBETH PETERS
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Mr. SMITH. I’ll recognize myself for some questions, and the 

first—and maybe I should comment, this is a wonderful turnout on 

the part of Members, as well. That’s how important the subject is 

and how much we appreciate your testimony. 

Ms. Peters, some of the industry groups have recommended or 

advocated some type of a super-agency instead of your proposal. 

How efficient would that be or not be, in your opinion? 

Ms. PETERS. Well, I would actually oppose that at this point in 

time. The one thing it does do is it would allow one-stop shopping, 

but it would impose another layer of administration and perhaps 

another layer of transaction costs, and I think there would be an 

antitrust concern. It could reduce competition. So at this point in 

time, I would not necessarily favor going that way. 

Mr. SMITH. Okay. Suppose our goal was to have high revenue 

and low overhead. What would be the most efficient licensing system that you would recommend, the one—go on. 

Ms. PETERS. I would suggest that it’s the one that I propose. 

[Laughter.] 

Mr. SMITH. Okay. Why would that increase revenue and reduce 

overhead? 

Ms. PETERS. Because you would be able to license all works, and 

because all users of digital music would have PROs to go to, or 

MROs to go to and get what they needed, I think it would enable 

a lot more legitimate use of music and bring in more revenue. 

Mr. SMITH. Okay. Speaking of MROs, under your proposal, how 

many MROs do you think would exist? Would it be four or would 

it be 40? 

Ms. PETERS. Let’s put it this way. It is possible that there could 

be many MROs, but I would suggest that it would be unlikely. 

There are expenses in setting up an MRO. In fact, today, other 

MROs or PROs could have, in fact, developed, but they haven’t. In 

the performing rights area, it went from 1914 until 1939 before a 

second one showed up in the form of BMI. So I think that it’s unlikely. 

In the mechanical rights area, technically, there may be several, 

but there’s only one predominant or Collective Licensing Organization, the Harry Fox Agency. So I have no reason to believe that we 

would have a proliferation of MROs. 

Mr. SMITH. Ms. Peters, what do you think we need to learn from 

what other countries’ experiences have been with music licensing? 

What has worked in other countries, what has not worked, and 

does that influence your recommendation? 

Ms. PETERS. A number of countries actually have—the PROs 

have combined the reproduction right with, in fact, the performance right. That is a plus. I do have to say that in other countries, 

they have different problems that they are struggling with. But 

with regard to administering both rights, there are many who actually do administer both rights. 

Mr. SMITH. One further question. This gets into a subject that is 

still contentious to a lot, and that is royalty rates. If royalty rates 

cannot be established by private negotiations, I know you favor 

some form of binding arbitration, but why would that be the recommendation? 
38

Ms. PETERS. Well, actually, I think what we would basically feel 

is that the marketplace should—that we should attempt to use the 

marketplace, and if, in fact, it turns out that there’s a problem, 

then maybe you turn to, you know, a consent decree with a rate 

court. But I don’t think that you leap there. And there are alternatives. There’s the copyright royalty judge system that you could 

look at if, in fact, a problem developed. But at this point in time, 

I would actually favor letting the marketplace try to work. 

Mr. SMITH. I was just going to say, when it comes to royalty 

rates, you still prefer the free market approach, letting that be negotiated rather than imposed by the Government—— Ms. PETERS. Yes. 

Mr. SMITH. —or by other entities? Okay. 

Last question. You made a curious statement that I thought was 

a valid statement in your written testimony. You said that you 

thought the current system, which is to say section 115, quote, ‘‘inhibits the music industry’s ability to combat piracy.’’ I thought it 

would be interesting to hear why you thought that was the case. 

Ms. PETERS. It actually goes back to my first answer to—the answer to the first question. If it’s too difficult to obtain the license, 

then people might use the works without permission and that actually increases unauthorized distribution of musical compositions. 

So for me, in order to decrease piracy or to take away the excuse 

that, well, I couldn’t get a license, you need an efficient system in 

place. 

Mr. SMITH. Okay. Thank you, Ms. Peters. 

The gentleman from Michigan, Mr. Conyers, is recognized for his 

questions. 

Mr. CONYERS. Thank you, Mr. Chairman, and thank you for 

being with us today, Ms. Peters. 

Where does the—in your view, the concept of remuneration come 

in and how would it be affected by the proposal in the draft that 

you have before us for songwriters? 

Ms. PETERS. My perspective would be a blanket license that 

would be negotiated in the marketplace. The piece that we have 

been very critical of over the years is that the existing section 115 

sets a ceiling and people bargain down from the ceiling. I don’t like 

seeing a ceiling. I notice that the songwriters said, well, they would 

like a floor. You can’t go below a particular level. Well, that may 

be true, but the ceiling, in fact, is a problem. 

Mr. CONYERS. You dislike ceilings, but not—you don’t feel too 

bad about floors. 

Ms. PETERS. Well, basically, the songwriters were saying, no 

matter what, we should make sure that we have a decent royalty 

rate. I care about songwriters. It’s the creator that we have to 

make sure that we take care of, and I thought my proposal was, 

in fact, increasing the ability of songwriters to get additional 

money. We know that songwriters make more money through the 

performance right and from PROs than they do from the administration of the mechanical compulsory license. 

Mr. CONYERS. Is the proposal you have a narrower group of 

changes as opposed to some of the other proposals out? I notice 

that some of my colleagues on the Committee have weighed in on 

115 in earlier times. 
39

Ms. PETERS. If you are not going to abolish the compulsory license and your choice is to reform it, then I strongly recommend 

reforming it on a blanket license-type basis. I think there was 

agreement when we were overseeing discussions last summer that 

the 114 blanket license worked much more efficiently than the 

title-by-title, music publisher-by-music publisher system. 

Mr. CONYERS. I would like to just thank you very much for moving us along in this direction and ask the Chairman, I assume that 

we are going to have additional hearings and you will be hearing 

from the ASCAP, BMI, SESACs of the world on this same subject, 

Mr. Chairman? 

Mr. SMITH. Mr. Conyers, if you would yield, we have had two 

hearings involving the witnesses whom you have just mentioned 

and I am sure there will not only be additional hearings, but discussions on the subject, as well. 

Mr. CONYERS. All right. Thank you very much. 

Mr. SMITH. The gentleman from Virginia, Mr. Goodlatte, is recognized for his questions. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

Ms. Peters, welcome. Do you believe that providing for courts to 

resolve disputes over royalty rates for public performances has 

worked to decide those rates when the private parties cannot 

agree? 

Ms. PETERS. You’re talking about the rate courts and the consent 

decrees? 

Mr. GOODLATTE. Right. 

Ms. PETERS. Yes. 

Mr. GOODLATTE. If Congress adopted your idea to allow MROs to 

license reproduction and distribution rights for phonorecords, do 

you believe that applying such a rate dispute mechanism would be 

useful for those licenses, as well? 

Ms. PETERS. It may be. We actually have had a short time to talk 

to the parties, but if there’s one thing that they vehemently disagree about, it’s that issue. So I guess for me, I would like to see 

if, in fact, there was a problem that developed and if, in fact, it did 

develop and the Antitrust Division of the Department of Justice 

felt the remedy was, in fact, an expansion of the consent decrees 

to cover rate courts in this area. Then that would be the way to 

go. 

Mr. GOODLATTE. How would that—would you then have to come 

back to the Congress for additional legislation——

Ms. PETERS. No——

Mr. GOODLATTE. —or would we be looking at a court expanding 

its own jurisdiction? 

Ms. PETERS. Yes. You would be looking at an expansion of the 

existing consent decrees if, in fact, it turned out that there was a 

problem with regard to monopolistic practices. 

Mr. GOODLATTE. All right. In order for providers to offer legitimate online music services and new physical music products to 

compete with illegal services, these providers need certainty that 

they will be able to license the reproduction and distribution rights 

to all music with greater ease. What provisions in your plan would 

create more certainty that these licenses would be more readily 

available to these legitimate music services and products? 
40

Ms. PETERS. Actually, we chose the PRO model because they 

serve all comers and you have the license no matter what. You 

work out the details later. I think that was the model that we 

wanted. All people who wanted licenses could get them. The details, you know, might come later, but you still could, in fact, use 

the work. 

Mr. GOODLATTE. And you think that would be easy enough, and 

you testified to the Chairman that you don’t envision having too 

many of these organizations? 

Ms. PETERS. Right. That is my anticipation. I will just cite that 

I was on the website of some of the PROs and they’ve got licenses 

for podcasting in many of the new forms of making works available 

on the Internet, so I have faith that that would be handled. 

Mr. GOODLATTE. Do any of the provisions of the consent decrees 

operating in the performance rights realm help to create this kind 

of certainty for the licensing of performance rights? 

Ms. PETERS. I have to say I’m not an expert on the consent decrees and I’m really—we can look into that answer and get back 

to you on it, but I don’t feel comfortable answering it right now. 

Mr. GOODLATTE. Well, that would be fine, Mr. Chairman, if she 

could be allowed to do that. I would certainly be interested in having your additional thoughts on that subject. Thank you, Mr. 

Chairman. 

Mr. SMITH. Thank you, Mr. Goodlatte. 

The gentleman from California, Mr. Berman, is recognized for his 

questions. 

Mr. BERMAN. Well, Ms. Peters, thank you very much for your 

very bold proposal. I think it’s—in a way, I like the idea of starting 

off with the, almost the revolutionary and then, unlike Iraq, try to 

see what the consequences are beforehand. 

I want to press you. I guess both the Chairman and Mr. Goodlatte raised this issue. But why in the world that you are proposing 

will the MROs look more like the Performance Rights Organizations, three, using blanket licenses——

Ms. PETERS. Right. 

Mr. BERMAN. —than—I mean, nothing in your proposal would require, would put a limit on the number, and nothing in your proposal would require blanket licensing, as I understand it. 

Ms. PETERS. That’s right. 

Mr. BERMAN. Why would it look more like the PROs than like 

the situation we now have with the mechanical license? What I 

mean is just—I mean, the PROs developed in a non-digital world. 

Ms. PETERS. That is right, but they’ve adapted to a digital world. 

Mr. BERMAN. Yes. Why wouldn’t we be more likely to see a proliferation of publishers who decide to be their own MRO, in effect? 

Ms. PETERS. Let me start with, yes, they could. Our proposal 

doesn’t necessarily require that in the end there will be a blanket 

license, but a blanket license must be offered in our proposal. So 

from my perspective, if you look at what has happened—— Mr. BERMAN. A blanket license—— Ms. PETERS. Must be offered—— Mr. BERMAN. To—— Ms. PETERS. Any——

Mr. BERMAN. —for a licensee to utilize the reproduction——
41

Ms. PETERS. Yes. 

Mr. BERMAN. —performance—— Ms. PETERS. Yes. 

Mr. BERMAN. —the whole bundle of rights—— Ms. PETERS. Yes. 

Mr. BERMAN. —must be offered—— Ms. PETERS. It must be offered. 

Mr. BERMAN. —at a rate determined through negotiations between the license—— Ms. PETERS. Right. 

Mr. BERMAN. —between the MRO and the licensee—— Ms. PETERS. Right. And it’s possible, just like today——

Mr. BERMAN. —and if they haven’t negotiated it, with a dispute 

resolution mechanism to essentially set the price, the fair price. 

Ms. PETERS. Right. 

Mr. BERMAN. Okay. Go on now. 

Ms. PETERS. What I was actually going to say is based on the experience of the PROs, it is much cheaper to administer a blanket 

license, and although they are required to do program licenses, 

those are administratively difficult. So it would seem to me—now, 

you have to know my entire career is in the Government, so I have 

never worked in the real live business world, but it would seem 

that the blanket licensing would be the most efficient way. PROs, 

and I think even the Harry Fox Agency, try to give the composer 

and the music publisher as much of the money as they possibly 

can. The problem with HFA is it’s a title by title. So it seems to 

me not to make much sense to think that a PRO, if they have this, 

would, in fact, choose not to, in essence, push the blanket license. 

Mr. BERMAN. And again on the notion of why, in the context of 

now having the—why will songwriters and publishers—I guess 

they think the answer would be they get a better deal this way. 

That’s why they would——

Ms. PETERS. Hopefully, yes, and—— Mr. BERMAN. —rather than become their own MRO——

Ms. PETERS. Right, and in the PRO scenario, there is, in fact, a 

direct payment to songwriters. It’s 50 percent to publishers, 50 percent direct payment to songwriters. 

Mr. BERMAN. All right. Now, talk about this issue of the consent 

decree, that is, if they’re still allowed after—no, never mind. 

[Laughter.] 

Every 4 years, we’ll be back. Explain a little more slowly for me 

where the consent decree comes into this as opposed to us legislating an alternative dispute resolution mechanism. 

Ms. PETERS. Two of the PROs are currently subject to a consent 

decree——

Mr. BERMAN. Right. 

Ms. PETERS. —with regard to the performance right, and the 

question is what happens vis-a-vis that consent decree? Should you 

add these additional rights to what they can do? And we actually 

tried to start a conversation with the Justice Department, but we 

only were able to contact the Antitrust Division in the last few 

days. So we’re not sure how all of this would come out, but we 

think that—or we hope that the Antitrust Division would be persuaded that our proposal does not raise serious antitrust concerns 
42

and there really wouldn’t need to be an adjustment at this point 

in time. But if, in fact, it turned out that, in practice, then you 

could expand the consent decree to cover the additional rights. 

Mr. BERMAN. And what do we do during the transition period? 

Ms. PETERS. The transition period—— Mr. BERMAN. From the passage of the legislation to—— Ms. PETERS. Until the point where you realize it’s broken? I’m 

hoping it’s not broken. I’m actually—— Mr. BERMAN. Well, the parties don’t come together. You get relatively little privately negotiated and now you have to deal with 

the mechanism for setting a rate. What happens during that interim period? 

Mr. SMITH. The gentleman from California is recognized for an 

additional minute. 

Ms. PETERS. I’m not totally sure. Maybe there are dispute resolution clauses that could be put in the contracts, or as this is happening the Antitrust Division could start talking with the parties. 

I don’t have the ultimate answer. 

Mr. BERMAN. And actually, you could, if you knew the way it was 

going to be settled—well, the problem is you don’t, but if you knew 

how this was going to be settled, the obligations could accrue and 

then the amount of money owed could be determined later. That’s 

done a lot of times——

Ms. PETERS. Well, I was assuming that, that you can always get 

the license and worry about what you owe later. But for people, 

that doesn’t give much comfort, not knowing what they’re going to 

owe. 

Mr. SMITH. Thank you, Mr. Berman. 

The gentleman from Florida, Mr. Keller, is recognized for his 

questions. 

Mr. KELLER. Well, thank you, Mr. Chairman, and thank you, Ms. 

Peters, for being here today. I have read your complete testimony 

and I’ve also read various memos and other items from industry 

members and I’m reminded of the many media reports of identical 

twins who speak their own language which they understand but 

nobody else knows what the hell they’re talking about. [Laughter.] 

Ms. PETERS. I understand that. 

Mr. KELLER. So I’m going to simplify things and walk you 

through. Let me tell you what I do know about children, as someone who has two kids in elementary school. This is what I know 

about 10-year-olds in fourth grade. They don’t want to pay $18 for 

a CD that has one hit song and 11 crappy songs. They don’t want 

to break the law by illegally downloading because they’ve heard 

that you could be sued or even sent to jail. And they kind of like 

MTV videos. 

So with that in mind, the ideal situation for that 10-year-old and 

fourth grader would be a DVD/CD, one on one side, one on the 

other, that has the top 12 songs of the current top 40 along with 

the music videos for their songs. That, I think, may be the future 

for these kids. 

So some creative entrepreneur comes around and he wants to 

distribute this DVD/CD combination and play by the rules. He 

wants it in all the record stores and Wal-Marts throughout America. He wants to do it in a way that is legal and quick and that 
43

fairly compensates the copyright owners. Under this scenario, I 

want to see how he would go about doing that under existing law 

versus your proposal. 

So let’s start with the CD side of it. He wants to get the rights 

to these 12 songs on the CD. Under existing law, I would imagine 

his first stop would be with the Harry Fox Agency, since you’ve testified they have 65 to 90 percent of the market share, is that right? 

Ms. PETERS. Yes, and if it’s the top ten or 12, they probably have 

it. 

Mr. KELLER. Okay. And——

Ms. PETERS. So they would go to Harry Fox to get the reproduction and distribution right, and at that point, if all he’s doing is 

making the CD——

Mr. KELLER. Right. 

Ms. PETERS. —the question would be, where is he getting it 

from? If he’s downloading it from an online service, or did he buy 

the CD, whether the performance right is implicated depends on 

how he gets——

Mr. KELLER. Okay. Let’s say it’s just the mechanical licensing 

rights we’re talking about——

Ms. PETERS. Okay, we——

Mr. KELLER. —and let’s say that ten of the 12 songs, we can get 

from Harry Fox under the existing scenario. He has to track down 

the other two licensors of music publisher rights? 

Ms. PETERS. Right. 

Mr. KELLER. And that could take a while? 

Ms. PETERS. It depends. If they’re top songs, I would think that 

the name of the publisher would be on the album or it would—the 

data would be available and they could contact the publisher. 

Mr. KELLER. Under your proposal, would it make it any easier 

to track down those licensors other than Harry Fox, or would that 

essentially stay the same? 

Ms. PETERS. Well, if it’s a blanket license, there would be several 

places that you would go to clear for all of the songs. The whole 

purpose is that in the PROs, if you get the three licenses, you’re 

essentially covered for everything, Even if, in fact, you can’t find 

the copyright owner. The way it is today, you could use the statutory license by coming to the Copyright Office, looking up the 

records to see whether or not it was registered. If it was registered, 

then you would serve or you could contact that publisher. But you 

also have to deal with the record company, for the rights in the 

sound recordings. 

Mr. KELLER. But let me go on because I have got some followups. 

Ms. PETERS. Okay. 

Mr. KELLER. So we’ve managed to now track down the appropriate people, the licensors of all these 12 songs. Under existing 

law, there’s a compulsory license. So in other words, as long as I 

pay the appropriate amount of money, I can use that song. 

Ms. PETERS. If you follow the terms and conditions——

Mr. KELLER. Right. 

Ms. PETERS. —in the statute or you get a modified license from 

the publisher. 
44

Mr. KELLER. Now, under your proposal, you are talking about 

possibly doing away with the compulsory licenses—— Ms. PETERS. Right. 

Mr. KELLER. —so the songwriter may say, you know what? I 

don’t want my song listed on that compilation CD, is that right? 

Ms. PETERS. If, in fact, it were part of a PRO, no, they couldn’t, 

because it would be required to be offered on a blanket basis. 

Mr. KELLER. So as many licenses would still be available? 

Ms. PETERS. The truth is, in certain circumstances, maybe the 

songwriter could say no. But most songwriters want to make 

money, so most songwriters want to license. 

Mr. KELLER. Okay. So tracking down all these people and making sure they’re appropriately paid, do you think your proposal 

would make that process on the CD side any quicker than it exists 

right now? 

Ms. PETERS. Personally, yes. 

Mr. KELLER. And that’s because of the blanket licensing issue 

when you——

Ms. PETERS. And going to one place. 

Mr. KELLER. Okay. Now let’s flip over the CD to the DVD 

side——

Ms. PETERS. The truth is, if it were a mechanical and Harry Fox 

did, in fact, represent all those people—— Mr. KELLER. Right. 

Ms. PETERS. —it could be one-stop shopping with Harry Fox, too. 

Mr. KELLER. Which would be ideal. Now, let me ask, as a followup to that, let’s say Harry Fox has it all, let’s say 100 percent of 

all these songs, and we do away with the compulsory license. 

What’s to keep them from charging whatever they want to charge? 

Ms. PETERS. The marketplace. 

Mr. KELLER. But there’s no competitor. They have 100 percent of 

the songs. I mean, what’s to keep them from saying, you know 

what? I’m going to charge you three times that or take a walk. 

Ms. PETERS. They could try. I mean, it’s really like, as ASCAP 

and BMI and SESAC negotiate with the broadcasters, they have all 

the music. 

Mr. KELLER. Okay. Just one final question, Mr. Chairman. 

Mr. SMITH. Without objection, the gentleman is recognized for an 

additional minute. 

Mr. KELLER. And I’m sorry, this is a harder question, but you flip 

over that CD. Now we’re on the DVD side and you want to get the 

rights to those corresponding music videos. Tell me how, if any, 

there would be a difference between existing law and your new proposal. 

Ms. PETERS. Actually, we don’t address music videos. Those are 

audio-visual works, not just musical compositions. There are sync 

rights, synchronization rights, that are involved that—they are 

handled by music publishers. So there is more licensing involved 

when you’re making a music video, separate licenses. 

Mr. KELLER. And whatever those complications are, and I understand there are many, are not going to be affected by what you are 

suggesting? 

Ms. PETERS. No. 

Mr. KELLER. Okay. Thank you, Mr. Chairman. 
45

Mr. SMITH. Thank you, Mr. Keller. 

The gentleman from Virginia, Mr. Boucher, is recognized for his 

questions. 

Mr. BOUCHER. Mr. Chairman, thank you very much, and I want 

to commend you for your persistence in holding a series of hearings 

and giving in-depth consideration to the need for legislation that 

will remove the barriers that currently inhibit the ability of digital 

media companies to use the Internet in order to compete very successfully with peer-to-peer file sharing, and I think we all acknowledge that need. And I’m very impressed with the efforts you’ve undertaken, Mr. Chairman, to help us achieve that goal. 

And Ms. Peters, I want to commend you for your longstanding 

work in this area also and what I think is a very thoughtful report. 

You’ve done a first-rate job with this. I want to ask you just a couple of questions about some of your recommendations. 

I have listened very carefully to the conversation regarding your 

preferred alternative, which is that section 115 be repealed and 

that we basically trust the market in order to agglomerate the various songwriter-publisher interests, and that we also trust the market in order to set a fair rate. And I have some concerns about both 

of those components. I am a little bit worried that, notwithstanding 

your projection, that what we would see is a small number of Music 

Rights Organizations arise in order to agglomerate and license 

these rights, that what we might end up seeing is dozens of them, 

and if that were to happen, the digital media companies would be 

placed at a severe disadvantage in order to have to negotiate separately with dozens of agencies, some of which would have some 

songs, some of which would have others. 

I guess there is no way to know at this juncture whether your 

projection is right—we would hope that it is—or whether the eventuality might prove that dozens of these rights organizations arise. 

And so, Mr. Chairman, I would simply note a concern with regard 

to that and recommend that at some future hearing on the subject, 

we invite all of the various externally interested parties and get 

their opinion on how they think that particular part of the market 

would arise. 

The other concern I would note, Ms. Peters, relates to the rate. 

Mr. Berman engaged you in a very thorough discussion of that subject. I won’t reprise that except to note that I really don’t share 

your confidence on several points. 

First of all, I have some real doubts that the Department of Justice would, in fact, seek to extend the consent decrees in order to 

provide a rate backstop. I think it would be better if we considered 

providing that backstop directly through the legislation and I 

would be very interested in hearing what other witnesses will have 

to say at future hearings concerning that possibility, and I know 

you’ve acknowledged the potential for doing all of this in your testimony. 

So let me depart from section 115 and take just a moment to talk 

about a few other things also within the general sphere of effective 

music licensing that will make it easier for the lawful companies 

to compete with the unlawful. You performed another valuable 

public service several years ago when in response to section 104 of 

the Digital Millennium Copyright Act, your office studied a number 
46

of questions. And then you published what I thought was a 

thoughtful and highly constructive report that made a number of 

recommendations. 

One of those recommendations is that server copies, including 

buffer copies and other ephemeral copies that are made in very 

large numbers through the act of streaming online and digital 

webcasting be declared to be fair use. Your interpretation of the 

104 report is that those ephemeral copies, buffer copies, et cetera, 

are, in fact, fair use, but I think you suggested at the same time 

that we codify that principle just to make sure that the ultimate 

interpretation by the courts and others was consistent with your 

view. Do you still make that recommendation to us? 

Ms. PETERS. Actually, we looked at it with respect to 115 and we 

certainly said that if you are amending section 115, which is the 

compulsory license, that all of that activity should be encompassed 

within the compulsory license and in certain areas that when, in 

fact, what you have is a licensed download and that the performance is simply to accomplish that download, we didn’t see any separate economic value. One of the things that——

Mr. BOUCHER. In the ephemeral copy or the buffer——

Ms. PETERS. In the ephemeral copies. 

Mr. BOUCHER. Right. 

Ms. PETERS. Now, one of the things about our proposal is that 

we can argue long and hard about the value of those and whether 

they are implicated and we should pay for them. By putting the 

rights together, it really takes away that stress. But yes, in general, we stick with our thought that when you have a licensed activity and you have copies that are made or incidental performances—you can argue whether they’re public or not—that those 

should not necessarily be separately compensable events. 

Mr. BOUCHER. All right. Thank you very much. 

Mr. Chairman, I ask unanimous consent for an additional 

minute. 

Mr. SMITH. Without objection, the gentleman is recognized for an 

additional minute. 

Mr. BOUCHER. And Ms. Peters, I have two other questions. I am 

going to ask these in a block and you can answer in a block, if you 

would like. I would hope you would separately address each. 

You also suggested in your section 104 report that in order to 

make the purchase of legal music on the web more attractive to the 

consumer, that the right of the consumer to back up the music that 

he has lawfully acquired be recognized as a fair use. I would be 

very interested in acknowledging that in whatever statute we report from this Committee. Do you continue to make that recommendation to us, also? 

Ms. PETERS. When you have, yes, legally purchased material, we 

basically said that everybody was, in fact, doing it and we might 

as well acknowledge it. 

Mr. BOUCHER. Okay, thank you. I forgot to ask this other question at the same time. I have always thought that we should 

equate webcasting with the rights and privileges that inure within 

the record store, within the physical record store, with respect to 

the ability to sample for 20 seconds or 30 seconds the music before 

the decision is made to purchase it. 
47

And so you acknowledged also in your 104 report that these samples, it would be appropriate to equalize treatment with regard to 

these, and so I would ask you if you would recommend to us that 

we allow the web 20-second or 30-second sample to be given the 

same license-free status that presently applies to the in-store sales. 

Ms. PETERS. You are talking about section 110(7)? 

Mr. BOUCHER. That’s correct. 

Ms. PETERS. We think that certainly there’s a reasonable argument that using a snippet for the purpose of selling music, so that 

people can listen, do I want to buy it or not, is something that we 

could support. But the question is, how much is the snippet, and 

there have been talk of 30 seconds and 60 seconds. I am of he view 

that 60 seconds may be too long. 

Mr. BOUCHER. Sixty seconds may be too long? 

Ms. PETERS. Right. 

Mr. BOUCHER. Well, thank you. Those were very helpful answers, 

and again, thank you for the good job you have done with this. 

Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Boucher. 

The gentleman from Utah, Mr. Cannon, is recognized for his 

questions. 

Mr. CANNON. Thank you, Mr. Chairman. 

It’s always a pleasure to have you with us, Ms. Peters. To follow 

up on Mr. Keller’s comment, in a world where we have twins or 

triplets or quadruplets or however many people out there speaking 

this special language, you’ve always been very clear with the Committee and very helpful to me. 

Following up also on one of the things that Mr. Keller was saying, I take it from where you are headed that you believe that 

these—that your proposal is going to help legal royalty paying online kinds of services compete against piracy. Is that the case, and 

if so, how will that work? 

Ms. PETERS. I was essentially saying that if, in fact, it is easy 

to get a license and license all of the things that you need to do, 

then, in fact, I thought that that would encourage legitimate music 

services, and the more music services that we have providing product and competing with each other, that is a good thing. 

I do think that many people in the United States would prefer 

to help songwriters and would buy the legitimate version if, in fact, 

it was a viable option to the free. 

Mr. CANNON. Because of the efficiencies your system would have, 

it would—the system would be cheaper and therefore you could 

compete at a lower price, I take it, with free. 

Ms. PETERS. And the people who had these services were able to 

acquire the entire music repertoire, not just parts of it. 

Mr. CANNON. So is the point of your legislation to combine the 

system so that the mechanical side of the equation functions like 

the PROs? 

Ms. PETERS. Yes. 

Mr. CANNON. Thank you. One reason we have decided to review 

the issue of music licensing is because today, customers are not 

able to access all of the new products they want to buy in the marketplace. So it is my understanding that DVD audio disks and 

other new formats cannot break into the marketplace to meet con-
48

sumer demand. Under your proposal, would these types of formats 

automatically be able to be licensed and available to consumers? 

Ms. PETERS. If you’re talking about DVD audio, it may have an 

audio-visual component that I haven’t addressed. 

Mr. CANNON. So—— Ms. PETERS. So I only addressed the music part, so it may not. 

Mr. CANNON. So where do we go? I mean, obviously, the world 

doesn’t make the nice distinctions we have historically drawn here. 

How do we get to the next phase? 

Ms. PETERS. In our proposal, we actually looked at what the 

problems seemed to be, which was the right to get the music. If it’s 

a broader problem and it’s true some of the parties have identified 

broader problems—lyrics, video, synchronization rights—then it’s 

appropriate for the Committee to look at those things and determine what the scope of any activity, remedial activity it wants to 

make should be made. 

Mr. CANNON. Thank you again for your very clear thoughts and 

I yield back, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Cannon. 

The gentleman from Florida, Mr. Wexler, is recognized for his 

questions. 

Mr. WEXLER. Thank you, Mr. Chairman. 

I would first like to just associate myself with the remarks of Mr. 

Boucher regarding the thoughtfulness, obviously, that your plan 

was prepared. 

If I could ask you, just in terms of the theory of where you think 

you’re headed, in previous hearings, we’ve heard the predictions of 

the variety, and Mr. Keller spoke to them a bit, about the new type 

of products that would be offered, the music videos, the concert 

footage, the lyrics and so forth. Are you confident that the proposed 

changes that you have associated yourself with, that if we make 

them, that the licenses to all of these works will be at least as 

available as they are today? Can you assure us that that will be 

the case? 

Ms. PETERS. There are no assurances. 

Mr. WEXLER. In your view? 

Ms. PETERS. It’s my view that they would be, but it’s only my 

view. I don’t have a crystal ball and—I just think that people don’t 

make money unless they license works. I mean, I have never heard 

a copyright owner—well, there’s a few recluse authors, but most of 

the time, people want their works to be licensed and they want it 

licensed about the world so that they can be paid. 

Mr. WEXLER. Would you agree that the net result of the proposed 

changes are that the works are less available than they are today, 

then the changes have not been successful? 

Ms. PETERS. That would be bad. Yes, I agree. I mean, the whole 

goal is more availability, so anything less than more availability is 

not a good thing. 

Mr. WEXLER. I’m done, Mr. Chairman. Thank you very much. 

Mr. SMITH. Thank you, Mr. Wexler. 

Ms. Peters, thank you very much for your testimony. This has 

been most helpful and most informative. 

If there are no further questions, we stand adjourned. Thank 

you. 
49

[Whereupon, at 11:03 a.m., the Subcommittee was adjourned.] 

(51)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD
52

PREPARED STATEMENT OF THE HONORABLE HOWARD BERMAN, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF CALIFORNIA, AND RANKING MEMBER, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY
53
54
55

PREPARED STATEMENT OF THE HONORABLE JOHN CONYERS, JR. 

As I have stated before, I have serious reservations with proposals that limit the 

rights of content creators to negotiate a fair rate for their creativity. 

I understand that there are broad proposals to revamp the music licensing system. Many of the proposals, however, appear to impact only the songwriters, the 

lowest-paid content owners there are. This process should not be thought of by anyone as an opportunity to extract further concessions from creators who already are 

the most heavily-regulated and restricted in the music industry. 

Further, considering that all of the interested parties agree that the administration of the section 115 mechanical license should be streamlined, I believe that is 

where this Subcommittee should direct its energy. If we do that, we could pass a 

non-controversial bill very quickly. If, however, we pursue a broad approach that 

negatively impacts some groups in favor of others, it is likely that nothing will be 

accomplished except for alienating the actual creators of content. 

Finally, we must retain the ability of songwriters to negotiate a far rate for their 

musical content. While a rate court would appease some parties seeking a quick resolution to royalty disputes, private negotiations would be the most appropriate 

forum for such conversations.
56

LETTER FROM JONATHAN POTTER, EXECUTIVE DIRECTOR, DIGITAL MEDIA ASSOCIATION TO THE HONORABLELAMAR SMITH, A REPRESENTATIVE ON CONGRESS FROM

THE STATE OF TEXAS, AND CHAIRMAN, SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY
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58
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LETTER FROM STEVEN M. MARKS, RECORDING INDUSTRY ASSOCIATION OF AMERICA TO

THE HONORABLE LAMAR SMITH, A REPRESENTATIVE IN CONGRESS FROM THE STATE

OF TEXAS, AND CHAIRMAN, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY
60
61
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RESPONSE FROM THE NATIONAL MUSIC PUBLISHERS’ ASSOCIATION, INC. IN RESPONSE

TO THE TESTIMONY OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, SUBMITTED

JUNE 28, 2005

National Music Publishers Association (‘‘NMPA’’) respectfully submits its testimony in response to the legislative proposal drafted by the Copyright Office. We 

thank the Chairman, Ranking Member, and the Subcommittee for their attention 

to matters instrumental to the livelihood of songwriters and music publishers. We 

also appreciate the time and effort invested in drafting the draft legislation; however we are unable to support this proposal. 

First, we believe the Copyright Office proposal is fatally flawed and would be 

harmful to songwriters and music publishers. Second, we believe the unilicense proposal submitted by NMPA, the American Society of Composers, Authors, and Publishers (‘‘ASCAP’’), Broadcast Music, Inc. (‘‘BMI’’), Nashville Songwriters Association 
63

International, and the Songwriters Guild of America is a superior proposal and 

would better address the needs of the marketplace while protecting the owners of 

copyrights. And third, we strongly believe if Congress chooses to change the laws 

regarding music licensing, it should embrace a free market approach rather than 

the more intrusive government role proposed by the Copyright Office 

Initially, we believe the Copyright Office proposal would impose more government 

control over the music industry and would not result in a free marketplace system. 

At the Courts, the Internet, and Intellectual Property Subcommittee hearing on 

June 21, 2005, the Register of Copyrights, stated in her written testimony, ‘‘I believe 

that the preferable solution is to phase out the compulsory license to allow for truly 

free market negotiations.’’ The Copyright Office proposal would indeed eliminate 

Section 115 of the Copyright Act; however, the Copyright Office proposal does not 

allow for free market negotiations. Instead, the Copyright Office proposal forces new 

Music Rights Organizations (‘‘MROs’’) to be subjected to rate courts, unlike record 

labels, which have no rate setting mechanism and are allowed to operate in a free 

market. A true marketplace system would allow all parties to negotiate on the same 

level without any ‘‘backstop.’’ By mandating that Performing Rights Organizations 

(‘‘PROs’’) become MROs and tasking these new MROs with administering both performance and mechanical rights, the Copyright Office proposal may subject mechanical rights to the same rate courts outlined in consent decrees, which govern some 

PROs. The Copyright Office proposal does not clearly address whether the rate 

courts that currently apply to some performing rights rate negotiations would apply 

to mechanical rate negotiations. More than likely, mechanical rate negotiations 

would be subjected to these same rate courts, resulting in more government control 

over negotiations rather than less. Merging mechanical and performance rights into 

one rate proceeding will reduce the small amount of bargaining power that the songwriters have. Record companies currently do not have a rate court imposed on them, 

so they are free to negotiate as they please without regulation. This proposal does 

nothing to level the playing field. 

Additionally, the Copyright Office proposal would put the Harry Fox Agency 

(‘‘HFA’’), the primary mechanical licensing agency, at a severe competitive disadvantage since it would take away a substantial section of its business, administering 

mechanical royalties in the digital world, and forcibly give it to PROs by statute. 

For HFA to compete, it would have to convince writers and publishers to grant expressly both mechanical and performance rights to HFA and then build a performance right infrastructure, which would take a considerable and potentially prohibitive amount of effort and expense. The most likely result of the Copyright Office 

proposal is that HFA will be left with only licensing mechanical rights in the physical world, threatening its viability all together. 

The Copyright Office proposal would have major financial repercussions on the industry as well. The PROs would be forced to build a mechanical rights licensing, 

collection and distribution infrastructure, which would involve a large capital cost 

and additional operational overhead, thereby reducing royalty payments to writers 

and publishers. Likewise, as stated earlier, for HFA to continue to function, it would 

have to build a performance rights infrastructure which would be almost impossible. 

There are many other complications, such as splits that can differ between performance and mechanical royalties. The proposal also devalues mechanical rights by 

combining them with performance rights, thereby reducing royalty payments to 

writers and publishers. 

The Copyright Office proposal would create more confusion than the current system. It was the Copyright Office’s intent to create one (or three) stop shopping for 

the digital media companies who sell the property of songwriters and artists. However, it is entirely conceivable that several MROs could emerge and complicate 

things even more. The publishers, especially large multinational publishers, may decide it is more economical to create their own MROs and license directly. 

We are also concerned that the Copyright Office proposal does not address the 

transition from the current system to this new MRO system. When asked about the 

transition at the subcommittee hearing on June 21, 2005, the Register confessed 

that the Copyright Office proposal does not provide for such a transition. 

Second, we believe our unilicense proposal is a superior solution to the Copyright 

Office proposal that would balance the needs of the marketplace with the interests 

of copyright owners. The goal sought by the Copyright Office—to have one place to 

obtain the performance and mechanical rights needed for a single price - is achieved 

in the unilicense proposal. 

The unilicense addresses the areas of most critical need raised by digital media 

providers—access. The unilicense would create a Super Agency. Digital companies 

would go to the Super Agency and obtain a blanket license covering both performing 

and mechanical rights and pay a percentage of their revenue. The digital companies 
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would then have a license for all recorded songs, and it would be the responsibility 

of the mechanical designated agent and performance designated agents to administer the royalties and distribute them to the appropriate writers/publishers. 

Finally, we believe any Congressional action regarding music licensing should 

move toward a free market. 

NMPA supports eliminating Section 115 of the Copyright Act and truly allowing 

the marketplace to govern the music industry. We support eliminating controlled 

compositions, which is not addressed in the Copyright Office proposal even though 

there has been receptivity to this in some congressional quarters. We support ending 96 years of compulsory licensing of songwriter effort. We support ending the 

government choosing the rates at which songwriters are compensated. We support 

keeping the government out of dictating the amounts songwriters and publishers 

are paid. If Congress acts, we respectfully request it act consistently with free market principles. 

Again, we appreciate the opportunity to respond to the Copyright Office draft legislation and testimony. We will continue to meet with other parties in the industry 

and are hopeful that the marketplace can address many of these concerns without 

government intervention.
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STATEMENT OF MAJOR SONGWRITING ORGANIZATIONS, THE SONGWRITERS GUILD OF

AMERICA AND THE NASHVILLE SONGWRITERS ASSOCIATION INTERNATIONAL IN RESPONSE TO THE TESTIMONY OF THE HONORABLE MARYBETH PETERS, REGISTER OF

COPYRIGHTS
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PREPARED STATEMENT OF THE LOCAL RADIO INTERNET COALITION IN RESPONSE TO

THE TESTIMONY OF THE HONORABLE MARYBETH PETERS, REGISTER OF COPYRIGHTS
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STATEMENT OF THE RECORDING ARTISTS’ COALITION IN RESPONSE TO THE TESTIMONY

OF THE HONORABLE MARYBETH PETERS, REGISTER OF COPYRIGHTS, SUBMITTED

JUNE 28, 2005

Mr. Chairman, Mr. Berman, and distinguished Members of the Subcommittee, 

Thank you for the opportunity to present our views to the Subcommittee on the 

proposed 21st Century Music Licensing Reform Act, and the Statement of Marybeth 

Peters, Register of Copyrights, before this Subcommittee on June 21, 2005. 

The Recording Artist Coalition is a non-profit recording artist advocacy group 

comprised of numerous well-known featured recording artists, including Don Henley, Sheryl Crow, Jimmy Buffet, Natalie Maines, Billy Joel, Stevie Nicks, Bonnie 

Raitt and Bruce Springsteen. 

In her testimony, Register Peters identified numerous problems relating to music 

licensing on the Internet. A number of her suggestions have merit and should be 

considered. However, her proposal to abolish the Section 115 compulsory license for 

all ‘‘physical’’ delivery of mechanical reproductions of sound recordings 

(‘‘phonorecords’’) is not desirable. RAC favors some reform of the licensing system 

for ‘‘digital’’ delivery of phonorecords, but strongly urges caution when applying this 

solution to ‘‘physical’’ phonorecords. 

Contrary to the assertions made by the Register, the Section 115 compulsory license for ‘‘physical’’ product remains vital to the business model used by the vast 

majority of the recording industry. Repeal of the compulsory license will most assuredly bring greater uncertainty, unintended consequences, increased transactional 

costs and, most likely, a decrease in royalties for most songwriters. 

The Register states in her testimony that ‘‘. . .the use of the Section 115 compulsory license has steadily declined to an almost non-existent level. It primarily serves 

today as merely a ceiling for the royalty rate in privately negotiated licenses.’’

In our estimation, when applied to the sale of physical phonorecords, the compulsory license does much more than that. Recording artists, record labels, songwriters, 

and publishers have embraced the compulsory license system as a ‘‘backdrop.’’ For 

example, while it is true few record labels or recording artists seek a Copyright Office compulsory license, the copyright owners and prospective licensees understand 

that, if direct negotiations fail, a license may be secured from the Copyright Office. 

This is why the rate offered by the Harry Fox Agency is almost invariably set at 

‘‘a full statutory rate,’’ and controlled composition clauses of the vast majority of recording artist/songwriter contracts provide for a ‘‘full statutory rate,’’ ‘‘seventy-five 

percent statutory rate,’’ or something in between. The industry has accepted the 

compulsory license rate, which increases every few years, and other terms of the 

compulsory license as a benchmark. 

The compulsory license was originally intended to prevent or stifle monopolistic 

practices. Abolishing the compulsory license for physical phonorecords, however, will 

adversely affect many parties and will create the exact monopolistic, anti-competitive tendencies in the music industry the compulsory license was created to prevent. 

In a totally unregulated free market, the major labels could pay highly coveted 

songwriters advances and/or a rate well above the present statutory rate. Mid-level 

or new songwriters (the vast majority of the songwriter community) will most likely 

have to settle for a fraction of the compulsory rate. They will be unable to compete 

with established songwriters. Those surviving will earn less, and those unable to 

survive may stop writing. Major labels may even seek exclusive licenses over highly 

coveted songs, thus preventing their competition from recording a ‘‘cover version’’ of 

the same song - a practice impossible to impose under the present system. 

Major record labels will also have a distinct advantage over independent and 

start-up record labels. They will be able to exert unprecedented control over the top 

songwriters and songs. They could offer songwriters advances and other benefits on 

particular songs - a practice which independent and start-up labels could not afford. 

Independents and start-ups would be cut off from the best songwriters and songs. 

Repeal of the compulsory license would also adversely affect the recording process. 

Without the certainty of the compulsory license, recording artists would opt for recording more of their own songs because they would not know how the inclusion of 

a third party ‘‘cover song’’ would affect their controlled composition rate. This would 

certainly result in fewer recordings of ‘‘cover songs.’’ For recording artists dependent 

on third party songs, the situation will be even more dire. The cost associated with 

‘‘cover songs’’ will most likely skyrocket. 

Furthermore, since almost every recording contract references the compulsory license to the controlled composition clause, the repeal of the compulsory license will 

result in contractual chaos, even if the repeal was prospective only. Most recording 

artists enter into long term recording agreements. 
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Repeal of the compulsory license will also increase transactional costs. Record labels, recording artists, managers, publishers, and songwriters will all have to devote 

more time and incur greater cost to clear the songs for release. Music licensing reform was not supposed to result in increased transactional costs. 

Register Peters suggests that collective licensing, perhaps based on a European 

model, would work better. We believe there is merit in considering a system keying 

the rate to a percentage of the wholesale or retail price of the product. However, 

beyond that change, there is little the European system offers. RAC is not opposed 

to consideration of a collective licensing system so long as the rate is uniform, it 

applies to all equally, and there is no opportunity to reject the request for a license. 

Only under these conditions will the process benefit all. 

The European licensing system, however, does have one provision that should be 

adopted immediately. In Europe, and most of the world, performers receive a royalty 

for analog-based, public performances (i.e., radio). Performing artists enjoy such a 

right for digital transmissions in the United States, but not for analog use. Equity 

and comity demand an extension of that right in the United States to cover analog 

performances. 

Regarding the proposed changes to the digital delivery of music, RAC is in favor 

of the principle of streamlining the licensing procedure and much of what Register 

Peters suggests is worthy of consideration and debate. However, the proposal to create multiple, unlimited music rights organizations (MRO) should be reconsidered. 

Creation of a new collection agency receiving notices and paying songwriters directly 

would be preferable. 

As previously mentioned by Register Peters, the compulsory license system is 

rarely used in its present form. We believe that is because the accounting and payment system is monthly instead of quarterly, and mechanicals must be paid on all 

phonorecords manufactured and distributed, not merely sold. These are two of the 

most important differences between the Harry Fox Agency licensing system and the 

compulsory license system offered by the Copyright Office. If the compulsory license 

provision were amended to include quarterly payments and an allowance for ‘‘free 

goods,’’ most likely the Copyright Office system would become very appealing. 

We thank you again for this opportunity to provide the Subcommittee with our 

comments.
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STATEMENT OF THE TELEVISION MUSIC LICENSE COMMITTEE AND THE RADIO MUSIC

LICENSE COMMITTEE IN RESPONSE TO THE TESTIMONY OF THE HONORABLE

MARYBETH PETERS, REGISTER OF COPYRIGHTS
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LETTER TO THE HONORABLE LAMAR SMITH, A REPRESENTATIVE IN CONGRESS FROM

THE STATE OF TEXAS, AND CHAIRMAN, SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY AND TO THE HONORABLE HOWARD BERMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA, AND RANKING MEMBER, SUBCOMMITTEE ON COURTS, THE INTERNET, AND INTELLECTUAL PROPERTY

FROM DEL R. BRYANT, BROADCAST MUSIC INC.
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PREPARED STATEMENT OF SESAC, INC. 

SESAC appreciates the opportunity to present this statement in light of the written and oral testimony presented by MaryBeth Peters, the Register of Copyrights, 

at the June 21, 2005 hearing in connection with the proposed revision of Section 

115 of the Copyright Act and the draft of her proposed ‘‘21st Century Music Licensing Reform Act’’ and related comments. SESAC also appreciates the efforts of the 

Register of Copyrights to update the statutory framework for the licensing of nondramatic musical works. 

The Register’s proposal would transform the performing rights organizations 

(‘‘PROs’’) into, and perhaps have other entities become, Musical Rights Organizations (‘‘MROs’’). Of the four entities that presently license musical rights on a collective basis - SESAC, ASCAP, BMI, and the Harry Fox Agency (‘‘HFA’’), only SESAC 

has any experience in licensing both performance and mechanical rights, as the proposed MROs would be authorized to do. Although SESAC historically has engaged 

in a limited amount of mechanical licensing as an accommodation to some of its affiliates, SESAC has not decided at this time whether it wants to engage more extensively in that marketplace. Given its on-going struggle to compete effectively in the 

highly competitive performing rights marketplace against two dominant competitors 

(one of which, ASCAP, contrary to its recent testimony, has raised ever greater hurdles for songwriters wishing to leave and, in any event, requires their compositions 

to stay in the ASCAP repertory), SESAC is opposed to being required by legislation 

to undertake a substantial new business function that it might choose to forgo. 

Unlike ASCAP and BMI, SESAC is not subject to Department of Justice Consent 

Decrees or their specific remedial restrictions, such as rate court proceedings. Those 

provisions are not free marketplace mechanisms but, rather, are punitive and remedial requirements placed upon ASCAP and BMI. In any proposed legislative reworking of the musical rights licensing marketplace, including the Register’s proposal 

concerning MROs, SESAC strongly believes that the corrective measures imposed 

upon ASCAP and BMI by the Department of Justice should not be foisted by legislative fiat upon other MROs whose marketplace behavior does not otherwise require 

Department of Justice sanctions. 

Although SESAC generally finds the Register’s proposal concerning the creation 

of MROs interesting and worthy of further discussion, SESAC has the following 

comments and concerns regarding the Register’s testimony and the specific provisions of her draft legislation and accompanying commentary:

A. The Testimony

1. SESAC agrees with the Register’s position (a) that the free marketplace 

and private negotiations should be permitted to dictate the economics of 

music licensing (at least for those entities who do not exercise undue 

market power in an anticompetitive way), (b) that ever more efficiency 

and effectiveness should be brought to the process of music licensing (but 

not as an excuse for de facto devaluation of copyright owners’ property 

rights), and (c) that the present collective licensing system utilized by 

the PROs is working (subject to continued Department of Justice antitrust oversight of ASCAP and BMI).

2. The Register, however, appears to further indicate that, if Section 115 

were expanded to encompass a blanket license, she ‘‘would not be disappointed to see’’ rates for such a license ‘‘established by a mechanism 

similar to that which is employed with the other statutory licenses.’’ To 

the extent that the Register appears to be endorsing Copyright Office arbitration proceedings for fee disputes between music users and MROs 

concerning Section 115 blanket licenses, such statutorily imposed third 

party arbitration would be contrary to, and effectively would trump, free 

market negotiations. SESAC is opposed to being subjected to such a punitive mechanism for its performance and mechanical licensing as an 

MRO. Although such statutory Copyright Office arbitration proceedings 

are mandated for fee-setting under certain compulsory statutory licenses 

(as for cable and satellite retransmissions under Sections 111 and 119, 

respectively), statutorily mandated arbitration has never been the rule 

in musical performing rights licensing; it would be an expansion, not a 

reduction, of regulatory oversight in place of a free market negotiations, 

(particularly as to SESAC, which represents only approximately five percent of the performance rights marketplace). 

By the same token, to the extent that any other form of ‘‘rate court’’ or 

other third-party fee-setting oversight is contemplated, SESAC is strongly 

opposed. Rate court proceedings are a Consent Decree remedy imposed by 
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the Department of Justice upon ASCAP and BMI, and SESAC or any other 

potential MRO should not be statutorily and automatically hobbled with 

such mechanisms. Any rate court, arbitration, or other third-party oversight 

of fee-setting imposed upon SESAC, or upon any other MRO representing 

a small proportion of copyrights, would be ‘‘free market’’ in name only; in 

fact, it would be the antithesis of a free marketplace and a ‘‘fix’’ for a ‘‘problem’’ that has not been found to exist.

3. SESAC does not accept the proposition that there is any ‘‘double-dipping’’ in the licensing of musical rights for digital transmissions. SESAC 

takes the position that all such transmissions implicate the public performance right, regardless of what other rights might be implicated. See

U.S.C. § 101.(‘‘To perform . . . a work ‘publicly’ means . . . to transmit 

or otherwise communicate a performance . . . of a work . . . to the public, by means of any device or process, whether the members of the public capable of receiving the performance . . . receive it in the same place 

or in separate places and at the same time or at different times.’’). 

Moreover, although SESAC is generally in favor of legislative efforts to seek 

greater efficiencies in the present system of music licensing, it does not 

agree that the existence of PROs to license public performance rights, on 

the one hand, and the licensing by others of the mechanical rights, on the 

other hand, necessarily constitutes ‘‘an impediment that should be removed 

because it does not serve the interests’’ of music owners and users. SESAC 

does not believe that the performing rights side of music licensing, as opposed to mechanical licensing, as it presently functions needs to be legislatively ‘‘fixed’’ in any way. The mechanism to encourage a mechanical rights 

organization (be it the HFA or some other entity) to embrace more efficient 

licensing practices can be achieved by eliminating the compulsory license 

and statutory rate under the present Section 115 and permitting that entity 

to operate freely in the marketplace, perhaps by issuing blanket licenses.

4. SESAC is particularly troubled by the Register’s suggestion that ‘‘there 

is no reason why an MRO could not issue a license subject to subsequent 

agreement on what the rate would be, perhaps with some dispute resolution provision.’’ Beyond SESAC’s concerns about having ‘‘dispute resolution’’ mechanisms imposed upon itself or any other entity representing 

a small proportion of copyrights, this suggestion of ‘‘automatic’’ licensing 

subject to later fee-setting again is based upon provisions of the ASCAP 

and BMI Consent Decrees, to which SESAC has never been subject because its business practices would not warrant such a requirement. The 

imposition of this provision upon SESAC or any other small MRO would 

be ‘‘free market’’ in name only. By the same token, SESAC would not 

expect any record company or digital music provider, not otherwise subject to Department of Justice Consent Decrees, to accept the ‘‘automatic’’

sale of CDs or instant provision of on-line music services upon consumer 

request, with the prices of such transactions to be set sometime in the 

future.

As SESAC has stated in previous testimony before this Subcommittee, such a provision would be injurious to SESAC’s business. Taken to its logical extreme, a music 

user could obtain an ‘‘automatic’’ license and dispute even the most reasonable fee, 

thus avoiding payment indefinitely while ‘‘negotiating,’’ while already having obtained the benefit of the bargain. In that event, SESAC’s only practical recourse 

would appear to be (a) avoiding the expense of further negotiation or litigation by 

essentially permitting a ‘‘free’’ license, or (b) submitting to a fee dictated by some 

third party after having already been compelled to permit the use of its affiliates’

intellectual property. Such ‘‘automatic’’ licensing might be an effective tool under 

the ASCAP and BMI Consent Decrees, but it should not be imposed across-theboard upon SESAC or any other MROs under the banner of efficiency.

B. Draft Legislation and Comments

1. In the Register’s comments to her draft legislation (the ‘‘Bill’’) concerning 

the proposed revision of Section 101 discussing the definition of an MRO, 

she indicates that SESAC, ASCAP and BMI, and perhaps the HFA, 

would transform into MROs. Although the Register indicates that other 

entities might also become MROs (or, presumably, simply opt out and 

conduct their own music licensing), in her oral testimony she has further 

indicated that she does not find a proliferation of MROs likely under her 

proposal. To the extent, however, that the perceived impediment of prohibitory start up costs is less substantial than suggested, the Bill cer-
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tainly provides for the possibility of a large number of MROs each representing a relatively small proportion of copyrights, an outcome that 

might be viewed as no more efficient - and perhaps less efficient - than 

the present system, at least from the perspective of music users.

2. Proposed Section 115(a)(2) would require that a license from an MRO to 

publicly perform a musical work by means of a digital audio transmission also include a non-exclusive mechanical license in the work, ‘‘to 

the extent that the exercise of such rights facilitates the public performance of the musical work.’’ SESAC would propose that, in order to narrow the ambit of this provision to its purported purpose, the language 

be changed to read ‘‘to the extent that the exercise of such rights is necessary to facilitate the public performance of the musical work.’’ (Emphasis added.)

3. Proposed Section 115(a)(4) would provide that, in order for an MRO to 

recover statutory damages for copyright infringement of a musical work, 

that work must have been included on a publicly available list ‘‘at the 

time the infringement commenced.’’ Because, under the current Copyright Act, an infringer of a single work can only be liable for a single 

award of statutory damages no matter how many separate acts of infringement, over a period of time, are involved in the action, see U.S.C. 

§ 504(c)(1), this proposed language could permit a scenario under which 

the work is included on the list at some point after the infringement 

‘‘commenced’’ but long before it concluded, in which event the later unauthorized uses might nevertheless be immune from liability because the 

infringement began before the listing. (For example, a radio station’s repeated unauthorized performance of a given popular song could be legally considered only one infringement for purposes of statutory damages.) 

SESAC would propose that the language be changed to clearly indicate 

that, once the work is listed, any later acts of unauthorized use would be 

subject to infringement liability, regardless of whether the infringement of 

that work legally ‘‘commenced’’ before the listing. Again, the Register’s ‘‘safe 

harbor’’ proposal is rooted in the provisions of the ASCAP and BMI Consent 

Decrees imposed by the Department of Justice, and is a provision that has 

never been judicially or statutorily imposed upon SESAC, nor would 

SESAC’s market power or behavior warrant such a sanction. SESAC’s proposed change to the language more closely comports with the general principle of copyright law that it behooves the copyright user to obtain authorization before exploiting the owner’s intellectual property, and that it is not 

the copyright owner’s duty, in the first instance, to seek out potential users 

to notify them of copyright requirements. In this regard, SESAC believes 

that the citation to Section 412, concerning the requirement of copyright 

registration as a prerequisite to statutory damages, is inapposite.

4. The comments to proposed Section 115(a)(5) recognize that ASCAP and 

BMI are presently subject to Department of Justice Consent Decrees, 

which may prohibit their licensing of both performance and mechanical 

rights, and state that the proposed statutory language would abrogate 

those restrictions without abrogating the other provisions of the ASCAP 

and BMI Consent Decrees, such as the rate court provisions. SESAC is 

concerned, however, that the language of proposed Section 115(a)(5) is 

ambiguous and could easily be read to suggest that, once ASCAP and 

BMI become MROs, they are no longer subject to ‘‘the antitrust laws or 

any judicial order’’ presently restricting their activities in public performance licensing. SESAC proposes that this language be changed to 

simply and clearly state that ASCAP and BMI would no longer be prohibited from mechanical licensing by virtue of the antitrust laws or any 

judicial order then in effect. The language of the comment itself could 

be the source of revised statutory language. Additionally, as the Register 

of Copyrights anticipates in her comments to this proposed subsection, 

SESAC believes that, if the provision in the ASCAP Consent Decree 

which prohibits it from mechanical licensing were abrogated, all of the 

other provisions of that Consent Decree (and of the BMI Consent Decree) 

should remain in place. On the issue of whether the Consent Decrees 

should be modified to cover ASCAP’s and BMI’s new mechanical licensing activities as MROs, SESAC presumes that a careful review by the 

Department of Justice would be in order.
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As a general matter, the creation of MROs presents substantial logistical issues 

that would have to be addressed. For example, any MRO other than a music publisher would be required to negotiate and execute a massive number of new agreements with their affiliated copyright owners (hundreds of thousands, in the case of 

ASCAP, BMI, and HFA), which could result in a total realignment of the music licensing system which, at least from the perspective of performing rights, does not 

appear to be malfunctioning. In reality, ASCAP, BMI, and the HFA are not knowledgeable or experienced in licensing rights that they currently do not represent. The 

concern is that, by entrusting such valuable rights to unproven, inexperienced, and 

ill-prepared organizations could create a less efficient marketplace that would lower 

the value of music licensing fees. 

Additionally, each of the present PROs has reciprocal agreements with numerous 

foreign performing rights organizations under which the foreign entities monitor 

and collect and remit payment for foreign performances of U.S. works, while the 

U.S. entities likewise monitor and collect and remit payment for domestic performances of foreign works. The creation of MROs that also license mechanical rights 

would necessarily require significant contract revision among the many parties to 

address whether , and how, those mechanical rights would be administered reciprocally for both U.S. and non-U.S. works. Moreover, as acknowledged in the commentary to the Bill, in the case of a so-called ‘‘split copyrights’’ co-written by songwriters who are not affiliated with the same MRO, true ‘‘one stop’’ licensing for that 

musical work simply would not be possible because more than one MRO would be 

licensing the right to use that work. 

SESAC would note that it has presented an alternative proposal to amend Section 

115 - to the extent any amendment is necessary - that also would eliminate the compulsory license in favor of a so-called ‘‘unilicense’’ under an enhanced collective licensing system, as suggested by the Register. Although SESAC’s proposal is in line 

with a similar unilicense proposal submitted jointly by ASCAP, BMI, and the HFA, 

SESAC cannot agree to their further proposal that such a unilicense be administered by a SoundExchange-like ‘‘superagency’’ in which SESAC would be 

inexplicably excluded from having an equal voice in its administration. If, as suggested by those entities, such a superagency would be merely a ‘‘lockbox’’ mechanism for collecting and disbursing licensing fees, then they should have no objection 

to SESAC’s equal participation. If, on the other hand, such a superagency would, 

in the guise of merely clerical decisions, be making substantive determinations concerning the rights involved, (such as determining what constitutes a ‘‘pure’’ download or stream, setting or adjusting the price and terms of licenses, setting the 

reporting requirements of licensees, determining what proportion of a unilicense fee 

is attributable to performance rights, determining what proportion of performance 

fees are attributable to SESAC, the terms and conditions of licenses, and the 

amount of overhead charges and administrative fees), then SESAC should have, and 

in fact deserves, equal participation in the administration for at least two reasons. 

First, it is a simply illogical and unfair that, of the four principal entities that 

collectively license rights in musical works, only one of them - SESAC - would be 

excluded. Second, SESAC’s presence, more than that of any of the other entities - 

would provide the expertise and efficiency to see that such a superagency run efficiently and effectively. In this regard, SESAC alone has experience in the licensing 

of both performance and mechanical rights. Moreover, unlike the other three, 

SESAC, as a for-profit entity is required to constantly create and employ marketplace efficiencies to operate successfully. For example, as the only for-profit entity 

among the four, SESAC assuredly has a keener regard for minimizing overhead in 

the operation of such a superagency. In this light, SESAC has at least an equally 

valid claim to full and equal participation in such a superagency. 

In particular, the arrogance of ASCAP and BMI in proposing that SESAC be ‘‘specifically excluded’’ from administration of such a superagency, and their proposal 

that they alone control the purse strings for license fees attributable to (their smaller competitor) SESAC, are striking but not unexpected. Just as ASCAP and BMI 

dominate the performing rights industry, they now propose without hesitation that 

they alone control the functioning of this superagency’s musical rights licensing - 

a dominance that they would exercise throughout the entire musical rights licensing 

industry. Clearly, although these entities’ anticompetitive tendencies have been circumscribed, they have not been fully cured by the intervention of the Department 

of Justice. Expanding the field to include mechanical licensing would not be in the 

best interests of competition or of the economic development of a free marketplace 

for musical rights in new and developing media. 

In the end, it is no more fair or logical to prohibit SESAC’s equal participation 

in a superagency than to propose, for example, that ASCAP be excluded, given its 

anticompetitive nature and lack of experience in mechanical licensing. It is no more 
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fair or logical to propose, alternatively, that ASCAP and BMI share or alternate one 

‘‘seat at the table’’ designated to represent the dominant not-for-profit PROs, given 

the fact that they both lack mechanical licensing experience and both are in agreement concerning the superagency’s functioning, as evidenced by their joint proposal. 

In fact, it would be no less fair or logical to propose that SESAC - the only PRO 

that is not under Department of Justice oversight and the only PRO with mechanical licensing experience - be the entity designated to represent all PROs in this 

superagency. 

Despite all of these possible scenarios which would be at least as fair and logical 

as the ASCAP/BMI/HFA proposed domination of a superagency, SESAC has merely 

proposed that either the Copyright Office administer such a unilicense for digital 

audio transmissions, along the lines of its administration of cable, satellite and 

DART compulsory licenses or, alternatively, that SESAC - for reasons of fairness 

and expertise - have at least an equal voice in the administration of any proposed 

superagency to administer such a unilicense 

In conclusion, any legislative reworking of the music licensing system, through 

the creation of MROs, a unilicense, a superagency, or some other means, should recognize SESAC’s unique and beneficial role in this marketplace; it cannot support 

any proposal that it determines would lead (in the course of correcting problems created by others) to the imposition of punitive, remedial, or exclusionary constraints 

upon it. SESAC stands ready to work with all interested parties in exploring any 

legislative initiative to improve the efficiency and effectiveness of music licensing, 

so long as the interests of fairness to all parties are preserved.
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COMMENTS OF THE AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND 

PUBLISHERS 

SUMMARY 

ASCAP submits these comments in response to the testimony of the Register of 

Copyrights and accompanying draft legislation submitted to the Subcommittee on 

June 21, 2005. ASCAP applauds the efforts of the Subcommittee, the Chairman and 

Ranking Member, in addressing issues vital to the well-being of songwriters and 

music publishers. ASCAP also applauds the goals of the Copyright Office’s effort, 

as stated by the Register in her testimony. Unfortunately, the legislative proposal 

offered by the Copyright Office with the best of intentions does not further these 

laudable goals. The Copyright Office proposal, well-intentioned though it is, is fatally flawed throughout and will likely harm, rather than help, songwriters and 

music publishers. Our unilicense proposal, however, achieves the same goals as the 

Copyright Office proposal, without any of the attendant dislocations and concerns. 

COMMENTS 

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

these comments in response to the testimony of the Register of Copyrights and accompanying draft legislation submitted to the Subcommittee on June 21, 2005. As 

the Subcommittee is familiar with ASCAP, we simply attach a brief description of 

the Society and its operations for the record. 

ASCAP applauds the efforts of the Subcommittee, the Chairman and Ranking 

Member, in addressing issues vital to the well-being of songwriters and music publishers.

ASCAP applauds the goals of the Copyright Office’s effort, as stated by the Register 

in her testimony. The Register made several points in her testimony that bear repeating, and which we fully endorse:

1) The Register advocated a solution to the pending issues ‘‘that comports with 

the Copyright Office’s longstanding policy preference against statutory licensing for copyrighted works and our preference that licensing be determined in the marketplace where copyright owners exercise their exclusive 

rights.’’ (Written test., 6.) We agree.

2) The Register said that the time had come to phase out the mechanical compulsory license and allow for truly free market negotiations. We agree.

3) The Register said that Section 115 should be modernized to deal with licensing of copyrighted works in the digital age. We agree.

4) The Register advocated collective administration as a means of achieving 

that end. We agree.

5) The Register recognized that separate rights in copyrighted musical compositions - the mechanical right and the performing right - were involved in 

digital uses, and that payment to creators and copyright owners for both 

rights was proper and was not ‘‘double dipping.’’ We agree.

6) The Register advocated enabling a single licensing regime which would encompass both rights, and thus benefit users administratively. We agree.

7) The Register noted that facilitating legal uses, for which creators and copyright owners were paid, was necessary to combat piracy. We agree.

8) The Register noted that our model of licensing the performing right ‘‘works 

very well.’’ (Written test., 14.) We, of course, agree.

9) Most importantly, the Register said that, ‘‘As always, my focus is primarily 

on the author. The author should be fairly compensated for all non-privileged 

uses of his work. Intermediaries who assist the author in licensing the use 

of the work serve a useful function. But in determining public policy and legislative change, it is the author - and not the middlemen - whose interests 

should be protected.’’ (Written test., 15.) As a membership association owned 

and run by and for composers, authors and music publishers - in which the 

interests of songwriters and music publishers coincide fully - we agree.

Unfortunately, the legislative proposal offered by the Copyright Office with the best 

of intentions does not further these laudable goals. Here are some reasons why: 

The Copyright Office’s proposal to unify mechanical and performing rights licensing in Music Licensing Organizations (MROs) would defeat the very purpose it ostensibly seeks to achieve. 
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First, instead of the ‘‘one-stop shop’’ advocated by the Register, the proposal would 

result in a proliferation of MROs. Instead of dealing with one, or even three, licensing organizations, digital users would have to deal with far more than they now do. 

Second, the proposal would severely harm, rather than help, authors. The efficiency of collective licensing through the existing performing rights organizations 

(ASCAP, BMI and SESAC), which was so lauded by the Register, would be destroyed, as members or affiliates of the organizations could well withdraw (by resignation) from the organizations and put their rights into smaller MROs, fragmenting the market and exacerbating the unequal bargaining power the PROs now 

face in dealing with huge user entities. The result could be the destruction of the 

PROs’ efficiency. And those fragmented MROs might not be run by and for songwriters in partnership with their music publishers, as ASCAP is. 

Third, ASCAP and BMI, transformed into MROs, would still be subject to the 

strictures of the consent decrees which, for example, make their rates subject to 

court determination. While we have lived comfortably under the consent decree in 

the licensing of performing rights for over fifty years, the Copyright Office proposal 

is unfair for several reasons: It would impose court rate determination on mechanical rights, where it has never been before. It flies in the face of the stated goal of 

freeing mechanical rights from compulsory licensing and allowing the free marketplace to work, and would reduce the bargaining power that songwriters and their 

publishers have. And, if MROs other than ASCAP and BMI arise (which we believe 

is a virtual certainty), there would be an unequal playing field - they would not be 

subject to any rate determination mechanism, while our writer and publisher members and BMI’s affiliates would be for both performing and mechanical rights. That 

is patently unfair. 

Fourth, ASCAP and BMI do not have any administrative structure in place to 

deal with mechanical rights. The proposal thus would penalize songwriters and publishers, who would have to pay the costs of creating and administering such a structure. 

Fifth, our experience has shown that when the rights of reproduction, distribution 

and performance are combined on a compulsory basis - which would be the case 

with the Copyright Office’s proposal - the license fees received by songwriters, composers and their publishers go down, and not just because administrative cost savings (if any) are passed along to users. Such was the result when, fifty years ago, 

the synchronization and performing rights were compulsorily ‘‘merged’’ for theatrical 

exhibitions of motion pictures in the United States - our writers and publishers receive far less than do their colleagues in other countries where those rights are not 

compulsorily merged. 

Sixth, there are many concerns regarding both digital and physical goods mechanical licensing. ASCAP does not license and has never licensed these rights - indeed, 

our consent decree forbids us from doing so - and hence defers to the expertise of 

the National Music Publishers Association and the Harry Fox Agency on these matters. 

In sum, the Copyright Office proposal, well-intentioned though it is, is fatally 

flawed throughout.

Our unilicense proposal, however, achieves the same goals as the Copyright Office 

proposal, without any of the attendant dislocations and concerns.

Our unilicense proposal works because: 1) it provides digital users with a true 

‘‘one-stop shop’’ where they can get all the rights in musical compositions that they 

need; 2) it keeps existing licensing structures, thus eliminating any additional administrative expenses of any significance, while reaping the benefits of many decades of licensing experience and expertise; 3) it prevents the utter chaos in the 

music industry that would result from the Copyright Office proposal; and 4) it does 

not impose any compulsory licensing regime, and allows the marketplace to function 

without governmental interference. 

We greatly appreciate the leadership shown by the Chairman and Ranking Member in dealing with this issue, and also commend the Register for the laudable goals 

she set forth in her testimony. We pledge our full efforts to achieve a workable solution which is beneficial for songwriters, for the music publishers who invest in and 

facilitate their creativity for the benefit of the public, and for the users of music as 

well. 

ABOUT ASCAP 

The American Society of Composers, Authors and Publishers is the United States’

oldest and largest performing rights licensing organization. ASCAP was founded in 

1914 by songwriters including Victor Herbert and John Phillip Sousa, for the pur-
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pose of licensing the right of nondramatic public performance in the copyrighted musical works they created. 

ASCAP is the only true American performing rights society - it is an unincorporated membership association, whose members (now numbering over 210,000 active writers and publishers) are exclusively composers, lyricists and music publishers. ASCAP is run by a 24-person Board of Directors consisting of 12 writers and 

12 publishers; the writer Directors are elected by the writer members of ASCAP and 

the publisher Directors by the publisher members. The current Chairman of the 

Board is the noted, multiple award-winning lyricist Marilyn Bergman. 

The ASCAP repertory consists of millions upon millions of musical works in all 

genres and types - pop, rock, alternative, country, R&B, rap, hip-hop, Latin, film 

and television music, folk, roots, blues, jazz, reggae, gospel, contemporary Christian, 

new age, theater, cabaret, dance, electronic, symphonic, chamber, choral, band, concert, educational and children’s music - the entire musical spectrum. 

ASCAP is home to the greatest names in American music, past and present, as 

well as thousands of writers in the early stages of their careers. ASCAP members 

include Cole Porter, Aaron Copland, Stevie Wonder, Bruce Springsteen, Leonard 

Bernstein, Madonna, Wynton Marsalis, Stephen Sondheim, Dr. Dre, Mary J. Blige, 

Duke Ellington, Rogers and Hammerstein, Garth Brooks, Tito Puente, Dave Matthews, Destiny’s Child, and Henry Mancini, just to name a few. In addition, through 

affiliation agreements with foreign performing rights societies, ASCAP licenses the 

music of hundreds of thousands of their members in the USA. 

ASCAP’s licenses allow music users to perform any and every work in the ASCAP 

repertory, upon payment of one license fee. ASCAP’s hundreds of thousands of licensees include Internet sites and wireless services, restaurants, nightclubs, hotels 

and motels, cable and television networks, radio and television stations, conventions 

and expositions, background/foreground music services, shopping malls, dance 

schools, concert promoters, and retail businesses. Those who perform music find 

ASCAP’s licensing model highly efficient, for, with one transaction, they are able to 

perform whatever they want in the enormous ASCAP repertory. 

ASCAP deducts only its operating expenses from the licensing fees it receives (in 

2004, operating expenses were 13.5% - lower than any other American performing 

rights organization, and among the lowest in the world). The remainder is split 50-

50 between writers and publishers. Each member’s royalty distribution is based on 

a survey of what is actually performed in the various licensed media. ASCAP royalty distributions make up the largest single source of income for songwriters, enabling them to make a living, pay their rent and feed their families. ASCAP thus 

fulfills the Constitutional purpose of copyright, allowing songwriters - who are the 

smallest of small businessmen and women - to earn a fair return on the use of their 

property and so use their creativity to enrich America’s culture.
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LETTER FROM THE HONORABLE MARYBETH PETERS, REGISTER OF COPYRIGHTS TO THE

HONORABLE LAMAR SMITH, CHAIRMAN, SUBCOMMITTEE ON COURTS, THE INTERNET, 

AND INTELLECTUAL PROPERTY, SUBMITTED JULY 19, 2005
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