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[Federal Register Volume 79, Number 141 (Wednesday, July 23, 2014)]
[Notices]
[Pages 42833-42835]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17354]

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LIBRARY OF CONGRESS

 Copyright Office

[Docket No. 2014-03]

Music Licensing Study: Second Request for Comments

AGENCY: U.S. Copyright Office, Library of Congress.

ACTION: Notice of inquiry.

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SUMMARY: The U.S. Copyright Office has undertaken a study to evaluate 
the effectiveness of current methods for licensing musical works and 
sound recordings. At this time, the Office seeks additional comments on 
whether and how existing music licensing methods serve the music 
marketplace, including new and emerging digital distribution platforms.

DATES: Written comments are due on or before August 22, 2014.

ADDRESSES: All comments shall be submitted electronically. A comment 
page containing a comment form is posted on the Office Web site at 
http://www.copyright.gov/200B;docs/200B;musiclicensingstudy. The Web 
site interface requires commenting parties to complete a form 
specifying their name and organization, as applicable, and to upload 
comments as an attachment via a browser button. To meet accessibility 
standards, commenting parties must upload comments in a single file not 
to exceed six megabytes (MB) in one of the following formats: The 
Portable Document File (PDF) format that contains searchable, 
accessible text (not an image); Microsoft Word; WordPerfect; Rich Text 
Format (RTF); or ASCII text file format (not a scanned document). The 
form and face of the comments must include both the name of the 
submitter and organization. The Office will post the comments publicly 
on its Web site in the form that they are received, along with 
associated names and organizations. If electronic submission of 
comments is not feasible, please contact the Office at 202-707-8350 for 
special instructions.

FOR FURTHER INFORMATION CONTACT: Jacqueline C. Charlesworth, General 
Counsel and Associate Register of Copyrights, by email at 
jcharlesworth@loc.gov or by telephone at 202-707-8350; or Sarang V. 
Damle, Special Advisor to the General Counsel, by email at sdam@loc.gov 
or by telephone at 202-707-8350.

SUPPLEMENTARY INFORMATION: 

I. Background

    The U.S. Copyright Office is conducting a study to assess the 
effectiveness of the current methods for licensing musical works and 
sound recordings. To aid with this study, the Office published an 
initial Notice of Inquiry on March 17, 2014 (``First Notice'') seeking 
written comments on twenty-four subjects concerning the current 
environment in which music is licensed. 78 FR 14739 (Mar. 17, 2014). 
The eighty-five written submissions received in response to this 
initial notice can be found on the Copyright Office Web site at http://www.copyright.gov/docs/musiclicensingstudy/200B;comments/Docket2014--
3/. In June 2014, the Office conducted three two-day public roundtables 
in Nashville, Los Angeles, and New York City. The three roundtables 
provided participants with the opportunity to share their views on the 
topics identified in the First Notice and other issues relating to 
music licensing. See 79 FR 25626 (May 5, 2014). Transcripts of the 
proceedings at each of the three roundtables will be made available on 
the Copyright Office Web site at http://www.copyright.gov/docs/200B;musiclicensingstudy/.
    In the initial round of written comments and during the roundtable 
sessions, a number of significant issues were discussed that the Office 
believes merit additional consideration.
    First, as explained in the First Notice, in 2013, the two federal 
district courts overseeing the antitrust consent decrees governing the 
largest performance rights organizations (``PROs''), American Society 
of Composers, Authors and Publishers (``ASCAP'') and Broadcast Music, 
Inc. (``BMI''), held in separate opinions that under those decrees, 
music publishers could not withdraw selected rights--such as ``new 
media'' rights--to be directly licensed outside of the PROs; rather, a 
particular publisher's song catalog must either be ``all in'' or ``all 
out.'' \1\ Following these rulings, both in public statements and at 
the recent roundtables, certain major music publishers have indicated 
that, if the consent decrees remain in place without modification, they 
intend to withdraw their entire catalogs from the two PROs and directly 
license public performances.\2\ Such a move would affect not only 
online services, but more traditional areas of public performance such 
as radio, television, restaurants, and bars.
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    \1\ In re Pandora Media, Inc., Nos. 12-cv-8035, 41-cv-1395, 2013 
WL 5211927 (S.D.N.Y. Sept. 17, 2013); Broadcast Music, Inc., v. 
Pandora Media, Inc., Nos. 12-cv-4037, 64-cv-3787, 2013 WL 6697788 
(S.D.N.Y. Dec. 19, 2013).
    \2\ See Ed Christman, Universal Music Publishing Plots Exit From 
ASCAP, BMI, Billboard (Feb. 1, 2013), http://www.billboard.com/biz/articles/news/publishing/1537554/universal-music-publishing-plots-exit-from-ascap-bmi; see also Ed Christman, Sony/ATV's Martin 
Bandier Repeats Warning to ASCAP, BMI, Billboard (July 11, 2014), 
http://www.billboard.com/biz/articles/news/publishing/6157469/sonyatvs-martin-bandier-repeats-warning-to-ascap-bmi.
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    Stakeholders at the roundtables expressed significant concerns 
regarding the impact of major publishers' complete withdrawal from the 
PROs. Notably, traditional songwriter contracts typically include 
provisions that assume that a songwriter's performance royalties will 
be collected by and paid directly to the songwriter through a PRO, 
without contemplating alternative arrangements. Songwriters and 
composers raised questions as to how withdrawing publishers would 
fulfill this responsibility in the future, including whether they would 
be in a position to track and provide adequate usage and payment data 
under a direct licensing system. Another concern is how such 
withdrawals would affect the PROs' cost structures and the commission 
rates for smaller entities and individual creators who continued to 
rely upon these organizations to license and administer their public 
performance rights. At the same time, some stakeholders questioned the 
existing distribution methodologies of the PROs, suggesting that the 
PROs should rely more on census-based reporting (as is typically 
supplied by digital services) and less on sampling or non-census-based 
approaches to allocate royalty fees among members.
    Next, many stakeholders appear to be of the view that the Section 
115 statutory license for the reproduction and distribution of musical 
works should either be eliminated or significantly modified to reflect 
the realities of the digital marketplace. While music owners and music 
users have expressed a range of views as to the particulars of how this 
might be accomplished, much of the commentary and discussion has 
centered on two

[[Page 42834]]

possible approaches. The first would be to sunset the Section 115 
license with the goal of enabling musical work owners to negotiate 
licenses directly with music users at unregulated, marketplace rates 
(as the synchronization market for musical works currently operates). 
Some stakeholders have acknowledged, however, that such a market-based 
system might still have to allow for the possibility of collective 
licensing to accommodate individuals and smaller copyright owners who 
might lack the capacity or leverage to negotiate directly with online 
service providers and others.
    A second model, advocated by the record labels, would be to 
eliminate Section 115 and instead allow music publishers and sound 
recording owners collectively to negotiate an industrywide revenue-
sharing arrangement as between them. For the uses falling under this 
approach, a fixed percentage of licensing fees for use of a recorded 
song would be allocated to the musical work and the remainder would go 
to the sound recording owner. Record labels would be permitted to 
bundle musical work licenses with their sound recording licenses, with 
third-party licensees to pay the overall license fees to publishers and 
labels according to the agreed industry percentages. While musical work 
owners would retain control over the first recordings of their works, 
such an arrangement would cover not only audio-only uses but would 
extend to certain audiovisual uses not currently covered by the Section 
115 license, such as music videos and lyric display.
    Another theme that emerged from the first round of written comments 
and the public roundtables relates to the Section 112 and 114 statutory 
licenses for the digital performance of sound recordings.\3\ Although 
there appeared to be substantial agreement that these licenses are 
largely effective, there was also a general consensus that improvements 
could be made to the Copyright Royalty Judges' (``CRJs'') statutorily 
mandated ratesetting procedures. For instance, under 17 U.S.C. 
803(b)(6), parties in proceedings before the CRJs must submit written 
direct statements before any discovery is conducted. A number of 
commenters believed that the ratesetting process could be significantly 
streamlined by allowing for discovery before presentation of the 
parties' direct cases, as in ordinary civil litigation. Stakeholders 
were also of the view that it would be more efficient to combine what 
are now two separate direct and rebuttal phases of ratesetting 
hearings, as contemplated by 17 U.S.C. 803(b)(6)(C), into a single 
integrated trial--again as is more typical of civil litigation. There 
was also general agreement that more could be done to encourage 
settlement of rate disputes, such as adoption of settlements earlier in 
the process and allowing such settlements to be treated as non-
precedential with respect to non-settling participants.
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    \3\ Based upon written comments and discussion at the 
roundtables, it appears that certain language in the First Notice 
concerning the lack of availability of licenses for pre-1972 
recordings under Sections 112 and 114 may have been misinterpreted 
by some. In a footnote, the First Notice observed that ``a person 
wishing to digitally perform a pre-1972 sound recording cannot rely 
on the Section 112 and 114 statutory licenses and must instead 
obtain a license directly from the owner of the sound recording 
copyright.'' 78 FR 14739, 14741 n.12. In making this statement, the 
Office was not opining on the necessity of obtaining such a license 
under state law, but merely observing that licenses for the digital 
performance of pre-1972 sound recordings, and for the reproductions 
to enable such performances, are not available under Section 112 or 
114. A licensee seeking such a license would thus need to obtain it 
directly from the sound recording owner (as the Office understands 
to be the current practice of some licensees with respect to 
performances of pre-1972 recordings).
     On the other side of the coin, it appears that others have 
misread the Office's observation in its report on pre-1972 sound 
recordings that ``[i]n general, state law does not appear to 
recognize a performance right in sound recordings'' as an official 
statement that no such protection is (or should be) available under 
state law. See U.S. Copyright Office, Federal Copyright Protection 
for Pre-1972 Sound Recordings 44 (2011). This, too, is a 
misinterpretation. While, as a factual matter, a state may not have 
affirmatively acknowledged a public performance right in pre-1972 
recordings as of the Office's 2011 report, the language in the 
report should not be read to suggest that a state could not properly 
interpret its law to recognize such a right. As the Office 
explained, ``common law protection is amorphous, and courts often 
perceive themselves to have broad discretion.'' Id. at 48.
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    Finally, many commenting parties pointed to the lack of 
standardized and reliable data related to the identity and ownership of 
musical works and sound recordings as a significant obstacle to more 
efficient music licensing mechanisms. Stakeholders observed that 
digital music files are often distributed to online providers without 
identifiers such as the International Standard Recording Code 
(``ISRC'') and/or International Standard Musical Work Code (``ISWC''), 
and that the lack of these identifiers (or other unique or universal 
identifiers) makes it difficult for licensees or others to link 
particular music files with the copyrighted works they embody. In 
addition to problems identifying the musical works and sound recordings 
themselves, commenters noted the difficulties of ascertaining ownership 
information, especially in the case of musical works, which frequently 
have multiple owners representing varying percentages of particular 
songs. These issues, in turn, relate to a more general ``transparency'' 
concern of music creators that usage and payment information--including 
information about advances and equity provided by licensees to 
publishers and labels--may not be fully and readily accessible to 
songwriters, composers and artists.
    At this time, the Office is soliciting additional comments on these 
subjects, as set forth in the specific questions below. Parties may 
also take this opportunity to respond to the positions taken by others 
in the first round of comments and/or at the roundtables. Those who 
plan to submit additional comments should be aware that the Office has 
studied and will take into consideration the comments already received, 
so there is no need to restate previously submitted material. While a 
party choosing to respond to this Notice of Inquiry need not address 
every subject below, the Office requests that responding parties 
clearly identify and separately address each subject for which a 
response is submitted.

Subjects of Inquiry

Data and Transparency
    1. Please address possible methods for ensuring the development and 
dissemination of comprehensive and authoritative public data related to 
the identity and ownership of musical works and sound recordings, 
including how best to incentivize private actors to gather, assimilate 
and share reliable data.
    2. What are the most widely embraced identifiers used in connection 
with musical works, sound recordings, songwriters, composers, and 
artists? How and by whom are they issued and managed? How might the 
government incentivize more universal availability and adoption?
    3. Please address possible methods for enhancing transparency in 
the reporting of usage, payment, and distribution data by licensees, 
record labels, music publishers, and collective licensing entities, 
including disclosure of non-usage-based forms of compensation (e.g., 
advances against future royalty payments and equity shares).
Musical Works
    4. Please provide your views on the logistics and consequences of 
potential publisher withdrawals from ASCAP and/or BMI, including how 
such withdrawals would be governed by the PROs; whether such 
withdrawals are

[[Page 42835]]

compatible with existing publisher agreements with songwriters and 
composers; whether the PROs might still play a role in administering 
licenses issued directly by the publishers, and if so, how; the effect 
of any such withdrawals on PRO cost structures and commissions; 
licensees' access to definitive data concerning individual works 
subject to withdrawal; and related issues.
    5. Are there ways in which the current PRO distribution 
methodologies could or should be improved?
    6. In recent years, PROs have announced record-high revenues and 
distributions. At the same time, many songwriters report significant 
declines in income. What marketplace developments have led to this 
result, and what implications does it have for the music licensing 
system?
    7. If the Section 115 license were to be eliminated, how would the 
transition work? In the absence of a statutory regime, how would 
digital service providers obtain licenses for the millions of songs 
they seem to believe are required to meet consumer expectations? What 
percentage of these works could be directly licensed without undue 
transaction costs and would some type of collective licensing remain 
necessary to facilitate licensing of the remainder? If so, would such 
collective(s) require government oversight? How might uses now outside 
of Section 115, such as music videos and lyric displays, be 
accommodated?
Sound Recordings
    8. Are there ways in which Section 112 and 114 (or other) CRB 
ratesetting proceedings could be streamlined or otherwise improved from 
a procedural standpoint?
International Music Licensing Models
    9. International licensing models for the reproduction, 
distribution, and public performance of musical works differ from the 
current regimes for licensing musical works in the United States. Are 
there international music licensing models the Office should look to as 
it continues to review the U.S. system?
Other Issues
    10. Please identify any other pertinent issues that the Copyright 
Office may wish to consider in evaluating the music licensing 
landscape.

    Dated: July 18, 2014.
Jacqueline C. Charlesworth,
General Counsel and Associate, Register of Copyrights.
[FR Doc. 2014-17354 Filed 7-22-14; 8:45 am]
BILLING CODE 1410-30-P
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