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S. HRG. 109–1021 

MUSIC LICENSING REFORM 

HEARING 

BEFORE THE

SUBCOMMITTEE ON INTELLECTUAL PROPERTY 

OF THE

COMMITTEE ON THE JUDICIARY 

UNITED STATES SENATE 

ONE HUNDRED NINTH CONGRESS 

FIRST SESSION 

JULY 12, 2005 

Serial No. J–109–30 

Printed for the use of the Committee on the Judiciary 

( 

(II) 

COMMITTEE ON THE JUDICIARY 

ARLEN SPECTER, Pennsylvania, Chairman 

ORRIN G. HATCH, Utah 

CHARLES E. GRASSLEY, Iowa 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

JEFF SESSIONS, Alabama 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

HERBERT KOHL, Wisconsin 

DIANNE FEINSTEIN, California 

RUSSELL D. FEINGOLD, Wisconsin 

CHARLES E. SCHUMER, New York 

RICHARD J. DURBIN, Illinois 

DAVID BROG, Staff Director 

MICHAEL O’NEILL, Chief Counsel 

BRUCE A. COHEN, Democratic Chief Counsel and Staff Director 

SUBCOMMITTEE ON INTELLECTUAL PROPERTY

ORRIN G. HATCH, Utah, Chairman 

JON KYL, Arizona 

MIKE DEWINE, Ohio 

LINDSEY O. GRAHAM, South Carolina 

JOHN CORNYN, Texas 

SAM BROWNBACK, Kansas 

TOM COBURN, Oklahoma 

PATRICK J. LEAHY, Vermont 

EDWARD M. KENNEDY, Massachusetts 

JOSEPH R. BIDEN, JR., Delaware 

DIANNE FEINSTEIN, California 

HERBERT KOHL, Wisconsin 

RICHARD J. DURBIN, Illinois 

BRUCE ARTIM, Majority Chief Counsel 

BRUCE A. COHEN, Democratic Chief Counsel 

(III) 

C O N T E N T S 

STATEMENTS OF COMMITTEE MEMBERS 

Page 

Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah ............................ 1 

Leahy, Hon. Patrick J., a U.S. Senator from the State of Vermont .................... 3 

prepared statement .......................................................................................... 89 

WITNESSES 

Barros, Glen, President and Chief Executive Officer, Concord Music Group, 

Beverly Hills, California ...................................................................................... 16 

Bryant, Del R., President and Chief Executive Officer, Broadcast Music, Inc., 

New York, New York ........................................................................................... 18 

Carnes, Rick, President, Songwriters’ Guild of America, Nashville, Tennessee 13 

Cuebas, Ismael, Director of Merchandising Operations, Trans World Entertainment Corporation, Albany New York, on behalf of the National Association of Recording Merchandisers ........................................................................ 14 

Glaser, Rob, Chairman and Chief Executive Officer, RealNetworks, Inc., Seattle, Washington ................................................................................................. 11 

Israelite, David, President and Chief Executive Officer, National Music Publishers’ Association, Washington, D.C. ............................................................... 19 

Peters, Marybeth, Register of Copyrights, Library of Congress, U.S. Copyright 

Office, Washington, D.C. ..................................................................................... 5 

SUBMISSIONS FOR THE RECORD 

American Society of Composers, Authors, and Publishers, New York, New 

York, statement .................................................................................................... 31 

Barros, Glen, President and Chief Executive Officer, Concord Music Group, 

Beverly Hills, California, statement ................................................................... 41 

Bryant, Del R., President and Chief Executive Officer, Broadcast Music, Inc., 

New York, New York, statement ........................................................................ 49 

Carnes, Rick, President, Songwriters’ Guild of America, Nashville, Tennessee, 

statement .............................................................................................................. 58 

Cuebas, Ismael, Director of Merchandising Operations, Trans World Entertainment Corporation, Albany New York, on behalf of the National Association of Recording Merchandisers, statement ..................................................... 63 

Glaser, Rob, Chairman and Chief Executive Officer, RealNetworks, Inc., Seattle, Washington, statement .............................................................................. 75 

Local Radio Internet Coalition, Washington, D.C., joint statement .................... 90 

Peters, Marybeth, Register of Copyrights, Library of Congress, U.S. Copyright 

Office, Washington, D.C., statement .................................................................. 106 

Robinson, Irwin Z., Chairman and Chief Executive Officer, Famous Music, 

statement .............................................................................................................. 145 

SESAC, Inc., Nashville, Tennessee, statement ..................................................... 149 

(1) 

MUSIC LICENSING REFORM 

TUESDAY, JULY 12, 2005 

UNITED STATES SENATE, SUBCOMMITTEE ON INTELLECTUAL PROPERTY, COMMITTEE ON THE JUDICIARY, Washington, D.C. 

The Subcommittee met, pursuant to notice, at 2:38 p.m., in room 

SD–226, Dirksen Senate Office Building, Hon. Orrin G. Hatch, 

Chairman of the Subcommittee, presiding. 

Present: Senators Hatch and Leahy. 

OPENING STATEMENT OF HON. ORRIN G. HATCH, A U.S. 

SENATOR FROM THE STATE OF UTAH 

Chairman HATCH. We will begin this hearing. Senator Leahy is 

here. He is on the phone, but he said it is fine if I move on ahead. 

Good afternoon. I welcome you all to today’s hearing on music licensing reform. This is the first of what will likely be a series of 

hearings on whether changes to current copyright law are needed 

to encourage rapid deployment of legal online music services, while 

ensuring the equitable compensation of creators and copyright 

holders. 

Now that some of the fundamental liability issues involved in the 

Grokster case have been resolved, our focus turns in part to a variety of difficulties that hinder the ability of legal online services to 

compete effectively against illegal download and file-sharing services. At this hearing, I hope we can begin to identify some of the 

perceived problems faced by a number of companies and businesses 

in the area of music licensing. Although the discussion will center 

principally on Section 115 and the mechanical compulsory license, 

I hope today’s hearing will also help us gain a better understanding 

of some of the emerging business models and any impediments to 

their development. 

Section 115 of the Copyright Act governs the compulsory license 

that allows a licensee to make and distribute a mechanical reproduction of a non-dramatic musical work without the consent of the 

copyright owner. The compulsory license appears to have been enacted in response to concerns about the potential for a monopoly 

in the market for player piano rolls. 

In spite of various amendments and occasional suggestions that 

it be repealed, Section 115 and the mechanical compulsory license 

have survived enormous changes in the music industry and are 

still with us almost a century later. And despite attempts by Congress and the Copyright Office to alter the terms and application 

of the license in response to new business models, it is reported 

2 

that use of the compulsory license has steadily declined to the point 

that it may be the exception rather than the rule. 

Currently, there appears to be near consensus that Section 115 

is outdated and, particularly in the online world, does not adequately serve the purposes for which it was intended. Some argue 

that changing the marketplace for music products and the evolution of online music services has made Section 115 obsolete. 

In sum, we appear to be at a point where there is widespread 

agreement that the current compulsory license simply does not 

work. However, from my perspective, there appears to be little or 

no agreement among experts, academics and industry participants 

regarding what can or ought to be done about these problems. 

Some of the difficulties identified involve the application of a system in which two sets of distinct mechanisms, organizations and 

practices have evolved for the licensing of different rights in the 

same musical work—one for the public performance rights and the 

other for the reproduction and distribution rights. 

Especially when dealing with new types of services and uses that 

do not fit easily into familiar categories and concepts, it is often unclear precisely which rights are implicated. Understandably, some 

argue that many new uses, especially those involving digital transmission and storage, implicate both sets of rights and thus may require separate licensing by two different entities for the same song 

on behalf of the same copyright owner. 

It is claimed by some that this scheme of licensing imposes inefficiencies and burdens that unreasonably delay or prevent deployment of some new services and limit the potential success of others. 

Today, I expect that we will hear different opinions about both the 

scope and seriousness of the difficulties caused by the uncertainty 

as to which rights are implicated by new services and online activities, as well as what, if any, changes to copyright law are necessary 

to address this set of problems. 

Like the Register of Copyrights and others, I would like to see 

a solution that focuses on two goals that are inherent in copyright 

policy: ensuring that creators are compensated fairly and facilitating consumer access to good music. 

A second set of concerns involving the burdens and inefficiency 

of the specific terms and operation of the compulsory license itself 

also appears to figure prominently in the debate on music licensing 

reform. Some argue the license is sufficiently burdensome to severely limit its usefulness both in the physical and virtual marketplace. Again, I anticipate that there will be some disagreement as 

to the nature and scope of the problems posed by some of the specific provisions of Section 115, as well as what should be done to 

address these provisions. 

A wide variety of remedies to problems identified by the stakeholders and others have been proposed to date. They range from 

incremental reforms to wholesale repeal of Section 115. In addition 

to helping us identify and define these problems, I hope that our 

witnesses today will help the Subcommittee understand the range 

of possible solutions that have been proposed and the implications, 

both positive and negative, of such solutions for various segments 

of the music industry. 

3 

On our first panel, we are pleased to have the U.S. Register of 

Copyrights, Marybeth Peters. We are always happy to have you 

testify and we appreciate your expertise and the work that you do 

and the help that you give this Committee from time to time, you 

and your dedicated staff. 

Our second panel includes a diverse group of industry participants. First, we will hear from one of the pioneers and leading 

voices in the legal distribution of content over the Internet, Rob 

Glaser, the founder and CEO of RealNetworks. 

After that, we will hear from Rick Carnes, who is a very talented 

working songwriter down in Nashville, as well as President of the 

Songwriters’ Guild of America, and Glen Barros, President of the 

Concord Music Group, which is an independent record label and 

music publisher. 

After that, Ismael Cuebas, the Director of Merchandising Operations at Trans World Entertainment Corporation, who is testifying 

on behalf of the National Association of Recording Merchandisers, 

will give us his views on the licensing difficulties faced by music 

retailers. 

Then we will hear from Del Bryant, the President and CEO of 

BMI, Inc., one of the largest and best-known performing rights organizations in the business which represents more than 300,000 

songwriters, composers and music publishers in all genres of music. 

I understand that Del was born into the music business and came 

up through the ranks at BMI. His views are informed by more than 

three decades at BMI, and we are lucky to have the benefit of his 

expertise and perspective. I would also like to thank Del for being 

willing to testify here on short notice, despite scheduling difficulties 

for him and his organization. 

Last not but least, we welcome David Israelite, who is the President and CEO of the National Music Publishers’ Association, a 

man who is well known to this Committee and well respected by 

all of us. 

First, we will turn to Senator Leahy for his opening remarks. I 

appreciate the privilege of working with Senator Leahy on these 

issues. We work together well on these issues, and hopefully we 

can find some ways of solving some of these problems. But, today, 

we want to learn all we can about them and see where we go from 

there. 

Senator Leahy. 

STATEMENT OF HON. PATRICK J. LEAHY, A U.S. SENATOR 

FROM THE STATE OF VERMONT 

Senator LEAHY. Well, thank you, Mr. Chairman, and I will be 

brief because we want to get on to the witnesses. As some know, 

we have had another matter that has been somewhat distracting 

today and may take me out of here for a while. 

First off, to state the obvious, digital music is here. I was leaving 

on a trip to Europe back a few years ago—actually, Europe and Africa. My daughter explained to me that I probably couldn’t bring 

the old victrola—that went right over everybody’s head; there is nobody here to remember what a victrola is—on the plane, and that 

it was time now to download some music that you could listen to 

digitally. I loved the idea. I ended up with several days’ worth of 

4 

music, ranging from Puccini to the Grateful Dead and just about 

everything else in between. 

Chairman HATCH. There is everything else in between. 

[Laughter.] 

Senator LEAHY. You don’t like Puccini? 

Chairman HATCH. I like them all. You got me to like the Grateful 

Dead. 

Senator LEAHY. You never got to go to a concert with me. 

Chairman HATCH. You never invited me. 

[Laughter.] 

Senator LEAHY. Too late now. 

[Laughter.] 

Senator LEAHY. I do recall one time being on stage at one of the 

Grateful Dead concerts. Sting was warming up the crowd. The 

phone backstage rang and it was the White House and they were 

looking for me. I got on the phone and the Secretary of State started talking and he said, Pat, could you turn that radio down? Of 

course, they had no idea where they reached me. I said, well, that 

is Sting. Dead silence. I said Sting, the rock star. Still dead silence. 

I said I am on stage—and by now the sweat is pouring down my 

face— 

Chairman HATCH. Was that the Clinton administration? 

[Laughter.] 

Senator LEAHY. I am not going to tell you. 

I am on stage at a Grateful Dead concert and Sting is warming 

up the crowd. There was a sigh and he said, well, that is fine, but 

do you have time to speak with me and the President? 

[Laughter.] 

Senator LEAHY. It is exciting for companies that are seeing business potential in new platforms and formats. I mention my daughter Alicia because we looked at a number of the different ways of 

downloading and I thought if I was going to be doing this, I would 

like to find out more about it. It is exciting, the variety that is out 

there. 

What I find exciting is musicians who see greater avenues for 

their artistic expression, not only people like my friends in U2, but 

people that might have a niche area that would not be heard of 

otherwise, but now have a way of reaching not only nationwide, but 

worldwide distribution. What is most exciting is for consumers. 

Those who have very eclectic tastes like I do can pick up the music 

in various different ways and can listen to it anywhere. 

We are going to hear today about some outdated laws that were 

never intended to address digital music. As legislators, you try to 

pass laws that stand the test of time. For the most part, our intellectual property laws have accomplished that goal. In fact, Section 

115 of the Copyright Act at the center of today’s discussion, as Senator Hatch already said, had its roots in piano rolls at the turn of 

the last century. So we have to ask if these laws for piano rolls are 

ready to go digital today. 

There are problems with the current licensing system. I would 

like to thank Marybeth Peters for her hard work and her patience. 

Over the years, she has shown both for this Committee as we try 

to work through these problems. 

5 

Everybody agrees the present system is not working as efficiently 

as it might. Potential licensees aren’t sure which licensing rights 

apply to certain activities. They may have difficulty even tracking 

down the appropriate person from whom to obtain those rights. 

This means that building a comprehensive online catalog of music 

available to consumers can sometimes be slow or ultimately impossible. 

Just as it may be the case that outdated laws have contributed 

to this problem, it may well be the case that the market offers a 

solution, either by forcing the parties to adjust to the new environment or by encouraging the stakeholders to back consensus legislation. It is in the interest of all of us to reach an agreement, and 

we don’t want to pass a law that is going to make it more difficult 

for you. There is nobody in this room that can tell me what will 

be the furthest advance in digital devices five years from now. 

None of us can do that. 

As Ms. Peters has noted, making legal copies of musical works 

available online is essential to combatting online piracy. It is a simple thing for me. I want technology not to be hampered and technology to expand however it might. I want as large markets available as possible and let people compete at the market. But, thirdly, 

those who produce the music in whatever form—the writers, the 

performers, whoever else—have a right to be compensated. It 

should not be stolen. 

Now, if we can protect all of that, the marketplace can do a great 

deal. So let us protect the interests of the songwriters and serve 

the interests of consumers. I think it is possible to do both. 

So, Mr. Chairman, I thank you for having this hearing. I think 

it is well worthwhile. 

[The prepared statement of Senator Leahy appears as a submission for the record.] 

Chairman HATCH. Well, thank you, Senator. We appreciate it. 

We will turn to Ms. Marybeth Peters, who is certainly an expert 

in this area, and we look forward to taking your testimony. 

STATEMENT OF MARYBETH PETERS, REGISTER OF COPYRIGHTS, LIBRARY OF CONGRESS, U.S. COPYRIGHT OFFICE, 

WASHINGTON, D.C. 

Ms. PETERS. Mr. Chairman, Senator Leahy, just two weeks ago 

in MGM v. Grokster, the Supreme Court gave a boost to copyright 

owners in their battle against massive peer-to-peer infringement on 

the Internet. Nobody has suffered peer-to-peer infringement more 

than copyright owners of music, and the Grokster decision represents an opportunity for music publishers, the record industry 

and authorized online music services to take action to stop illegal 

services that assist and encourage infringement, and to offer attractive alternatives to consumers who have been tempted by illegal services in the past. 

But as much as we can rejoice in the Grokster decision, it is too 

early to declare victory in the battle against the culture of infringement that has led so many to demonstrate a lack of respect for 

copyright law and for the authors who are supposed to benefit from 

that law. 

6 

While the Grokster decision may make it more difficult for peerto-peer services to encourage large-scale infringement, it does not 

necessarily mean that all of those users of peer-to-peer services will 

flock back to legitimate services. 

Mr. Chairman, you and Senator Leahy have long made it clear 

to the music industry that it cannot simply rely on strong copyright 

laws to stop online infringement. The music industry has to offer 

consumers what they want, and what they want is easy and affordable access to all the music they desire, preferably through onestop shopping from a single online music service such as Rhapsody, 

iTunes and other legitimate services. 

Now, when there is reason to hope that the illegal services may 

be stopped or at least slowed down, and before the next generation 

of infringement-enabling services captures the attention of the 

Grokster generation, now is the time to enable legitimate services 

to meet that demand. 

In order to give consumers one-stop shopping, digital music services need something similar to one-stop shopping. Just as the consumer wants to get all of his or her music in one place, a digital 

music service wants and needs an efficient way to clear all rights 

to all of the music it wishes to offer. 

But, sadly, a digital music service today must seek a separate license for each musical work it wishes to offer for downloading. And 

for each musical work, it is faced with the demands for payment 

from two different middlemen who represent the same copyright 

owner and the same songwriters. 

Much of the blame for our unworkable system can be laid at the 

feet of the antiquated Section 115 compulsory license. But much of 

the blame is due to the division of the world of music into two separate realms—one for public performance and one for reproduction 

and distribution. In the age of the Internet, that division makes no 

sense, when so many digital transmissions of music can be said to 

involve both public performance and reproduction. 

These two sets of rights are licensed in very different ways. 

Songwriters and music publishers license music performance 

through three performing rights organizations, or PROs, and virtually every song anyone could wish to license is in the repertoire 

in one of these three PROs, which offer blanket licenses for public 

performances of all the songs in their repertoires. 

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

work must obtain a separate license for each musical work it wishes to license, must track down the music publisher for each song 

it wishes to license. And while Harry Fox represents a large number of music publishers, he can license only a fraction of the works 

that are, in fact, licensed by the PROs. 

Unlike the public performance right, reproduction and distribution rights are subject to Section 115’s compulsory license. But as 

a practical matter, that license simply sets a ceiling on the rates 

that can be charged for the making and distribution of 

phonorecords and for licenses that are actually obtained through 

the music publisher or the Harry Fox Agency. 

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

7 

when it occurs today, the PROs will assert a right to license and 

receive royalties for the performance right and Harry Fox and the 

music publishers will assert a right to license and receive royalties 

for reproduction and distribution, even though in many cases the 

justification for requiring both licenses is tenuous. 

But 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 and the same songwriters 

for the right to engage in a single transmission of a single work. 

In my written testimony, I outline some of the possible solutions 

to these problems. One solution is to convert the Section 115 license to a blanket license along the lines of Section 114 for digital 

public performances of sound recordings. Such a reformed statutory 

license ideally would include all reproduction, distribution and performance rights necessary for digital transmissions. Another solution would be to repeal Section 115 and establish a system of collective licensing that builds on the strengths of the existing PROs. 

My written testimony elaborates on these and other possible solutions. 

I and my staff stand ready to work with you and the affected industries to find effective and efficient solutions to improve the licensing of musical works for the benefit of our songwriters and 

composers, as well as consumers. 

Thank you. 

[The prepared statement of Ms. Peters appears as a submission 

for the record.] 

Chairman HATCH. Thank you. Now, let me just ask one simple 

question. What types of music licensing systems are used in other 

countries of the world? How do they work and, in your opinion, how 

efficient are they? 

Ms. PETERS. I think that with respect to performing rights, our 

performing rights societies are as good as any in the world. One of 

the differences is that, of course, they are limited to performance 

rights, and in a number of countries of the world a single PRO 

does, in fact, license both the public performance right and the reproduction and distribution right. That is very prevalent in Europe 

and in Eastern Europe. 

While you get the one-stop shopping for the rights, there are 

some issues with the fact that there are many societies and their 

reporting rights are different. So, actually, I am not sure one is better than the other. But at least with regard to obtaining the rights, 

there is one-stop shopping in other countries. 

Chairman HATCH. So do collective licensing systems in other 

countries tend to provide for blanket licensing of all musical works 

on a percentage royalty? 

Ms. PETERS. That is a prevalent model. 

Chairman HATCH. Well, what are some of the tradeoffs involved 

in this type of an approach? 

Ms. PETERS. We have heard in the Copyright Office that with respect to digital transmissions many people who participate in the 

process would prefer a percentage royalty rather than a penny 

rate. I don’t think there is anything inherent in our existing license 

to restrict that, but we have never had a percentage rate. 

8 

Certainly, we know today that with respect to the mechanical reproduction right, people do not use the compulsory license and it 

is impossible to clear the bulk of the rights in the vast number of 

works that music services want. So in our case, there is an inability to clear the rights. At least with respect to some of the foreign 

societies, you can get the right. There are, as I said, some other efficiency issues with those societies. 

Chairman HATCH. Someone recently described music licensing 

negotiations as being similar to blind men playing poker. Not only 

do the players not see everyone else’s cards, they don’t even know 

what cards are in their own hand. They don’t see their cards and 

they don’t know what is in their own hand, and as a result each 

of them keeps upping the ante hoping that others will fold. Perhaps 

this is also a question for the second panel, but is this something 

where Congress has sufficient sight to referee the game? 

Ms. PETERS. If you believe that something should be done right 

now and that the situation needs to be improved right now, I originally had suggested a different model that actually would take a 

longer time to put into place. You actually could use the Section 

114 compulsory license as a model, which provides a blanket license for the right to use all sound recordings. You could put that 

model in place, and if you enacted it this year, almost overnight 

you could, in fact, enable the licensing of all musical compositions 

that have been distributed to the public in the form of 

phonorecords. 

Chairman HATCH. If a blanket statutory license system were 

adopted, how do you think the online marketplace would change 

from what we currently see today? 

Ms. PETERS. Well, I think the second panel will tell you, but I 

think that to the extent that they are unable to license certain musical compositions and either they use them without permission 

from the music publisher or they don’t use them at all, I think you 

create a much more secure environment for those businessmen and 

I think you create the availability of a much larger repertoire that 

can, in fact, compete much more effectively with the illegitimate 

services. 

Chairman HATCH. Thank you. 

Senator Leahy. 

Senator LEAHY. Thank you. 

Ms. Peters, if I understand both from your testimony and what 

you have said before, it is often unclear which licensing rights 

apply to a particular technology. I am wondering, are there lines 

that can be drawn? When is a download a performance distribution, some sort of hybrid? What about the different varieties of 

streaming? Can you make those distinctions clearer or do we need 

legislation to do that? 

Ms. PETERS. We are struggling with the issue of limited 

downloads and on-demand streams at the moment. I would say 

that for a vast number of the services that are made available, 

whether it is on-demand streaming or limited downloads or a different combination, there is, in fact, a public performance right 

that is implicated and there are reproduction and distribution 

rights that are implicated. So for the bulk of the online services, 

9 

whether or not there should be compensation is a separate question, but the rights are, in fact, implicated. 

Senator LEAHY. You and a whole lot of others have told me that 

we have got to make improvements to the way music is currently 

licensed if we are going to fight illegal downloading. Of course, 

there are hundreds of millions of dollars at stake here, but we can’t 

seem to get consensus legislation. 

Why can’t the parties get together, when there is so much at 

stake? We all know that we are going to have online music. In effect, you open a store in everybody’s home all over the world, and 

if you are going to sell music, you want to have that store. Why 

can’t we get some kind of consensus agreement? I say that as one 

who would sing the Alleluia Chorus if we did because it would 

make our job a lot easier up here. 

Ms. PETERS. There are some areas where there is some agreement. It is not broad enough to craft a complete solution, so actually what I am going to say to you and to Senator Hatch is you 

need to take some leadership to try to get it accomplished. 

I think that when we held negotiations with most of the parties 

last summer, there was agreement on a blanket licensing approach. 

Maybe that was as far as there was total agreement. There are 

huge issues with regard to what the rate would be, how the rate 

would be set, who would oversee the rate. 

I actually think that if the parties were told that we need to do 

it and we need to do it now and it has to be broad enough so that 

it doesn’t only answer the issues of today which seem to focus on 

subscription services, but I think would be much broader in a year 

or two, I actually would be hopeful that it could be accomplished 

this year. Nobody has held people’s feet to the fire and said we are 

going to change this law; it doesn’t work. I would like to assist in 

trying to get that done. 

Senator LEAHY. What do you do to reach the next point? You 

might have comparable services, but entirely different technologies. 

Mr. Glaser’s written testimony, if I read it correctly, expresses concern that satellite radio is able to offer services RealNetworks cannot, such as the capacity to record content and play it back later 

on. Is this appropriate? How do you figure out how to treat different technologies that are offering similar products? 

Ms. PETERS. Mr. Glaser has a point. He says that the Internet 

now is actually competing with radio, cable, satellite, and that they 

should be looked at similarly. I think each one seems to have its 

own niche and have its own rules that grew up around it. Certainly, cable has a statutory license that is different than the satellite compulsory license, and now we are talking about a music 

Internet license. 

I am not sure at this point in time that you really could from a 

policy perspective put it all together so that you were comfortable 

that the policies went across the board. But I do think that with 

respect to Internet music, you could start there and maybe when 

some agreement was reached with that, you could look at other 

models and see if, in fact, maybe there was consensus on how to 

get them closer together. 

10 

Certainly, Mr. Glaser and others are correct in saying that they 

pay royalties for webcasting and that broadcasters are not going to 

pay royalties for digital broadcasting, and they say that is not fair. 

Senator LEAHY. If I might, Mr. Chairman, just one more question. 

Chairman HATCH. Sure. 

Senator LEAHY. You offer two approaches to legislative reform of 

Section 115. One is to take 115 and change it something along the 

lines of Section 114, the blanket license. The second approach—and 

that was in the Copyright Office’s draft legislation—would replace 

Section 115 with a system of collective licensing. Many refer to it 

as the ASCAP–BMI system. 

But you state that, in principle, you support just a simple repeal 

of Section 115. What if we just simply repealed it? What is going 

to happen in terms of cost of online services and availability? 

Ms. PETERS. In my idealistic view, we basically oppose compulsory licenses. We believe in exclusive rights and in people controlling those exclusive rights. So I would, in principle, always support 

eliminating a compulsory license, and I would still suggest doing 

that, though you may have to put it off if you want to solve the 

problem very quickly. 

The problem with eliminating it right now is we have a dysfunctional way of licensing the reproduction and distribution of the mechanical right, and I don’t know how you fix that overnight if you 

just eliminate it. So although I favor it in principle, if our goal is 

to have efficient licensing of the broadest musical repertoire possible for online services, I think we have to go another route in the 

interim. 

Senator LEAHY. Thank you, Mr. Chairman. 

Chairman HATCH. Thank you, Senator. 

Well, thank you, Ms. Peters. 

Ms. PETERS. Thank you. 

Chairman HATCH. We appreciate having your advice. We hope 

you will continue to think about these matters and let us have the 

best advice you can give us. 

Ms. PETERS. Thank you very much. 

Chairman HATCH. We will move to panel two, with Rob Glaser. 

We are honored to have you here, Rob. We appreciate all that you 

have been able to do in your business. 

Rick Carnes is an old friend who is a great songwriter, the President of the Songwriters’ Guild of America. We will turn to you 

next, Rick, afterwards. And then we have Ish Cuebas, Director of 

Merchandising Operations for Trans World Entertainment and CoChairman of the Media On Demand Task Force Corporate Circle, 

National Association of Recording Merchandisers, from Albany, and 

then Glen Barros, President and CEO of Concord Music Group, 

from Beverly Hills, California; Del Bryant, President and CEO of 

BMI, in New York; and David Israelite, who is President and CEO 

of the National Music Publishers’ Association right here in Washington, D.C. 

So we will start with you, Mr. Glaser. We welcome you back to 

the Committee. You are no stranger to this Committee and we appreciate you taking the time and putting forth the effort to be here 

with us. We look forward to what you have to say. 

11 

STATEMENT OF ROB GLASER, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, REALNETWORKS, INC., SEATTLE, WASHINGTON 

Mr. GLASER. Well, thank you, Mr. Chairman. Senator Leahy, 

thank you as well. It is a privilege to testify here today on behalf 

of RealNetworks and the Digital Media Association, which represents all of the leading companies in our industry. 

Rhapsody, our award-winning music subscription service, enables 

consumers to play over a million songs on demand and to download 

the music to their PC or portable device for unlimited listening. 

Today, we have over 1 million music subscribers, and in each case 

we pay a piece of our revenue to rights-holders, both the performers and composers. 

All along, our biggest competitor has not been another legitimate 

service, but piracy. Frankly, outdated and broken laws have made 

it much harder than it should have been to build compelling legitimate services such as Rhapsody. In the process, the global recorded 

music industry shrank from about $40 billion to about $30 billion 

in annual revenue. 

Today, I urge the Subcommittee to modernize archaic music licensing laws and stabilize the foundation for lawful online services. 

Updating our laws will enable the industry to channel resources 

into building great legal music services that can win consumers 

away from the pirate networks. 

Specifically, I urge the Congress to take the following four steps: 

first, modernize Section 115 to provide a one-stop-shop blanket license for mechanical rights; second, clarify that no mechanical license is necessary for streaming services, including the incidental 

and server copies required to deliver a performance; third, end the 

statutory bias that provides satellite and cable radio providers with 

a more favorable royalty standard and more flexible technology requirements than Internet radio providers like us; and, fourth, enable us to innovate with compelling radio features so our royaltypaying radio creates more paying customers and generates more 

royalties for artists. These are our simple steps, but let me take a 

few minutes to elaborate. 

First, the blanket license. As recognized by the Copyright Office, 

and I believe everyone sitting here today, the song-by-song, penciland-paper compulsory mechanical licensing process that dates back 

to 1909 in some cases just doesn’t work and must be updated to 

help Rhapsody and other Internet services compete more effectively 

against piracy. 

While we have spent millions of dollars setting up our licensing 

systems, we simply don’t have the resources to procure the millions 

of individual song licenses the current system requires. Meanwhile, 

illegal services like Grokster give away all the music for free, don’t 

pay artists anything and have millions of songs. 

A recent article stated that illegal P2P networks have up to 25 

million unique song files. We have about 1 million. Online services, 

music publishers, songwriters, recording artists, recording companies and retailers all support a single statutory blanket license that 

provides online music services, all necessary publishing rights, 

without legal confusion or administrative delay. There are solvable 

disagreements about how broad the scope of the blanket license 

12 

should be and whether the royalty rates should be set by Congress 

or by industry negotiation. We strongly favor negotiated royalties, 

with arbitration as a last resort. 

Second, we face the significant uncertainty of not knowing when 

online music triggers the performance right, when it triggers the 

mechanical reproduction right, or when it triggers both. We agree 

with the Copyright Office that a stream is a performance that 

should only require a public performance license and a song that 

is downloaded for on-demand access should only require a mechanical license. 

Like in the physical world, we don’t believe there is any case in 

which both a mechanical and a performance royalty should be paid 

for the same digital distribution. To be clear, we absolutely want 

to pay creators for using their music, but they should be paid fairly 

and fully, and only once. A double-dip royalty simply isn’t fair. 

Third, we ask the Subcommittee to address the basic unfairness 

caused by application of more favorable royalty ratings to satellite 

and cable providers who compete directly with online companies 

such as RealNetworks. The result is that Internet services are subject to sound recording performance rates that are 50 percent higher than our competitors in satellite and cable radio. 

The Copyright Office has said on several occasions that competitive services such as satellite and cable television should be governed by equivalent royalty standards and royalty rates. Today, we 

ask the Subcommittee to pick one standard for all digital radio 

competitors and let the market, rather than Congress, determine 

the winners in the business. 

Fourth and finally, to re-ignite Internet radio innovation and promote renewed growth in sound recording performance royalties, 

RealNetworks and DiMA, joined today by the Recording Artists Coalition, urge a broader, clarified and objective definition of noninteractive services. 

Today, it is often difficult to ascertain whether an online radio 

service is a, quote, ‘‘non-interactive service’’ and therefore eligible 

for the statutory sound recording performance rights or a, quote, 

‘‘interactive service’’ that is ineligible for the statutory license. We 

would much rather innovate than litigate, and there have already 

been several lawsuits on this topic. Consumer-influenced radio specifically should be deemed non-interactive as long as the songs are 

not played on demand and the radio station complies with the existing rules governing the frequency with which a radio station can 

play a given artist or album. 

In closing, let me emphasize the current system is broken, but 

you can fix it. Give us a chance to compete fairly and both consumers and content owners will benefit from the technological innovations we will unleash. 

Thank you very much. 

[The prepared statement of Mr. Glaser appears as a submission 

for the record.] 

Chairman HATCH. Well, thank you, Mr. Glaser. 

Mr. Carnes, we will turn to you. 

13 

STATEMENT OF RICK CARNES, PRESIDENT, SONGWRITERS’ 

GUILD OF AMERICA, NASHVILLE, TENNESSEE 

Mr. CARNES. Chairman Hatch, Senator Leahy and members of 

the Subcommittee, thank you for allowing the Songwriters’ Guild 

of America the opportunity to testify today on proposals for reform 

of the music licensing system. 

My name is Rick Carnes and I am President of the SGA, the Nation’s oldest and largest organization run exclusively by and for 

songwriters. I have been a professional songwriter for 27 years. It 

is a job that pays practically nothing, has no benefits, no health insurance, no pension and no job security at all. In a way, it is a 

crazy way to make a living, but I love it anyway because, you see, 

songwriters don’t write songs just to make money. We make money 

just so we can keep writing songs. 

In the last decade, over half of America’s professional songwriters have been forced to abandon their careers. Songwriters are 

not in a recess; we are in a deep, deep depression. Between deregulation of radio, corporate mergers throughout the music industry 

and rampant Internet piracy, we are being wiped out. So how can 

the reform of Section 115 improve the lot of songwriters? 

To start with, please give us a raise. For 69 years— 

Chairman HATCH. Marybeth, you had better pay attention to 

this. 

[Laughter.] 

Mr. CARNES. For 69 years, from 1909 to 1978, royalty rates were 

fixed at two cents. From 1978 on, we have only gotten cost of living 

increases on our 1909-level wages. So today’s songwriters are literally being paid piano roll rates for digital downloads. 

The compulsory license isn’t even a minimum wage for us; it is 

a maximum wage. At the eight-and-a-half-cent penny rate, that 

means that the most I can make on a million-selling album is 

$85,000. I have to split that with my music publisher, so I get 

$42,500. Then I split that with my co-writer, the recording artist, 

and that leaves me only $21,250. 

And then there is that catch-22, the controlled compositions 

clause. This is a clause placed in every new recording artist’s contract that basically forces the artist to have to write or co-write all 

the songs they record so the record labels can get away with paying 

a three-quarters royalty rate. That cut rate leaves me with less 

than $16,000 for a million sales. For a platinum album, the very 

pinnacle of success in the music business, all I get is $16,000, while 

the middlemen make millions. Register of Copyrights Marybeth Peters recently stated that in determining public policy and legislative change, it is the author, not the middleman, whose interests 

should be protected. 

Section 115 needs to be streamlined to make music licensing 

much easier for all, especially the music subscription services that 

have a legitimate complaint that they don’t know who to pay, nor 

how much. But if the subscription services insist on making 50 percent of the revenues and the record labels demand 50 percent of 

the revenues for their master recordings, then there is nothing left 

on the table for the songwriters. And in these negotiations so far, 

they have been demanding up to 95 percent of the money. There 

is nothing left for the songwriters. 

14 

A form that makes the licensing process fast and efficient would 

be a good thing. But if it starves the songwriters in the process, 

the whole enterprise is going to fail. These Internet companies are 

new to the music business, but they need to understand something. 

We are not manufacturing widgets here. The best way to make 

great music is not by driving the cost of production down. The way 

is to pay great songwriters a livable wage and make great music, 

which will drive the profits up for everybody. 

To that end, the SGA and our colleagues in the National Songwriters’ Association, the NMPA, ASCAP and BMI have all put forward a unilicense proposal that we believe best achieves music licensing reform while simultaneously providing essential marketplace protection for songwriters. Our proposal seeks a reasonable 

rate of 16 2/3 percent of Internet subscription service revenues, 

with a minimum flat dollar fee as a floor. A single designated super 

agency will collect the blended mechanical and performance royalties under a blanket license, thereby creating one-stop music licensing. 

America’s first professional songwriter, Stephen Foster, died in 

poverty with 38 cents in his pocket at the age of 37. He left behind 

a legacy of songs that have moved the entire Nation and enriched 

a horde of middlemen, but he never earned enough money to sustain him or his family. The story of American songwriters is far too 

often a rags-to-rags tale. It is my sincere hope that in reform of the 

music licensing process, we will begin and end with a focus on 

helping today’s American songwriters and artists survive in a very 

difficult present and thrive in a much better future. 

Thank you. 

[The prepared statement of Mr. Carnes appears as a submission 

for the record.] 

Chairman HATCH. Well, thank you. 

Mr. Cuebas, we will take your testimony. 

STATEMENT OF ISMAEL CUEBAS, DIRECTOR OF MERCHANDISING OPERATIONS, TRANS WORLD ENTERTAINMENT CORPORATION, ALBANY, NEW YORK, ON BEHALF OF THE NATIONAL ASSOCIATION OF RECORDING MERCHANDISERS 

Mr. CUEBAS. Good afternoon, Chairman Hatch, Ranking Member 

Leahy. Thank you for inviting me to testify about the state of the 

music industry and the challenges in music licensing. We hope 

Congress can help our industry to remain healthy and vibrant. 

I am Ish Cuebas, Director of Merchandising Operations at Trans 

World Entertainment in Albany, New York. Trans World is a member of the National Association of Recording Merchandisers, an industry trade group that serves the music retailing community. 

Trans World is one of the largest entertainment retailers in the 

United States, with 800 stores in 46 States, the District of Columbia, Puerto Rico and the U.S. Virgin Islands. 

Trans World operates four e-commerce sites and the FYE 

Download Zone, a digital music subscription and download service. 

Trans World is currently designing and developing the next generation of our listening and viewing stations, called LVS 3. These stations will allow our customers to search, find and explore music. 

These stations are designed and built to support the growing busiVerDate Aug 31 2005 12:19 Sep 10, 2008 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\22919.TXT SJUD1 PsN: CMORC
15 

ness of digital media distribution, allowing consumers to burn full 

albums onto a CD or create their own compilations. It will allow 

them to download a full album or compilation or a song they have 

just heard on the radio onto a portable device. It will allow them 

to buy download at the store and send them to a home or office PC. 

Music retailers continue to face significant business challenges. 

Sales of digital tracks continue to post big increases year over year, 

but has not slowed illegal downloading on peer-to-peer networks. 

We know one of the best ways to prevent pirated downloads is to 

provide consumers with legal alternatives. This is no small challenge and time is definitely not on our side. 

A lot of music is still unlicensed largely because of the extremely 

burdensome process that is required. Our record label partners are 

trying to ramp up to handle the licensing process, but that takes 

time we simply do not have. In order to support these initiatives, 

we need to modernize the Section 115 mechanical license. The license is outdated and doesn’t fit with today’s new digital technologies. 

In March 2004, NARM formed a Media On Demand Task Force 

comprised of various member segments to seek solutions to the 

challenges of the new business models. NARM, RIAA and the Recording Artists Coalition have strongly advocated a broad blanket 

license that would cover all products in the marketplace and speed 

up the process. 

The current unilicense proposal is too narrow in its scope, applying only to subscription services which account for less than 1 percent of all music sales. The Copyright Office’s proposal would offer 

broader blanket licensing for the distribution of music, but the administrative process resulting from eliminating the compulsory license would likely make things worse instead of better for music 

retailers. 

These proposals do not address dual discs. The music industry 

needs a vehicle to attract consumers by offering an exciting value 

proposition. We believe that the dual disc serves this purpose. 

Under the current system, for example, it would take more than 

100 separate licenses to clear one dual disc, which is hindering a 

more robust release schedule. 

What our retailer members have told us loud and clear is that 

they need an opportunity to experiment with various digital distribution models over the next few years. Legal digital download 

services represent a significant anti-piracy initiative. It is a great 

opportunity for songwriters, publishers, record labels, retailers and 

digital service providers to sell more music and generate excitement and enthusiasm among consumers. This opportunity will be 

missed if retailers can’t easily experiment with the whole range of 

models for providing music on demand. 

We are committed to moving forward with both one-to-one and 

group negotiations and look forward to working with you and your 

staff to help resolve these important issues. 

Thank you. 

[The prepared statement of Mr. Cuebas appears as a submission 

for the record.] 

Chairman HATCH. Thank you so much. 

Mr. Barros, we will take your testimony. 

16 

STATEMENT OF GLEN BARROS, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CONCORD MUSIC GROUP, BEVERLY HILLS, 

CALIFORNIA 

Mr. BARROS. Thank you, Chairman Hatch, Ranking Member 

Leahy and all the other members of the Subcommittee for inviting 

me today to participate in this hearing. I am grateful for the opportunity to share some practical thoughts on how the inefficient system of licensing musical compositions is contributing to the contraction of the music industry by preventing companies from offering consumers exciting and competitive products that I think are 

necessary if we are to thrive and maybe even survive as an industry. 

A little background on the Concord Music Group. Concord 

Records is a 32-year-old independent record label that focused on 

jazz and traditional pop for most of its history, expanding into 

adult contemporary pop recently. Last year, we acquired a company 

called Fantasy, Inc., which is a treasure chest and one of the greatest catalogs on the planet of recordings and also musical compositions, focusing on jazz, R&B, blues and rock. Our catalog encompasses artists such as Miles David, John Coltrane, Rosemary 

Clooney, Ella Fitzgerald, all the way to Little Richard, Isaac Hayes 

and Credence Clearwater Revival. 

We also invest millions of dollars each year in new recordings 

and in trying to develop new artists. Current recordings are Chick 

Corea, Sonny Rollins, Carole King, Michael Feinstein, Peter 

Cincotti. And most recently we have enjoyed great success this past 

year with the final recording of Ray Charles. In all, we are one of 

the largest independent record companies in the world, with over 

10,000 recordings ranging from 1940 until today. Also, an important distinction is that we own music publishing rights. So we are 

here today really as a music publisher and a record company, and 

have a broad perspective on the issue being discussed here in this 

hearing. 

Our position is that the current system for licensing musical 

compositions is not serving anyone as it really should. This is a 

challenging time in the music business. Piracy, radio consolidation 

and exciting entertainment options have caused the market to contract. At the same time, we have new technologies that can help 

add value and bring exciting new products to the consumer. 

We have talked a lot about digital alternatives which are very 

important, but also there are physical alternatives which bring 

value—dual disc, SACD. All of these things add significant value 

and can help expand the market. Unfortunately, we have struggled 

with music licensing issues raised by these new technologies, and 

I would like to focus on one example of a physical product where 

the licensing system impedes our ability to make it work. 

There is a product called Super Audio CD where there are two 

layers on a disc. The first layer is a standard two-channel CD 

where the consumer has the normal experience. The other is a surround sound product where the consumer can hear it like you 

would a video where you can sit in the center of a six-channel mix. 

Because it is multi-layer, many publishers have taken the position 

that, in fact, there are two music files on that disc and that you 

should be compensated twice. Yet, the disc sells at exactly the 

17 

same price and is really designed to offer the consumer an alternative. 

Intuitively, I know this shouldn’t be the case, and legally I am 

told it probably isn’t. But there really is no way to solve this dispute. It costs thousands of dollars to issue every single SACD and 

it is a speculative proposition. We don’t know if the market will 

take hold. Yet, here we are investing, and at the same time having 

to face the possibility of arguing with our colleagues in the music 

publishing community. That just doesn’t make practical business 

sense. 

The same applies when we want to add video content to a CD. 

Again, we have to approach dozens of publishers. The response 

time is difficult. Often, it involves duplicate costs, and once again 

it is just not practical. The end result is we usually just don’t do 

it. We can’t devote scarce human resources to a process that has 

low probability and usually ends up in us paying more for it. What 

this means is that everybody is hurt by a system that is an impediment to giving consumers more value and getting them to buy 

more music. 

I would like to be clear that I believe writers and publishers 

should absolutely receive their fair share of music industry revenues, especially since we are publishers, too. But this mechanical 

licensing process that we have today is a true impediment to seeing 

that happen. 

My suggestions for reform are as follows: Adopt an efficient blanket licensing system like every other compulsory license. Two, provide a percentage royalty. Writers and publishers should share in 

the upside when consumers are willing to pay a premium price. 

When it is necessary to provide extra value to win back business 

from the pirates or economic realities of new technologies and business models demand, the mechanical royalties should reflect that. 

Three, avoid potential for disputes. A simplified percentage royalty would be a big step. We should also give consideration to process changes, such as the possibility of an expedited proceeding in 

the Copyright Office to put to rest questions like whether or not 

we have to pay twice on an SACD. 

Four, consider whether licensing for uses not currently covered 

by Section 115 can be facilitated. There are uses like lyrics or 

bonus audio-visual material where the transaction costs of workby-work clearance are very high relative to the returns that the 

market will bear. 

I want to reiterate this is not an issue of trying to undercut royalties or shift divisions in how the pie is cut up. It is really an effort to grow that pie for all of us, and I believe if we do that and 

create the flexibility that we need to compete, it will make a huge 

difference in enhancing the availability of music, the investment in 

new artists and new songs, and will grow the music industry for 

everyone. 

Thank you. 

[The prepared statement of Mr. Barros appears as a submission 

for the record.] 

Chairman HATCH. Thank you, Mr. Barros. 

Mr. Bryant. 

18 

STATEMENT OF DEL R. BRYANT, PRESIDENT AND CHIEF EXECUTIVE OFFICER, BROADCAST MUSIC, INC., NEW YORK, 

NEW YORK 

Mr. BRYANT. Chairman Hatch, thank you for the opportunity to 

testify today. My name is Del Bryant and I am the President and 

CEO of BMI. BMI is proud to represent the public performing 

rights of over, as you mentioned, 300,000 songwriters, composers 

and music publishers. With a catalog of more than 6.5 million 

works, and growing, the BMI family includes icons of American 

music today and yesterday—the icons Hank Williams, Sr., Billie 

Holiday, Charles Ives, Miles Mingus Monk, Chuck Berry and the 

Eagles, to Toby Keith, Mariah Carey, Three Doors Down, Norah 

Jones and John Williams, and that simply scratches the surface. 

My background gives me special insight on the issues that we 

are discussing today. My late parents, Boudleaux and Felice Bryant, were the first full-time professional songwriters in Nashville, 

Tennessee. And like most songwriters, you wouldn’t know their 

names, but you would know some of their works—‘‘Bye, Bye Love,’’ 

‘‘Wake Up Little Susie,’’ ‘‘All I Have to Do Is Dream,’’ and the Tennessee State song, ‘‘Rocky Top.’’ 

As a son of songwriters, I know firsthand what it means to rely 

on the income that comes from performing rights through BMI and 

the money which comes to the publisher in the form of 

mechanicals. I know how precious these royalties are to the creators, and especially to their families. In more than three decades 

at BMI, I have learned how precious dollars going out as licensing 

fees are to the broadcasters and the other users who use America’s 

music. 

Because we were founded by leaders of the broadcast industry to 

create competition in licensing, BMI has always had a special appreciation for the business models and programming needs of the 

hundreds of thousands of enterprises which bring our music to the 

public. Many groups with whom we negotiate, including DiMA 

members, have acknowledged that BMI does a good job in establishing a fair market value for music. Our operations are efficient, 

fair, transparent, and our royalty distributions are accurate, timely 

and competitive. 

American performing rights organizations operate in a healthy 

competitive atmosphere which provides benefits to the creators and 

music users alike. It is a win-win for the American free enterprise 

system. BMI has been recognized as a global leader in digital initiatives for more than a decade. We are among the absolute very 

first in the music industry with a website, the first to license music 

for performance on the Web, and the first to post our entire catalog 

on the Internet. 

In calendar year 2004, BMI tracked more than 2.4 billion performances of music on over 3,500 licensed digital services. As those 

numbers grow exponentially, we have developed a robust infrastructure to handle the volume. Over the past several months, BMI 

has had participation in industry discussions in an attempt to facilitate the licensing of digital music services. We are not part of 

the problem, but we are willing to be part of the solution. 

BMI, along with the NMPA, FHA and ASCAP, has made a proposal to provide one-stop shopping for both the mechanical and the 

19 

performing right for digital subscription music services described in 

more detail in my written statement. 

The two key components, in BMI’s view, for the Committee to 

consider are, first, an antitrust exemption; second, a statutory rate 

set by Congress. I also address the recent proposal by Register of 

Copyrights Marybeth Peters and what BMI feels are its benefits 

and probable shortcomings. 

The current conversations among creators, music providers, licensees and members of Congress will, we believe and hope, deliver 

an equitable marketplace solution to the issues being examined by 

this Committee today. Whether it be our proposal or another, we 

believe Congress should not lose sight of the more modest attempts 

to address digital music services problems. We look forward to 

being a supportive and, if necessary, proactive participant in these 

ongoing discussions under the Chairman’s leadership. 

Mr. Chairman, we are grateful to the Committee and Congress 

for the effectiveness of the Copyright Act, which has permitted BMI 

to develop a highly successful business, allowing songwriters, composers and publishers to be fairly compensated for their creative 

endeavors. 

Thank you, and I would be glad to answer any questions. 

[The prepared statement of Mr. Bryant appears as a submission 

for the record.] 

Chairman HATCH. Well, thank you, Mr. Bryant. 

Mr. Israelite, we will turn to you. 

STATEMENT OF DAVID ISRAELITE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATIONAL MUSIC PUBLISHERS’ ASSOCIATION, WASHINGTON, D.C. 

Mr. ISRAELITE. Thank you, Chairman Hatch, Senator Leahy. I 

am David Israelite, the President and CEO of the National Music 

Publishers’ Association. I thank you for allowing me to testify today 

about music licensing reform, and I thank you for allowing Irwin 

Robinson, the Chairman and CEO of Famous Music and the chairman of my board, to submit written testimony for the record. 

For more than 80 years, NMPA has been the principal trade association representing the interests of music publishers and their 

songwriter partners in the United States. A music publisher is a 

company or individual that represents songwriters by promoting 

songs, licensing the use of songs and protecting the property rights 

of the songwriter. Put simply, the role of the music publisher is to 

represent the interests of the songwriter and the song. 

While this is a hearing about music licensing, I must thank you, 

Mr. Chairman, and you, Senator Leahy, and the members of this 

Committee for all that you have done to help music through your 

efforts to protect intellectual property. You have long recognized 

that the property rights in intellectual property deserve no less 

protection than physical property. It is an important value and one 

that is relevant to this hearing. 

Mr. Chairman, I know that you and several other members of 

Congress are concerned about the recent Supreme Court decision 

in Kelo v. The City of New London regarding the rights of private 

property owners. A taking of property for the public good must be 

balanced very carefully against the importance of private property 

20 

rights, which are the cornerstone of our constitutional freedoms. 

While we can all agree that it is in everyone’s best interest to develop the digital music industry and make it successful, it must not 

be done in a way that is disrespectful of the private property rights 

of creators. 

Many people would be surprised to learn that in every recorded 

song there exist two separate and distinct copyrights. When a songwriter writes the words and notes of a song, that musical composition contains a copyright. When an artist records that song, that 

particular version of the songwriter’s song or that sound recording 

also has a copyright. Both copyrights contain property rights, and 

the songwriter and the artist both deserve compensation for the 

use and sale of that property. What would surprise people even 

more is to learn that while the value of an artist’s sound recording 

is governed by a free market, the value of a songwriter’s musical 

composition is controlled and regulated by the Government. 

Further complicating the music business is the emergence of digital technology. While digital technology provides an exciting new 

medium for distribution of music, it also presents new challenges 

to the licensing of music. A digital media company wishing to sell 

music must obtain both copyrights. It must obtain the sound recording copyright from the recording industry at a price negotiated 

in a free market and it must obtain the musical composition copyright from the publishing industry at a price largely controlled by 

the Government through Section 115 of the Copyright Act. 

Songwriters and music publishers are excited about the emergence of digital technologies, but it always must be remembered 

that the purpose of a digital music company is to sell the private 

property of others. With that in mind, we recognize that there are 

challenges to the licensing of this private property. 

NMPA, through its wholly-owned subsidiary, the Harry Fox 

Agency and its publisher clients, have issued nearly 3 million licenses to at least 385 different licensees for digital delivery of musical works. There are several digital media companies offering millions of songs to the public today. The system has allowed these 

companies to launch successfully, but the system can work better. 

NMPA, along with ASCAP, BMI, the Songwriters’ Guild and the 

National Songwriters’ Association, have proposed a solution which 

respects property rights, protects creators and addresses the needs 

of licensing reform for the digital age. Our proposal, called the 

unilicense, would create a one-stop shop where online subscription 

services could obtain a blanket license covering both performance 

and mechanical rights through a licensing agent. 

Our proposal would minimize disruption of the industry by maintaining existing licensing structures, thus eliminating any additional administrative expenses. It is a proposal that has been embraced by both songwriters and publishers, and is the subject of 

continuing negotiation with the Digital Media Association. 

There are other proposals that suggest more radical changes to 

the music business. While songwriters and music publishers are 

ready and willing to help facilitate the efficient licensing of musical 

compositions of their property, we would be opposed to any proposal that will impose more Government control, be less respectful 

21 

of private property rights, or create an even more unlevel playing 

field in the music business for the songwriter. 

I thank you again for this opportunity to testify and I look forward to answering any questions you may have. 

[The prepared statement of Mr. Robinson appears as a submission for the record.] 

Chairman HATCH. Well, thank you so much. This has been an interesting panel to me. Of course, you are citing the various interests and the various problems that exist. 

Let me start with you, Mr. Israelite. I am intrigued by the 

unilicense concept that you have mentioned in your remarks and 

that has been advanced by some folks. Now, how would such a system work, if implemented? Let me just a couple follow-on questions 

on that. 

Would the license cover all rights to all musical works, and if so, 

would it be implemented by adding performance rights to Section 

115? Also, what mechanism would allow for adjustments to the royalty rate over time? 

Mr. ISRAELITE. We have offered the unilicense proposal because 

we have identified these digital subscription services as the area 

most in need of reform. There are several problems today. Number 

one, it is a unique type of service that blends both a performance 

right and a mechanical right. Yet, the digital company is troubled 

by the fact that it must pay both or doesn’t know exactly what it 

should pay. Secondly, there isn’t a rate today for a mechanical license in a subscription service. 

What our proposal would do is create a one-stop agency that 

would license all music. It would license both the performance and 

mechanical rights for one price. That agency would then distribute 

the money through existing distribution mechanisms, so that the 

user or the license would never have to choose between a performance or a mechanical, would not have to pay twice, and would get 

blanket licensing for all works, for all rights. But yet it would leave 

the current system in place so that the current mechanisms to use 

for performance and mechanical licensing could continue to exist 

and work as they work today. 

We think it is a proposal that solves the problem today. It is one 

that has been embraced by, I think, most, if not all of the songwriting and publishing organizations, and it has been the subject 

of intense negotiation. We continue to negotiate. Obviously, money 

has been a large part of that negotiation, but in terms of implementation I think that we have worked out most of the issues 

about how it would work. 

Chairman HATCH. Would there be any way for publishers to opt 

out? If so, wouldn’t that raise the same concern that has been 

voiced by many about both the current system and the proposals 

to move to a system of multiple collective rights organizations or 

music rights organizations, MROs, if you will, namely the inefficiency of having to license from numerous rights-holders, agents or 

MROs? 

Mr. ISRAELITE. One of the advantages of the unilicense is the 

concept of being able to go a single place to get all of the rights. 

The issue of the opt-out is one that we continue to negotiate in our 

private negotiations. Obviously, there are some that would prefer 

22 

to be able to license directly, as they do today in the current marketplace. 

Some of the other proposals that have been put on the table potentially could create even more places to have to go for licenses. 

For example, the idea of creating MROs, or multiple rights organizations, that have both, but yet not limiting the number of them 

could create a situation where you would have thousands and thousands. 

I think we can work that out. I think we can make it so that— 

I am not sure that one-stop shopping is necessarily what is required, but as long as it is manageable. And I don’t think that the 

digital media companies would mind as long as they have a manageable number of places to go to get the rights, much like they 

do in the performance rights area today where they go to three different ones to get their rights for performances. 

Chairman HATCH. I am not against having any of you who care 

to make any comments about these things interrupt and make 

them. 

Mr. GLASER. What I would say, Senator Hatch, on that point is 

since Mr. Israelite mentioned the services, from our company’s perspective and DiMA, we have a significant preference for Register 

of Copyright’s proposal. It may be that if there is further clarification on the unilicense, some of the issues would be addressed. But, 

specifically, of the ones we know about, the notion of opt-outs defeats the purpose of a blanket license and would be probably worse 

than the status quo. 

In terms of the royalty rate, we have a process that has worked 

most recently in our arbitration with the Copyright Office over the 

rate for radio stations. Like all of these things, it was a negotiation. 

The negotiation didn’t conclude successfully, and then there was an 

arbitration that resulted in an outcome that we as an industry can 

live with. I think that process is far superior to the Congress trying 

to set a price or a price mechanism. 

One other element is having prices where you have to have a 

fixed minimum per subscriber would limit innovation in a very specific way. For instance, we have a service called Rhapsody 25 that 

we introduced in April. It is one of the best mechanisms that we 

think we have come up with in the industry to combat piracy 

where a consumer can listen to up to 25 on-demand streams a 

month without being a paying subscriber. And on the 26th, they 

say, hey, you are done. 

We got all of the major record companies to agree to that, which 

was a fair amount of work, but they were all ultimately interested 

in combatting piracy. And having a free on-ramp to legitimacy 

seemed like a good way to go. If we had had a per-subscriber minimum rate, we could have never have done that. So you have got 

to be very careful when setting prices to avoid doing it in a way 

that limits innovation. 

Chairman HATCH. I have some other questions, but I will turn 

to Senator Leahy and then I will ask my other questions. 

Senator LEAHY. Well, I was just curious. The NMPA and the 

Songwriters’ Guild have put forth a proposal that would provide 

them with 16 2/3 percent of gross Internet subscription service revenues. Am I correct on that? 

23 

Mr. GLASER. Yes, Senator. 

Senator LEAHY. I understand that other countries use some different formulations. 

I will start with Mr. Glaser and ask each one of you the same 

question. What is the appropriate amount of compensation for 

songwriters, and do you favor an approach that guarantees a percentage of revenues or some other kind of determination? 

Mr. GLASER. Well, I would say that it is a little bit hard to answer the question in the absolute because from our standpoint we 

care about the cumulative cost; in other words, what we are paying 

all of the rights-holders, in general. Today, it has been widely reported that that rate is about 50 percent, plus or minus, and if it 

ended up going from 50 percent to 67 percent, that would have a 

significantly deleterious effect. 

Senator LEAHY. I am talking about the amount to songwriters. 

Mr. GLASER. Well, that is what I am saying. It is a little bit hard 

to answer in the abstract. I will tell you that internationally where 

there have been negotiations, like in the UK, France and Australia, 

the online services are paying 8 percent or less of revenue. So that 

has been marketplace negotiations. Now, certainly, some of the 

rights-holders have gone in looking for more, but that is kind of 

what we are seeing in the marketplace today, which is principally 

internationally what is going on. 

Senator LEAHY. Mr. Carnes. 

Mr. CARNES. Well, to add to that, first of all we don’t know exactly what they are paying for. Their subscription services may be 

covering who knows what. I know the one 8-percent rate that I 

know of was a start-up rate. It was a rate in the UK, where they 

gave them the opportunity to start at 8, but it is supposed to go 

to 12, and then I don’t know where it goes from there. 

I can tell you this: If you ask somebody on the street, how much 

do you think the songwriter is getting for this one-dollar song, they 

will tell you probably 50 cents. 

Mr. GLASER. And how much are you getting on the pirate networks, Mr. Carnes? 

Mr. CARNES. Well, now, you know, if we are going to try to compete with free, then we are going to have to drop the rate all the 

way down to what they are talking about—nothing. I think this is 

a property rights thing, just like David was saying. It is about 

what my property is worth and how I can make a living creating 

it. 

Senator LEAHY. Mr. Cuebas. 

Mr. CUEBAS. Well, our interest primarily is in retail and getting 

this to the consumer. We do want the songwriters to get paid. We 

want everybody to get paid here. We just want it to be easy to get 

these licenses so we can offer it to our consumers. If we are going 

to compete with these online services who are offering 4 millionor-so tracks and the best I can offer them is 1 million, then I can’t 

compete. 

Senator LEAHY. But you don’t have a feeling on the 16 2/3 percent of gross Internet subscription service revenues? 

Mr. CUEBAS. Not on the percentage, no. 

Senator LEAHY. Thank you. 

Mr. Barros. 

24 

Mr. BARROS. On the subscription service, I think the matter 

needs to be studied. I don’t know if 16 2/3 is right or not, but I 

would certainly be willing to roll up my sleeves and figure it out 

and help figure it out. But I do think that the 16 2/3 concept is too 

specific. We are only talking about subscription services here and 

I think the issue is really broader than this. 

For example, when we get to the physical world, I think the 

same issue applies. A percentage royalty has to be brought to bear, 

and what is that correct percentage royalty? My proposal would be 

that we look at it in such a way that right now we try to create 

that right economic division without disrupting the economics of 

the business. 

One thing you have to clearly remember is that somebody is also 

investing a lot of money. Record companies spend millions of dollars trying to promote artists, and therein promote songs, too. So 

there is a significant investment that goes into it and there is the 

right division of the profits from that and payment for costs and 

supplies, and I think we would need to just study that and come 

up with the right number. 

Senator LEAHY. Mr. Bryant and Mr. Israelite, you believe in the 

16 2/3? 

Mr. BRYANT. Well, I think there are several benchmarks you can 

look at for the 16 2/3. Ring tones in the last few years have sold 

over a quarter of a billion units that have been paid for, and the 

approximate share for a publisher is 10 percent. And between BMI, 

ASCAP and SESAC, it is somewhere between 5 and 6 cents. So you 

have in the marketplace that has been negotiated freely approximately 16 cents that is working in the digital area. 

Also, in the home recording digital situation with DART, there 

was a two-to-one ratio—the artist, record company twice that of the 

underlying work, the writer and the publisher share. What is being 

suggested here is a three-to-one, which is certainly far more reasonable. 

I would suspect, in light of what Rick said, that it is very reasonable, and that indeed when you are measuring it up to what the 

record company is getting for their share and what someone may 

have to pay for the record company share, it may not work into the 

model that Mr. Glaser is speaking of. But that really shouldn’t be 

cut out of the hides of songwriters and publishers. That is an examination of the model, I would suspect, but there are several very 

good examples in the marketplace that work. 

Senator LEAHY. Mr. Israelite. 

Mr. ISRAELITE. Thank you, Senator. Two things. First of all, I 

think it is important to recognize that since 2001 we have not had 

a rate for these subscription services and that publishers and songwriters have voluntarily licensed the entire catalog that we represent without knowing what our rate is. And we haven’t distributed one penny in those last four years to allow these new services 

to get off the ground. It is something that we have done to help 

them. 

Secondly, the reason why the market doesn’t work today is because if you are a DiMA company and you have to go out and get 

both copyrights, one of the copyrights represented by the record laVerDate Aug 31 2005 12:19 Sep 10, 2008 Jkt 000000 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 S:\GPO\HEARINGS\22919.TXT SJUD1 PsN: CMORC
25 

bels has a complete free market. They can charge whatever they 

want and if you don’t like it, they can say no. 

On our side of the equation, with our copyright, we are controlled, and as a result the DiMA companies know that they can 

get our copyright without having to pay a rate that is negotiated 

in the free market. What has happened as a result of that is that 

these subscription services today have cut deals with the record 

companies where I think they are paying roughly 50 percent of revenue and they haven not been able to cut a deal with us because 

they know ultimately they can get our licenses and we don’t have 

a free market to say no. That has created quite a problem. 

We have put the number of 16 2/3 on the table. We anticipated 

that as part of a negotiation, we could work all this out. We haven’t 

gotten there yet, but we are still hopeful. We still think that we 

can work the economics out to make this work. 

Senator LEAHY. Well, Mr. Chairman, not only is my time up, but 

I have to go to another matter. These are very good things. We 

have a number of technical questions, including one very real one 

here: What do I have to do if I want to get the necessary licenses 

if we set up the Hatch-Leahy Music Store, either bricks and mortar 

or online? I wasn’t quite sure how you get through that thicket. It 

would be an eclectic problem. 

If I might, I would like to submit some of these questions for the 

record, but I do want to thank the Chairman for holding this hearing. 

Chairman HATCH. Well, thank you, Senator Leahy. 

If I could just ask a couple more questions, because this is an extremely interesting hearing to me. I want the system to work, I 

want everybody to come out of it whole. 

I know, Rob, if we don’t compensate writers, we are not going to 

have the creativity. If we compensate them too much so you can’t 

be in business, we won’t have the dissemination, just to cite the 

two of you. We have also been confronted with piracy that has been 

robbing us blind in this industry, and a belief by our young people, 

at least, in many respects that anything that is on the Internet is 

free and therefore they can take whatever they want to, regardless 

of whether they are robbing Mr. Carnes or not, which, of course, 

they are, and you and all of you. 

Let me just say, according to the NMPA testimony, the Harry 

Fox Agency has, quote, ‘‘issued almost 3 million licenses to at least 

385 different licensees for digital delivery of musical works,’’ unquote, that, quote, ‘‘represent the vast majority of musical works 

for which there is any meaningful level of consumer demand,’’ unquote. But you indicate that RealNetworks still, quote, ‘‘cannot obtain licenses for the broad category of songs it needs to compete 

with pirate services,’’ and that you ‘‘do not know the final licensing 

royalty costs,’’ unquote. 

Now, can you comment for the benefit of the Committee on this 

difference in perspective and explain what type of works you cannot license and why, so that we will understand that? 

Mr. GLASER. Well, there are two issues. One has to do with 

whether we can get a license at all, and the second has to do with 

whether or not we can get a license for all of the modes of use of 

a service, and I will explain by way of example. 

26 

One of our new capabilities is something called portable subscriptions. That means you pay a larger fee—$15 a month is our general 

fee for that—and you download music onto an MP3 player, kind of 

like an iPod, and you move that around. And as long as you every 

month check back in and we get a reporting of what songs were 

played so we can pay the artists, and we verify that you have a 

subscription that is active, you can keep doing that for paying $15. 

It is sort of a rental model for music. 

We have a lot of songs that we have the right to stream directly, 

but we don’t have the right either for publishing reasons or for performance reasons or for recording reasons to play. So it makes 

these portable subscription services much more confusing for a consumer, because we have a catalog of 1 million, but we may only 

have 600,000 where you can take them on the go. So do we sort 

of have to explain to consumers, hey, we have got this footnote out 

here for a third of our library? It is a difficult thing and it is one 

of the things that has impeded that kind of service. 

In turn, if you compare it to something like the illegal services 

like Grokster, they let you download and move it onto a portable 

device with no limitation at all. So that is a very specific thing 

where we have invented a lot of technology to make a better competitor against the pirate services and this specific licensing issue 

is getting in the way. 

I could go on, but I hope that that gives you a flavor of how this 

undercuts our ability to compete, not in a black-and-white way, but 

in a cumulative way that is quite significant. 

Chairman HATCH. Well, some claim that online music services 

will pay, as you have said, about half their revenues in music royalties, but that current arrangements funnel most of these royalties 

to the recording companies, leaving almost nothing for the songwriters. 

Do you agree with that, Mr. Carnes? 

Mr. CARNES. Well, as the negotiations stand right now, I mean 

I think that I am going to go back to the 16 2/3 percent. I thought 

that was entirely reasonable because the songwriter’s share of that 

is only 8 1/3, which leaves more than 90 percent for everybody else. 

I mean, I feel like that is reasonable. We are taking a real leap of 

faith here by going with a percentage rate instead of a penny rate. 

Chairman HATCH. Well, let me ask you this, Mr. Glaser. What 

proportion of the overall royalty payment goes to the record labels 

for the sound recording and what proportion is expected to go to 

songwriters and publishers, if you know? 

Mr. GLASER. Well, in terms of expected, it is very hard to say. 

We are reserving money; in fact, we have already booked it as expenses and every quarter our accountants and our lawyers write 

down what they think is the rate to reserve. I don’t actually know 

what the rate is. I know, cumulatively, we have set aside probably 

millions of dollars at this point, and we would love to pay Mr. 

Carnes and his colleagues through the agencies here as soon as we 

have a rate established. 

So this isn’t a case where we are going to have to change our economics if there is a fair rate. We have set that money aside. So 

when we say 50 percent, that is based on including what we pay 

27 

the recording companies today, both the majors and the independents, and what we expect we will pay. 

Now, just to be clear, that is only for on-demand services. For 

things like radio services, there already are rates established either 

through the licensing regimes or through negotiations that we have 

done directly with ASCAP and BMI. And those rates, I believe— 

and I will get corrected—are in sort of the 3- to 5-percent range for 

radio play. 

And that is a final point. We are the only kind of service that 

is paying both performers and songwriters for radio play. So our industry offers a better deal, and I believe a fairer deal to artists 

than traditional radio, because traditional radio only pays publishing and it doesn’t pay recording. So I think our service, if you 

looked it sort of thoroughly, is the most artist-friendly kind of service out there. And we are willing to pay fair rates; we just don’t 

want the rates to accumulate up to where it makes the economics 

of our business unsustainable or where we are disadvantaged relative to other broadcast methods, be it either radio-style or full sort 

of on-demand services. 

Chairman HATCH. Well, as you know, I admire you and the pioneer work that you have done in this industry and how you have 

tried to at least help us move along the lines of winning over the 

pirates out there. I have a lot of respect for that. 

Mr. GLASER. Thank you, Mr. Chairman. 

Chairman HATCH. We still have a lot of questions, but we appreciate what you are trying to do. 

Mr. Bryant, let me turn to you for a second. What are the potential concerns for creating an exemption for incidental reproductions 

or incidental performances so online services, depending on the 

type of service, would have to get a mechanical license or a performance license, but not both? Is there a practical solution of making our current system of exclusive rights which developed in a 

world of sheet music and live public performances fit in the online 

world a little bit better? Can you help me with that? 

Mr. BRYANT. I am not sure, Mr. Chairman, of the scope of your 

question. I heard it, but I am not sure I understood that. 

Chairman HATCH. Well, basically, what I am saying is if we create an exemption for incidental reproductions or incidental performances so online services, depending on the type of service, 

would have to get a mechanical license or a performance license, 

but not both— 

Mr. BRYANT. You are talking about ephemeral rights, I believe. 

Chairman HATCH. Yes, I think so. 

Mr. BRYANT. I am sure that the Copyright Act as it stands now 

implicates, certainly, a performing right with each transmission. 

Chairman HATCH. Right. 

Mr. BRYANT. And I believe that creators are certainly entitled in 

this new space to every opportunity to make income, and I believe 

it was stipulated in the Copyright Act; I am sure it was. 

Are all of the situations that we have discussed here today at 

each end of the spectrum the best way to fairly handle this? I am 

not sure, but as David said, there seems to be at this point a little 

bit of reluctance to start talking about some of these issues when 

there are propositions on the table. We have writers and publishers 

28 

who are literally waiting for some decisions and we are in the process of trying to come up with some of those solutions on a real 

workable scale. 

Of course, BMI, of itself, licenses every situation. You can get a 

BMI license, as I am sure Mr. Glaser knows, by simply asking for 

one. It is an automatic situation. It certainly doesn’t take anybody 

out of a going into business model because you can take us to rate 

court and come with a fair rate at some point if we can’t agree to 

one. 

In some of the other situations which don’t have the rate proceedings, I think it comes down to negotiating and working in the 

marketplace. Even though BMI has a rate proceeding, we have 

rarely used it because we certainly negotiate and we work out situations. So I think once again, as David said, there are some solutions out there on the table and we are ready to negotiate. 

Chairman HATCH. Mr. Cuebas, let me ask you a question. How 

important is it to music retailers to get a more robust stream of 

releases in new physical formats like your dual disc format, and 

how much of a difference would that make to purchasing behavior? 

Mr. CUEBAS. Well, recently with dual discs, we have seen increased sales. We are offering the customer additional value. The 

value of CDs has been decreased tremendously and dual disc gives 

the consumer the value they are looking for. 

Chairman HATCH. Let me just say this. You are all interrelated. 

The problem is the system isn’t working well, and part of it is because of piracy, but part of it is the way the system has built upon 

bygone years. We are in a digital world now, we are in an online 

world now. 

Naturally, every one of you has to make money, starting with the 

music writers. I have known Mr. Carnes for a long time and he is 

a marvelous songwriter, no question about it, one of the best in the 

business. And he is good-natured about it, too, but not when it 

comes to representing his group. He feels like they are getting 

screwed. 

I think that is a fair comment. Don’t you? 

Mr. CARNES. Yes. 

Chairman HATCH. Yes, okay, and I can personally testify to that 

in the sense that I know some wonderful writers who are as good 

as anybody in the business who just can’t make it anymore and 

have had to get out of the business and work in fast-food restaurants, and so forth. Generally, they have to anyway just to be 

able to sustain themselves while they are writing. 

What percentage of writers would be able to live off what they 

make from writing music? 

Mr. CARNES. I hesitate to make a guess. You know, it has got to 

be less than 1 percent, though. 

Chairman HATCH. I can’t help but remember about seven or 

eight years ago I spoke to one of the national groups, and I had 

just received my first royalty check for writing songs and it was, 

I think, $57 or something like that, which is a big, big check for 

me. There were about 1,000 people there, all music writers, and I 

got up and I said I just got my first royalty check, and the place 

went crazy. They stood on chairs and yelled and screamed, and so 

forth. 

29 

One of the leaders of the industry leaned over to me and she 

said, Senator, the reason they are so excited is, as good as everybody is in this room, very few of them will ever receive a royalty 

check at all. So, naturally, I have tried to help the creators because, Mr. Glaser, without them—of course, there have been 

enough creators in the past and maybe we can just live off that, 

but I don’t think so. We have got to continue to innovate and continue to come up with ways of solving these problems. 

Mr. GLASER. Absolutely. 

Chairman HATCH. But I generally try to help the creators because they are at the bottom of this totem pole, and unless they 

are performers who write their own music, there is very little 

chance for them to really be able to self-sustain themselves. I know 

some of the best in the business who can’t do it. As Rick said, we 

try to earn money so that we can continue doing what we love, and 

that is what these songwriters tell me. 

One of the reasons why I started writing music was so I could 

understand this. And, boy, have I gotten so that I understand it. 

It is just terrible, and I empathize greatly with Mr. Carnes. Now, 

I also empathize with Rob Glaser. I have seen what he has had to 

do to create Rhapsody and to create this business. He has had to 

take on a lot of big-time people and go through an awful lot of 

fighting and screaming and litigation and everything else to create 

what really is a remarkably efficient and good system for delivering 

music. Knowing him, I know that he wants to pay what the market 

will bear, and I hope that continues to be true. 

You retailers, if you don’t have the music, you can’t sell it, and 

we all know that. What BMI and ASCAP and SESAC do is extremely important. The question is should we go to one single, unitary system whereby all of these special deliverers of services are 

kind of pushed out into just one great big agency that does it. 

I see a lot of different problems here that have to be solved, and 

I don’t know that we in the Congress are capable of solving them. 

Maybe we are, with your help, but this hearing is really a beginning hearing for trying to understand and sort this out to see if 

there is some way that we can be fair to everybody concerned. But 

I would like to start with the songwriters because without them, 

all of this is a house of cards. So I am very concerned about it. And 

as you know, we are going to just turn to Marybeth here and she 

is going to solve all these problems for us. It is only fair that you 

have to live up to your earth-shaking reputation. 

Let me leave just a final thought here and that is that we are 

open here, Senator Leahy and I and the other members of this 

Committee, too good ideas. We don’t have any desire to hurt anybody. We don’t have any desire to pick one side over the other. 

When I say that I naturally have a lot of affinity for songwriters, 

I do because they create this stuff, and without them everything 

else falls. 

A few years ago, worrying about piracy, I tongue-in-cheek said 

that there is technology that could destroy individual PCs. My 

gosh, you would have thought the whole world was coming to an 

end. I was just kidding, just kidding, but trying to make the point 

that this is a terrible problem and that we have to do something 

30 

about it. And I challenged the industry to help us. Mr. Glaser is 

doing something about that, and so are all of you. 

I guess I am so serious most of the time, they don’t catch my 

humor when I actually tell—and they are still complaining about 

that. I had so many vicious e-mails that you would have thought— 

it was actually a lot of fun, between you and me. 

But I want some help here, and I know Senator Leahy does. If 

you guys can help us to know how to do this system better, we 

want to do it better. I am not sure that legislation is the answer, 

but we are certainly willing to look at if we could help everybody 

in the process. I do believe that ASCAP, BMI and SESAC—I didn’t 

mean to put them in any particular order, but I believe they do a 

tremendous service. I also believe that the publishers can do a tremendous service, too. Naturally, without retail we can’t do it. Without delivery systems, we can’t do it, and the wholesalers. I mean, 

it all is a system that has worked to a degree in the past, but it 

is not working well today and we need to come up with some ideas 

that will work here. 

The whole purpose of this Subcommittee is to try to help resolve 

some of these issues. And we don’t want to pick any sides. We want 

to get these resolved as best we can, and we would appreciate the 

best ideas you have. 

Does anybody have any other comments they would care to 

make? 

Rick, I am amazed that you are not willing to make some more 

comments. I have been around you enough that you have never 

lacked a comment. 

Mr. CARNES. I have always just been an opening act. I am not 

a closer. 

[Laughter.] 

Chairman HATCH. That is great, that is great. 

Well, I am grateful to all of you. This has been helpful to us. We 

are going to continue to hold these hearings and hopefully we can 

get to the bottom of this in the future. Thanks so much. 

[Whereupon, at 4:12 p.m., the Subcommittee was adjourned.] 

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