Songwriters are legally entitled to get paid for reproductions and public performances of the notes and lyrics they create (the musical works). Recording artists are entitled to get paid for reproductio ns, distributions, and certain digital performances of the recorded sound of their voices combined with instruments in some sort of medium, such as a digital file, record, or compact disc (the sound recordings). Yet these copyright holders do not have total control over their music. For example, although Taylor Swift and her record label, Big Machine, withdrew her music from the music streaming service Spotify in 2014, a cover version of her album 1989 recorded by the artist Ryan Adams could be heard on the service. Copyright law allows Mr. Adams to perform, reproduce, and distribute Ms. Swift's musical works under certain conditions as long as he pays Ms. Swift a royalty. Thus, as a singer who owns the rights to her sound recordings, Ms. Swift can withdraw her own recorded music from Spotify, but as a songwriter who owns the rights to her musical works, she cannot dictate how the music service uses other recorded versions of her musical works. The amount Ms. Swift gets paid for both her musical works and her sound recordings depends on market forces, contracts among a variety of private-sector entities, and federal laws governing copyright and competition policy. Congress wrote these laws, by and large, at a time when consumers primarily accessed music via radio broadcasts or physical media, such as sheet music and phonograph records, and when each medium offered consumers a distinct degree of control over which songs they could hear next. With the emergence of music distribution on the internet, Congress updated some copyright laws in the 1990s. It attempted to strike a balance between combating unauthorized use of copyrighted content—a practice some refer to as "piracy"—and protecting the revenue sources of the various participants in the music industry. It applied one set of copyright provisions to digital services it viewed as akin to radio broadcasts, and another set of laws to digital services it viewed as akin to physical media. Since that time, however, music distribution has continued to evolve. In addition to streaming radio broadcasts ("webcasting") and downloading recorded albums or songs, consumers can stream individual songs on demand via music streaming services. The result, as the U.S. Copyright Office has noted, has been a "blurring of the traditional lines of exploitation." Figure 1 illustrates the evolution of music consumption over the last 40 years. In 1999, recording industry revenues reached their peak of $21.3 billion. That same year, the free Napster peer-to-peer file-sharing service was introduced. In 2003, after negotiating licensing agreements with all of the major record labels, Apple launched the iTunes Music Store to provide consumers a legal option for purchasing individual songs online. The year 2012 marked the first time the recording industry earned more from retail sales of digital downloads ($3.2 billion) than from physical media such as compact discs, cassettes, and vinyl records ($3.0 billion). Apple had approximately a 65% market share of digital music downloads. After peaking in 2012, however, sales from digital downloads began to decline, as streaming services such as Spotify, which entered the U.S. market in 2011, became more popular. Facing a mounting threat to its iTunes store, Apple launched its own subscription streaming music service, Apple Music, in 2015. The popularity of subscription music services has significantly altered music consumption patterns. According to the Recording Industry Association of America (RIAA), the proportion of total U.S. recording industry retail spending coming from webcasting, satellite digital audio radio services and cable services (digital subscriptions), and streaming music services increased from about 9% in 2011 (out of $7.6 billion total) to about 67% in 2017 (out of $8.5 billion total). After 11 consecutive years of declining revenues, consumer spending on music was flat between 2014 and 2015, grew 10% between 2015 and 2016, and grew 14% between 2016 and 2017. Nevertheless, annual spending on music by U.S. consumers, adjusted for inflation, is still nearly two-thirds below its 1999 peak. These changing consumption patterns affect how much performers, songwriters, record companies, and music publishers get paid for the rights to their music. Under copyright law, creators of musical works and artists who record musical works have certain legal rights. They typically license those rights to third parties, which, subject to contracts, may exercise the rights on behalf of the composer, songwriter, or performer. Owners of musical works and owners of certain sound recordings possess, and may authorize others to exploit, several exclusive rights under the Copyright Act, including the following: the right to reproduce the work (e.g., make multiple copies of sheet music or digital files) (17 U.S.C. §106(1)) the right to distribute copies of the work to the public by sale or rental (17 U.S.C. §106(3)) In the context of music publishing, the combination of reproduction and distribution rights is known as a "mechanical right." This term dates back to the 1909 Copyright Act, when Congress required manufacturers of piano rolls and records to pay music publishing companies for the right to mechanically reproduce musical compositions. As a result, music publishers began issuing mechanical licenses to, and collecting mechanical royalties from, piano-roll and record manufacturers. While the means of reproducing music have gone through numerous changes since, including the production of vinyl records, cassette tapes, compact discs (CDs), and digital copies of songs, the term "mechanical rights" has stuck. For sound recordings, federal copyright protection of reproduction and distribution rights applies only to recordings originally made permanent, or "fixed," after February 15, 1972. Works that were fixed prior to this date are protected, if at all, pursuant to a patchwork of state laws and court cases until February 15, 2067, but some music services have voluntarily negotiated agreements to pay royalties for use of sound recordings fixed prior to 1972. The Copyright Act also gives owners of musical works and owners of sound recordings the right to "perform" works publicly (17 U.S.C. §106(4) and 17 U.S.C. §106(6), respectively). However, for sound recordings, this right applies only to digital audio transmissions. Examples of digital audio transmission services include webcasting, digital subscription services (the SiriusXM satellite digital radio service and the Music Choice cable network), and music streaming services such as Pandora and Spotify. As with sound recording reproduction and distribution rights, sound recording public performance rights under federal copyright laws are granted only to recordings fixed after February 15, 1972. Who pays whom, as well as who can sue whom for copyright infringement, depends in part on the mode of listening to music. Consumers of compact discs purchase the rights to listen to each song on the disc as often as they wish (in a private setting). Rights owners of sound recordings (record labels) pay music publishers for the right to record and distribute the publishers' musical works in a physical format (such as a CD, vinyl record, or digital download). Retail outlets that sell digital files or physical copies of sound recordings pay the distribution subsidiaries of major record labels, which act as wholesalers. Radio listeners have less control over when and where they listen to a song than they would if they purchased the song outright. The Copyright Act does not require broadcast radio stations to pay public performance royalties to record labels and artists, but it does require them to pay public performance royalties to music publishers and songwriters for notes and lyrics in broadcast music. As described below in " Broadcast Radio Exception ," Congress appears to have concluded in 1995 that the promotional value of broadcast radio airplay outweighs any revenue lost by record labels and artists. Digital services must pay record labels as well as music publishers for public performance rights. Both traditional broadcast radio stations and music streaming services that limit the ability of users to choose which songs they hear next (noninteractive services) make temporary copies of songs in the normal course of transmitting music to listeners. The rights to make these temporary copies, known as "ephemeral recordings," fall under 17 U.S.C. Section 112. (For more on ephemeral recordings, see " Reproduction and Distribution Licenses .") Users of an "on demand," or "interactive," music streaming service can listen to songs upon request, an experience similar in some ways to playing a CD and in other ways to listening to a radio broadcast. To enable multiple listeners to select songs, the services download digital files to consumers' devices. These digital reproductions are known as "conditional downloads," because consumers' ability to listen to them upon request is conditioned upon remaining subscribers to the interactive services. The services pay royalties to music publishers/songwriters for the right to reproduce and distribute the musical works and royalties to record labels/artists for the right to reproduce and distribute sound recordings. The music industry comprises three distinct categories of interests: (1) songwriters and music publishers; (2) recording artists and record labels; and (3) the music licensees who obtain the right to reproduce, distribute, or publicly perform music. Some entities may fall into multiple categories. Many songwriters, lyricists, and composers (referred to collectively as "songwriters" in this report) work with music publishers. On behalf of songwriters, music publishers promote songs to record labels and others who use music. They are also responsible for licensing the intellectual property of their clients and ensuring that royalties are collected. Under agreements between a songwriter and a publisher, the publisher may pay an advance to the songwriter against future royalty collections to help finance the songwriter's compositions. In exchange, the songwriter assigns a portion of the copyright in the compositions he or she writes during the term of the contract.