Will Work for Pennies: Music Publishers Seek More for Digital Downloads

19 09 2009


The price of digital music and movie downloads could be on the rise.

ASCAP, BMI, and other royalty collection groups have begun lobbying Congress to pass legislation to require music users and online digital distributors to pay performance fees each time a song, TV show or movie is downloaded. To grasp the significance of these new demands you have to understand a little bit about how artists and music publishers are compensated.

Mechanical Rights

U.S. copyright law grants songwriters and music publishers the right to license to others the ability to record a particular musical composition. However, once a composition has been recorded and released to the general public, any other artist may use the musical composition, but not the actual sound recording, as long as they pay fees to the writer and music publisher. The amount of these fees are set on a statutory basis and are known as mechanical royalties.

Performance Rights

Where mechanical licenses cover the right to record and distribute music, performance royalties compensate writers and publishers each time a song is played or “performed.” Examples of performances include songs played over the radio, background music in a television show, and even music played while you are on hold with a phone operator.

It would be cumbersome for an artist to negotiate and collect royalties each time their music was performed. To make it easier on artists, organizations were formed to negotiate royalty rates with music users and then collect and distribute those royalties back to the music writers and publishers.  In the United States, the two major organizations are the American Society of Composers, Authors & Publishers (ASCAP) and Broadcast Music Inc. (BMI).

The Issue

These organizations along with many music publishers believe mechanical fees do not adequately compensate artists and music publishers in the arena of digital distribution, and now look to extend their collection process to include royalties in three key areas: downloads of music, downloads of movies and television shows, and song snippets or samples.

These royalty groups argue that artists and composers are loosing out on royalties they should otherwise be receiving.

The CEO of Universal Music Publishing Group, David Genzer stated, “In the U.S. while we do get paid mechanicals from iTunes, we are not getting any performance income from Apple yet,” “(On iTunes) you can stream radio, and you can preview (tracks), things that we should be getting paid performance income for.” The desire to collect performance royalties is not limited to just music downloads. Genzer continued, “Also, if you download a film or TV show, there’s no performance (payment) and typically there’s no mechanical (payment) either.”

TV & Film Downloads

Copyright law already provides songwriters and publishers a revenue stream for music used in TV and film. When a song accompanies visual images, the copyright holder is compensated through a synchronization license. Common examples include songs used in television programs, commercials and movies. Although paying copyright holders for the use of their works is important, some consider collecting both performance royalties and synchronization fees as “double-dipping.”

Others like David Israelite, president of the National Music Publishers Association disagree. He stated, “If you watch a TV show on broadcast, cable or satellite TV there is a performance fee collected, but if that same TV show is downloaded over iTunes, there’s not. We’re arguing that the law needs to be clarified that regardless of the method by which a consumer watches the show there is a performance right.”

The lobbying groups face an uphill battle in their efforts for reform, and their success will depend upon whether downloading a song, TV show or movie can be considered a performance.

Under U.S. copyright law, the exclusive right to perform is limited to public performances. The Copyright Act was not enacted to restrict the private performances of copyrighted works. This important distinction allows you to privately listen to a song  for free, where a radio station must pay royalties when it plays that same song. Attaching a performance fee to a digital download may blur the line between the definition of a public and private broadcast of copyrighted material.

Song Snippets & Previews

Right now you can listen to small samples of songs without any compensation owed to songwriters or publishers. This makes sense since a user has not performed a full version of a song. However, the royalty groups want performance fees collected for even small song snippets. For instance, each time you visit the iTunes store and listen to a 30-second preview of a song, Apple would have to payout royalties. This makes more sense when it applies to steaming radio and full songs, but less when it applies to mere previews.

Undoubtedly, collecting performance royalties on mere previews would drive up the price for digital downloads. You cannot help but wonder if the lobbying efforts would be worth the negative backlash, not to mention the potential decline in digital download sales. Digital distribution has thrived not only because of its convenience, but also the price for digital content has remained competitive with the traditional CD format. Who will buy a digital album if the price exceeds that of a CD? Fortunately, a 30-second sample probably qualifies as fair use under current copyright law.

Source: Cnet