Amid the increasingly liquid landscape of the music industry, there is a constant struggle to re-define the terms used in copyright law. These disputes are often over only a few words, but their impact on future royalty structures and business models is enormous. As we head further into the digital age, performing rights organizations seek to monetize public performances through the digital medium on three fronts: downloads of music, downloads of audiovisual works, and song-samples. ASCAP and BMI have been at the forefront of many of these legal battles, most notably suing Verizon and AT&T in their failed attempt to establish public performance royalties in ringtones. Are the performance rights organizations simply fulfilling their fiduciary duties to rights holders or have they overreached?
The right to public performance is one of the six exclusive rights granted to copyright holders by Copyright Law. To dissect these issues clearly, we should look at what makes the performance of a song “public”. According to Section 101 of the Copyright Act:
(1) to perform or display it at a place open to the public or at any place where a substantial number of persons outside of a normal circle of a family and its social acquaintances is gathered
So if your phone rings on the train and everyone hears Michael Jackson’s “Beat It,” it seems that this ‘performance’ would be ‘public’ under this definition alone. However, this certainly leaves a lot to be desired as it merely specifies the receiving environment of a performance. To account for the gradient of uses for copyrighted materials, limitations on exclusive rights are made in Copyright Law. For public performances, royalties are not payable for performances of an educational nature, religious services, and:
(4) performance of a non dramatic literary or musical work otherwise than in a transmission to the public, without any purpose of direct or indirect commercial advantage and without payment of any fee or other compensation for the performance to any of its performers, promoters, or organizer
Indeed, this exemption on performance royalties for ringtones was used recently for cell phone users and service carriers . In October 2009, U.S. District Judge Denise Cote ruled that cell phones are not sources of commercial public entertainment. The court took some time to determine if there are any commercial purposes for playing ringtones, and came to the conclusion that there are none. ASCAP did provide one example- the 2006 Chicago Sinfonietta “Concerto for Orchestra and Cell Phones,” where ringtones were incorporated directly in the performance. However, the defendant (Verizon Wireless) pointed out that ASCAP had a public performance license in place with the orchestra at the time of the performance.
Back in 2005, in a rate-court proceeding between ASCAP and music services provided by Yahoo, AOL, and RealNetworks, it was made clear that digital downloads are the more modern equivalent of album purchases, and therefore are ‘private’ in nature and not subject to performance royalties.
However, as David Israelite (President and CEO of the National Music Publishers Association) points out- “This is really a fight about the future… As more and more people watch TV or movies over an Internet line as opposed to cable or broadcast signal, then we’re going to lose the income of the performance. For people who do production and background music, that’s how they make their living.” If the NMPA had its way, anyone who sells a download would have to pay a performance royalty.
In contrast, Jonathan Potter- executive director of the DiMA (Digital Media Association), makes the case that this push is merely a knee-jerk reaction to the dry wells music industry executives once profited from so greatly:
These guys are afraid that the business model is shifting away from public performances to a model of private performances. This is a turf battle. They are saying, ‘The songwriters aren’t getting paid.’ Baloney. Songwriters are getting paid. They’re paid sync rights and (mechanical) rights. They aren’t getting paid for the public performance in a download because there is no public performance in a download.
The performance rights organizations have shown their cards regarding where they feel business are heading, and it shows they are worried about the impact this could have on songwriters and copyright owners.
Most controversial is the case made that 30-second iTunes samples should be subject to performance royalty as well. Apple has licenses to offer these samples with rights holders but they currently do so without paying. The argument is likely made that the previews add value to the music offered because it allows prospective music buyers to try before they buy, an important feature to the music download paradigm. Along with the recent pricing changes including an increase on popular iTunes downloads (.99 to $1.29), many are worried that any other added cost will further drive the price of downloads upward given the popularity of single-song downloads. As digital revenues seek to replace the more profitable physical sales-revenues, the argument for performance royalties in song samples appears more likely to sink than swim.
In sum, ASCAP and BMI’s fiduciary duty to their affiliates seems to explain their willingness to fight these battles. The digital realm certainly remains the wild west- especially in terms of copyright law. These skirmishes will likely continue as new methods of delivery continue to evolve. But these waters must be trolled carefully, as the main threat to the income of rights holders is not a lack of public performance income, but a lack of consumers who are willing to pay for music at all.
By Michael Benson