Exclusive: How the RIAA Would Fix Music Licensing

To help streamline and modernize the way music is licensed, the RIAA wants new blanket licenses and market-based royalty rates to replace the current system of one-by-one licensing and rates set by courts. These and other suggestions were made in the RIAA's response to the U.S. Copyright Office's request for comment on music licensing.
The RIAA believes any fix to the music licensing system should include a simplified, blanket license that pays a fair market value to creators and copyright owners. In its 52-page filing to the Copyright Office, the RIAA argues that a market-derived royalty system would benefit rights holders and creators, product greater consumer choice, cost savings for digital services due to simpler licensing procedures, improved transparency and accuracy of royalty payments, and help spur new business models and services by providing greater transparency of the costs and eliminating the delays caused by litigation.

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“Modernizing the licensing system for musical works is a win for everyone -- from digital music services to songwriters, music publishers, artists, labels, and fans,” said Cary Sherman, CEO, Recording Industry Association of America, in a statement.  “That’s the only way this will work – it must be a collaborative exercise."
Here are the main suggestions in the RIAA's filing:
· Bundle the rights for reproduction, distribution and performance into a single licensing system. "It makes no sense to have three entirely separate processes for setting rates, licensing and paying for a single set of activities," the RIAA says in the filing.
· Replace Section 115, which establishes the compulsory right for mechanical reproductions of phonorecords, with a "modern, efficient blanket license" that would cover all rights involved with 21st-century music products. The blanket license would have a single process for obtaining licenses, paying royalties and distributing royalties to creators and rights holders. Either a new or an existing organization would administer this process. However, licenses for "third-party created product," such as synchronization rights for television and performances at live venues, would exist outside this new blanket license.
· Replace the Copyright Royalty Board and rate court, and the 17 mechanical rate categories, with "a rate that is an agreed, consistent, set percentage of label revenues from modern music products." Labels would negotiate rates on the open market, and publishers would get an agreed-upon percentage of the deals.
· Establish a pre-1972 copyright in the federal licensing system. Currently, pre-1972 sound recordings are excluded from the statutory licenses under which services such as Pandora and SiriusXM operate. These pre-1972 sound recordings, which the RIAA estimates comprise 10% of all usage on statutory services, are instead protected under various state laws.
· Establish a terrestrial performance right for sound recordings. While songwriters and publishers currently have a performance right for terrestrial radio, record labels and performing artists receive royalties from terrestrial radio only through direct negotiations. A number of labels, namely Warner Music Group and Big Machine Label Group, have negotiated deals with some large broadcasters.
· Create rate parity between digital services. Services that existed before 1998 -- satellite and cable radio -- pay statutory royalties using the 801(b)(1) rate standard rather than the "willing buyer, willing seller" standard used for Internet radio. Whether rates are set through direct negotiations or by the Copyright Royalty Board, the RIAA desires satellite and cable radio to pay market rates.
Music licensing is, as the RIAA put it, "byzantine" and "complex." The system for copyright and licensing was built in an era of physical media such as phonographs and printed sheet music. Now music is commonly streamed to computers and, increasingly, mobile devices. How music and other media -- such as music and album art -- are licensed needs to be updated.
Congress is already looking at the matter. House Judiciary chairman Bob Goodlatte announced last year his desire to conduct a comprehensive review of U.S. copyright law, and a number of hearings have already taken place. According to sources, music licensing will be the focus of a hearing in June by the House Judiciary subcommittee that oversees intellectual property.


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