Publication Date

1-19-2016

Abstract

[Excerpt] The laws that determine who pays whom in the digital world were written, by and large, at a time when music was primarily performed via radio broadcasts or distributed through physical media (such as sheet music and phonograph records), and when each of these forms of music delivery represented a distinct channel with unique characteristics. With the emergence of the Internet, Congress updated some copyright laws in the 1990s. It applied one set of legal provisions to digital services it viewed as akin to radio broadcasts and another set to digital services it viewed as akin to physical media. Since that time consumers have increasingly been consuming music via digital services that incorporate attributes of both radio and physical media. However, companies that compete in enabling consumers to access music may face very different costs to license music, depending on the technology they use and the features they offer. These differences in technology and features also affect the amount of money received by songwriters, performers, music publishers, and record companies.

U.S. copyright law allows performers and record labels to collectively designate an agent to receive payments and to negotiate the licensing fees that certain types of digital music services must pay to stream music to their customers. Groups representing public radio and educational stations reached voluntary agreements with the agent, SoundExchange, in 2015. Rates paid by parties that do not reach voluntary agreements with SoundExchange during a limited negotiation period are instead set by the Copyright Royalty Board (CRB), a panel of three judges appointed by the Librarian of Congress.

On December 16, 2015, the CRB set rates for online music streaming services for the period 2016 through 2020. For nonsubscription services, the CRB reduced the per-stream rate it had set in the previous rate proceeding, but the costs paid by several “small” music streaming services are likely to increase. Advocates of the small streaming services have launched a petition asking Congress to either allow their previous agreements to continue indefinitely or discontinue the requirement that small streaming services pay royalties to performers and record labels. SoundExchange has objected that the rates set by the CRB do not provide adequate compensation to performers and record labels.

Members have introduced several bills in the 114th Congress that would change the amounts various participants in the music industry pay or receive in royalties. These bills are controversial, as they could alter the cost structures and revenues of broadcast radio stations, songwriters, performers, and others at a time when the music industry’s overall revenues are not growing. At the same time, the U.S. Department of Justice (DOJ) is continuing a review of consent decrees it entered into with music publishers in the 1940s. The outcome could affect the extent to which songwriters can control the use of their works.

Comments

Suggested Citation
Gravelle, J. G. (2016). Money for something: Music licensing in the 21st century (CRS Report R43984). Washington, DC: Congressional Research Service.

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