Chapter 21
Content Rights: The Realm of Music
Music has been at the center of many important, hotly disputed copyright conflicts for the past 100 years. In the digital content revolution, music continues this time-honored role. From music's complex relationship with radio and television broadcasters, to the use of music in film and television production, to pirated music on tape and disk, to the Internet, MP3, and Napster, fair exploitation of music has been a burning question in the development of copyright rules respecting ownership and use. Beginning in the early part of the 20th century and growing more forceful during the ensuing decades, the debate over just compensation for use of music has been as contentious as it has been entertaining.
Core Licenses for Music
Flowing from these disputes, four crucial licenses took shape and are now an essential part of copyright law and the way in which musical creators are rewarded. The broadcast media—radio and television stations—offer a perfect place to start consideration of these licenses.
Performance License
Most fundamentally, broadcast media perform music. The radio industry is, by and large, the single largest performance outlet for music. As discussed earlier, the right to perform music on radio and television is licensed by ASCAP, BMI, and SESAC, as the three major performing rights societies, and by a host of smaller operations and individuals that grant rights in libraries of music or individual compositions.
Synchronization License
Synch rights involve copying music onto film or video and associating the words and songs with images. Most television programs and films merge musical components with photography. Advertising also makes significant use of music. Granting a synch license—in other words, clearing music works for that purpose—is legally distinct from granting a public performance license and generally handled by different music agents. The Harry Fox Agency is probably the best known of the group; however, many others also grant these rights.
Master Use License
Once a musical performance is recorded, there is often no need to rerecord the work using different musicians or orchestras. You can simply use the LP, tape, or CD. However, to exploit the original rendition requires copying the sound recording, which is the province of the record label that made the original. Recording companies license the copying, and deals must be made directly with them.
Compulsory (Mechanical) License
A special provision of copyright law allows that, once a musical work is published, anyone can create recordings of one's own adaptation of it for public distribution and play on mechanical devices. A procedure spelled out in the Copyright Act comes into play whenever a negotiated mechanical license is unavailable. Procedures must be followed and fees paid according to the rules set forth in the Copyright Act and accompanying regulations. The compulsory license may be an alternative to the mechanical license, but it requires that the media hire the artists to create the adaptation.
Let us take a closer look at these four crucial musical rights and licenses (Figure 21-1).
Figure 21-1 Music Rights
Performance Rights
Since the 1950s, ASCAP has labored, quite successfully, under a federal consent decree. The decree was issued because, as an association of competitors, ASCAP challenged federal antitrust laws. As noted in Chapter 17, these provisions hold that conspiracies (that is, more than two people) in restraint of trade (that is, setting prices or requiring customers to buy or license one product, such as an unpopular song, to obtain the rights to another product, say, a popular song) are illegal. ASCAP, as an association of thousands of songwriters, which licenses all the works in its repertoire on a total or blanket basis, technically fits that definition. However, the radio industry, and later the television and cable television industries, needed the economies of scale that derive from blanket licensing. What has evolved is a system of licensing reviewed by a federal magistrate, whose job it is to see that the music license fee structure is reasonably fair to the composers and the users.
For radio stations needing to perform hundreds of different popular or classic tunes on a 24-hour-a-day basis, blanket licensing of a whole repertoire is a bitter (expensive) pill that makes sense. Even though stations initially argue that radio play helps to sell recordings and therefore the stations should not have to pay for the privilege of promoting record sales, the truth is that the stations make a lot of money from the public performance of popular songs. So, licensing is a must, and blanket licensing is an efficient way to go. There is no need to identify and clear works one at a time. Hundreds of songs a day, thousands of songs a year, may be publicly performed without legal anxiety.
Of course, for some stations, such as all-news radio outlets, music is a minor part of programming, compared with the talk component. However, no station escapes the need to license the performance of music, if only to ensure that commercials with music can be aired. To fit all users, the performing rights societies have established special licensing fees for stations that have less than a full music repertoire.
For television stations, the use of music may also be sporadic. Typically, programming originating from the network comes with music performance rights attached. Local newscasts and public affairs shows, which can occupy up to 25% of a station's programming fare, contain some, but not a predominant amount of, music. Program theme music may be licensed at the source or composed by company employees.
In general, syndicated programming creates the greatest need for a television station to license music. By tradition, most syndicated shows are sold to local television stations without music performance rights. However, with the proliferation of daytime talk, game, and reality shows, which contain little music other than in a theme, the need for blanket licensing diminishes. More than 20 years ago, because it seemed to be paying very high music license fees, the broadcast industry challenged the prevailing blanket system in court. The television stations argued they were obligated to pay for music clearances they never used. The argument was positively received, and a decision resulted in the creation of the per-program license. The per-program license was developed as an alternative to blanket fees. We next contrast the two fee arrangements.
The Blanket License Allows Broadcasters to Pay a Set Fee and Use as Much Music as They Please
The blanket system allows a television station to use every song in the repertoire of the performance rights society, actually millions of songs, in exchange for a set monthly fee. The station can use as much or as little as it pleases. The fee itself is like a tax on revenue derived from programming, and the payments are collected much like the Internal Revenue Service collects taxes, with the completion of forms. Both advertising and program revenue, as well as on-air mentions where value is quantifiable (airline, hotel, or restaurant trades or credits; equipment leases; messenger services, etc.) is totaled and a percentage, averaging about 1.5% of income for radio to 1% of income for television, is assessed. Each station is allowed to take some deductibles off the top; the adjusted revenue is then calculated and the percentage applied. ASCAP and BMI routinely audit their licensees for accuracy in their reporting.
Per-Program License Offers a Break If Not as Much Music Is Used
By contrast, a per-program license measures actual use and charges fees accordingly. The per-program license involves a compromise and a complex formula. The rationale of the per-program formula is that stations should pay a licensing percentage according to how much money qualified music generates, and they should also be able to segregate programs that utilize ASCAP or BMI music but not both. A cost is paid for the privilege of opting out of the blanket fee in terms of keeping accurate records, but the effort can result in significant savings.
Briefly, the per-program license fee formula takes into consideration, on a market-by-market basis, (1) how much revenue ASCAP (or BMI) would be entitled to under the blanket approach, (2) each station's relative share of the total based on ratings, and (3) an X factor. The X factor is a 40% premium for calculation purposes. This station-by-station total is then multiplied by a fraction consisting of the revenue specifically generated from programs utilizing ASCAP (or BMI) music as a fraction of total station revenue from nonnetwork programs. An “incidental or ambient fee” of 15% of the blanket fee tops off the total. This charge covers most other uses of music, including music in commercials and news or public affairs programs.
The per-program license requires that stations keep good records of music performed and revenues with regular submissions of cue sheets (songs performed) and financial reports. On balance, if more than 40% of a station's weekly, nonnetwork programming revenue comes from programs that contain no ASCAP (or BMI) music, then the per-program formula saves the station money. When music license fees for big market stations can cost hundreds of thousands of dollars a year, the savings can add up fast.
Both the blanket and the per-program station licenses cover all nonnetwork programs; that is, programs licensed from syndicators and those produced locally. The performing rights societies negotiate separate contracts with the major networks for fees covering all network shows. Since the 1980s, the societies have negotiated directly with cable networks for performance licenses as well. Telecasts by affiliates of the network programming are therefore excluded from the blanket and per-program fee arrangements.
As noted, BMI adopted its own version of the blanket and per-program fees, which it offers all broadcast licensees. By comparison, SESAC, the much smaller European and classical music performing rights organization, typically licenses its repertoire on a fixed-market fee basis. Because it lacks the pop star recordings and performances, its charges are relatively modest. This society collects roughly 5% of the total musical fees paid. A few foreign performing rights organizations, including some in Europe, also license U.S. facilities. With licensing rights well exceeding half a billion dollars per year, performance revenues take a big bite out of the broadcast industry's wallet. Nevertheless, the entertainment value of music is undeniable. Try watching a movie with no music and see what you think.
The performance license for broadcast stations is only one kind of license offered by the performance rights societies. All other venues that offer music to the public are subject to licensing. This includes nightclubs and concert halls, restaurants that pipe in music or have a pianist playing during dinner, dance schools, and recital locations. One of the most hotly contested arenas is the Internet. We have more to say about the disputes that raged with respect to music on the Internet in Chapter 29.
Synchronization Rights
Producing original programming with music attached involves synchronization rights. Even if a station has a performance license, such permission does not cover copying the music to video or film. That merger of sound and images must be separately licensed. Let us take a closer look at how creative professionals who produce movies and videos clear music rights.
Original Programming
Most original programming contains music. Virtually all broadcast and cable television programs contain music. Even videos shown at conventions or professional meetings utilize music as a lure for attention. Theme or background music is an integral part of these programs. In movies, the soundtrack can be a big selling point for popular films. If musical recordings are being recorded onto the film or video, then a synchronization license must be secured for each song played. For programs that will be exhibited or televised, these rights are an essential part of production costs. Failure to clear these rights can render an expensive program unusable.
Background Music and Incidental Uses
How often does an on-the-scene telecast involve the incidental copying of music? A parade marches by and the performing band's rendition of a popular song is part of the video account. A sportscaster sums up the local team's weekly highlights by using background music to make a point. If the music is performed live and no independent copy made, there is no obligation to clear synch rights. The performance license permits the rendering of the music. However, if the station composes the video with music in anticipation of telecast or if it records the show as it is being televised live, then synch rights come into play. It is incumbent on the station to identify each composition to be used and obtain synch rights prior to telecast. Since it is often easier to replace a song with a comparable song before the telecast (e.g., one generic clarinet swing solo by an unknown artist in place of another performed by Benny Goodman), knowing at the outset whether a piece is going to be prohibitively expensive in relation to the program's overall costs is vital.
One special exemption under copyright can be effectively used to eliminate much of the synch headache. Under the ephemeral copy exemption, broadcast stations that hold performance licenses may use that right to justify making copies of music for limited purposes. Originally conceived as a way to allow radio stations to copy music from records to smooth the transition between songs, thereby allowing for playing many songs in a row with no need to cue the titles one at a time, the ephemeral copy license allows copying of music by “transmitting organizations.” Those qualifying for the exemption are broadcasters licensed by music performance societies, under the blanket arrangements or any specific performing rights contract.
Under this exemption, stations can incorporate selections in any programming, provided that the use of the program is completed in 6 months and then either archived or destroyed. Since stations that warehouse programming for some time may replay pieces years later, technical violations of the exemption are common in the industry. To date, there has been no litigation against a station that held onto the work more than the 6-month retention period allowed under Section 112 of the Copyright Act; indeed, fair use may allow retention even beyond the period allowed by Section 112. However, if there is any expectation that the work will be reaired or marketed after the 6-month period, any exploitation could trigger a copyright infringement claim. Particularly as stations and networks dip into their archives to create new programs or rebroadcast old shows, determining whether all music is cleared may be the new game in town. Care should be taken with respect to any future use of these programs.
Master Use License
A commonly forgotten music clearance issue involves master use license rights. In part, this is because taking musical clips from CDs is extremely easy; if the synch rights have been attended to, why worry? Since 1972, however, the manufacturers of the sound recordings have been entitled to a limited number of copyright rights. Prior to 1972, the companies that made the records owned no independent copyright in their recordings. In 1972, Congress amended the Copyright Act and added sound recordings as a new category of protected works. This was done in response to rampant piracy of audiotapes. The rights granted to recording companies were limited, however, to reproduction, preparation of derivative works, and public distribution. Now, whenever music is taken directly from a post-1972 record, the manufacturer of the sound recording must be consulted and rights cleared.
With the arrival of the digital age, recording companies successfully established an additional copyright right, the right to control public performance of a sound recording by means of a digital audio transmission. For decades, during the era of traditional, analog transmissions, radio stations in particular had no obligation to compensate recording companies when music was performed. While the composers and publishers of original musical works were paid, the company that recorded the singers and musicians were not. This changed in 1995, when Congress yielded to the argument that some compensation should be made to recording companies when the audio transmission is digital, not analog. If listeners had sophisticated equipment and recorded a digital transmission, the near perfect copies could ruin the recording company's market. So, while nothing formal was done in copyright law to prevent the home recording, the recording companies were granted the right to receive payments via a compulsory license.
In 1995, with digital sound still in its infancy, the change in law went unnoticed by the public at large. However, as the 21st century began, digital was the medium of choice. The FCC has ordered television stations to switch to digital television services, satellite services offering hundreds of digital radio channels to home and automobiles are now available, and radio facilities are also changing over. The impact of the copyright law changes mean that how music is to be compensated when publicly performed will take on a different shape in the coming years. Combined with the anticircumvention rules of the DMCA, encrypted digital transmissions that require monthly access fees, pay-per-play, and anticopying codes make major changes to the practices of home recording and storage of popular music.
Mechanical License
The mechanical license is a long-established copyright principle, which permits anyone to create his or her own version of published music for play on mechanical devices, such as record, tape, and CD players, provided a statutory fee is paid. The compulsory license, which is used instead of a negotiated mechanical license, has three key parts.
First Performance by the Copyright Owner
The license affects only published music. In other words, the creator of a song is entitled to choose the first release of the work. Who sings a song and how it is marketed are within the absolute control of the copyright owner. This is a parallel of the copyright law's first sale doctrine that gives the copyright owner control over that initial public release.
New Arrangement Must Be Faithful to the Original
The license allows for artistic interpretation and variations, up to a point. There can be no significant change in the lyrics or melody under the compulsory license. Although parody—fair use—is another way to exploit a work without any clearance, if the compulsory license is employed, the new version must render the original in a faithful way, even if substantive changes are made for purposes of comment and criticism. The variation of style is key. In some instances, a song released by one artist can become a signature piece of another. For example, although Liza Minelli first sang “New York, New York” for the film of the same title, Frank Sinatra did his version as well. The publishers of the Sinatra recording were entitled to use the compulsory license to ensure that the rights were cleared for their production. Like “Chicago,” “New York, New York” is closely associated with Ol' Blue Eyes.
Accounting and Puying the Fee
The license requires filing a notice with the Copyright Office and paying a fee of about a penny plus per minute of playing time or about 7 cents per song, whichever is greater. The fees relate only to publicly distributed copies. A report must be filed with the Copyright Office and the copyright owner. Regular follow-ups on sales figures must also be submitted. Rates can change periodically, so it is best to check on the most current rules.
Trademark also rears its head in music issues. While the easiest way to conceive of a trademark is a word or design, musical themes are also protectable as trademarks. The NBC chime is a perfect example of a musical signature that identifies the source of services. Similarly, television and radio introductory theme songs can constitute trademarks. But, remember that a trademark is a short phrase. Therefore, it is important to develop a cogent summary of a musical theme in a handful of notes to gain protection as a trademark. While the full song is copyrighted, the central lyric can be the signature sound. Programs such as M*A*S*H and Seinfeld are good examples of shows with thematic musical elements that may be protected as trademarks.
If a musical element is a trademark, an additional benefit is secured. Although copyrights last for limited times, trademarks are protectable in perpetuity, as long as they are in use and not abandoned. Themes can extend the licensing value of works well past the era when the copyrights would fall into the public domain. Since most television shows are under copyright protection, this is not an issue today. However, in the coming years, as shows enter the public domain, even as they have continued life on new media such as cable, Internet, and whatever the future brings, the trademark status of show themes will add to the value of the works.