Music Licensing | Leo Versel | April 19, 2016

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Music Licensing

by Leo Versel Show/Hide

History of Music Licensing:

The very beginning of music licensing began in the 20th century with the creation of ASCAP.  In 1914, a group of composers got together and created the American Society of Composers, Authors, and Publishers which was to be used as a joint pool of music that could then be sold to music users. After it’s creation, ASCAP created a blanket license that would allow for users to use any musical composition for anything by just paying one single licensing fee. This blanket license was beneficial because it made sure that artists were actually getting paid at least some money for the use of their songs. Before ASCAP was created, there was no central company that would collect performance rights royalties for the artists, so lots of money was getting left on the table. However, since ASCAP was the only company working on licensing, they had tremendous leverage that began to push fees to an extremely high amount and because of these extremely high demands, the radio broadcasters created BMI (Broadcast Music, Inc). The main difference between the two companies was ASCAP continued to have strict membership rules, while BMI had open enrollment which allowed for more composers and artists to start collecting on their licensing.


The most damaging piece of legislation that would affect music licensing companies were the Consent Decrees that were put into place in 1941. The Consent Decrees were created because of the fear that ASCAP was becoming too similar to trust and needed to have the DOJ step in. In an agreement with the Department of Justice, BMI and ASCAP agreed to a set of rules that included: they were no longer to allowed to have exclusive rights to composers and publishers works, they also could not seek payments for programs that did not contain ASCAP/BMI music, it also required a different set of program and network licenses for broadcasters, and it stated that ASCAP and BMI could not discriminate between users and had to give royalties in a “fair and nondiscriminatory manner.” While these Consent Decrees have been changed some, the underlying rules still stand.

Source:

http://www.nrbmlc.com/music-licensing/music-licensing-history/

(Audio Visual Material)

https://www.youtube.com/watch?v=Mwx9m6-z0fE


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  1. 1 Show/Hide More Radio and Online Services
    Original Creator: Leo Versel

    Radio and Online Listening Services: More Information on Licensing

    1) Licensing for radio is different than online: satellite radio does not have to pay royalties and is functioning on a “free advertising” model. Radio stations pay fees to licensing bodies for non-exclusive rights to broadcast music. Radio stations and businesses typically pay a flat rate once a year, called a blanket license. This can vary based on the size of the audience, value of the advertising revenues, and amount and nature of music usage. As part of the license contract a radio station may conduct periodic audits of the music being played, with the audit results submitted to the licensing body 

    https://en.wikipedia.org/wiki/Music_licensing

    2) What this article is saying is that licensing allows you to purchase the right to play and have that music through your radio station or online service, so that you don't have to personally go to the artist you wish to play and pay them individually. You have to make sure that the stations are monitored so that you can ensure that music will not be tampered with, because if this does happen then you and your station are at risk of being fined. Following the companies record keeping and reporting requirements is everything when it comes to being able to play music that isn't yours. Unless you have obtained a waiver you need to follow the specific rules that the company or label has put in place. Most songs are licensed by the three main PROs, which are performance rights organizations. ASCAP and BMI each having more songs in their catalogs than SESAC. When and if an artist is not represented by a PRO, then you must get permission from the artist directly.

    There are two different types of licenses that are imperative in the music industry and those are explained as so in the link below, “There are two kinds of music licenses that we're concerned with – recording artist royalties and publisher royalties. When playing songs over the radio, only the authors/composers/writers of the song have to be compensated (the owners of the “musical work” copyright), not the performers/producers of the song (the owners of the “sound recording” copyright, which is usually assigned to record labels).” 

    When it comes to streaming music online different people have to be compensated in addition to the composers, artist, label, etc. The producers now have to be compensated as well as the performer. The Librarian of Congress deals with Sound Exchange when it comes to handling online streaming. There are different fees that come into play when it comes to online streaming. ASCAP, BMI, and SESAC charge a fee for online streaming. This is different from the fee they charge for broadcast radio transmissions. Transmitting music over broadcast radio and also live streaming/simulcasting music online requires two separate licenses from these PROs, in additional to the one from SoundExchange. 

    Prometheus Radio states in the article below that the license from SoundExchange requires that you abide by the “sound recording performance complement,” which states the following:

    “1) No more than 4 tracks by the same featured artist (or from a compilation album) may be streamed to the same listener within a 3 hour period (and no more than 3 of those tracks may be streamed consecutively)”

    2) No more than 3 tracks from the same album may be streamed to the same listener within a 3 hour period (and no more than 2 of those tracks may be streamed consecutively."

    http://www.prometheusradio.org/musiclicensing

    3) Title 17 of the US Code explains the copyright regulations when it comes to music. The link show below gives a perfect definition of what it means to obtain copyright, it states as follows, "Copyright in a sound recording protects the particular series of sounds “fixed” (embodied in a recording) against unauthorized reproduction and revision, unauthorized distribution of phonorecords containing those sounds, and certain unauthorized performances by means of a digital audio transmission." 

    Terms that one should know when it comes to understanding copyright and music licensing are:

    sound recording: a recording of sounds

    the label: what owns and produces the music

    the publisher: works on behalf of the composer and songwriter

    Examples in the music industry when one has to obtain rights include:

    * Public performance rights are needed when a public place or radio station want to play an artists music

    *Blanket licenses are obtained so the station can play anything it chooses. PRO's then decide how to divide up the money among all the rights owners. 

    *Master Use Licenses are used if a particular song is wanted for a commercial or film.

    http://entertainment.howstuffworks.com/music-licensing.htm

    (Audio Visual Material)

    The link below is a video that explains the general idea of copyright in regards to radio and online mediums.

    https://www.youtube.com/watch?v=5W7EV7XH8B8


  2. 2 Show/Hide More Compulsory Licenses
    Original Creator: Leo Versel

    Compulsory License

     

    • Music and Radio services have to pay a mechanical royalty rate ($.091 per song per copy distributed) to use on their services

    • Artists have to allow for people to cover your music, whether you like it or not

    • Non-interactive services (Pandora, Satellite radio): Limited # of skips, playlist restrictions (can't pay more than 4 songs per artist), no advance playlists (can't know what's coming next)

    • Voluntary negotiations (Copyright Royalty Board)  judges who set the rates web radio have to pay

    • Artist and label = compulsory (if the music has been publically distributed and is available for public consumption in any form, they have to allow for a compulsory license) 

    • Songwriter = voluntary (artists, specifically songwriters, are allowed to have voluntary compulsory licenses if their music has not been licensed to a publishing house or has been distributed publically)

    • Interactive- anyone can voluntarily say no to having their music on the sites, users can do as many skips as they like and can pick and choose what they listen to (Spotify, Apple Music)  

    • Taylor Swift: didn’t allow her music to be on Spotify, but her publishing (songwriting) still can be on Spotify

    • Songwriters with a publishing company still have to have a compulsory license and while they can't claim the music aspect of the cover, they can claim royalties from the songs because it is their lyrics 

    • EX: “I Will Always Love You,” written by Dolly Parton, but famously covered by Whitney Houston. Dolly Parton would get all the royalties (about 50%) because she wrote the song.

    (Audio Visual Material)

          https://www.youtube.com/watch?v=zQrgzBzGgzg

          https://www.youtube.com/watch?v=3JWTaaS7LdU

          https://www.youtube.com/watch?v=_utP1mGoutQ

  3. 3 Show/Hide More Music Licensing Main Case
    Original Creator: Leo Versel

    Main Case: F.B.T vs Aftermath

    Plantiff: F.B.T = Eminem’s production company

     Defendant: Aftermath = subset of Universal records that was given the right to Eminem’s music

     

    • The case has to do with ringtones and iTunes, which were previously not covered in many contracts created in the early 2000's simply because they did not exist. The main issue involved in the lawsuit was the definition of what was considered “records sold” and what was “music licensed”. Aftermath argued that since there was at least the act of buying/downloading the music and paying a set rate, that it would be considered part of the “records sold” definition. F.B.T countered and stated that since the digital version of the songs were sent to a third party distributor (iTunes) and included the licensing of a master. They also argued that Aftermath did not have to through the typical paths of distribution due to not having to pay for manufacturing and distributing of hard copy records. Becuase of these differences, F.B.T. stated that digital downloads should be paid as “music licensed”. 

    For reference:

    • “records sold” = 15-20% of records sold

    • “Music Licensed” = 50% per licensed

    • District Court Ruling: no industry custom beforehand, said Aftermath did not need to pay license fee: awarded them $2.4 million in legal fees

    • Appeal: US Courts of Appeals the Ninth Circut relooked at the case and decided that since purchases of music on iTunes and ringtones are not actually records and the transaction between Aftermath and iTunes was a license and not a sale. F.B.T., and other contracts based on the same legality as Eminem's, would earn the 50% of licensed music. 


    Source:

    http://www.law360.com/articles/201833/case-study-fbt-v-aftermath (primary)

    (Audio Visual Material) “Lose Yourself” by Eminem

    https://www.youtube.com/watch?v=Yhyp-hX2s 

     

  4. 4 Show/Hide More Case Examples Continued
    Original Creator: Leo Versel

    UMG Recordings INC. Vs  Veoh Networks INC:

    Plaintiff: Universal Music Group

    Facts: Veoh is a video sharing website that allowed for users to upload video content, then the company would reformat and republish the videos all for free. The site had a category called “music videos” with many of the videos using music from Universal Music Group and other labels artists without getting the proper license. UMG filed a lawsuit claiming that Veoh was committing copyright infringement because they did not pay for the license to use the music nor were they paying any royalties.

    Decision: Veoh was cleared of all claims because UMG was not able to bring for specific infringement based music videos. Set a precedent for all future cases involving online media and it’s use of music making it the record labels/artists job to track down all the music being used without a license and take it down themselves. Web sites such as Veoh and Youtube are not held accountable.

    http://www.lexology.com/library/detail.aspx?g=2ca724af-f68d-453c-805e-82b507ef2bf8

    Broadcast Music Inc. vs Columbia Broadcasting System:

    Plaintiff: Columbia Broadcasting System

    Facts: This case was brought about 30 years after the Consent Decrees against ASCAP and BMI were put into place. In the lawsuit, Columbia Broadcasting System (CBS) claimed that Broadcast Music Inc. (BMI) was still charging unfair prices for music licensing for radio. CBS argued that the fees given to them very illegal because they were based on price fixing between the two licensing agencies (ASCAP and BMI).

    Ruling: The issuance by ASCAP and BMI of blanket licenses does not constitute price-fixing per se unlawful under the antitrust laws.

    https://supreme.justia.com/cases/federal/us/441/1/case.html

    “Blurred Lines” Copyright Case of Pharell Williams, Robin Thicke, and T.I. v. the Heirs of Marvin Gaye

    Plaintiff: Marvin Gaye's Heirs

    Facts: On March 10, 2015 a federal jury ordered singer and producer Pharrell Williams and singer Robin Thicke to pay $7.4 million dollars, which was later reduced to late singer Marvin Gaye's heirs, who said that their new single, “Blurred Lines,” was copyright infringement of Gaye's 70's hit “Gotta Give It Up.” They said that “Blurred Lines” copied the feel and music of Gaye's song. Pharrell, Robin Thicke and rapper T.I, who also appeared on the song, vowed that they never intentionally used anything deliberate from the song. They did want the 70's feel that Gaye was known for, but feel that they didn't take directly from the song itself. So how did this jury determine whether or not this was a copyright infringement? 

    Ruling: The judge ruled that the original $7.4 million be reduced to $5.3 million, but that the Gaye family is to also receive fifty percent of the royalties from “Blurred Lines” going forward.

    http://web.law.duke.edu/cspd/blurredlines/

    http://www.usatoday.com/story/life/music/2015/07/15/lawyer-for-singers-blurred-lines-copyright-fight-not-over/30189927/

    Spotify v NMPA (National Music Publishers Association)

    Facts: NMPA claims Spotify did not obtain the proper mechanical licenses for a large portion of songs on their service. Also that they didn’t pay the mechanical royalties needed for the songs (9.1 cents). Spotify needs to pay this in order to use the song, lawsuit claims they did not. Essentially no one is getting paid for the playing of the tracks. The plaintiffs were seeking $200 million. In response to the lawsuit, Spotify claimed they did not have the proper data to tell if the publisher’s were telling the truth or not about a specific song and therefore did not know who to pay. They had no central database to record licenses and send out the appropriate amount to each publisher.

    Ruling: Publishers and Spotify settled out of court for $20 million

    http://www.digitalmusicnews.com/2015/12/30/why-exactly-is-spotify-being-sued-and-what-does-this-mean/

    (Audio Visual Material) 

    “Blurred Lines” by Pharrell Williams, Robin Thicke and T.I.

    https://www.youtube.com/watch?v=yyDUC1LUXSU

    Marvin Gaye's “Gotta Give It Up”

    https://www.youtube.com/watch?v=yyDUC1LUXSU

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April 20, 2016

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Leo Versel

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American University

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