Performance Licensing 1-2-3


	Performance Licensing 1-2-3 Thank you for your interest in SWCast Network! This guided user tutorial will instruct you on the legal requirements of operating an Internet radio station in the United States. This material is provided for informational purposes only. It is strongly advised that you consult with a qualified legal professional if you are uncertain of your obligations under U.S. copyright law. Click Next when you are ready to begin. Table of Contents Basics of Copyright Law What Copyright Protects Obtaining Public Performance Rights Compulsory Licensing Explained The Performing Rights Societies The Digital Millennium Copyright Act The CARP Proceedings Sound Recording Royalties About the Author Randall Krause is passionate about the music industry. As both a professional sound engineer and nightclub disc jockey as well as a seasoned industry veteran, he began broadcasting live dance-mix shows in January of 2000 on Live365 and taking an active role in the SHOUTcast broadcaster and developer forums. In the spring of 2003, with a dream inspired by the creative needs of the small Webcaster community, including a firm understanding of digital intellectual property rights and the legal implications of new media technologies, he set out to form the first licensing collective for small Webcasters, SWCast Network. As an unwavering advocate of the small Webcaster he soon thereafter formed Small Webcaster Community Initiative, a coalition whose mission is to advocate for independent online radio. SWCI contributed signficant resources toward the SaveNetRadio campaign following the historic CRB rate hike of 2006 -- lobbying on Capitol Hill, speaking with Congresspeople, interacting personally with many well known faces in Web radio including Kurt Hanson and Paul Maloney (RAIN), David Oxenford (BroadcastLaw Blog), Rusty Hodge (SomaFM), and Jonathan Potter (former Executive Director of DiMA), co-signing in support of the Internet Radio Equality Act, submitting crucial testimony to key legislative committees, and of course finally meeting many colleagues and supporters of Internet Radio. Performance Licensing 1-2-3 Basics of Copyright Law By purchasing records and CDs, you have the right to enjoy them at your leisure whether in the privacy of your home, in your car, or through a portable player. You can rip the CDs to a tape deck, transfer them to a personal MP3 player, or burn them back to a CD-R in the form of mix compilation. However, while your personal enjoyment of purchased music is protected to a great extent under the Audio Home Recording Act, you don't have the right to perform that same music in the presence of a public audience. Performance Licensing 1-2-3 What Copyright Protects The intent of copyright is to protect the creators of original artistic works from certain types of unauthorized uses and to provide the creators with several exclusive rights of ownership in those artistic works, thus providing a continued "incentive to create" throughout society. In this way, copyright maintains a reasonable balance between both the interests of the copyright owners to control their works and the interests of the public to use those same works for creative or constructive purposes, thereby ensuring the continued progress of science and the arts. Some of these exclusive rights of ownership (i.e. the oft spoken of "bundle of rights") include: Public performance rights Adaptation rights (creating derivative works) Reproduction rights (creating fixed copies of works) Synchronization rights (adding visuals to music) Publication rights (sale, lease, and lending of works) Any or all of these rights can be assigned or licensed by the copyright owner to another individual. Performance Licensing 1-2-3 What Copyright Protects (Cont'd) Every time that you pick up a CD or a record, there are two distinct copyright owners represented: one in the sound recording and one in the underlying musical work. You do not acquire copyright ownership in either creative work. The sound recording is an analog or digital reproduction in which sounds have been fixed onto a phonorecord. The musical work is the original music composition itself arranged in the form of both notes and lyrics. A phonorecord is any audio recording medium, whether it be a DAT cassette, a CD Digital Audio disc, or an actual vinyl phonograph record. Performance Licensing 1-2-3 Obtaining Public Performance Rights (Cont'd) As mentioned previously, public performance is an exclusive right. Therefore, you must acquire a license before publicly performing musical works and (in many cases) sound recordings. Unfortunately, this also necessitates contacting every respective copyright owner, agent, or representative. In most cases Music publishers (i.e. publishers) represent the rights in the musical works Record labels (i.e. sound recording copyright owners or SRCO's) represent the rights in the sound recordings Contrary to popular belief, performing artists rarely have any ownership in the sound recordings, but rather they are under contract by a recording company, that is "work made for hire." Of course, the situation becomes further clouded when musicians produce and release their songs independently or underground, in which case it may be almost impossible to procure a license. Performance Licensing 1-2-3 Obtaining Public Performance Rights (Cont'd) To further complicate matters, a historic exemption applies to public performance of sound recordings by non-digital means, excepting cable television but not digital FM radio transmissions. To summarize, the performance right in the sound recordings generally applies to the following services: AM/FM Radio: No Cable Television: Yes Call-On-Hold: No Digital FM Radio: No Jukeboxes: No Nightclubs & Bars: No Restaurants & Lounges: No Satellite Radio: Yes Theme Parks: No Webcasting: Yes Thus, a royalty obligation exists for online radio broadcasts. As well, simulcasts of terrestrial radio broadcasts over the Internet necessitate a license. The reason for this disparity will be discussed in greater depth later in the tutorial. Performance Licensing 1-2-3 Obtaining Public Performance Rights (Cont'd) Music licensing on a case-by-case basis can be complex even if your radio station has a small audience or limited music library. Furthermore, if you have little or no experience negotiating contracts, you will lack the assurance that any record label or music publisher will even issue you a license nor that the contract will grant the terms and rates that are reasonable to you. Performance Licensing 1-2-3 Compulsory Licensing Explained Fortunately, there exists an alternative in the form of compulsory licensing. A compulsory license is an amendment to the Copyright Act enacted by Congress with provisions intended to enable certain commercial uses of artistic works based upon statutory rates and terms and on a non-discriminatory basis that predominate a copyright holder's exclusive rights. However, such a mechanism is only instituted when the prevailing marketplace conditions do not allow for willing buyers and willing sellers to effectively negotiate a royalty rate. Thus, a compulsory license is evidence of a "broken system" and is intended as a last resort to make up for economic failure and/or inefficiency. Performance Licensing 1-2-3 The Performing Rights Societies Similar to a compulsory license, a "blanket license" provides a means to efficiently secure rights to a large repertory of artistic works through an established "society" of artists. Such societies are responsible for collection of license fees from commercial users and subsequent distribution of royalties to all of their member copyright holders, in addition to enforcing their members' copyrights and engaging in educational campaigns. Performance Licensing 1-2-3 The Performing Rights Societies In the United States, there are three established societies which represent music composers and music publishers for purposes of administering blanket license agreements for public performance: ASCAP American Society of Composers, Authors, and Publishers http://www.ascap.com/ BMI Broadcast Music, Inc. http://www.bmi.com/ SESAC The Society of European Stage Authors and Composers http://www.sesac.com/ However, while the rates and terms of blanket license agremeents are not specifically dictated by federal statute, ASCAP and BMI are nonetheless governed by a consent decree in the royalty rate setting of their members' works, due to several historic antitrust settlements. As well, several precedents recently established in case law have restricted the specific terms available to ASCAP licensees, particularly in regard to podcasts and ringtones, neither of which as judicially determined implicate the performance right in musical works. Performance Licensing 1-2-3 The Performing Rights Societies (Cont'd) Due to the sheer depth of the ASCAP, BMI, and SESAC reportories — which comprise everything including modern day hits to classics from decades gone by — these three agencies alone will typically cover most of the musical works that you intend to broadcast. However, the licensing rates and terms that a small Webcaster may face can be daunting. The BMI license alone starts at $285 annually and requires filing ongoing reports of music use, Website traffic, and revenue which are factored into the final license fee. Performance Licensing 1-2-3 The Digital Millennium Copyright Act The DMCA (or Digital Millennium Copyright Act of 1998) is the most significant new amendment to U.S. copyright law. It was drafted in response to concerns from copyright holders about the impact of digital technologies on their products in the marketplace. Prior to the DMCA, there existed the Digital Performance Right in Sound Recordings Act (DPRA). However, the DPRA had its own shortcomings, the most obvious being that it didn't specify how copyrighted works in general were to be protected through newly emerging digital devices, media formats, and the Internet. Performance Licensing 1-2-3 The Digital Millennium Copyright Act (Cont'd) The RIAA (Recording Industry Association of America) had the greatest impact upon DMCA legislation. Record companies saw growth potential in new digital broadcast mediums (satellite, cable, and Internet radio), and they wanted to cash in on the emerging opportunities. But the RIAA had very real apprehensions about digital music formats: Near-perfect sonic accuracy between playback and recording and potential for illicit reproduction and distribution. Performance Licensing 1-2-3 The Digital Millennium Copyright Act (Cont'd) Based on such concerns, the U.S. Copyright Office saw it fit to finally amend the Copyright Act to both recognize an exclusive right in public performance for sound recordings over digital broadcast transmissions and to preclude circumvention of anti-piracy controls placed within any digital medium or device. Prior to the adoption of the DMCA, public performance of sound recordings wasn't an exclusive right. In other there was no federal regulation in place to allow performing artists nor record companies to seek royalties from public performance. Performance Licensing 1-2-3 The Digital Millennium Copyright Act (Cont'd) Of course, the RIAA's almost surreptitious involvement in the creation of such a powerful new legal instrument impacted many long-established freedoms of music consumers, and in particular imposed great burdens on the small Webcaster community. As a result, since being signed into law by President Clinton in 1998, the DMCA has been met with nothing short of criticism and controversy by the public at large. Performance Licensing 1-2-3 The CARP Proceedings Prior to 2004, the rates for Webcasters under the DMCA were decided through a public deliberation process known as the CARP, or Copyright Arbitration Royalty Panel. The CARP would meet periodically, under the auspices of the U.S. Copyright Office, allowing specified parties to negotiate new requirements for compulsory licensing of Webcasts. SoundExchange was then created by the RIAA to manage the collection of licensing fees from Webcasters and distribution of royalties to the respective record labels and performing artists. Performance Licensing 1-2-3 The CARP Proceedings (Cont'd) There were initially two sets of rates that applied to Webcasters: the first which was established based on the recent CARP proceedings and then amended by the U.S. Copyright Office, and the second which was devised by the Webcaster community in cooperation with the RIAA. This came to be known as the Small Webcaster Settlement Act of 2002 (SWSA). The CARP rates, were immediately overwhelming for most small stations because the fees were calculated based on the number of songs performed. The SWSA, however provided for a more reasonable revenue-based fee. Performance Licensing 1-2-3 Sound Recording Royalties SoundExchange, by the act of Congress, distributes royalties for the digital performance right in sound recordings, including the concomitant ephemeral reproductions (where digital FM radio is exempt). The rates and terms are based on numerous factors depending on the eligibility of the services exploiting the sound recordings and these rates and terms are set by the Librarian of Congress after their publication in the Federal Register. In contrast with the three Performing Rights Societies, SoundExchange does not collect license fees nor distribute royalties for songs, only the individual sound recordings embodied on phonorecords. These royalties are distributed to the respective copyright holders and performing artists based upon the reports of use supplied by each service provider. Currently, eligible small Webcasters may continue to elect rates lower than those routinely established by the Copyright Royalty Board. These rules and requirements are codified in the Webcaster Settlement Act of 2009. Conclusion This completes the tutorial. For further information, please visit our homepage at www.swcast.net. Copyright (c) 2005-2011, SWCast Network, Inc. All Rights Reserved No part of this publication may be reproduced, redistributed, or retransmitted in any form or by any means whatsoever either in-whole or in-part without the prior written consent of SWCast Network, Inc. The information contained hereinbefore is not intended to constitute legal advice or consultation nor does it form a legally binding contract. "SWCast Network" is a registered U.S. trademark. All other trademarks referenced hereinbefore are the property of their respective owners.