Anyone who follows legal issues in the music industry is at least vaguely aware of some of the multitude of challenges that music licensing has faced as the industry has adapted to the digital age. On June 10, 2014, one of the industry’s heavyweights, Neil Portnow, who currently serves as President/ CEO of the Recording Academy, testified before the U.S. House of Representatives Committee on the Judiciary, Subcommittee on Courts, Intellectual Property, and the Internet.
His remarks, presented during part one of a series of two hearings that will be held on “Music Licensing Under Title 17,” were direct and thoughtful while simultaneously repeating some well-heeled complaints and failing to consider some of the pressing complications confronting the world of music licensing. Perhaps Portnow’s biggest contribution is his suggestion to implement a series of reforms to music licensing in one comprehensive legislative plan he dubs the “Music Omnibus Bill, or “MusicBus” for short.
As expected, Portnow repeated some of the industry’s old grievances. For example, he reiterated that the DMCA notice and takedown provisions (Section 512) are unduly burdensome and probably need reform, and he recited that creators must expend too much time and effort to protect their content, which in turn reduces both the incentive and the amount of time available to create such content. However, for all his hand wringing over the DMCA, Portnow fails to present meaningful suggestions for improving what he calls a “patchwork of laws” or changing the current regime imposed by the DMCA for the better.
Nevertheless, before presenting his main legislative suggestions to the Subcommittee, Portnow admirably refocuses the nature of the conversation when he points out the individuals his proposed legislation is meant to benefit: songwriters, composers, performers, producers, and engineers. Portnow aims to provide incentives for creators with his MusicBus.
One of the ways Portnow suggests to provide these incentives is to close what he calls the “Corporate Radio Loophole.” Corporate radio does not pay performance royalties on sound recordings, meaning that the artists performing on those records do not get compensated for radio airplay the way that songwriters and composers are compensated. Portnow validly points out that the powerful lobby of the National Association of Broadcasters (“NAB”) opposes providing a performance right to artists, and he points to several “myths” that he believes the NAB has spread as self-serving propaganda to discourage legislation in this area.
However, it is equally valid to criticize Portnow’s proposal on those same grounds: he represents a powerful interest group as well. It should be pointed out that the Recording Academy has a directly competing interest with the NAB on the issue of performance royalties, so his comments can be interpreted as self serving propaganda on the performance rights issue as well. Nevertheless, he convincingly argues that the licensing system should be consistent for both digital radio and for terrestrial radio. He also defends that radio promotion does not provide an adequate quid pro quo for broadcasters’ free play of sound recordings and points out that the United States is in the minority of developed nations in not providing this right.
Portnow also wisely supports the implementation of the “Songwriter Equity Act,” H.R. 4079/S.2321 (“SEA”), which would change the method whereby rates are set for mechanical licenses for compositions. According to Portnow, the current mechanical rate set by the Copyright Royalty Board is substandard. Specifically, he cites the fact that under the SEA Copyright Royalty Judges will be able to look to market rates for similar uses in voluntary licensing agreements (amongst other things), perhaps suggesting that songwriter royalties should be on par with royalties granted to artists by contract under analogous situations.
Additionally Portnow suggests that producer royalty payments, as administered by SoundExchange, should be streamlined and consistently applied (a point to which no one is likely to object). He also briefly mentions other minor reforms in passing.
Portnow provides convincing arguments to implement the legislation he supports. However, at the same time, Portnow fails to address some important issues facing music licensing. As stated above, he fails to provide suggestions on how to fix the DMCA notice and takedown while lamenting its burdensome provisions. If Congress is serious about curbing the proliferation of online piracy, it should seriously consider reforms that would put the burden of discovering infringing content on ISPs rather than copyright owners.
Furthermore, while suggesting that streaming royalty rates are insufficient, he fails to address the glaring insufficiency of the framework provided by the “Digital Performance Right in Sound Recording Act” (although the Recording Academy does address this issue in its prepared comments to Congress, Docket No. 2014-3 Submitted May 23, 2014). Any comprehensive plan for music licensing should include a discussion on streaming and the rest of the digital radio landscape.
Lastly, while Portnow spends a great deal of time addressing the interests of established stakeholders in the industry, he fails to consider the interests of an important and growing stakeholder in the music industry: DIY artists, especially on the electronic music and production side of the spectrum. Because of the nature of the music they create and the limited access they possess, these creators could greatly benefit from the implementation of a compulsory license for sound recording samples. A compulsory licensing solution would address a market failure (the topic of a larger paper) that has been prevalent in music licensing at least since the advent of hip-hop. Unfortunately, it is not surprising that this underrepresented class of creators will likely not be given a seat at the bargaining table.
Apparently, the MusicBus plan supported by Portnow and the Recording Academy is already gaining momentum. According to the Recording Academy, in his opening statement the ranking member of the Subcommittee, Representative Jerrold Nadler (D-NY), expressed enthusiastic approval and support for MusicBus. Other members of Congress have expressed approval as well, and the support appears to be coming from both sides of the isle. However, not everyone is on board, as illustrated by the opinion of Blake Farenhold (R-TX), a former broadcaster, who expressed the view that a performance royalty would drive terrestrial radio out of business.
All told, Portnow’s plan to implement comprehensive music licensing reform is a good one. Nevertheless, Congress should not overlook the important issues that Portnow left out of his remarks when crafting a new regime for music licensing.