Groups Oppose Licensing Reform Act

Nine music and digital-media trade groups with a wide range of ideas about music licensing voiced a single opinion June 28 to a House subcommittee. In a respectful manner, they trashed the U.S. Copyright Office's proposed bill that would abolish the compulsory mechanical license and form music rights organizations, or MROs.

While acknowledging the good intentions and hard work of Register of Copyrights Marybeth Peters in proposing the 21st Century Music Licensing Reform Act (Billboard, July 2), the groups wrote that requirements in the draft bill would not work in practice and would create financial havoc for some.

The groups submitted letters expressing their concerns to the House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property, which wants to revamp the mechanical-license process (section 115 of the Copyright Act).

Among their concerns: that the proposal cannot ensure that the MRO mechanical-licensing process would run smoothly and efficiently, that publishers' bargaining power to negotiate rights and royalty rates would not be kept in check and that royalty rates could exceed reasonable limits.

While some groups suggested specific changes to the bill, many generally supported a "joint uni-license proposal" previously presented to the subcommittee by ASCAP, BMI and the National Music Publishers' Assn. as well as its subsidiary the Harry Fox Agency.

Although there is no formal written version of that proposal available for the public, Billboard has learned that it focuses on only one aspect of the Copyright Office proposal: performance and mechanical licenses for online subscription services.

The uni-license proposal would create one "super agency" for all U.S. publishers that would handle "blanket" licenses granting performance and mechanical rights to digital subscription services. Similar to SoundExchange, which licenses and distributes non-interactive webcasting royalties to performers and owners of sound recordings, the new agency would also collect and distribute royalties to publishers or publishers' agents.

Negotiations on the uni-license proposal among certain publishing interests, the Recording Industry Assn. of America and the Digital Media Assn. are ongoing. The royalty rate tossed around at this point is 16.666% of a digital service's gross revenue, with a flat-fee dollar rate as a minimum payment.

This represents an increase from the current mechanical statutory rate of 8.5 cents per song, per download, a source says. It is intended to place a value on the ease of one-stop shopping to secure a license for all U.S. repertoire without the risk of copyright-infringement liability. In other words, it would help spread the cost of building an infrastructure to handle the administration responsibilities.

This proposal does not cover licenses for master ringtones or other new products—something the RIAA and DiMA would like to resolve.

SESAC wrote in its response that it has been excluded from the uni-license negotiations and that it wants to have a voice in the operation of any such agency.

Most industry observers do not expect the Copyright Office's proposal to stand.

DiMA was among those that criticized the Copyright Office proposal for permitting an unlimited number of MROs to handle performance and mechanical licenses, which it said only "guarantees turbulence and uncertainty and increased risk for law-abiding services, which is precisely what the legitimate online music market does not need."

ASCAP wrote that performing right organizations do not have the internal structure to handle mechanical licenses.

The RIAA and some publishers' agents wrote that the bill changes the terms of current contracts and might invalidate many agreements, including mechanical licenses, recording contracts, songwriter agreements and subpublishing deals.

"The economic dislocation of this unprecedented action would be staggering," the RIAA wrote.

While a date for the House subcommittee to act on the proposals has not been set, Billboard has learned that a Senate subcommittee has begun an inquiry about the issue. ••••



Additional reporting by Bill Holland in Washington, D.C.