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Liner Notes
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The “No
Performance Right in Downloads” Ruling Against ASCAP Explained
by Randi Reed
The landmark April 25 federal court ruling regarding
downloading music files has many people in an uproar, and there's a lot of
misinformation and misinterpretation about what the ruling really means to
songwriters, publishers, music labels, internet service providers, and
consumers.
This article covers what actually happened in court. Later installments
about this issue will cover what it means to various people in the music
industry.
On Tuesday April 25, 2007, Senior Federal Court Judge
William C. Conner made a landmark ruling: that the act of downloading music
files, “in and of itself,” is not a public performance of a song, and that
digital music services are not required to pay public performance royalties
to publishers and songwriters for downloads.
Conner did say in the judgment that “streaming of a
musical work does constitute a public performance,” however.
(The streaming part is an important detail many articles and blogs about the
ruling fail to mention. I'll get to why this detail is so important in a
minute.)
The ruling came as part of a federal court proceeding originally intended to
determine a royalty rate that digital music services AOL, RealNetworks, and
Yahoo would pay ASCAP songwriters and publishers. The parties are in court
because they could not work out a fair royalty rate amongst themselves.
Described in the judgment as “an unincorporated membership association that
aggregates the licensing authority of thousand of composers, authors,
lyricists, and music publishers”, ASCAP is one of three performing rights
organizations that determine and collect royalties on behalf of songwriters
and publishers. (BMI and SESAC are the other two performing rights
organizations. For more on performing rights organizations and what they do, read
this.)
During the court proceeding, ASCAP proposed a royalty rate that would
include a fee for performance rights in downloads.
The digital music services objected (despite earning millions of dollars in
profits via ad revenues and corporate partnerships by featuring music
content on their services). So, they filed motions which asked the Court “to
determine whether or not downloading a music file constitutes public
performance within the meaning of the US Copyright Act,” said Conner in the
judgment.
It was the first time in music history that a federal court had been asked
to determine this.
Representatives from corporations and associations on both sides of the
issue filed amicus briefs to be heard on the matter as well. (See below for
a list of corporations and associations who filed amicus briefs and had
legal representation in the proceeding.)
The Court ultimately ruled against ASCAP (which, by the way, is a non-profit
organization--not a large corporate entity, as some reports have implied).
The proceeding to determine license fees is scheduled to go forward to trial
on May 21, 2007.
Background on the Two Main Types of Royalties, and Why the Streaming
Issue is Important, and Why People Are Upset About the April 25, 2007
Judgment
Before the digital age, royalties (and the licenses that get them for
you) came in two forms: mechanical royalties (which come from the
license to record someone’s song) and public performance royalties
(which come from the license to play the recorded song on the radio or on
TV, or to play the song live. There are several different types of
performance royalties. For this discussion, it’s only important that you
know the above main two types of royalties.)
Mechanical licenses are compulsory, which means the publisher must
grant the license to anyone who wishes to cover the song once it’s been
recorded and released. Public performance royalties are negotiable, giving
the publisher the right to say yes or or no.
The digital equivalents of these two types
of royalties are digital phonorecord delivery royalties (aka DPD),
which cover downloading and are similar to mechanical royalties), and
digital performance royalties (which cover streams and are
similar to public performance licenses). Like their old-school
counterparts, digital performance licenses are negotiable. DPD licenses
are usually compulsory.
Therefore, in regards to the case between ASCAP and the digital music
services, the April 25 federal court ruling may have the potential
future impact of eliminating a songwriter’s or publisher’s right to
determine the use and royalty rate for his or her own songs.
We'll discuss more about the potential impacts of this ruling in
other articles (and probably on my
blog as well), so stay tuned.
Meanwhile, as always, be very careful not to believe everything you
read. As we stated on the home
page of MusicBizAdvice.com, there's a lot of misinformation out
there about publishing and royalties...including some blogs by people
with a vested interest in keeping you from getting the full story about
both sides of this very complex issue.
Additional
Corporations and Associations Who Filed Amicus Briefs in the Court
Proceeding
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