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Wednesday, June 22, 2005

Summary and some analysis of Peters' testimony

Marybeth Peters' proposal before Congress.

* She uses the term 'author' and 'copyright owner' interchangeably. Never a good sign.

* "Clarification that all reproductions of a nondramatic musical work made in the course of a digital phonorecord delivery (“DPD”) are within the scope of the Section 115 license." I can't tell if this means she thinks that every copy made in the course of delivering a digital file falls under one license, or whether each copy requires its own. I can't imagine she really believes that the latter option would be best, so going to assume the former--which looks like a good thing.

* In her list of outside proposals: "Creation of a complete and up-to-date electronic database of all nondramatic musical works registered with the Copyright Office." I've often remarked on how incredibly disorganized the Copyright Office is, even when visiting in person. This would be a nice step forward.

* From the same list, "Shifting to the sound recording copyright owner the burden of obtaining the rights for online music services." Perhaps a good step in correcting the imbalance of power and profit from online music.

* Same list, "Provision for an offset of the costs associated with filing Notices with the Office in those cases where the copyright owner wrongfully refuses service."

But Peters favors eliminating the source of the problem: statutory licensing itself: "Although some of these options may still be viable, my testimony today focuses on the elimination of the statutory license in favor of marketplace collective administration because that is the solution I believe is most likely not only to remedy today's problems, but perhaps more importantly, also to provide a workable solution for tomorrow's issues. Moreover, it is the solution that comports with the Copyright Office's longstanding policy preference against statutory licensing for copyrighted works and our preference that licensing be determined in the marketplace where copyright owners exercise their exclusive rights."

Regarding meetings between the National Music Publishers' Association, Inc. (“NMPA”) and its subsidiary The Harry Fox Agency, Inc. (“HFA”), the Digital Media Association (“DiMA”) and the Recording Industry Association of America, Inc. (“RIAA”): "The key parties were willing to consider a blanket license that, similar to the licenses for performance rights offered by organizations such as ASCAP and BMI, would relieve licensees of the burden of seeking separate licenses for each nondramatic musical work they wished to use. But on issues such as the scope of the license, the royalty rates and terms, and other issues, the parties were far apart."

She goes on to say that there is concensus that Section 115 needs to be fixed, and that prior attempts to incorporate digital advances into the statute have been mere band-aids, albeit useful ones. The Copyright Office long ago proposed the elimination of Section 115. "Section 115 and its predecessor have rarely been used as functioning compulsory licenses. Rather, it has served simply as a ceiling on the royalty rate in privately negotiated licenses."

So what does she hope to solve? "A new mechanism is needed to make it possible quickly and efficiently to clear the several of the exclusive rights of copyright for large numbers of works." "The reality of digital transmissions, though, is that in many situations today it is difficult to determine which rights are implicated and therefore whom a licensee must pay in order to secure the necessary rights. Faced with demands for payment from multiple representatives of the same copyright owner, each purporting to license a different right that is alleged to be involved in the same transmission, licensees end up paying twice for the right to make a digital transmission of a single work." Peters dodges the question of whether or not this 'double-dipping' is fair--although she leans towards saying it is, and even explicitly decries the use of the term. She goes on to say, "But whether or not two or more separate rights are truly implicated and deserving of compensation, it seems inefficient to require a licensee to seek out two separate licenses from two separate sources in order to compensate the same copyright owners for the right to engage in a single transmission of a single work."

She stresses the importance of streamlining the process for piracy deterrence:
" The increased transactional costs (e.g., arguably duplicative demands for royalties and the delays necessitated by negotiating with multiple licensors) also inhibit the music industry's ability to combat piracy. Legal music services can combat piracy only if they can offer what the “pirates” offer. I believe that the majority of consumers would choose to use a legal service if it could offer a comparable product. Right now, illegitimate services clearly offer something that consumers want, lots of music at little or no cost. They can do this because they offer people a means to obtain any music they please without obtaining the appropriate licenses. However, under the complex licensing scheme engendered by the present Section 115, legal music services must engage in numerous negotiations which result in time delays and increased transaction costs. In cases where they cannot succeed in obtaining all of the rights they need to make a musical composition available, the legal music services simply cannot offer that selection, thereby making them less attractive to the listening public than the pirates. Reforming Section 115 to provide a streamlined process by which legal music services can clear the rights they need to make music available to consumers will enable these services to compete with, and I believe effectively combat, piracy."

Other alternatives? "We have tried the regulatory approach, and it has failed. Perhaps it has failed because of insufficient regulation: if Section 115 were to be expanded to encompass a blanket license for all (or at least many more) uses of nondramatic musical works, at rates to be established by a mechanism similar to that which is employed with the other statutory licenses, record companies and online music services might finally be able to obtain the right to offer what consumers are clamoring for, and to provide appropriate compensation to composers and music publishers for the exercise of those rights. Last year I tried in vain to guide the interested parties to consensus on such a proposal, and I would not be disappointed to see such a proposal be adopted. Unfortunately, I do not believe the various parties will be able to reach a final agreement on such a proposal; if it is to be enacted, it most likely will have to be because you have concluded that it should be enacted notwithstanding the objections of some or all of the interested parties."
This fits with the impression that has been building until now, that despite Peters' talk of free-markets in the introduction, her objection is mainly to the double-licensing and its barriers to online music store catalog building, and that she will take anything that can streamline the process.

She aims her canon briefly at the PRO she has heretofore praised, for their real-world actions in inhibiting digital licensing, and then comes out with this:
"As always, my focus is primarily on the author. The author should be fairly compensated for all non-privileged uses of his work."
The few commentaries I've read so far mostly blast her for this, saying she should focus on the public good as well, but the next sentences seem to indicate that she meant it in opposition to focusing on the 'copyright owners:'
"Intermediaries who assist the author in licensing the use of the work serve a useful function. But in determining public policy and legislative change, it is the author - and not the middlemen - whose interests should be protected." This meaning is reinforced soon after, when she talks of a "balance between the rights of copyright owners and the needs of the users in a digital world."

Her proposal is to create Music Rights Organizations, similar to the ASCAP et. al of today, "authorized by a copyright owner to license the public performance of nondramatic musical works." Indeed, the current performing rights societies would automatically become MROs under her proposal. The key is the pairing of the two formerly divergent paths: "An MRO that is authorized to license public performance rights in nondramatic musical works would also be authorized to license reproduction and distribution rights for phonorecords of the same works." The proposal also attempts to eliminate the double dipping to some extent, by requiring that any license to publicly perform a work via digital methods also includes the requisite rights to do so (effectively acknowledging that all digital transmission is copying, and saying, 'so what? don't play games'). She later extends a similar framework to cover digital music sales.

And then the free-market turns out to be not so free:
"A copyright owner could not authorize more than one MRO to license the right to a particular nondramatic musical work at any given time. That is essentially what happens today with respect to the public performance right. This provision is necessary for the efficiency this proposal seeks to foster. By having only one MRO authorized at any time to license a particular nondramatic musical work, the prospective licensee can more efficiently identify which MRO it must contact to obtain a license, and the MRO can more easily calculate and account for the royalties owed to the copyright owner and any other applicable parties." In the final accounting, she's still thinking like a regulator. If someone can't find the second MRO, they'll just use the primary one. Moreover, if MROs have to compete for business, they might find it in their best interest to offer an easily accessible catalog of the works they can license. Instead, her proposal provides a regulation mechanism to ensure that they put forth lists of the works they can license. Then it discusses the potential anti-trust issues that limiting each work to a single MRO creates. Excuse me, but creating a monopoly and then setting about regulating it doesn't seem like the best idea unless there's absolutely no other choice.

The MROs aren't compulsory. For one, there are several of them. And a copyright controller need not even use them at all: "Copyright owners of course retain the ability to enter into direct licenses on whatever terms to which they choose to agree, as they always have. Nothing obligates a copyright owner to utilize a MRO, but the increased efficiency of that structure provides an incentive for them to do so, just as they have all utilized performing rights organizations. Copyright owners may also authorize as many entities as they wish to license mechanical rights (other than those involved in digital audio transmissions) for their nondramatic musical works."

It does seem like this proposal makes much sense, with the exception of the single-MRO-per-work requirement. Indeed, it may well be significantly overdue, given that "existing performing rights societies appear to have all of the data and resources necessary to be effective and immediate MROs," indicating the barriers to adoption were strictly legislative.



Blogger Daniel H said...

I've proposed an alternate fix to this mess: “Musician Donations Anonymous". Why not allow those who don't pay for their music to make direct micro-payments to the artists?
- The Precision Blogger

11:54 AM  

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