Thursday, July 14, 2005

Music Licensing Reform: A New Era?

Congressional interest in serious reform of music licensing is palpable. On Tuesday, the Senate IP subcommittee held a Section 115 reform hearing. The House IP subcommittee held its second hearing on the subject on June 21st. (March 11, 2004, was the first House hearing). On May 11th of this year the House also held a hearing on licensing by ASCAP, BMI, and SESAC. On April 6th of this year, the House held a hearing on "digital interoperability," i.e., porting music between different types of services and devices. On July 15, 2004, the House held a hearing on Internet streaming. These oversight (that is non-legislative) hearings also come on the heels of a considerable amount of time spent by House subcommittee IP chair Lamar Smith in roundtable meetings with industry representatives and by the Copyright Office in trying to develop a workable licensing scheme for music on the Internet, efforts that have so far not borne fruit.

Congress does not spend this much time on issues it does not intend to deal with, though, and Congressional IP leaders have indicated the question is not whether a reform is required and will take place, but what it will consist of. A wholesale reform is long overdue. The present system, hearkening back to the 1909 Act is broke and can't be fixed. Digital distribution has wiped out distinctions which previously supported, needlessly, separate licensing schemes and business models. The relationship between the performance right, the copying right as implicated by buffering and caching, and the distribution right no longer hold up, and certainly cannot justify the type of separate payments that have impeded online licensing.

What is needed at the outset is a visionary idea for how an ideal system should work. Legislation should then be drafted and introduced that would make that scheme law. After that comes the hard part: exercising the political muscle to get the scheme through. Due to the way IP legislation is processed, especially in the Senate via unanimous consent, serious compromises will be made along the way and at the end. But if we start out with only what industry groups collectively will agree to, the final product may fall far short of the objective of meaningful reform. I understand the contrary approach: get a solid agreement and then start the legislative process, but to me, that cedes too much control to the private sector. Committee chairs and ranking minority members can knock heads together and the threat of a pending bill going through can clarify thinking.

The time to get involved is now. The beginning of a session is a time for oversight hearings and study. That is the current phase. The second session, 2006, is when the legislative part begins in earnest and the rubber begins to meet the road. But to jockey at the end, your car needs to be in the race during the starter trials.


Anonymous said...

You are suggesting that the arcane world of music licensing (that has evolved with myriad interconnected delicate balances in business practices going very far beyond the four corners of the Copyright Act) suffer another experiment in government mandated social and business engineering. Why should the government intervene here and from what authority can you suggest an approach in which legislation should embrace an as yet unfound "visionary idea for how an ideal system should work." Ideal for whom? This is about business and nothing else, after all. If the affected parties are having trouble making a deal, they probably aren't ready to make a deal. And they have been talking a lot.

What is the social purpose in the Register of Copyrights (not a member of the Executive branch with only a Librarian as a boss) taking over either structural design or the management of music licensing schemes for digital distributions? The U.S. music licensing markets should not be turned over to a central licensing authority with quasi-governmental status under the aegis of the Register as she just suggested a few days ago to the Senate committee. It would be a big, huge mistake that only non-business people could devise. It apes the European models that have done little but to create constrained and constipated markets.

Do away with Section 115 as unnecessary - - just like the jukebox compulsory scheme became functionally unnecessary - - but don't add back some outsider conception of ideal structure. For example, many might agree that a GEMA model provides better efficiencies but it also acts to fund German cultural activities (national and state Opera, theatre and orchestral companies) at very comfortable levels of support as part of its core architecture and function- - an accepted trade-off for its oversized market influence and power. Is that part of the Register's ideal? Whether it is or not, we all know that Congress will not support the arts with publicly controlled funding.

Of course the Copyright Act is full of private interest claptrap (restaurants come to mind, in particular) as well as hopelessly failed attempts at "fixes" (the AHRA and much of the DMCA come to mind) and its beginning to look more and more like the Tax Code. But is that a good thing? And the predicate to a licensing solution (visionary or otherwise) is, unsurprisingly, a settled market to license in the first place. Digital distribution of music is not a settled market - - not even close. What we have here is a tech industry vs media industry battle being waged by the K street gang in the halls of government as a giant distraction to the real work going on in meetings from Redmond to Sunnyvale, to LA and New York. Its not anywhere near the romanticism of a "visionary" architecture for the future. It's about buying and selling and all the grit and mud that comes with it.

William Patry said...


The rights granted arewholly created by the government. This is not a case of government standing to the sidelines as the mysteries of the market do their magic free of government interference. It was government "interference" by creating the rights in the first place. And the rights can be granted only in accordance with the constitutional objective. So, its Congress's responsibility to be "visionary" or however one wants to describe it. (I didn't mean to Romanticize it; I meant only to suggest that one has to have a view of how things should ideally work on the ground).

If one wants the government out of that role, it can be accomplished only by abolishing the right. Business is delighted to have government intervene to help them accomplish their "vision" (its called protecting business interests then) and objects only when its their ox being gored.