This course provides an engaging and methodical insight into the past and present cultural and commercial music industry developments, directions, and trends. It will equip the students with the knowledge and skills necessary to appreciate, understand and more productively participate in today’s music industry field.
Regulations: Sound Recording Licensing
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From the course by West Virginia University
Today’s Music Industry
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Meet the Instructors
Darko VelichkovskiMusic Industry Program Director
Music Industry
In case of sound recordings, just like with musical compositions we covered in the previous
module, there are several different licenses used today stemming from the copyright contained
in sound recordings, some compulsory, and some non-compulsory in nature. Remember that
“compulsory” in this context does not mean that some licenses are required by the
users and some not, but that some can be refused and are freely negotiated, and some can not
be refused and are statutory. All of these licenses are required by law in order to use
the copyrighted sound recordings in ways that we will talk about.
We’ll start with the digital transmission license. Digital Transmission License is a
compulsory type of a performance rights license, limited to the digital transmission of sound
recordings (satellite radio, Internet broadcasting, etc.). Meaning, it is only required for the
digital broadcasts of the sound recordings, and not for the regular terrestrial broadcasts.
Regular radio stations, broadcasting terrestrially, are not required to obtain this license. Satellite
radio and internet streaming services are. The terms and the rates for this license are
determined and periodically adjusted by the Royalty Copyright Board, and paid by the digital
broadcasters, generally to SoundExchange, which distributes the funds to the recording
artists and record labels.
SoundExchange is a non-profit organization that operates since 2003 as a performing rights
organization for the sound recording copyright owners, collecting the digital transmission
royalties, and the ephemeral recording royalties, which we will talk about next, and distributing
them to its members. SoundExchange is the only legally designated and authorized organization
to perform such task in the United States, and as such, it distributes over 500 million
dollars of statutory royalties to the record labels and recording artists annually.
It should be noted that the digital transmission license comes in two varieties, covering two
different types of digital transmission services – those that are interactive, like Spotify,
and those are non-interactive in nature, like Pandora. Meaning, those that users can control
in terms of what songs they want to hear, and those where that choice is not offered.
The digital transmission license we described earlier concerns non-interactive services.
The license for interactive digital transmission services is non-compulsory, and is payable
by the interactive services directly to the sound recording copyright holders, usually
the record labels, not to SoundExchange.
The next two licenses are also related to the digital transmission of sound recordings.
Ephemeral Recording Reproduction License is a compulsory license required to make a copy
of the original sound recording for the use in digital broadcasting. That copy is referred
to as an ephemeral copy, and the license it’s a form of a reproduction license, since it
includes copying of the copyrighted work. The terms and the rates for this license are
determined and periodically adjusted by the Royalty Copyright Board, and the royalties
are paid by the digital broadcasters to SoundExchange and distributed by that organization to the
recording artists and record labels.
Ephemeral Recording Performance License is also a compulsory license, required in order
to transmit (to broadcast) an ephemeral copy of the original sound recording in digital
broadcasts. So it is a form of a performance rights license, as it concerns broadcasting
of the copyrighted work. The terms and the rates for this license are determined and
periodically adjusted by the Royalty Copyright Board, as well, and the royalties are paid
by the digital broadcasters to SoundExchange, which distributes the payments to the recording
artists and record labels.
Moving on from digital broadcasting to the recording production and industry, the sound
recording license relevant there is the Sound Recording Sampling License. Sound Recording
Sampling License is a non-compulsory type of a derivative license, because it concerns
the creation of a derivative of an original sound recording. It is required in order to
use a sound recording, or any portion of it however small, as the basis for a sound sample
of any kind, utilized in another sound recording. This includes looping, filtering, tempo stretching,
one shots, and any other type of sampling work for which one might use the preexisting
copyrighted sound recording. This license is payable by the recording producers directly
to labels. Being that this license is not compulsory, the granting of it, and the rates,
are freely negotiable between the parties.
And lastly, there is a license that covers the use of the sound recordings in audiovisual
works. Master Use License is a non-compulsory license, required in order to use a sound
recording in a motion picture, a video, a video game, or in a television based work.
It is payable by the audiovisual works producers seeking the license, directly to the labels.
The license is not mandatory, and the rates are freely negotiated. It should be noted
that a “Sound Recording Sampling License”, which we just spoke about, is often also referred
to as a “Master Use License”, in order to distinguish it from the “Musical Works
Sampling License” which covers the use of musical compositions in sampling. Both licenses,
as we have seen, are not mandatory, and their granting and rates are freely negotiated.
In our discussion about music copyright, in the previous module, we mentioned some special
considerations that apply to sound recordings and its copyright coverage. Since any relevant
type of sound recording licensing is only applicable to the recordings under the copyright
protection, we need to briefly revisit the issue of the copyright of the sound recordings
here and make sure that we understand the regulations regarding which recordings are
protected, under which conditions, for how long, in which commercial context, etc.
The 1971 Sound Recording Amendment to the 1909 Copyright Act, which became effective
on February 15, 1972, provided that the recordings published and copyrighted after February 15,
1972 be protected by the Federal Copyright Act and their copyright be regulated like
the copyrighted musical works, with the exception of the performance rights, which were not
granted to sound recordings at the time. Until then, the recordings were not covered by the
Copyright Act and were thus not protected by the federal law, but by the state laws
under the states’ common and criminal law. The amendment also provided that the state
protection of all the pre-1972 recordings will end on February 15, 2067, 95 years after
the 1972 Sound Recording Amendment became effective, and will not last indefinitely,
as it would be the case under the state laws.
So ever since 1972 we have a dual system of protection for the sound recordings – through
the state laws, for the pre-1972 recordings, and through the federal law, the Copyright
Act, for the post-1972 recordings. Since the state laws vary from state to state regarding
the copyright, much confusion and litigation in the market resulted from this dual system
of protection and its different legal standards. Especially when the Internet and digital technology
entered into the picture, and music started to be distributed, shared, broadcasted, and
sold in ways and forms not in existence before.
Shortly after the Sound Recording Amendment, the Copyright Act was revisited and redone,
in 1976, and the revised version, which included the Sound Recording Amendment, came into effect
on January 1, 1978, and is still in effect today, modified by a number of amendments
that followed in the past several decades. As the digital technology became relevant
and widely used, the amendment was enacted, in 1995, which gave the copyright owners of
sound recordings an exclusive right to digital transmission of their works, a type of a performance
right. This act is referred to as the Digital Performance Right in Sound Recording Act or
DPRA. As we have seen, the sound recording owners did not have any public performance
rights until this point, and this act remedied that disparity, but only in the digital realm.
The regular, so-called “terrestrial” broadcasting is still outside of the boundaries of the
performance rights for the sound recordings.
A few years later, the 1998 Digital Millennium Copyright Act, or DMCA, strengthened further
the position of the sound recordings regarding new digital technologies and digital delivery
issues, and together with the 1995 DPRA still serves as the backbone of the regulations
and licensing of the sound recordings in the digital world.
The compulsory Digital Transmission license, and the Ephemeral Recording licenses we discussed
previously, stem from these new regulation regarding sound recordings. These regulations
require all the operators of the digital transmission systems to pay the sound recording copyright
owners for various uses of their works. That includes satellite radio, digital cable television,
and Internet streaming.
At the first glance that seems pretty straightforward. But remember the pre-1972 recordings’ exemption
from the federal protection by the 1972 Sound Recording Amendment? Does the law requiring
payments for the digital transmission of sound recordings apply to those pre-1972 recordings
as well? Those recordings are not protected by the Federal Copyright Act, but are under
state laws that do not include regulations of the digital transmission of sound recordings.
So when Sirius XM digitally broadcasts Jimi Hendrix recording of “Power to Love” from
the 1970 Capitol Records album “Band of Gypsys”, or when Pandora streams Aretha
Franklin’s recording of “Ain’t No Way” from the 1968 Atlantic Records album “Lady
Soul”, do they need to pay digital performance rights in sound recording royalties as required
by the Copyright Act or not? The Copyright Royalty Board, in December 2012, decided that
Sirius XM does not have to pay the royalties to the sound recording copyright owners for
the pre-1972 recordings, as those are not protected by the Federal Copyright Act. And
so by implication, neither does Pandora or other such services. OK. So that’s settled,
right? Well, less than a year later, all three major record labels, and SoundExchange, which,
as we mentioned earlier in this module, represents labels and recording artists in digital transmission
licensing collection and administration, sued Sirius XM for not paying the royalties for
the pre-1972 recordings it broadcasts. The labels also sued Pandora for the same thing.
The cases are pending.
But, regardless of the outcome of these litigations, the copyright issue of the pre-1972 recordings
will remain a gray area, since it will depend on various state court decisions, case by
case, until 2067, which, as we mentioned earlier, is when all the pre-1972 recordings, according
to the current Copyright Act, will lose state protection and enter the public domain. Digital
transmission licensing issues we described, are just some of the controversial issues
caused by the dual regulatory treatment of the sound recordings. Other issues, such as
the so-called “safe harbor” provision of the Digital Millennium Copyright Act, protecting
the Online Service Providers from the responsibility for copyright infringements by its customers
under certain conditions, also resulted in litigations stemming from the pre and post
1972 distinction. Unless Congress folds the pre-1972 recordings back under the federal
copyright protection, so the Copyright Act regulations can clearly be applied, the situation
will remain unresolved and unstable.
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