The Future of Music: From Blanket Licensing to Registries October 10, 2011

The Future of Music Coalition Policy Summit, which took place last week, has been a fixture in Washington, DC for a decade now.  For those interested in how copyright has to find its way in the ever-changing world of digital music, this is a wonderful place to spend a couple of days.  The FMC Policy Summit is a great event — and an inspiration for our own Copyright and Technology Conference — because it gathers many different types of people and forces them into a single room to get to know one another.  As an organization, FMC represents the interests of independent musicians and songwriters, but the subject matter discussed at its Policy Summit should be of interest to anyone contemplating the future of music.

The panels at the FMC Policy Summit cover a range of topics beyond copyright.  But last week’s conference had two panels on copyright arcana that were linked implicitly if not explicitly: on the first day, a panel on blanket licensing; on the second, a panel on music copyright registries.  Perhaps the most remarkable aspect of these two panels was that digital music expert/ideologue Jim Griffin was on the latter panel, not the former.

Let me take a couple of steps back to explain why this is remarkable.

The treatment of music copyrights most countries is a horrible mess.  It is so complex as to be virtually incomprehensible to content creators — the people who need to understand them the most.

If you make a music recording, you have two sets of copyrights: one for the underlying composition (which could be someone else’s if you didn’t write the music), and another for the recorded performance of it.  Each of those rights needs to be owned by, granted by law to, or licensed by entities such as record labels, distributors, service providers, and end-users.  These rights are handled in various different ways in the United States.  Some are implicit copyright rights; some come from so-called statutory licenses that have been added to the copyright law; some result from ad-hoc license agreements; and some come through collecting societies (a/k/a PROs or Performing Rights Organizations) like ASCAP and BMI, which represent only those rights holders who sign up with them.

If you’re already confused, welcome to a very large club.

A few panelists at the FMC Summit — mainly law-professor types who habitually think in terms of concepts and idealism instead of practicalities and the real world — contemplated blowing up the entire system and starting from scratch.  Others, such as the new Register of Copyrights, Maria Pallante, settled for “Sure it’s bad here in the US, but it’s worse elsewhere” arguments.  Her predecessor, Marybeth Peters, was an advocate of streamlining the entire music licensing process so that content creators can come closer to “one-stop shopping,” as countries such as the UK have attempted.

There are two schools of thought on how to improve a system that, in the words of Gary Greenstein of the law firm Wilson Sonsini (who will also speak at Copyright and Technology 2011), exists primarily to preserve the many jobs that would be eliminated under a more streamlined system.  One is to move to a comprehensive system of blanket licensing, i.e. forming entities that represent all music rights holders and license their works under fixed terms.  Another is to use technology to measure all usages of copyrighted works and compensate rights holders accordingly.

These two schools of thought are not mutually exclusive.  Automated measurement and compensation can work in a blanket or statutory licensing regime if the technology is pervasive and accurate enough.  Yet blanket licensing usually works with compensation schemes derived from sampling (e.g., BMI requires radio stations to log the music they play for a couple of weeks each year) or levies (“copyright taxes” collected from makers of consumer electronics or blank recording media).  These are blunt-instrument approaches which all but guarantee that “long tail” content creators will not be compensated fairly and that abuses will creep in.

The blunt-instrument school of thought has persisted for quite a while as a lowest common denominator that is at least practicable, even if it has outlived its usefulness.  Yet recent developments have proved two important things: first, the blunt-instrument approach has serious limitations in the digital world, given the Byzantine nature of the underlying system; second, better alternatives not only exist but are exposing the inherent inadequacies of the blunt-instrument approach.

The better alternative that has emerged here in the States, according to the views of most FMC Policy Summit attendees, is SoundExchange.  SoundExchange came in to being in the early 2000s as the result of laws enacted in the late 90s that established “performance rights in sound recordings”; this meant that online music services had to pay royalties for playing recordings, not just for the underlying compositions.  The latter royalties are administered by composers’ collecting societies like ASCAP and BMI.  As the result of the new laws, online music services would have to pay performance royalties, though terrestrial broadcast radio would not.  (See, I told you this was a confusing mess.)

SoundExchange requires online music services to collect data on the music they play, report the data, and pay royalties accordingly.  (Small noncommercial webcasters are exempt from this process and only pay a small flat annual fee.)  SoundExchange negotiates royalty rates for various types of digital music services (webcasters, on-demand streaming services, satellite radio, etc.) through periodic rate-setting proceedings before panels of judges in Washington.

FMC Policy Summit attendees — who tend to be musicians, songwriters, or indie label people — see SoundExchange as a beacon of light in the darkness, an organization that gets musicians paid and does it with relative transparency and low overhead, at least compared to older organizations like ASCAP and BMI.

While SoundExchange has shown that automated, data-driven royalty compensation can be done, advocates of blanket licensing have run into a major snag: if you’re going to offer an online music service a blanket license to music, you have to offer it for “all music,” not just some of it, otherwise what you’re offering is not going to be very helpful to the online music service.  The problem is that offering a license to “all music” is just plain impossible, at least without an act of Congress like that which produced SoundExchange.

With this insight, naive and idealistic notions such as charging all ISP subscribers a monthly “music tax” that gets (somehow) distributed to rights holders go straight out the window.  This is where we finally get back to Jim Griffin: blanket-licensing schemes such as Choruss, the business that Jim Griffin ran for Warner Music Group, are revealed to be the impossibilities they are.

Griffin, a battle-scarred veteran of the early days of digital music, had been an articulate blanket-licensing ideologue for years when WMG CEO Edgar Bronfman asked him to set up a blanket licensing business, which they called Choruss.  Choruss failed about a year ago; as I explained at that time, the primary reason for its failure was that it couldn’t get licenses to anywhere near “all music.”

So Griffin has acknowledged the impossibility and moved on.  He has turned his attention to an underlying problem that is even more complex and fundamental: the lack of a global registry of all music rights information that would be required to support any kind of comprehensive and fair licensing scheme.  At the FMC Policy Summit, Griffin was on a panel on music rights data; he was talking about the International Music Registry (IMR), a project led by the World Intellectual Property Organization (WIPO).  Griffin is one of over two dozen people from around the world working on the IMR.

IMR is adopting a federated approach to rights registries that acknowledges and leverages the existences of various “island” registries throughout the world and attempts to build a unifying layer on top of them.  (One of these “islands” is the so-called Global Repertoire Database, which is initially focused on Europe.)  This approach is analogous to the Digital Object Identifier (DOI) standard that I helped define in the publishing industry in the late 1990s: we wanted a copyright work identifier and registry that could coexist peacefully with various existing standards and registries such as ISBN for books, ISSN for journals, PII for other journals, URL for online resources, and so on. On the other hand, it differs from the Book Rights Registry contemplated in Google’s settlement with book publishers and authors, which would have been a single über-registry for all book content, at least in the United States.

So that’s a long way of explaining what Jim Griffin was doing on the music registry panel instead of the blanket licensing panel at the FMC Policy Summit, and why that’s important.  The rights registry problem is the right (no pun intended) one to be working on.  If it can be solved, it would get us away from blunt-instrument schemes that encourage systemic abuses and favor big-name artists over the long tail, and it would facilitate content creators actually getting paid according to how much their music is played.  It’s a problem that’s worth the monumental effort it will take to solve… if it’s even solvable at all.  It will take years to find out one way or another, but it’s worth the journey.