ROYALTY CHECKS AND REALITY CHECKS
About the author:
Bennett M. Lincoff is Senior Counsel at Darby & Darby in New York City, and a member of the firm's
Internet/New Media/E-commerce practice group. He was formerly the Director of Legal Affairs for
New Media at ASCAP (the American Society of Composers, Authors and Publishers), the world's
largest music performance rights organization.
WORLDWIDE MUSIC PERFORMANCE RIGHTS:
THE DEVIL IN THE DETAILS
© 2000 by Bennett M. Lincoff
Used by permission of the author.
In January, at the music industry's annual MIDEM conference in Cannes, France, BMI (one of the two principal U.S. music performing rights organizations), and its British, Dutch, French and German counterparts (PRS, BUMA, SACEM, and GEMA, respectively), announced an agreement by which each will offer webcasters worldwide performance rights to the music in their combined repertories. Prior to this, no collecting society had granted webcasters anything other than domestic performance rights. This was inadequate because webcast performances not only may be infringing if unauthorized in the territory from which they originate, but also if not authorized for territories in which they are received. Webcasters now can obtain the worldwide rights they need to perform a significant portion of Anglo-American and European music. This will be sufficient for webcasters willing to forego performances of excluded music, or to obtain authorization to perform those works directly from their copyright owners.
It has been difficult for the rights societies to agree on how to determine which among them shall license which webcasters. Essentially, there are two possible solutions. Either each society would have authority to license webcasts originating in its territory; or that authority would lie with the society in the territory where the webcaster has its principal place of business ("economical residence" in European parlance). Under the first scenario, for example, BMI and ASCAP would license all webcasts originating in the United States. Under the second, a webcaster whose economical residence was in Paris would obtain rights through an agreement with SACEM, and pay SACEM's prevailing license fees, regardless of the territory from which its webcasts originate, or in which they are received.
The European organizations oppose bestowing authority to license webcatsers on the society in the territory from which a site's transmissions originate.They believe that solution would encourage webcasters to use foreign host servers so that their transmissions will originate from the territory with the lowest Internet license fees. Whenever such migration occurs, the society in the webcaster's home territory will lose license fee revenues it otherwise would have earned. That society's music publisher members also would receive fewer royalties.
In theory, each European society could avoid this loss by not affiliating with any other organization which, in its view, charges unacceptably low Internet license fees. In practice, however, this may not prove workable.
Web site migration is significant only because the United States is the territory to which webcasters might be expected to flee. ASCAP and BMI operate in a highly regulated marketplace pursuant to antitrust consent decrees. The fees they charge are subject to review and adjustment by the federal court. As a consequence, performance rights license fees in the United States often are broadly lower than elsewhere.
There is probably nothing the European societies can do to remedy this situation. The ASCAP and BMI repertories are vast. Together, they may comprise a majority of the most frequently performed works worldwide. Licenses offered by societies affiliated with ASCAP and BMI depend, in large part, on inclusion of the U.S. repertory for their value.
On the other hand, agreements which limit the authority of rights societies so that only the organization in a webcaster's economical residence would be able to license it might not survive antitrust scrutiny in the United States. The ASCAP and BMI consent degrees compel them to license music users, including webcasters, who perform music in the U.S. and who submit written requests for licenses. Neither ASCAP nor BMI may refuse to license a webcaster whose transmissions originate in the United States merely because they have agreed with foreign rights organizations to do so.
According to BMI's press release, licenses under its new alliance "will be granted by each society based on the territory indicated by a website's URL (e.g. ".fr" [for France] to be licensed by SACEM, ".com" or ".net" [for the United States] to be licensed by BMI; etc). . . ." It appears, therefore, that BMI, PRS, BUMA, SACEM and GEMA have agreed that authority to license webcasters shall lie with the society in the territory where the site's server is located. However, the press release also alludes to "sufficient safeguards to prevent efforts by web music providers to limit or evade copyright liability."
Given the European organizations' perspective, it is unlikely that these "safeguards," whatever they may be, will operate in any way other than, for example, to preserve SACEM's opportunity to license Radio France even if Radio France's web site were hosted on a server in Cleveland (thus becoming and, otherwise, licensable by BMI) rather than one in Paris (where is would be and licensable by SACEM).
Nevertheless, BMI may be able to participate in this new alliance without violating its antitrust consent decree because it may not need to refuse requests for licenses from European webcasters operating from the United States. The matter may not come up.
Although BMI and its European partners have "combined" their repertories for purposes of worldwide Internet licensing, ASCAP is the U.S. society with authority to administer rights to most European music. Under pre-existing agreements, ASCAP is designated as the default U.S. organization to administer rights in British, Dutch, French and German music. In order for BMI to represent these works, European songwriters must affirmatively instruct their collecting societies to deviate from the standard practice.
Accordingly, BMI's webcaster license can include rights to only a small portion of the works in the repertories of PRS, BUMA, SACEM and GEMA. On the other hand, a license from any of these four European organizations would include rights to all works in their combined repertories, plus that portion of the U.S. repertory administered by BMI. Thus, even if not compelled to do so, European webcasters operating in the United States may chose licenses from the society in their home territory, rather than the BMI license, so as to obtain authorization to perform more works of European origin important to their end users back home. Of course, the result might be different if ASCAP also were participating in this new alliance.
Whatever else may come of this, BMI's initiative gives it an advantage in its ongoing competition with ASCAP. Because ASCAP offers domestic performance rights only, webcasters may seek to exclude from the base against which their ASCAP license fee is calculated any revenue attributable to accesses of their sites initiated by end users outside the United States. ASCAP's revenues also would decline if U.S. webcasters, interested primarily in U.S. music and eager for worldwide rights, rely on music available through a BMI license and music they are able to license directly from copyright owners.
In addition, BMI will no doubt claim leadership among the U.S. societies in licensing online performances of the music it represents. This may well draw more songwriters to BMI, enlarging its membership rolls, expanding the number of works in its repertory, and increasing the value of the BMI license for all music users.
The affiliated rights societies are highly interdependent. They rely on each other for their mutual success. The non-U.S. organizations depend on the depth, breadth, and worldwide popularity of U.S. music for much of the value of the licenses they offer. And ASCAP and BMI depend on the efforts of the non-U.S. societies to license foreign performances of U.S. music. There is reason to expect, therefore, that these organizations would find some way to respond as a group to the challenges and opportunities presented by the Internet.
The alliance between BMI, PRS, BUMA, SACEM and GEMA may well be a breakthrough. It also may be the first step leading to disestablishment of the worldwide network of affiliated performing rights societies. Were that to occur, it would result in substantial dislocation in the marketplace for music performance rights, to the detriment of writers, music publishers, webcasters and end users everywhere.