Hearing of U.S. Senate Judiciary Committee Subcommittee on Intellectual Property "Music Licensing Reform"
Good afternoon. I welcome you to today's hearing on music licensing reform. This is the first of what will likely be a series of hearings on whether changes to current copyright law are needed to encourage rapid deployment of legal online music services while ensuring the equitable compensation of creators and copyright holders.
Now that some of the fundamental liability issues involved in the Grokster case have been resolved, our focus turns in part to a variety of difficulties that hinder the ability of legal online services to compete effectively against illegal download and file-sharing services. At this hearing, I hope we can begin to identify some of the perceived problems faced by a number of companies and businesses in the area of music licensing. Although the discussion will center principally on Section 115 and the mechanical compulsory license, I hope today's hearing will also help us gain a better understanding of some of the emerging business models and any impediments to their development.
Section 115 of the Copyright Act governs the compulsory license that allows a licensee to make and distribute a mechanical reproduction of a nondramatic musical work without the consent of the copyright owner. The compulsory license appears to have been enacted in response to concerns about the potential for a monopoly in the market for player piano rolls. In spite of various amendments and occasional suggestions that it be repealed, Section 115 and the mechanical compulsory license have survived enormous changes in the music industry and are still with us almost a century later. And, despite attempts by Congress and the Copyright Office to alter the terms and application of the license in response to new business models, it is reported that use of the compulsory license has steadily declined to the point that it may be the exception rather than the rule.
Currently, there appears to be near consensus that Section 115 is outdated and, particularly in the online world, does not adequately serve the purposes for which it was intended. Some argue that the changing marketplace for music products and the evolution of online music services has made Section 115 obsolete. In sum, we appear to be at a point where there is widespread agreement that the current compulsory license simply does not work. However, from my perspective, there appears to be little or no agreement among experts, academics, and industry participants regarding what can or ought to be done about this.
Some of the difficulties identified involve the application of a system in which two sets of distinct mechanisms, organizations, and practices have evolved for the licensing of different rights in the same musical work - one for the public performance rights and the other for the reproduction and distribution rights. Especially when dealing with new types of services and uses that do not fit easily into familiar categories and concepts, it is often unclear precisely which rights are implicated. Understandably, some argue that many new uses - especially those involving digital transmission and storage - implicate both sets of rights, and thus may require separate licensing by two different entities for the same song on behalf of the same copyright owner.
It is claimed by some that this scheme of licensing imposes inefficiencies and burdens that unreasonably delay or prevent deployment of some new services and limit the potential success of others. Today, I expect that we will hear different opinions about both the scope and seriousness of the difficulties caused by the uncertainty as to which rights are implicated by new services and online activities, as well as what, if any, changes to copyright law are necessary to address this problem. Like the Register of Copyrights and others, I would like to see a solution that focuses on two goals that are inherent in copyright policy: ensuring that creators are compensated fairly, and facilitating consumer access to good music.
A second set of concerns involving the burdens and inefficiency of the specific terms and operation of the compulsory license itself also appears to figure prominently in the debate on music licensing reform. Some argue the license is sufficiently burdensome to severely limit its usefulness both in the physical and virtual marketplace. Again, I anticipate that there will be some disagreement as to the nature and scope of the problems posed by some of the specific provisions of Section 115, as well as what should be done to address them.
A wide variety of remedies to problems identified by the stakeholders and others have been proposed to date. They range from incremental reforms to wholesale repeal of the section 115. In addition to helping us identify and define these problems, I hope that our witnesses today will help the subcommittee understand the range of possible solutions that have been proposed and the implications - both positive and negative - of such solutions for various segments of the music industry.
On our first panel, we are pleased to have the U.S. Register of Copyrights, Marybeth Peters. We are always happy to have her testify and appreciate her expertise and the work of her dedicated staff in the Copyright Office.
Our second panel includes a diverse group of industry participants. First, we will hear from one of the pioneers and leading voices in the legal distribution of content over the Internet: Rob Glaser, the founder and CEO of RealNetworks.
After that, we will hear from Rick Carnes, who is a very talented working songwriter down in Nashville, as well as President of the Songwriters Guild of America.
Glen Barros, President of the Concord Music Group, which is an independent record label and music publisher.
After that, Ismael Cuebas, the Director of Merchandising Operations at Trans World Entertainment Corporation, who is testifying on behalf of the National Association of Recording Merchandisers, will give us his views on the licensing difficulties faced by music retailers.
Then, we will hear from Del Bryant, the President and CEO of BMI, Inc., one of the largest and best known performing rights organizations in the business, which represents more than 300,000 songwriters, composers and music publishers in all genres of music. I understand that Del was born into the music business and came up through the ranks at BMI. His views are informed by more than three decades at BMI, and we are lucky to have the benefit of his expertise and perspective. I would also like to thank Del for being willing to testify here on short notice despite scheduling difficulties for him and his organization.
Last, but not least, we welcome David Israelite, who is the President and CEO of the National Music Publishers' Association.
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