Legislative bodies in the EU and the United States are grappling in earnest with the issue of copyright royalties paid by webcasters. The European Commission announced this week will enable webcasters in any EU country to negotiate with any music licensing society in the European Economic Area (EEA) for digital rights, giving webcasters “one-stop-shopping” for the copyrights they need. In the United States, Congress has just voted to approve a that allows small webcasters to pay a percentage of their revenues to musicians and records labels (rather than the flat rate set for larger webcasters in June).
This is good news in the immediate sense that it means that webcasting will not be shut down by litigation. But how does it rate in the big picture?
Copyright law is supposed to work like other property rights; it lays out boundaries that serve as the foundation of a market, offering incentives for creation. But one of the essential features of a market is individual negotiations, or at least unregulated prices if one must use a clearinghouse. By this standard, copyrights in music, with their legislatively approved deals and compulsory licenses, fall far short. This has now become the webcasters’ problem.
Some have suggested that the key to a long-term solution lies with ending the separation of reproduction and performance rights. Here’s how that story goes:
For most of the nineteenth century, the public paid for live performances by musicians who bought sheet music from publishers, who paid composers, all in a tidy, linear series of individual negotiations. The advent of jukeboxes (formerly “player pianos”) and radios and televisions and so on changed that. Sales of sheet music have been virtually wiped out.
In response, the right of the composer to receive compensation for the public performance of his composition was recognized by federal statute in the United States in 1897. But until the Sound Recording Amendment of 1971, record companies and performers had no federal copyright in their performance (they did have some state rights).
Creation of rights in recorded performances is understandable; the switch away from live performances affects musicians’ ability to make a market. But the result of these disparate layers of legislative creations is separate copyrights in compositions, performances, and recordings. So anyone wishing to obtain the whole bundle of copyrights must often deal separately with composers, musicians, and recording studios. A deal with one group tempts the other to hold out.
So some suggestions for easing the path of webcasters and ending regulated pricing for music have focused on re-unifying the bundle of rights. Some have suggested a single digital copyright—“digiworks.” A similar older proposal for analog media is “source licensing.” Under source licensing, the producer of a recording would obtain the performance right from the copyright owner and then convey it to the broadcaster (or webcaster). Current rights holders oppose the imposition of such plans by legislative fiat (offering it as an alternative might be more acceptable).
But it isn’t clear that unifying the bundle of rights would solve the negotiation problem. Sophisticated markets in unbundled rights do exist (though perhaps they cannot be created by legislative fiat—legislators ironically seem to have better luck unintentionally created black markets than intentionally creating white ones). Other factors are at work, for example, the difficult of enforcing musical copyrights in the age of electronic reproduction makes it arguably as hard to get consumers or technology companies to the bargaining table as musicians. For now, we are at an impasse.