fair play fair pay act | Marc D. Ostrow, Esq.

On March 30, 2017, nearly two years ago to the day that they introduced the Fair Play Fair Pay Act of 2015, Reps. Nadler and Blackburn now re-introduce the bill as the Fair Play Fair Pay Act of 2017. Will this legislation go through or will it just be another “repeat and fade out?” My cursory review of H.R.1836 indicates that it is the same bill as the 2015 version, H.R.1733. Rather than re-inventing the wheel, I am re-posting my piece about the prior iteration of the bill from two years ago.

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On April 13, H.R. 1733, The Fair Play Fair Pay Act of 2015 (FPFPA) was introduced by a group led by Reps. Jerrold Nadler (D-NY) and Marsha Blackburn (R-TN). This bill would make several amendments to the Copyright Act, the most noteworthy of which would be to provide a public performing right in sound recordings for terrestrial radio broadcasts. Most of the provisions in this bill are things that were previously proposed in others and many mirror recommendations in the Copyright Office’s recent 202-page music licensing report (the Report), which I summarized here.

For example, right before last fall’s government shut down, Rep. Melvin L. Watt (D-NC), introduced H.R. 3219, the Free Market Royalty Act, which, among other things, would’ve created a public performance right in sound recordings when played on AM or FM radio, something supported in the Report. What’s the big deal about a performing right in a sound recording? As many have pointed out, the US is among the less than handful of nations, including China, Iran and North Korea, that doesn’t have one.

So if you’re groovin’ to a recording of Fly Me To The Moon on AM or FM radio as part of the Sinatra centennial celebrations, the composer, Bart Howard, and his music publisher get paid but Ol’ Blue Eyes and his label get bupkis. However, if you listen to that same recording over Sirius/XM or stream it over the Internet, then everybody gets paid. How’s that? Well, under amendments to the Copyright law in the 1990s, Congress created a performance right for recordings in digital transmissions but not for traditional radio and TV broadcasts.

The radio industry’s long-time rationale for not paying artists and labels is that airplay promoted the sales of recordings. However, in the current environment where the public is quickly moving from owning (e.g., CDs and downloads) to streaming (e.g., satellite radio, YouTube, Pandora), the “promotional” value of radio isn’t what it used to be. The performance itself is now the value proposition. And it kind of seems kind of unfair that labels and artists get paid for some performances but not others where the user experience is often virtually identical. This bill would provide “platform parity.”

So what else is in this bill? It fixes a loophole where some streaming services wouldn’t pay royalties on pre-1972 sound recordings because they’re not protected by federal copyright laws (although a couple of district court decisions recently told them otherwise). Addressing this situation, the Report recommended full copyright protection for pre-1972 recordings. And last year’s RESPECT Act would’ve provided for royalty payments on performances of these older recordings, but without providing full copyright protection. The FPFPA adopts the RESPECT Act approach and likewise provides for royalty payments without granting full copyright protection.

To make it more likely to pass, the bill has some protections for small broadcasters, capping royalties for stations with less than $1 million in annual revenue at $500 per year and at $100 a year for non-commercial stations, including public and college radio. Religious broadcasters, regardless of size, are exempted altogether.

The FPFPA also provides for royalty payments directly to artists even where the service does a direct deal with the labels if a statutory license were otherwise available. And these payments would be in the same proportion that SoundExchange currently pays on licensed services: 45% to the featured artist, 5% to the backing musicians and 50% to the label. This is a major protection for featured and side artists.

Moreover, there are also technical amendments to the rate-setting provisions for certain statutory licenses that attempt to provide a more uniform, market-based standard more evenly. Again, this issue was addressed in the Report and was handled somewhat differently in last year’s proposed Songwriter Equity Act. However, including statutory considerations like whether streaming is a substitute for sales of recordings or may otherwise interfere with or enhance a label’s revenue as well as the relative roles and value of the labels and streaming services could open a pretty big and murky can of worms.

Will this bill pass? Well, the National Association of Broadcasters (NAB) is vehemently opposing it. And the NAB is a pretty powerful lobby that’s long opposed paying royalties for broadcasting recordings. And while the music industry is largely concentrated in New York, Nashville and Los Angeles, every Congressional district has at least one radio station — and candidates need to advertise during elections.

On September 22, the Congressional Research Service (“CRS”) of the Library of Congress, released a report, Copyright Licensing in Music Distribution, Reproduction and Public Performance (the “Report”). The Report states its purpose as follows:

This report provides an overview of the complexities of the Copyright Act’s provisions concerning music licensing. It also discusses four issues involving copyrights in musical works and sound recording that have been the subject of recent congressional and judicial consideration: (1) extending copyright protection to pre-1972 sound recordings; (2) requiring radio broadcasters to compensate recording artists; (3) changing the standard used to calculate royalties for digital music transmissions; and (4) modifying antitrust consent decrees governing songwriter performance royalties.

For those of you unfamiliar with CRS, this is what it does, according to its website:

The Congressional Research Service (CRS) works exclusively for the United States Congress, providing policy and legal analysis to committees and Members of both the House and Senate, regardless of party affiliation. As a legislative branch agency within the Library of Congress, CRS has been a valued and respected resource on Capitol Hill for more than a century.

The CRS defines its mission as follows: “CRS serves the Congress throughout the legislative process by providing comprehensive and reliable legislative research and analysis that are timely, objective, authoritative and confidential, thereby contributing to an informed national legislature.” Accordingly, the Report provides a briefing book for members of Congress – or at least their staffs – on the current statutory and regulatory issues shaping the music industry. So it might be interesting to know what’s in it.

The 41-page report provides a dense, but useful summary of much of the statutory framework of the current music licensing landscape, including a discussion of recently introduced legislation. If this sounds somewhat familiar, it’s because the Copyright Office traversed this terrain earlier this year in its comprehensive 202-page report, Copyright and the Music Marketplace, and which I summarized here. And of course, the Copyright Office, like the CRS, is also a division of the Library of Congress, although perhaps may change, as the Register of Copyrights has proposed that the Copyright Office leave the Library of Congress and become an independent agency.

In keeping with its stated purpose, the CRS Report (as well as the Copyright Office’s earlier iteration) covers several key issues, including:

The Justice Department’s ongoing review of the ASCAP and BMI Consent Decrees, including the issue of “partial withdrawal” of works from their respective repertoires;
The background to the Fair Pay Fair Play Act of 2015, which would mandate that traditional AM/FM radio stations pay public performance royalties on sound recordings, just like their internet streaming counterparts do, as is done in virtually every other country in the world; and
The Songwriter Equity Act of 2015, which would modify regulatory standards to have all licenses fees set by statute, as under the ASCAP and BMI Consent Decrees, to be under a “willing buyer / willing seller” standard.

The Report also refers to the Copyright Office’s prior music licensing survey and its various recommendations, but does not contain any of its own.

The CRS Report provides a particularly detailed history of the current statutory framework, including case law and legislative developments, something one would expect in a Congressional briefing memo. However, in attempting to educate Congress about the relevant issues facing the music industry, the Report falls somewhat short in that there is no discussion of the music marketplace as a whole, as opposed to the particular statutory and regulatory scheme currently in place. One might think that putting the various legislative and consent decree proposals in context with the overall music marketplace would be highly relevant to Congressional consideration.

For example, there is no discussion about synchronization or “synch” licenses, which are the permissions required from both the copyright owner of the song (the music publisher(s)) and the copyright owner of the particular recording (the record label) to use a piece of recorded music in film, TV, advertising and other audio-visual uses. This significant portion of the music business is a free market, unregulated by statute or consent decree. Typically, music publishers and record labels command the same fees for synch licenses.

This is in stark contract to license fees for the distribution or downloading of recordings or the streaming of them over the internet. Both of these areas are regulated and there is a large disparity between the fees labels and artists receive as opposed to those received by publishers and songwriters. It is critically important that Congress understand the overall music licensing marketplace when considering any change in music licensing policy, including the pending legislation.

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Will the Fair Play Fair Pay Act Get a Fair Hearing This Time?