Wednesday, April 12, 2006

Angela's presentation:

Angela’s presentation: Ringtones and the Copyright Act – striking the balance between the rights of copyright owners and the needs of the users in the digital world.

The current market for ringtones is a lucrative one. At present, ringtone companies charge users between $1.99 and $5.00 to download their favorite song. Ringtones funneled 3.5 billion into the music industry last year, there are over 180 million cellphones ringing in the U.S alone.
What is a ringtone/ringback/realtone?
A ringtone is a simple series of tones that sound like a favorite song. A realtone is a 20-30 second snippet of an actual sound recording. Ringbacks are the sound heard when making a call while the other party receives a ringing signal
Currently there is a controversy between music publishers, artists, performance rights organizations, ringtone vendors, and record labels over how the laws that govern the sales of its products apply to ringtones.
Section 115 of the Copyright Act governs compulsory licensing of the reproduction and distribution rights for nondramatical musical works by means of physical phonocards and digital phonorecord deliveries. Section 115 states that “reproduced works subject to compulsory fees cannot be fundamentally altered.” According to music publishers, if one takes just a 30 second snippet of a song (a ringtone) - that is a fundamental alteration. A mechanical compulsory license is not available unless the licensee records the entire composition not just a few seconds. Thus a ringtone is a derivative work and section 115 does not currently grant a licensee the right to create a derivative work instead ringtones ought to be subject to licensing negotiations.
For the purpose of paying music publishers, record labels would like to rely on the digital phonorecord delivery provisions of the Copyright Act, which would result in mechanical license fee payments of 8.5 cents per ring tone download. Record labels observe that ring tone distribution is accomplished by “distribution of a phonorecord of a nondramatic musical work by means of a digital transmission” which is just what the statute defines as a “digital phonorecord delivery.” (17 U.S.C. Section 115(c)(3)(A)).
Currently, any licensee who sells a ringtone has only to notify the Harry Fox Agency( a New York based collecting agency that acts as a clearing house for much of the licensing monies flowing to music publishers), of a sale and pay the 8.5 cents compulsory licensing fee per ringtone sold. Section 115 of the copyright act forces music publishers to accept relatively small “compulsory license” fees for their copyrighted works.
If, on the other hand ringtones are reproductions that make a significant change in a songs composition or consumer use Harry Fox and its clientele can refuse to license copyrighted work for ringtone use. And they can charge much more that 8.5 cents per unit sold for the right to do so.
Music publishers and artists control or own the copyright in any musical composition that is made into a ringtone. The owner of a copyright has the exclusive right to reproduce, distribute or copy the work as well as the right to perform the work.
Publishers insist on being paid because they have the exclusive right under Section 115 of the Copyright Act to distribute the work (the right to make ones work available to the public). The record companies and artists want to be paid because of their exclusive right under section 115 to reproduce the work. Record companies also claim that a ringtones most valuable property lies in the underlying master recording of the music that makes up the ringtone.
The artists and performance rights organizations such as ASCAP claim that when a ringtone provider takes a copyrighted work and allows the consumer to try out the ringtone, the right of public performance under Section 114 of the Copyright Act is being violated. They point to the performance of the ringtone itself and its intent to attract attention. This argument hinges on whether actually hearing the download being transmitted to the receiving device is necessary to constitute a public performance. If it is not a performance, then ringtone downloads are the same as digital phonorecord deliveries and the PRO’s receive no fee.
When dealing with Digital transmissions such as realtones it is difficult to determine which rights are implicated and therefore to whom a licensee should pay in order to secure the necessary rights. Ringtone companies are being faced with demands for payment from multiple representatives of the same copyright owner such as record label, music publishers, and performance rights organizations. Each of these groups are purporting to license a different right that is involved in the same transmission. Licensees end up paying twice for the right to make a digital transmission of a single work. This makes it extremely inefficient and unfair to require a licensee to seek out three separate licenses from three separate sources in order to compensate the same copyright owners for the right to engage in a single transmission of a single work. This can take up to six months to get all the licenses for just one song. Sometimes there are difficulties in locating the various copyright owners.
We need to get the song in the marketplace as quickly as possible- songs are not popular forever especially in the case of ringtones. The ringtone companies complaint is that the current system impedes their ability to get access to as broad a collection of songs as they need. We need a new system that makes it possible quickly and efficiently to clear the necessary exclusive rights for large numbers of works.
The compulsory license is 96 years old. It was originally implemented to combat the potential monopoly that record labels could have on the music industry. However, the means to provide music to the public have changed dramatically in the last decade. It is in need of reform especially in regard to the use of new digital technology to deliver music to the public.
SOLUTION
I propose that section 115 compulsory license be repealed and replaced with a designated collective licensing structure. Most countries such as Great Britain, Germany, and France have repealed their compulsory license schemes in exchange for private negotiations and collective licensing organizations to license both the public performance right and the reproduction and distribution rights for a musical composition. This essentially will create a one stop shop for obtaining licenses for one copyrighted work and streamline the royalty processing for copyright owners.. While nevertheless permitting each publisher to set its own rates. We already have ASCAP for performance rights which does not require a statutory license, why not offer the same for distribution and reproduction rights?
Congress should not set the mechanical license prices, the participants within the music industry should decide because they know the marketplace. Without the statutory 8.5 cents per unit payment the more popular songwriters would receive greater payments than the less popular ones. The more desired an item is, the higher the price should be commanded. The compulsory license is putting a ceiling on the royalty rate in privately negotiated licenses; it is placing a limit on the marketplace
Presently, the songwriters are hurting because royalties are not being distributed while a debate among publishers continues as to the proper royalty rate. These organizations will provide a more competitive environment in favor of the individual songwriter because they will have more of a choice in who administers their musical works. I understand the nature of the industry and would still require that these same organizations are subject to some type of governmental oversight.

6 Comments:

Blogger duffee said...

I wonder if PROs are really going to provide a better and more streamlined structure for dealing with these issues. I know that lots of people really dislike ASCAP and BMI. Are there concerns that creating such a structure would actually impede the process?

4:56 PM  
Blogger ed said...

I guess I was a bit confused by your proposal, were you proposing something like ASCAP which is a collective licensing, or were you trying to let everyone go at it alone, which I would think would be too difficult - that being finding each person, that means lots and lots of negotiations, which raises transaction costs, delays time to market, etc. All things I thought you were advocating against. Good topic though..

5:34 PM  
Blogger DSomogy said...

I wonder if the compulsory license even applies here - are these realtones actually covers? I think short snippets are closer to an actual copy (of a segment) of the work than anything else. So, how are these snippets actually licensed?

6:20 PM  
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