United States House of Representatives
Subcommittee on Courts, the Internet and Intellectual Property
Committee on the Judiciary
Hearing on “Internet Streaming of Radio Broadcasts: Balancing the Interests of Sound Recording Copyright Owners with those of Broadcasters”
July 15, 2004
TESTIMONY OF JONATHAN POTTER
Executive Director, Digital Media Association
Mr. Chairman, Representative Berman, and Members of the Subcommittee:
Thank you for inviting me to testify today on behalf of the Internet broadcast music performance services offered by DiMA member companies, including by AOL, Apple, Live365, Microsoft, MusicMatch, Napster, RealNetworks, and Yahoo!.
The subject of today’s hearing is “balance” between the creators and owners of copyrighted works on the one hand, and broadcasters of sound recordings of all types – including broadcast radio, cable radio, satellite radio and Internet radio – on the other hand. DiMA was formed in 1998 to promote balanced copyright law and fair competition, as reflected by our two core public policy principles:
1. Creators and copyright owners deserve fair compensation for uses of their content; and
2. Copyright and commercial law should not discriminate between classes of media companies based solely upon their choice of technology to deliver content to consumers.
Since the Internet radio sound recording performance license was enacted in 1998 as part of the Digital Millennium Copyright Act, DiMA companies have paid several millions of dollars in royalties to recording companies and recording artists. In part, these payments reflect our first core principal, as we support and promote America’s creators and copyright owners. They also evidence widespread consumer adoption of Internet radio. However, the very fact of and the amount of these payments serves to underscore how the law discriminates against Internet media companies based solely on our choice to deliver music to consumers via the Internet, rather than broadcast, cable or satellite radio technologies.
Congress’ creation of a sound recording right for digital audio transmissions explicitly exempted broadcast radio transmissions. Accordingly, Internet radio services are significantly disadvantaged vis-à-vis their direct competitors in broadcast radio, who are not required to license or pay royalties for their performances of sound recordings. In addition, 1998 amendments to the performance right made it unequivocally favor satellite and cable radio – even when those services compete directly with Internet radio in the broadband music marketplace.
Internet radio competes directly against terrestrial radio for a limited universe of listeners and advertisers, and competes directly against cable and satellite radio for an even smaller universe of subscribers and advertisers. Paying higher royalties requires Internet radio to reduce programming or performance quality, or increase advertising prices or frequency, in ways that unfairly inhibit Internet radio’s competitive opportunity. With respect to the point of this hearing, if, as the Subcommittee will hear today, the sound recording performance right is out of balance with respect to any music performance service – then it is most out-of-balance with respect to online media, as only Internet-based services are subjected to royalty rates set under the “willing buyer-willing seller” standard.
Additionally, with respect to Internet radio only, there is a further imbalance, namely, whether an online music service is permissibly consumer-influenced within the scope of the Section 114 statutory license or is “interactive” and thereby fails to qualify for the statutory license. The definition of “interactive” as amended by the DMCA created an ambiguity in the law that has spawned two court cases, has been the subject of an administrative proceeding in which the Copyright Office declined to set standards or to provide a roadmap for well-intended royalty-paying compliance, has materially inhibited innovation, and has even driven DiMA companies into liquidation. Today, more than five years since these legal proceedings were initiated, we ask the Subcommittee to end this legal quagmire and fix the definition of “interactive” service so that it reflects Congress’ intention to promote rather than inhibit innovative royalty-paying music performance and discovery services.
Finally, I will discuss two additional points of imbalance in the sound recording performance right: (a) the requirement that online services pay a mechanical royalty for server copies of sound recordings associated with licensed royalty-generating public performances; and (b) the sound recording performance complement, which is overly restrictive and significantly hinders Internet radio’s competitiveness.
I. The Performance Rights Act is Generally Unbalanced in its Treatment of Competing New Media Services, As Internet Radio Suffers a Markedly Less Favorable Royalty-Setting Standard.
When the sound recording performance right was enacted it was expressly imposed only on new digital music services – not on FCC-licensed broadcasts, which Congress exempted even for digital audio terrestrial broadcasts. Thus, Internet radio and all digital music performance services suffer a significant copyright royalty disadvantage compared to our competitors in broadcast radio. I hope this imbalance is not permanent, but I appreciate political reality and the remote possibility – at best – that this Subcommittee will reconsider the inequity between my powerful friends in traditional terrestrial radio and their new online competitors as it respects sound recording copyright royalties.
What is perhaps more surprising and unfair is how the law advantages cable and satellite radio, even when those entities compete against us on our own turf – in the broadband marketplace. This cannot be what Congress intended when it created or amended the performance right statute, and we are pleased that the Copyright Office has suggested that the Committee review the issue.
a. Background: Though Imposed Only Upon New Digital Music Services, the 1995 Act Balanced the Performance Royalty With Reasonable Protections.
Understanding today’s imbalance in royalty-setting standards requires a brief review of the history of the performance right.
In 1995, when enacting the first sound recording performance right, the legislative history documents Congress’s dual and balanced intentions: to protect and promote the interests of copyright owners and recording artists and to promote the development of new technologies. Congress wished to provide a new right and royalty (benefiting creators and copyright owners), to promote efficient collective licensing processes (benefiting licensors and licensees), and also to incorporate the lessons of decades of antitrust controversy that had confronted similar collective licensing efforts, most notably of ASCAP and BMI.
After consulting with the Antitrust Division of the Department of Justice, Congress incorporated into the Digital Performance Right in Sound Recordings Act several provisions that sought carefully to balance the goals of enabling efficient licensing processes and ensuring that a new recording industry licensing cooperative would not have unrestrained pricing power. The provisions that furthered these goals included (a) a statutory license (rather than an exclusive right) to ensure the availability of blanket licenses to play music over new digital services; (b) an antitrust exemption to promote efficient license negotiations; and (c) the availability of a royalty-setting arbitration, or CARP, as a backstop or safeguard to ensure that above-market royalties would not be imposed on licensees.
Integral to the safeguard provided by the CARP process were the standards and factors to be used by the arbitrators to determine the appropriate rates and terms for the new statutory license. In 1995 Congress applied the traditional standards set forth in the Copyright Act at 17 U.S.C. § 801(b)(1), that balance the interests of licensors, licensees, and the public interest:
(1) To make determinations concerning the adjustment of reasonable copyright royalty rates … [which] shall be calculated to achieve the following objectives:
(A) To maximize the availability of creative works to the public;
(B) To afford the copyright owner a fair return for his creative work and the copyright user a fair income under existing economic conditions;
(C) To reflect the relative roles of the copyright owner and the copyright user in the product made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, risk, and contribution to the opening of new markets for creative expression and media for their communication;
(D) To minimize any disruptive impact on the structure of the industries involved and on generally prevailing industry practices.
This standard was applied in the first CARP under the 1995 Act, and yielded a royalty rate that applied to the three then-existing cable and satellite digital music services. Today, this royalty standard continues to apply to cable and satellite radio services.
b. 1998 Amendments Unraveled the 1995 Balance By Stripping Away the Act’s Original Protections – but Only for the Newest Digital Music Services: Internet Radio.
In 1998, Congress again considered how to appropriately balance creative and new media interests, and clarified the applicability of the sound recording digital performance right to Internet webcasters. At that time, webcasting was in its embryonic stages and new business models were just beginning to develop. DiMA companies were appreciative of Congress’ intent and accepting of the new royalty obligation that would benefit creators, so long as it was competitively fair and set at a reasonable level so as to permit the continued rapid growth of this nascent industry.
To ensure the appropriate balance between licensing efficiency and anticompetitive risk, Congress relied again upon the same three elements: a statutory license, an antitrust exemption, and a CARP safeguard. This time, however, at the RIAA’s urging and without consulting with the Department of Justice, Congress adopted a different standard to be applied by the CARP to determine statutory license rates and terms:
In establishing rates and terms for transmissions by eligible nonsubscription services and new subscription services, the copyright arbitration royalty panel shall establish rates and terms that most clearly represent the rates and terms that would have been negotiated in the marketplace between a willing buyer and a willing seller. In determining such rates and terms, the copyright arbitration royalty panel shall base its decision on economic, competitive and programming information presented by the parties, including-
(i) whether use of the service may substitute for or may promote the sales of phonorecords or otherwise may interfere with or may enhance the sound recording copyright owner's other streams of revenue from its sound recordings; and
(ii) the relative roles of the copyright owner and the transmitting entity in the copyrighted work and the service made available to the public with respect to relative creative contribution, technological contribution, capital investment, cost, and risk.
In establishing such rates and terms, the copyright arbitration royalty panel may consider the rates and terms for comparable types of digital audio transmission services and comparable circumstances under voluntary license agreements negotiated under subparagraph (A).
17 U.S.C. § 114(f)(2)(B) (emphasis added). Unfortunately, the legislative history offers no explanation or any reasons why Congress adopted this different standard for Internet radio, and little guidance as to how the standard is to be applied:
The test applicable to establishing rates and terms is what a willing buyer and willing seller would have arrived at in marketplace negotiations. In making that determination, the copyright arbitration royalty panel shall consider economic, competitive and programming information presented by the parties including, but not limited to, the factors set forth in clauses (i) and (ii).
H.R. Rep. No. 105-796, 105th Cong., 2d Sess. at 86.
Given the care that Congress undertook in 1995 to prevent excessive pricing power by antitrust-exempt licensors (including several written consultations with the Antitrust Division of the Department of Justice) and to ensure that the CARP would serve as an appropriate backstop, Congress surely could not have intended that this new standard be more susceptible to market power-based pricing by collective licensors. Unfortunately that is precisely what the arbitrators concluded in the first CARP under this new standard.
In their decisional Report the arbitrators in the first CARP under the willing buyer-willing seller standard recount in some detail how the RIAA adopted a “take-it-or-leave-it” licensing approach with a limited group of impecunious webcasters likely to accept whatever deal was offered them, in order to create a body of evidence of overpriced agreements and then argue to the arbitrators that only these executed agreements should be permitted as evidence of willing buyers and willing sellers. The arbitrators found that the RIAA “devoted extraordinary efforts and incurred substantial transactional costs” to negotiate agreements only with “minor” webcasters “that promised very little actual payment of royalties” in return – “sacrificial conduct mak[ing] economic sense only if calculated to set a high benchmark to be later imposed upon the much larger constellation of [Internet radio] services.” Id. at 50-51. Illustrating the strength of the evidence supporting this conclusion, the arbitrators specifically found that RIAA’s effort to deny this manipulative intent “lacked credibility.” Id. at 50.
More important to this Subcommittee than the RIAA’s behavior is that the strategy ultimately was successful because the arbitrators concluded that their hands were tied, believing that the willing buyer-willing seller statutory standard required them to consider only a few executed agreements, but not the relevant experience of thousands of services with music licensing royalty rates. The arbitrators, therefore, ignored compelling evidence that would have led to a far more reasonable and justifiable rate if they could have considered the four factors utilized in the traditional CARP standard found in 17 U.S.C. §801(b), or even if they could have considered “fair market value,” the CARP standard utilized in cable television royalty proceedings.
This conclusion caused the Panel to adopt rates based on what the arbitrators conceded were “above market” benchmarks obtained as a result of RIAA’s single-seller market power and its “take-it-or-leave-it” licensing approach, and to ignore the most compelling and analogous evidence in the case – the rates paid by thousands of radio stations and webcasters to composers, lyricists and publishers to perform their copyrighted music.
Setting aside whether the arbitrators incorrectly applied the willing buyer-willing seller standard, DiMA urges the Subcommittee to consider that the courts most experienced in the consideration of collective licensing agreements – the ASCAP and BMI rate courts – consistently have rejected evidentiary use of voluntary agreements entered into at the inception of an industry, because such agreements generally reflect extraneous factors such as the desire to avoid or settle litigation, and rarely evidence fair market value. See, e.g., United States v. ASCAP; Application of Showtime/The Movie Channel Inc., 912 F.2d 563, 579-82 (2d Cir. 1989). These very concerns underlie provisions in the most recent ASCAP consent decree which preclude agreements entered into during the first five years of licensing music users in a new industry as evidence of a reasonable royalty. In support of this provision the Department of Justice Antitrust Division explained that “[new] music users are fragmented, inexperienced, lack the resources [to litigate over rates] and are willing to acquiesce to fees requiring payment of a high percentage of their revenue because they have little if any revenue”. See United States v. ASCAP, No. 41-1395 at 13-14 (S.D.N.Y. June 11, 2001). See Memorandum of the United States in Support of the Joint Motion to Enter Second Amended Final Judgment, at 35, United States v. ASCAP. Thus, the very type of agreements that courts and the Department of Justice have rejected as evidence of fair value were the only agreements that the arbitrators believed the law allowed them to rely on using the willing buyer-willing seller standard.
Consequently, by requiring arbitrators to ignore long-established music performance license rates, by requiring reliance on inherently unreliable licenses intended by RIAA to yield above-market rates, and by eliminating the concept of fairness, balance or fair market value from the rate-setting standard, the willing buyer-willing seller standard resulted in a royalty rate for the performance of sound recordings by Internet radio that is:
· more than three times higher than the rates historically paid for public performances of compositions, and
· 50 percent higher than sound recording performance royalty rate paid by cable and satellite radio.
There is no principled basis why digital media services should be favored or disfavored relative to one another merely because they transmit performances to the consumer using different technologies. There is also no principled basis why the recording industry utilizes the traditional four-factor § 801(b) rate-setting standard when it is a licensee in proceedings to set songwriters’ royalties, but benefits from the more favorable willing buyer-willing seller standard when it is licensor in the Internet radio context. DiMA respectfully asks the Subcommittee to rectify these imbalances. We note that Register of Copyrights Marybeth Peters – in responding to a written question from Chairman Smith following a 2003 hearing on the issue of CARP reform – also has suggested that the Subcommittee reconsider the rate-setting standards that apply to essentially competitive digital radio services.
a. The Law May Disfavor Internet Radio Even Against Digital Music Competitors That Compete Directly in the Broadband Marketplace.
Recently DiMA has learned that Music Choice, a cable radio provider that is defined as a “pre-existing service” under Section 114, and therefore has its royalties set pursuant to the traditional 801(b) standard rather than the willing buyer-willing seller standard, is competing directly against DiMA companies and broadcasters in the broadband radio marketplace, but Music Choice is not paying royalties equivalent to those paid by online radio or broadcaster simulcasters.
Music Choice is utilizing the broadband connections of its cable partners such as Comcast to essentially webcast its traditional cable music channels plus additional new channels to cable broadband subscribers. This may be a brilliant idea that earns Music Choice and its cable partners lots of money. But it highlights the unprincipled foundation of a performance rights law that enables two companies to provide competing subscription broadband music services, but requires them to pay different royalty rates to creators and copyright owners. This law is unbalanced with regard to the competing services, and also is unbalanced with regard to copyright owners and performing artists.
The Music Choice example (or loophole if Music Choice’s legal position is correct) highlights DiMA’s core policy principle – that copyright law should be technologically neutral so that all competing media services pay the same royalty rates and compete on a level playing field – and highlights the prejudice and disparities that result when the law does not follow that basic principle.
III. Contrary to Congress’s Intent, the 1998 Amendment to the “Interactive” Services Definition Has Promoted Litigation Rather than Innovation.
Congress enacted the DMCA statutory Internet radio license to promote the growth of Internet radio as an innovative, competitive medium. Whether a particular Internet radio service qualifies for the statutory license is dependent on several statutory factors, most notably that it:
· complies with programming restrictions, e.g., that limits the number of songs of a single artist or album that can be played in a 3-hour period, and
· is not “interactive” as defined in the statute.
The “interactive” service exclusion was first included in the1995 Act, to ensure that statutory performance licenses were not available to “on-demand” music services that threatened to directly displace sales of pre-recorded music. The DPRSRA defined an “interactive” service as “one that enables a member of the public to receive, on request, a transmission of a particular sound recording chosen by or on behalf of the recipient.” This definition was clear, and there was never any question whether a service qualified or did not qualify for the statutory license on the basis of whether it was or was not interactive. In the statute Congress even confirmed that a consumer’s ability to request a song was not enough to make a service interactive, inasmuch as broadcast radio and other media regularly perform consumer requests.
In 1998 Congress amended this clear, bright-line definition of “interactive” service. Unfortunately, the revised standard makes it much less certain whether a service qualifies for the statutory license. The amended law defines an “interactive service” as
one that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording, whether or not as part of a program, which is selected by or on behalf of the recipient.
As in the original definition, the 1998 definition continues with a safe harbor: “The ability of individuals to request that particular sound recordings be performed . . . does not make a service interactive, if the programming on each channel of the service does not substantially consist of sound recordings that are performed within 1 hour of the request or at a time designated . . . by the individual making the request.”
Relying on this safe harbor and their interpretation of the “interactive” restrictions, several DiMA companies developed Internet radio services in 1999 and 2000 that permitted varying levels of consumer influence. “Consumer influence” features included the ability to rate songs, artists and albums, and to request that specific songs or artists’ recordings be performed (but not at a specific time or in any specific order). Recording companies complained that these services did not qualify for the DMCA license and threatened to sue. In an effort to clarify the situation DiMA petitioned the U.S. Copyright Office for regulations interpreting the definition. The Copyright Office declined to propose regulations, or to specify specific features that individually or in combination would disqualify programming from the DMCA license. The Copyright Office did, however, affirm unequivocally that services can incorporate consumer influence in their programming without making the service interactive.
In May, 2001, several recording companies filed a copyright infringement suit against Launch Media (now Yahoo!), contending that the service’s consumer-influence features disqualified it from the statutory license. In a second effort to resolve the issue without rancor, DiMA filed a declaratory judgment action on behalf of the Internet radio industry, but that court declined to hear the action and referred it instead to the court hearing the pre-existing infringement lawsuit.
In a follow-on action the recording industry also sued several additional DiMA companies, seeking again to disqualify consumer-influenced radio from the statutory Internet radio license. Some DiMA companies settled by agreeing to pay extraordinarily high royalties and maintain some consumer influence features; others agreed to eliminate all consumer influence features; and others went out of business.
As the Register of Copyrights determined, Congress clearly expressed its intent that some amount of consumer influence be a part of basic Internet radio and compliant with the statutory license. The recording industry, through its licensing behavior and public statements has agreed. However, through its litigation and conflicting public statements, the recording industry has also proffered more restrictive interpretations of the definition of “interactive” and intentionally fostered an uncertain, litigious environment.
For example, the RIAA has entered into statutory licenses with services that offer programs based upon listener preferences and with services that allow users to skip songs and pause songs, but has sued other services offering similar functionality. In fact, strikingly, in the litigation that continues today, the last remaining recording industry plaintiff has asserted that non-interactive webcasts are not permitted to allow any level of individual consumer influence over a program. This assertion clearly conflicts with the RIAA’s own licensing practices and the Copyright Office decision, and suggests that to be non-interactive a service must replicate the experience of broadcast radio. This would be an absurd result, as it would prohibit webcasters who already operate under significantly more restrictions than broadcast radio to utilize any functionality of the digital medium, absent direct licenses from the recording labels that would cause even greater anticompetitive impact than does the statutory license.
DiMA believes that the recording industry is taking unfair advantage of the unfortunate uncertainty that was created by the 1998 amendments to the definition of “interactive service,” in pursuit of grossly higher royalties for Internet radio services’ use of any consumer influence features, notwithstanding clear Congressional intent and the Register of Copyrights’ decision to the contrary. Moreover, the higher royalties for so-called “interactive” services (or for services that do not have million-dollar litigation budgets) will not have to be divided evenly with recording artists as they will fall outside of the statutory license.
As DiMA has testified in other contexts, in a strict liability environment with high statutory damages, uncertainty chills innovation and can destroy the entrepreneurial spirit. We urge the Subcommittee to clarify the definition of Internet radio interactivity, or to revise the statute to delegate regulatory authority to the Copyright Office so that it periodically can re-define “interactivity” in light of newly developing services and market conditions. DiMA companies want to focus our energy on developing exciting royalty-paying products and services that combat piracy, rather than on lawyers and litigation.
1. Although Broadcasters Have a Copyright Exemption to Utilize “Ephemeral” Reproductions of Compositions In Support of Broadcast Performances, Webcasters Do Not Have An Analogous Exemption for “Ephemeral” Reproductions of Sound Recordings And Are Required to Pay Significant Royalties for Such Copies.
As the U.S. Copyright Office pointed out in its August 2001 Section 104 Report to Congress, there is an imbalance between the legal and financial treatment of so-called ephemeral copies of compositions in the broadcast radio context, and similar copies of sound recordings in the Internet radio context. This imbalance in favor of sound recording copyright owners disadvantages Internet radio services, as well as broadcast radio simulcasters.
Since 1976 broadcast radio has had a statutory exemption, and thus royalty-free authority, to make reproductions of copyrighted compositions so long as the reproductions remain within their possession and are used solely to facilitate licensed royalty-generating performances of the same music. Internet radio services also require the same ephemeral recordings to enable their webcasts; but whereas a typical radio station requires only one copy to transmit over the air, webcasters need copies in different formats in order to let consumers listen using different software players (such as RealPlayer or Windows Media Player) and at different bandwidth speeds (for dial-up and broadband access). Although each one of the webcasters’ ephemeral recordings functions exactly the same way as the copies exempted for radio broadcasters, recording companies persuaded Congress to provide it with a statutory license for the same ephemeral recording for which terrestrial radio stations are exempt. The CARP and Librarian of Congress awarded the recording industry nearly a 9 percent bonus on top of the performance royalty for the making of these ephemerals.
In the Section 104 Report, the U.S. Copyright Office noted this imbalance between the exemption that is provided broadcasters for composition ephemerals but that is not provided to broadcasters or webcasters for sound recording ephemerals. The Copyright Office said that the compulsory license for sound recording ephemerals, found in section 112(e) of the Copyright Act, “can best be viewed as an aberration” and that there is not “any justification for the imposition of a royalty obligation under a statutory license to make copies that have no independent economic value and are made solely to enable another use that is permitted under a separate compulsory license.” Section 104 Report, p. 144, fn. 434. The Copyright Office urged repeal of section 112(e); DiMA agrees.
2. The Section 114 Programming Restrictions are Overly Rigid, and Prevent Internet Radio from Engaging in Traditional Broadcast-Style Practices That Do Not Undermine the Recording Industry’s Interests.
Another disparity between the rights of broadcasters versus the restrictions imposed upon webcasters is created by the programming controls imposed by Section 114, namely, the prohibitions against advance announcements and the sound recording performance complement. See 17 U.S.C. § 114(d)(2)(c)(i) and (ii). While intended by Congress to limit the digital public performance license to radio-like activities, in reality these provisions prevent Internet radio from engaging in many of the most common practices of radio broadcasters that have proved, over decades of experience, to promote rather than harm the interests of the record labels and performing artists.
For example, radio stations typically announce specific songs that are going to be performed either next or at an unspecified time in the near future, as an inducement to keep listeners tuned to their stations; Internet webcasters cannot. Or, when a famous artist such as Ray Charles passes away, radio stations have complete latitude to pay tribute by playing extended blocks of the artist’s work; the sound recording performance complement limits the ability of Internet radio to honor the artist to no more than two songs consecutively, and four songs total over a three-hour period. There is no evidence, however, that the broadcasters’ practices have harmed the record industry, or that webcasters’ adoption of these practices would be harmful. Given the clear promotional benefits of webcasting to the recording industry and performing artists, there is no reason why webcasting should not also be permitted this additional programming latitude to better attract and maintain its audience against broadcast competition.
These restrictions, if they ever served a meaningful purpose, became even more anachronistic in the age of personal computers as media centers. Any consumer can use the same personal computer to listen to webcasting or, by merely installing a PC card with an FM tuner (or, soon, a digital radio tuner), to broadcast radio. Soon it will not even be necessary to use a PC card, since software-based radio tuners are being developed and tested.
Under current law, nothing restricts that PC from digitally recording broadcasts on a hard drive either temporarily or permanently. And nothing prevents PCs from redistributing those recordings over the Internet utilizing peer-to-peer software. Yet, even though the very same PC can be used to either listen to the radio or to webcasting, only webcasting has unfairly been saddled with programming restrictions. Indeed, webcasters even have additional obligations under Section 114 that broadcasters do not have, such as to identify all songs they perform, to utilize available technological means in their transmission technologies to prevent direct recording of the webcast signal, and to prevent automatic scanning and switching of channels to find particular songs.
The Section 114 programming-based restrictions cannot be justified, particularly in light of the introduction of digital FM radio and technological convergence. If Congress perceives no danger from what consumers can do with broadcast radio on a PC, then there is similarly no danger with respect to webcasting. Therefore, the sound recording performance complement and the restrictions on advance announcing should either be eliminated or substantially relaxed, as a matter of fairness, logic and parity.
3. CARP Reform Legislation Accomplishes Much, But Additional Change is Needed to Ensure Balance in Sound Recording Performance Rights
In recent years this Subcommittee has responded several times to promote the business and legal environment of legitimate online music services. The sound recording performance right amendments provided a needed measure of stability to our industry in 1998, and the Small Webcasters Settlement Act was a lifesaver for many small webcasters.
Additionally, DiMA is most appreciative of the Subcommittee’s efforts and accomplishments with regard to H.R. 1417, and we are hopeful that the Senate will soon approve this bill and that it will be signed into law by the President. However, as Chairman Smith and Ranking Member Berman stated clearly as that legislation was being considered, H.R. 1417 only corrects procedural flaws in the CARP system, and not the substantive flaws that are equally important.
DiMA’s goal with regard to the sound recording performance right is the same goal we have urged before – that the law balance the interests of copyright owners, creators and users, and that all media companies be treated alike regardless of whose business was created first or what technology a service chooses to utilize.
DiMA hopes the Subcommittee will recognize that consumers and creators should be indifferent, to the technological means by which their music or other entertainment programming is delivered, so long as the content is of a high quality, is reasonably priced, is secure against piracy, and is accounted for and reasonable compensation is paid. Rather than focusing on fiber versus satellite versus copper wire versus coaxial cable, the law should ensure fair payment based on the value of the work and the use – and then the law will be well-balanced.
Thank you for the opportunity to testify today.