A Copyfighter’s Musings

Update, June 6, 2006: Along with the many flaws discussed below, this draft bill of SIRA would do serious damage to fair use – take action now to stop this dangerous proposal!

Yesterday, a House subcommittee held a hearing on proposed reforms to Section 115 of the Copyright Act.  It’s a set of music copyright reforms that are disappointing in all sorts of predictable ways.  IMO, it’s also unlikely to pass in its current form.

For those joining the party late, licensing compositions for online and many other novel uses is an absolute nightmare for reasons described here.  In sum, it is unclear when the section 115 mechanical compulsory license (for distributing recorded copies of compositions) is applicable and over time it has grown wholly unworkable.  More importantly, many services are forced to pay two sets of entities for one particular use of one composition, as publishers through Harry Fox Agency (HFA, the mechanical licensor) and the Performing Rights Organizations claim applicable rights.

One particularly right-thinking approach to this problem was the Register of Copyright’s proposal last year.  It would have guided the market to consolidate reproduction, distribution, and performance in particular entities, probably the current PROs who could offer blanket licenses to all the songs in their catalogs.  Rather than simply solving the licensing issues of the services that brought this issue to the fore — primarily on-demand streaming, which HFA claims requires a license for buffer and server copies — the Register’s proposal would have solved problems for tomorrow’s technologies. After all, in 5 years, interactive streaming may be rather irrelevant.

And thus, in 5 years, Section 115 Reform Act (SIRA) may be irrelevant too.  SIRA does replace the out-dated per-song compulsory license with a blanket license.  But it only extends the section 115 license to cover full downloads, limited subscription service downloads that time out, and on-demand streaming.  It doesn’t clarify what implicates performance or mechanical rights.  Podcasters still will be forced to pay HFA and PROs and face hold-out problems, and so will tomorrow’s novel uses.

SIRA would mean that non-interactive webcasters no longer have to pay for their server and buffer copies (even though interactive webcasters would be forced to).  But SIRA states that any service that enables time-shifting — such as Mercora — still has to pay the compulsory license for these copies. Why should webcasters have to pay extra for helping music fans make a use that, using non-affiliated software, they could make for free?  And why should that payment be related to the ephemeral and server-side copies license?

SIRA minimizes the number of licensors that one would have to go through, by designating one licensing entity (the General Designated Agent) that will by default be able to license all works that are not registered with a licensing entity.  All that means is that HFA, which has been repeatedly criticized for its many inefficiencies, has its place in the value chain secured.  Given their market share, they no doubt will be the GDA, so consolidation of licensing (as under the Register’s proposal) is even more of a pipe dream.

SIRA also requires the DAs to create an electronic searchable database, accessible to the public, that, theoretically, should help people track down licensors and reduce transaction costs. Of course, HFA has been promising to create and improve its licensing system for years, dragging its heels all the way. Given that the language here isn’t particularly strong (allowing for “reasonable confidentiality”), excuse me for not being particularly optimistic.

While it doesn’t solve the root problems facing the music industry and its licensing processes, it will clear the way for current subscription and download services. So why won’t this pass?  Jon Potter, representing music service providers, and the National Music Publishers Association’s David Israelite largely support the Act and used the least confrontational language in any of the many hearings they’ve had. However, RIAA strongly opposes it. 
First, SIRA doesn’t apply to physical and online-offline hybrids. Second, record companies are cut out as pass-through licensors for digital music services (i.e.,
collecting the mechanical monies from Apple or Rhapsody and then
distributing it). In other words, they want to protect the dying physical product revenue stream and they want their position in the online value chain entrenched, just like HFA’s. 

Expect these parties to keep squabbling over how to protect their power as intermediaries. Expect very few beneficial policy changes to occur. Expect disappointment with composition licensing reform.

Filed by Derek Slater at 12:43 am under General news
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