The Future of Music Licensing
By: Camran Ferrier
When you need to use a piece of music that you do not own the rights to, it usually means that you require a license from the copyright holder. This can take the form of a mechanical license, which covers the reproduction and distribution of a work, or a sync license, which is required when one utilizes another’s work in a visual piece such as a movie. Licenses exist in almost all areas of an artist’s life, and whether they are represented by a label, publisher, or even as an independent, it is crucial to be aware of how this part of the industry is changing.
Where Are We Now?
Late last year, Nielsen Music conducted thorough research in multiple markets in North America and Europe and found that the industry is missing out on a staggering $2.65 billion from small businesses that use songs without the correct licenses in place. They found that eighty-three percent of these small businesses use personal streaming accounts, either free or subscription versions, for background music, instead of getting a blanket license which allows them to “publicly perform” the musical works of others. While eighty-six percent of those interviewed said that they would be happy to pay for the music they use, Nielsen found that the majority of es in all countries studied will incorrectly assume that paying for a personal account on these streaming services allows them to use it as background music in their respective institutions.
Although performing rights organizations such as ASCAP and BMI offer blanket licenses to companies, there is a general misunderstanding about how one is allowed to utilize music and who is meant to be compensated for it. Andreas Liffgarden, Chairman of Soundtrack Your Brand (the company that commissioned the former report) puts this down to a lack of innovation from streaming services driving small businesses towards easier solutions for their musical needs, and suggests that a “business-to-business (B2B)” streaming service targeted at these companies would mitigate the monetary woes of artists; however, there have been some efforts to combat this in the US. Earlier this year, for example, ASCAP filed thirteen copyright infringement actions against bars and restaurants across the nation in February for unauthorized public performances of musical works. Although this may be a deterrent to other companies, this method is extremely inefficient as a way to ensure that every single small business has the correct licenses in place for playing music in their store.
Setting a Precident
Taking out lawsuits against small restaurants, however, is pocket change when compared to licensing disputes between big industry players. Spotify, for instance, has been sued several times for not paying artists their dues as a result of poor licensing, and although the case is usually settled, plaintiffs can be seeking billions of dollars in damages. More recently, exercise equipment company Peloton had a lawsuit brought against them by music publishers seeking $150 million in damages for not acquiring sync licenses for over 1,000 songs that they paired with their workout videos . The publishers claim that it was a knowing and willing infringement because Peloton entered into some licensing agreements with copyright holders while neglecting to do so with others, which shows the resilience of publishers when it comes to representing their artists, but it begs the question: how do we improve the current ecosystem for distributing music? Willing or not, if the deterrent of lawsuits that size and the damages that it potentially has on the brand are not enough to stop companies infringing on copyright law, then it is perhaps better to ensure that the information and infrastructure for finding rights holders is set up to encourage this kind of economy.
A Proposed Solution
Some companies may be unknowledgeable of how to get licenses for the music they use or even be aware that a license is required, but with big companies like Peloton and Spotify getting sued for their licenses (or lack thereof), it may reinforce the need for a centralized database of rights holders like the Mechanical Licensing Collective (MLC), which is currently being built as a result of the recently-passed Music Modernization Act. The MLC is a quasi-governmental body responsible for the collection and distribution of streaming mechanical licenses , and its intended purpose is to eliminate any confusion about identifying the correct rights-holders by consolidating that information into a database. However, there are currently two competing bids from organizations that wish to administer the licenses for the MLC: the National Music Publishers Association (NMPA) along with a consortium of other major publishers, and the American Mechanical Licensing Collective (AMLC). The head of the NMPA, David Israelite, argues that his group had the highest participation and contribution in passing the MMA and should, therefore, be in charge of operating the MLC. The group is backed by the Nashville Songwriters Association International (NSAI) and the Songwriters of North America (SONA), who claim that the majority of rights holders, labels and performing rights organizations are backing their submission and say that the Copyright Office should not be deliberating between competing bids at all.
However, the AMLC disagree and say that competition is necessary to ensure that the MLC will best reflect the needs of songwriters. In a guest Op-Ed for Billboard Magazine, they spoke about how big publishers that plan to run the MLC will have conflicting interests due to their direct licensing deals with the digital streaming services. Furthermore, they challenge the assumption that the NMPA and affiliated publishers represent the consensus of copyright owners, saying that about ninety percent of music copyright creators control their own copyrights, and the majority of works being written, recorded and distributed are overwhelmingly from independent, DIY artists. It is for these reasons that the AMLC is competing to become the MLC, as it believes it serves all copyright owners, from independent writers and publishers to the major ones. They also claim to be able to get it up and running for a fraction of the cost, with a start-up budget of seven million, annual operating costs approaching nine million. and a promise to not use artist royalties to cover their operating costs. Comparing this to the NMPA’s estimated twenty-five to fifty million in annual operating costs, the AMLC has a competitive bid against the incumbents, and when the US Register of Copyrights decides which bid gets to form and run the MLC in July, we will hopefully see that this level of competition will translate into the best terms for copyright holders.
Conclusion
Overall, the information pertaining to copyright holders is scattered around and difficult to find if one does not know what to search for. Most music copyright holders are not signed to a label or publisher, and so it can be a challenge to locate their information, therefore preventing correct licensing. Without the correct infrastructure in place to provide that information clearly, the industry is incentivizing music users to consume without a license. Companies and individuals will always try to cheat the system, for financial reasons or otherwise, but in order to make sure the industry continues to grow, it is imperative that we have a centralized database of information that works for all.
Endnotes
1. Nielsen.com. (2018). The hidden value in music for business. [online] Available at: https://www.soundtrackyourbrand.com/content/research/nielsen [Accessed 23 Mar. 2015].
2. Ibid
3. Oyer, Kalyn. 2019. Charleston-area venue sued by copyright organization over music licensing fees. February 27.Accessed April 3, 2019. https://www.postandcourier.com/charleston_scene/charleston-area-venue-sued-bycopyright-organization-over-music-licensing/article_103a1ff0-39f4-11e9-abf3-8f888e55c099.html.
4. Cerullo, Megan. 2019. Peloton sued for allegedly stealing artists’ music. March 1. Accessed April 4, 2019. https://www.cbsnews.com/news/peloton-lawsuit-fitness-company-sued-for-stealing-music/.
5. Resnikoff, Paul. 2019. The NMPA Submits Their Mechanical Licensing Committee (MLC) Proposal — And Calls forA No-Bid Contract. February 4. Accessed April 2, 2019. https://www.digitalmusicnews.com/2019/02/04/nmpamechanical-licensing-committee-mlc-mma/.
6.Ibid
7. American Music Licensing Collective. 2019. American Music Licensing Collective Says ‘Competition Is Needed’ In Forming Music Modernization Act’s MLC (Guest Op-Ed). February 20. Accessed April 4, 2019. https://www.billboard.com/articles/business/8499237/american-music-licensing-collective-competition-needed-forming-mma-mlc.
8. Resnikoff, Paul. 2019. The NMPA Submits Their Mechanical Licensing Committee (MLC) Proposal — And Calls for a No-Bid Contract. February 4. Accessed April 2, 2019. https://www.digitalmusicnews.com/2019/02/04/nmpa-mechanical-licensing-committee-mlc-mma/.
