Original URL: http://www.theregister.co.uk/2007/04/13/steve_gordon_performance_royalties/

Are songwriters double-dipping?

When a performance isn't a performance

By Steve Gordon

Posted in Media, 13th April 2007 08:28 GMT

Column Should songwriters get paid for a public performance when you download a song? Thanks to a New York legal case, we'll soon find out.

In the United States, three organizations license "public performance" rights for music on behalf of their music publisher and songwriter members: ASCAP, BMI and SESAC. Typical public performances include live performance in clubs and concert halls, radio, television, and streaming music on the Web. Until now, "downloading" music has not been considered to be a public performance.

But in late February, ASCAP filed papers in federal court in New York demanding the court rule that downloading music constitutes a "public performance" for which its songwriter and publisher members should be paid. AOL, Real Networks and Yahoo have responded that downloads are not public performances, and that ASCAP has no right to demand that they pay public performance royalties for downloads.

This article analyses the legal basis for ASCAP's claim, which is tenuous, and the strong economic forces that compelled them to try to add downloads to its income pool. Those reasons, surprisingly, may have more to do with the future of how people will watch TV programs and movies, rather than listen to music.

What does performance really mean?

Digital music services already pay songwriters and their representatives, the music publishers, a royalty for both streaming and downloading songs. They pay the performing rights organizations including ASCAP a royalty for streaming songs, that is listening to songs on demand or listening to songs that play automatically as part of a group of songs. In addition, they pay songwriters and publishers a royalty for downloading songs. This royalty is called a digital phonorecord delivery or "DPD."

DPDs are the digital equivalent of the "mechanical" royalty that labels pay publishers for making copies of songs in CDs. Both the mechanical and DPD rate are presently set by law at 9.1 cents per song. This royalty is paid to the publishers or their representative, the Harry Fox Agency. ASCAP's demand for an additional "public performance" royalty for a download, the digital music providers argue, would be an unfair second payment to the publishers, also known as a "double dip."

ASCAP announced it received record revenues of $785m in 2006. But as we discuss below, ASCAP may be afraid that current trends will ultimately diminish their revenues unless they can get income from downloads.

ASCAP's position is that it is well established in law that a "transmission" of music to the public, such as broadcast transmissions of music to radio and television, qualifies as a "public performance," even though people generally listen to radio and TV in private places, that is, their home or their car.

The fact that music plays on your radio or TV when you tune in rather than when you click on your computer files does not seem to be a huge difference. But the digital music services point out that in order for a transmission of music to qualify as a public performance, there must first be a "performance." The copyright law defines a performance as follows:

To "perform" a work means to recite, render, play, dance, or act it, either directly or by means of any device or process..."

No one disputes that when a song is broadcast via radio and "plays" on that radio "device", then that is a performance. But when you download a song, generally you do not hear the music until it downloads, and you make a decision to play it back. If this was considered to be a "performance" then the distribution of CDs at stores which people buy and later play back on their stereos or computers would also be a performance. But not even ASCAP is demanding public performance royalties for sales of CDs!

On the other hand, in certain systems you can hear a song as you download it, and it would make sense that ASCAP argue that this is a public performance. But ASCAP is demanding public performance royalties for all downloads even if you can't hear the music as it is being downloaded.

The Copyright Office actually offered its opinion on this issue several years ago.

In August 2001 MaryBeth Peters, the Register of Copyrights opined in written testimony before congress that, "although we recognize that it is an unsettled point of law that is subject to debate, we do nor endorse the proposition that a digital download constitutes a public performance even when no contemporaneous performance take place."

This March, Peters, who is still the Register of Copyrights, appeared to reaffirm this position in the face of ASCAP's action. In testifying before a congressional committee on digital music licensing, she said, "as we have seen, licensors have rarely turned down the opportunity in the digital age to seek royalties, even when the basis for their requests is weak at best."

A major distinction between standard radio and TV broadcast on the one hand, and downloading on the other, is that publishers and songwriters already collect a DPD royalty of 9.1 cents from downloading services, whereas they do not collect any mechanical royalties for transmission of music to radio or music performed on TV. Thus ASCAP's demand for an additional royalty for downloading seems like a classic "double dip."

The Federal Court is not expected to rule on ASCAP's demand until May, but a favorable result for ASCAP seems doubtful.

What tipped ASCAP to act

ASCAP waited for years before bringing this claim for additional revenues from downloading. And as we have just discussed, their arguments seem like a long shot. So why are they doing this? I believe the reason actually has more to with TV programs and movies then with music.

ASCAP collects performance royalties for music included in TV programs and movies whenever they are broadcast on TV. This has been a huge and growing source of revenue for them especially as more TV shows such as The OC, Gray's Anatomy, and The Sopranos, make increasing use of music. As new digital systems for downloading from the Web and playback on TV roll out, such as Apple TV, there is a greater likelihood that many more people will download their TV programs and movies instead of watching them as they are broadcast.

If the broadcast TV model declines because of this new way of consuming TV shows and movies, there will be less income for ASCAP, which receives a percentage of advertising income from the broadcast services. ASCAP's revenue may therefore suffer significant erosion. But if they successfully position themselves to collect monies from downloading music as well as performances, they will collect more monies as more people download TV shows and movies. ®

Steve Gordon is an entertainment attorney and consultant in New York, and the author of The Future Of The Music Business. He was Director of Business Affairs, TV and Video at Sony Music for ten years. His website is at www.stevegordonlaw.com.