Intellectual Property and Antitrust - Music Performing Rights in Broadcasting

The Performance Right and its Enforcement

By Michael A. Einhorn,

Copyright for the words and lyrics embedded in musical compositions is now protected by the Copyright Act of 1976, which was enacted on January 1, 1978 and codified in Title 17 of the U.S. Code. Section 106 grants four exclusive rights to composers/writers who create musical works. These rights include:

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a. The right to reproduce the work in copies or phonorecords,
b. The right to prepare derivative works,
c. The right to distribute copies or phonorecords of the work,
d. The right to perform the work publicly.

The fourth right, embedded in Section 106(d), represents the public performance right for musical compositions that is the topic of this paper. Public performance rights in musical compositions should not be confused with previous rights to physically reproduce, derive, and distribute the music or lyrics of a musical composition. These rights together compose the mechanical right or, when applied to video soundtracks, the synchronization right. Writer copyright in musical compositions also should not be confused with copyrights in the actual sound recordings that are made by singers and instrumentalists and owned by their recording labels. Sound recording rights are now protected in the U.S. only for non-broadcast digital audio transmissions.

There are two general categories of performance rights. Small or non-dramatic rights pertain to compositions (including popular songs) that are performed independently of a created story (or dramatic or concert excerpt thereof). Since use here may be spontaneous, individual licensing between user and writer is often impractical. Consequently, the PROs reasonably act as transactions agents for licensing material, monitoring performances, and collecting royalties on behalf of their members or affiliates. By contrast, grand or dramatic rights pertain to musical compositions that are performed as part of a larger theatrical production or concert excerpt thereof. Because dramatic rights can be negotiated in advance of actual performance, PROs do not license them.

ASCAP and BMI are the two major American PROs that license non-dramatic public performances of copyrighted musical compositions. After composing a song, a writer will enlist one of the PROs to act as her collecting agent. Once affiliated, a writer will enlist the services of a PRO-affiliated music publisher, to whom she passes the copyright. The PROs distribute license revenues evenly to publishers and writers based on estimated number of performances.

Fees for broadcast licensees are negotiated periodically with individual networks/stations or their collective agents (such as the Radio Music Licensing Committee and Television Music Licensing Committee). Each radio station generally pays a fixed percentage of its adjusted advertising revenue for a blanket license. Cable channels pay blanket fees based on advertising revenues or numbers of subscribers. The three full-time television networks pay fixed fees that are adjusted annually for inflation. Local television station fees are negotiated for the industry as a whole and subsequently portioned to each station based on estimated viewership.

In addition to blanket licenses, broadcasters have other ways of "clearing" music used on television programs. Per the terms of the relevant Consent Decrees, PRO license arrangements must be non-exclusive; i.e., licensees may directly contract with writers and publishers for usage rights for particular compositions. Direct licensing entails contracts between broadcast stations and writers for individual musical works that may be performed on station-produced shows, such as themes for local news and talk shows. Source licensing entails deals between copyright owners and program producers who hire music for prerecorded soundtracks used on network and syndicated programs. Once secured by a producer, performance rights can be conveyed with the program to station buyers.

Finally, each PRO must offer a program license, which is a "mini-blanket" that confers full usage rights for all catalog music used during the presentation (i.e., non-commercial) of specified programs or day parts. Total program payments for a particular licensee depend upon the total number of programs in which catalogued music is used. Program licenses should not be confused with per use licenses that would price each individual performance. As program fees can be reduced as more programs are "cleared" through source or direct-licensing, a station can save licensing revenues if it can source- or direct-license its music at a rate that is below the prevailing program fee. Program licenses are augmented with separate commercial "mini-blankets" that license off-program uses that surround the feature presentations.

A broadcast station or network can then obtain the same rights with a blanket license or a combination of direct, source, program, and commercial licenses The licensee will then choose its most preferred licensing system by comparing blanket fees with amounts from a modular alternative. If the market were perfectly competitive, the fee for each program license would equal the rate of the best direct- or source-license alternative, and blanket fees would differ from the sum of the composites only by the incremental administration costs that the providing PRO would save by implementing the blanket.

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