MUSIC STREAMING
How licensing works
Every song is protected by two types of copyright: one for the musical composition, which is held by the publishing company, and another for the sound recording, typically owned by the record label.
Paul Fakler, a partner at Arent Fox LLP in New York, says digital and analogue music services are treated differently in the US when songs are licensed. Terrestrial radio stations, for example, have to pay only the publisher, but radio stations with a digital service will have to pay both the publisher and the record label.
Similarly, non-interactive online music services, which mimic a radio broadcast and have very little user interaction, have to clear the copyright with both the publisher and the record label.
Tere’s a compulsory statutory licence for these non-interactive services, Fakler explains, where the rates have already been set. Interactive services that allow the user to choose what they’d like to listen to, such as on-demand streaming services, are
www.worldipreview.com
excluded from the statutory licence. Tey have to negotiate with each of the record labels that own the copyright, which can be very expensive.
“Te record labels essentially have absolute power in these negotiations and they can demand whatever they want,” Fakler says. He estimates that most digital services in the US pay 5 to 10 percent of their revenue to the music publishers, and between 50 and 65 percent to the record companies.
Te situation is similar in the UK, where about 10 percent of revenues will go to the publishers, with 60 percent paid out to the record labels.
A tough marketplace
Tis licensing structure has seen off at least one start-up.
Launched in January 2011 and backed by Lady Gaga’s then-manager Troy Carter, and musician Questlove, social media platform
turntable.fm turned its users into DJs who could broadcast their
favourite tunes to other users in virtual ‘rooms’, all in real time.
It boasted a catalogue of more than 11 million tracks, and in the beginning, while having no licensing deals in place, kept everything above board by complying with the rules of the Digital Millennium Copyright Act.
“DIGITAL, ON A PER USER BASIS, IS MASSIVELY MORE REMUNERATIVE TO SONGWRITERS AND ARTISTS THAN COMMERCIAL RADIO.”
Trademarks & Brands Online
Volume 3, Issue 1
15
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