The Latest Curious Case of the Copyright System

Dan Horowitz
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Posted: Oct 09, 2015 3:00 PM
The Latest Curious Case of the Copyright System
Ninety-nine percent of the time, the laws, rules and regulations that govern streaming music go unnoticed by every day Americans. So it is unsurprising that once again the US Copyright Office, through its delegates of the Copyright Royalty Board (CRB), is quietly in the midst of a process to determine the amount of money which digital streaming music services, like Pandora, Spotify and iHeartRadio, must pay performers for the use of their recordings. This royalty rate will be in effect from 2016 until 2020 and then a new rate will take affect.
So why does this matter to anyone outside the small universe of people directly impacted by this rate? Stick with me, its yet another story that could only happen "Inside the Beltway" and one which needs only a little sunlight to stop it.
The copyright royalty from streaming is paid to every record label big or small - and has quickly grown to become the largest source of revenue for the record labels. Some of these record companies are widely known like Sony Music or Warner Music, others less so like Big Machine, Young Money or Sub Pop. But each label, "major" or "independent", brings a different point of view to the music industry; Each brings a needed and necessary voice to "What's Good?".
Throughout the rate-setting process the CRB reviews the limited number of privately reached agreements which have occurred between streaming services and performance rights holders (Artists and their record labels). The CRB uses these limited number of agreements to determine the royalty rate for all rights holders for the use of their recordings by streaming services. Its a convoluted system that has been created over decades but it allows streaming services to use the music without being sued and uses a neutral arbiter to establish fair compensation for artists.
And this has been the situation since the mid-1990s when streaming music, then called "webcasting", was first commercially undertaken.
However, the judges of the CRB recently took the novel step of asking the Copyright Office if they can set one rate for recordings released by the major record labels and a different rate for independent labels. This seemingly simple question has sent shock waves throughout the entire music industry, the underlying assumptions are not as straight forward as they seem at first glance.
How this matters to you and I is simple. A decision by the CRB to assign one rate to "major label recordings" and another to "other labels" with the division based on the companies' market share of the music industry would be unfair to the artists currently signed to the labels - whether "major" or "indy". We, the fans and consumers of the music, don't care whether the record company is multinational conglomerate or just for a single artist in the backroom of their friend's house. The only fair way seems to be for a single rate - regardless of what company the artist chooses to sign a contract.
The example widely utilized by trade reporters is the omnipresent Taylor Swift. The CRB could choose to grant a higher rate to the major labels simply because they have more artists and a greater share of the distribution marketplace. Ms Taylor, signed to the independent label, Big Machine, would be forced to chose between independence or a higher royalty rate. Or more personally, between money and family - as her father is a stakeholder in Big Machine Records.
Another artist of similar stature, Niki Minaj, is a useful comparison. While Ms Minaj is also signed to an independent label, Young Money Records, her music is distributed through Universal Music Group and thus would likely qualify for the "major label rate".
Forget about "What's Good", this disparate treatment would definitely set off real fireworks! While there are several legal rationales the CRB could stretch to use to determine different rates for different suppliers (aka record labels), the resulting impact on competition and consolidation within the music industry would without a doubt have a negative impact on the music we love.
There are many reasons Ms Taylor and Ms Minaj, both vastly successful artists, have chosen to sign with independent labels - regardless of their distribution system. But the idea that artists of independent labels are "worth less" or any different than those signed to major labels couldn't further from the truth. How could any neutral judge believe that Nirvana's recordings should be compensated differently than those by the Foo Fighters? The level of compensation have been - and should be - determined by the number of times the recordings are listened to by consumers.
One of the many advantages given to us by the widespread use of the Internet is that it allows an unknown artist, produced and distributed by a small record label to shake up what we know to be good. The independent label system allows freedom, artistry, innovation and creativity. Social media, the Internet and the rapidly responding streaming music services quickly bring fame, fans and reward for artists. The independent record system works. Any attempt by the CRB to crush that should not be allowed.
That's how we were given NWA - by Ruthless Records.
That's how we were given Dave Matthews Band - by Bama Rags.
Gang Starr by Wild Pitch; Zac Brown Band by Southern Ground.
That's how we were given... well, fill in the rest. Pick your genre, it doesn't matter. Not one of these artists should ever be considered "worth less" than any of the major label acts. No matter what someone in DC tries to say.