INTERNET RADIO Stuck between a broadcast and a jukebox

OLD DOG, NEW TRICKS?  

OPYRIGHT GOALS  Economic Incentive to Create  Monetary based right related to the recreation of copyrighted works.  Rewards creativity and large initial investment before return  Public Need for Copyrighted Works  Furthers education and the “well-informed” populous  Fair Use & First Sale doctrines are evidence of the desire to allow for public consumption of copyrighted works.

2 MUSICAL COPYRIGHTS  Composition  Underlying melody, chord structure, and lyrics of the song Sound Recording Specific recording of a version of a song E.g., a live version of a studio album would envelope the same compositional rights, but there would be two distinct sound recording rights

RIGHTS OF THE OWNER OF EITHER SOUND RECORDING OR COMPOSITION RIGHTS  Reproduction  Includes sheet music, lyrics, & composition  Derivation  Cover songs  Mash-ups  Rearrangements  Distribution  Rent, lease & lend  Tempered by §109 First Sale Doctrine for physical copies of works

EXCLUSIVE RIGHTS  Composition  Public Performance  Includes actual performances of a song, as well as audible broadcasts through the radio or at both public & private venues  Sound Recording  Digital Audio Transmission  Constitutes a “public performance” when a sound recording is transmitted digitally, which provides for royalties when played via satellite, internet or cable radio.

LICENSES  Compulsory  Copyright holder’s permission is NOT required, and the rate is determined pursuant to the Copyright Act  Non-Compulsory  Must negotiate with copyright holder for a license fee, which is determined as between the parties, and must not necessarily be granted.

INTERACTIVE  Individual Request (Jukebox or Rhapsody)  End-user has complete control over what he or she listens to through the service  Program created for end-user (Pandora?)  End-user has some level of control over what he or she hears  Start & Stop songs  Skip songs  Rate music  Creates “micro-genres” “A service that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording... which is selected by or on behalf of the recipient.” 17 U.S.C. § 114(j)(7)

NON-INTERACTIVE  Subscription based transmission  XM Radio: end-user pays for service, but has no input as to what songs will be played at what time  Non-subscription based transmission  Traditional radio transmits its broadcast over the internet  “Webcast” radio in which users have no input as to song selection, but only select stations or channels “Primary purpose... is to provide the public to the public such audio or other entertainment programming.” 17 U.S.C. § 114(j)(6)

ROYALTY STRUCTURE  Non-interactive Services  No direct negotiation with the copyright holder(s) .0019¢ per performance, which is one song played to one listener  Simply pays the compulsory license fee and SoundExchange distributes the proceeds as follows:  50% Copyright holder  45% Featured recording artist  2.5% non-featured musician  2.5% non-featured vocalist  Interactive Services  Must negotiate with each individual copyright holder for licensing agreement.  Copyright holder may refuse to grant license, or may charge whatever he or she believes the work is worth  Difficult to track down copyright holders  Transaction Costs

THE TROUBLE WITH ROYALTIES…  As for the new CRB rates, McIntyre said, "There's no way you can build an Internet radio business, operating the way we were, with these kinds of royalties.”  At the end of 2008, Pandora founder Tim Westergren said the company was "losing money as it is" and that Pandora was "approaching a pull-the-plug kind of decision," describing the situation as a "last stand for webcasting.”  Westergren reported that the company expected to pay 70% of its projected $25 million revenue in 2008 to SoundExchange for performance royalties.  As cited in Andrew Stockment, Internet Radio: The Case for a Technology Neutral Royalty Standard, 95 V A. L. R EV. 2129, 2155 (2009).

Arista Records v. Launch Media, Inc., 578 F.3d 148 (2d Cir. 2009)  Background  Several music labels filed suit against Launch Media, Inc., which provided a radio internet service that allowed end-users to create stations related to a particular genre or artist  Service allowed users to select preferred artists and genres, skip or delete a current song, but did not allow for a user to restart or repeat a track  Users also rated each song on a scale between 0-100, and had a readily available option to purchase the current song  Holding  “[T]here is no bright line marking the limits between an interactive service and a noninteractive service.”  Congressional intent was to prevent the public from forgoing purchase of music, instead relying solely on digital transmission

PLAIN LANGUAGE V. CONGRESSIONAL INTENT  “A service that enables a member of the public to receive a transmission of a program specially created for the recipient, or on request, a transmission of a particular sound recording... which is selected by or on behalf of the recipient.” 17 U.S.C. § 114(j)(7) “In sum, from the SRA to the DMCA, Congress enacted copyright legislation directed at preventing the diminution in record sales through outright piracy of music or new digital media that offered listeners the ability to select music in such a way that they would forego purchasing records.” Arista, 578 F.3d at157.

FURTHER READING  2-8 M ELVILLE B. N IMMER & D AVID N IMMER, N IMMER ON C OPYRIGHT §8.22 et seq. (2009) (Matthew Bender, rev. ed.).  Jessica L. Bagdanov, Comment, Internet Radio Disparity: The Need for Greater Equity in the Copyright Royalty Payment Structure, 14 C HAP. L. R EV. 135 (2010).  Ira Hoffman, Comment, Pseduo-Interactivity: An Appropriate Rate Scheme for Customizable Internet Radio Services, 32 C ARDOZO L. R EV (2011).  Mary Ann Lane, Comment, “Interactive Services” and the Future of Internet Radio Broadcasts, 62 A LA. L. R EV. 459 (2011).  Andrew Stockment, Internet Radio: The Case for a Technology Neutral Royalty Standard, 95 V A. L. R EV (2009).