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President & CEO
STATEMENT OF DEL R. BRYANT
July 12, 2005
Chairman Hatch, Senator Leahy, and Members of the Subcommittee, thank you for the opportunity to testify concerning the important subject of "Music Licensing Reform".
My name is Del R. Bryant. I am President and Chief Executive Officer of BMI, one of the world's leading performing right organizations ("PROs"). America's copyright laws have provided a firm foundation to support a vibrant creative community of songwriters and composers whose works fuel a robust and growing entertainment industry. BMI is proud to represent the public performing rights of over 300,000 songwriters, composers and music publishers, more than any other performing right licensing organization. BMI oversees a repertoire of more than 6.5 million musical works. BMI's repertoire includes outstanding creators in every style of musical composition: from pop songwriters to film and television composers; from country music to gospel; from classical composers to commercial jingle writers; from library music to musical theatre composers; from jazz to hip hop; from metal to meringue; classical to soul; rock to reggae; and all categories in between. BMI also represents the performing rights in the musical works of thousands of foreign composers and songwriters when those works are publicly performed in the United States.
The emergence of a viable business in the digital distribution of music in recent years has focused the attention of the industry and members of Congress on issues having to do with licensing of the mechanical right when music is digitally delivered. Some digital music services have complained that the current compulsory license for mechanical rights codified in Section 115 of the Copyright Act is cumbersome and requires reform. While the issue of mechanical licenses has not historically impacted BMI, the digital transmission of music often involves both the mechanical right and the public performing right. Consequently, BMI has attempted to meet our licensees' needs to provide licensing solutions where both rights are required. Over its entire history, BMI has actively represented the public performing right interests of our affiliated songwriters, composers and music publishers in the marketplace as well as in Washington, DC, to protect the performing right which is vital to songwriters' and publishers' livelihoods. We have fought against legislative and regulatory efforts that would unfairly eliminate or truncate the public performing right as it applies to digital transmissions.
The "Unilicense" proposal does not involve a repeal of the Section 115 compulsory license, which for decades has set the backdrop for licensing of mechanical rights in physical CDs (and LPs and cassettes). Also, it does not create an upheaval in existing music industry licensing institutions with unsettling marketplace repercussions. Rather, it entails an antitrust exemption that would permit the existing PROs and HFA, to offer a one stop shop to obtain a license for the reproduction/distribution and performing rights to subscription interactive digital music services. A key component of the proposal is that Congress would establish a fixed license rate as a percent of subscription music services' gross revenues (with minimum fees as appropriate). This rate would provide reasonable compensation to the songwriters and music publishers for the use of their musical works. In this regard, it is noteworthy that the record industry, which has no regulation of its licensing of interactive digital music services, have negotiated substantial rates from these same users for the copyright rights in sound recordings.
There have been complaints by some internet music services' about "double-dipping" by copyright owners of musical works under the current copyright law. These complaints are unfounded. At bottom, they are simply complaints about the separate administration of the public performing and mechanical rights in the U.S. As you know, BMI and ASCAP for decades have licensed public performing rights only, while music publishers have customarily licensed reproduction and distribution rights either directly to record labels or else through the Harry Fox Agency. In Europe, by contrast, both performing rights and mechanical (i.e. reproduction/distribution) rights may be jointly administered. Despite the separate structure of the licensing organizations in the U.S., many businesses have successfully licensed both performance and reproduction rights over the past decades. BMI has long licensed subscription digital music services like Music Choice and DMX, and has licensed video on demand and other cable and satellite television services. Why should performance royalties not be available to songwriters for Rhapsody and other services, when the obvious intent of the subscriber who is enjoying conditional downloads is to listen to performances of the music?
While DiMA and the Local Radio Internet Coalition ("LRIC") have praised the collective blanket licensing model for licensing Internet music services, in their very next breath they will argue that the performing right should not apply to subscription downloading services. What these services seek is not only ease of licensing the copyright rights they need, but also a bargain basement license fee, all at the expense of the songwriters whose works provide the very foundation of their businesses. As mentioned above, in 2001, BMI and ASCAP publicly stated that they would not seek license fees for pure, unconditional downloads. This should satisfy the needs of "e-tailers" who are selling music digitally with no restrictions. Under these types of new subscription digital music services, however, the consumer's ability to listen to her subscription music (however delivered) stops the minute her subscription expires. The fact is that many of the new online music services also offer a wide variety of limited or conditional downloading services for a monthly subscription fee. It is these services that the PROs seek to license, and that are the focus of the "unilicense" proposal.
In Europe, where societies jointly administer the public performing right and mechanical rights, both the performing rights and mechanical rights are being paid for. The Joint NMPA-HFA/ASCAP/BMI unilicense proposal would accomplish something similar by providing for the necessary exemption from antitrust laws to create a joint licensing "super agency" for this purpose. The unilicense proposal achieves the goal of one stop shopping without the need for government oversight. It permits a private business issue to be resolved by the private businesses. It achieves this goal with a minimum amount of legislation and regulation. The royalty rate would be set by Congress. There would be no need for the parties to submit to expensive adjudication by Copyright Royalty Judges. The allocation of the royalties collected would be an internal business decision not requiring government intervention or oversight.
I believe that the "Unilicense" proposal directly targets the two types of digital audio transmissions currently being offered by digital music services, namely conditional downloads and interactive streams, for which DiMA and others have claimed that they are unable to obtain the necessary performing right and mechanical licenses. That is why we proposed a targeted solution that is narrowly tailored to fit the problem. Although we question whether or not the digital music services have adequately demonstrated that they cannot obtain the necessary licenses for these services in the market, BMI has nevertheless joined ASCAP and NMPA-HFA to offer a compromise "Unilicense" solution that has a suitably narrow scope and would involve as little disruption to the music industry as possible.
The plain fact is that many of the innovative and exciting new services represented by DiMA offer combinations of streaming and downloading capabilities to their subscribers As the industry's discussions proceed, our primary objective will be to safeguard the full value of our affiliated songwriters' and publishers' copyrights and create an efficient and fair licensing system for digital music services. We echo the sentiments of the Register of Copyrights Marybeth Peters when she testified at a recent hearing held by the House Judiciary Committee's Subcommittee on Courts, the Internet and Intellectual Property that the development of competitive licensed digital music services can help ease the piracy epidemic that is currently sweeping the country (and the world) through unauthorized peer to peer file sharing.
As we understand it, the Copyright Office's proposal would require MROs to offer a blanket license to audio digital music services that combines both the public performing right and the mechanical rights needed for making the various kinds of digital audio transmissions of music to consumers. Her proposal would facilitate this by automatically amending every public performing right grant to a PRO to include mechanical rights. The licensing contemplated by her proposal addresses all digital audio transmissions,
I testified at a recent "PRO oversight hearing" before the House Intellectual Property Subcommittee that the PRO business model of blanket licensing and marketplace negotiations works for licensees and creators alike and should not require legislative intervention. While the Copyright Office proposal to essentially adopt the PRO model for mechanical rights licensing in digital audio transmissions is a strong endorsement of the way we do business, the proposal represents a far-reaching change in the way music publishing rights are licensed in the United States that transcends the immediate issues at hand. At this time, while we appreciate Ms. Peters' attempt to offer a comprehensive overhaul of the mechanical licensing system, BMI believes that there are significant areas of concern and therefore supports the unilicense proposal.
BMI has been recognized as a global leader in digital initiatives for more than a decade. We were the first music company with a website, the first to license music for performance on the web, and the first to post data on our entire catalog, now more than 6.5 million musical works, on the Internet. We recognized the potential for licensing digital transmissions before Internet streaming was a reality. In calendar year 2004 alone, BMI processed 2.4 billion performances of music from more than 3,500 different digital licensees, and as those numbers grow exponentially, we have the robust infrastructure to track their growing volume, too. We provided the core technology for FastTrack, an international alliance of copyright organizations who share a network of performance and mechanical rights data on more than 20 million copyrights.
We look forward to continued conversations with you and your staff and other members of the Subcommittee, and will under the Chairman's leadership continue to work closely with all sectors of the music industry in order to develop music licensing solutions. Mr. Chairman and Mr. Ranking Minority Member, we are grateful to you for the effectiveness of the Copyright Act, which permits BMI to function, and songwriters, composers and publishers to be compensated. Thank you for your many years of strong leadership on these issues which affect the livelihoods of the hundreds of thousands of individuals we represent.
July 12, 2005