Music publishers: iTunes not paying fair share

Music publishers and songwriters want Apple and other Web retailers to pay performance fees for music samples and video downloads. What's right here?

Songwriters, composers, and music publishers are making preparations to one day collect performance fees from Apple and other e-tailers for not just traditional music downloads but for downloads of films and TV shows as well. Those downloads contain music after all.

These groups even want compensation for iTunes' 30-second song samples.

In the future, Apple may be required to pay licensing fees to ASCAP and BMI for the downloads of TV shows and films it sells. Apple

At a time when many iTunes shoppers are still fuming over Apple's first-ever increase in song prices , the demands by the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music Inc. (BMI), and other performing-rights groups, would likely lead to more price hikes at iTunes. For many, this would also undoubtedly confirm their perception that those overseeing the music industry are greedy.

For those reasons, composers and songwriters will struggle to sell their case to the public. But these royalty-collection groups say they're at the bottom of the music-sector food chain and aren't trying to gouge anyone. They say their livelihoods are threatened and wonder why movie studios, big recording companies, TV networks, and online retailers are allowed to profit from their work but they aren't.

"We make 9.1 cents off a song sale and that means a whole lot of pennies have to add up before it becomes a bunch of money," said Rick Carnes , president of the Songwriters' Guild of America. "Yesterday, I received a check for 2 cents. I'm not kidding. People think we're making a fortune off the Web, but it's a tiny amount. We need multiple revenue streams or this isn't going to work."

An Apple spokesman declined to comment.

ASCAP and BMI have their sights set on collecting fees from three main areas: downloads of music; downloads of films and TV shows, and 30-second song samples.

"(On iTunes), you can stream radio, and you can preview tracks, things that we should be getting paid performance income for."
--David Renzer, CEO Universal Music Publishing Group

In case you don't know the lingo of music licensing, here are some important definitions. When music is performed in public, say at radio stations, restaurants, or sports stadiums, groups such as ASCAP and BMI collect fees and pass them on to composers and songwriters. This is different than a "mechanical" licensing fee, which is paid for the right to record or distribute a song (ASCAP and BMI don't collect mechanical fees).

"In the U.S. while we do get paid a mechanical (licensing fee) from ITunes, we are not getting any performance income from Apple yet," David Renzer, chairman and CEO of Universal Music Publishing Group, said in interview late last month with entertainment-industry publication, Encore. "(On iTunes) you can stream radio, and you can preview (tracks), things that we should be getting paid performance income for.

"Also, if you download a film or TV show," Renzer continued, "there's no performance (payment) and typically there's no mechanical (payment) either."

Taking their case to Congress
Apparently, the music industry can't obtain the fees through negotiations. They have begun lobbying Congress to pass legislation that would require anyone who sells a download to pay a performance fee, according to David Israelite, president and CEO of the National Music Publishers Association.

"If you watch a TV show on broadcast, cable or satellite TV there is a performance fee collected," Israelite said. "But if that same TV show is downloaded over iTunes, there's not. We're arguing that the law needs to be clarified that regardless of the method by which a consumer watches the show there is a performance right."

Israelite acknowledges that the legislative efforts to this point have produced little. And they won't produce a thing if Jonathan Potter gets his way.

Potter is executive director of the Digital Media Association (DiMA), a trade group that represents Web music services and media companies, such as RealNetworks, Pandora, and Apple.

He stresses two points.

First, publishers, composers and songwriters do get paid for music inserted into TV shows and movies. A production company must pay a "synchronization" fee for the right to include a song in any show or film. Then, once the show airs or the film is screened, the music guys will require a separate payment from TV networks or studios for performing the music publicly. Israelite confirmed this.

Critics argue this is double dipping.

Israelite makes no apologies. He says that synchronization and performance fees cover very different rights. To illustrate the point, he says not all composers receive money from TV and films. Say, for example, a TV show licenses a popular tune from singer Aimee Mann or the rock band The Fray. Those acts would likely be paid both sync and performance fees. But the person who writes the little-known background music heard during a fight scene may not see any sync money. That's because traditionally, composers of this kind of production music gave away sync rights in the hope they would make money from performance fees.

"This is really a fight about the future," Israelite said. "As more and more people watch TV or movies over an Internet line as opposed to cable or broadcast signal, then we're going to lose the income of the performance. For people who do production and background music, that's how they make their living."

"They aren't getting paid for the public performance in a download because there is no public performance in a download."
--Jonathan Potter, executive director of the Digital Media Association

Potter says he is very sorry for those people. But if their income is drying up--this was the second major point he wanted to make--their troubles are not the fault of iTunes, Amazon, or consumers.

"These guys are afraid that the business model is shifting away from public performances to a model of private performances," Potter said. "This is a turf battle. They are saying, 'The songwriters aren't getting paid.' Baloney. Songwriters are getting paid. They're paid sync rights and (mechanical) rights. They aren't getting paid for the public performance in a download because there is no public performance in a download."

Downloading count as a performance?
Whether downloading a song from the Web should be considered a performance is much contested. So far, the courts have sided with digital media companies.

In 2005, ASCAP entered into a rate-court proceeding to set licensing fees for the music services of Yahoo, AOL, and RealNetworks. A U.S. district judge for the Southern District of New York delivered a blow to composers and songwriters by ruling that downloading music from a Web store was not a music performance. On the other hand, the judge found that streaming music was subject to a performance fee.

"The songwriter gets a performance fee if the song is streamed without the video," Carnes noted. "But if it is downloaded within an audio-visual work like a movie we don't get a performance fee--same song, no money."

ASCAP has appealed the decision and arguments in the case will be heard later this year.

Of all of the efforts to collect performing-rights fees, few will likely be more controversial than trying to charge for 30-second samples. These are the previews iTunes offers so users can test drive a song and hear what they're buying. According to sources close to the company, iTunes has acquired licenses to offer the previews but hasn't paid anything for them. According to Renzer's comments, music publishers want that to change.

Potter from DiMA argues that copyright law protects Apple and music stores from being charged performance fees for in-store sampling.

"They are picking on Apple because they say Apple is making a bundle of money," Potter said. "But these companies should be thrilled that Apple and the other services are selling music and generating millions, maybe tens of millions, in royalties."

 

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