The brouhaha arising from National Public Radio's threat to haul Danni Ashe into court for her re-broadcasting of KCRW - the Los Angeles NPR affiliate - to her callers that are placed on hold brings to the surface two categories of issue. One involves the grim reality that "mainstream" businesses will go to great lengths to avoid the appearance of approval of adult entertainment. The other involves the red-hot issue of digital re-broadcasting of music. The legal issues that underlie Danni's dilemma are crucial to anyone who is broadcasting music over the Internet, or is thinking of doing so. They also are interesting.
As reported elsewhere in this issue, the telephone system at the offices of epic Website Danni's Hard Drive (www.danni.com) includes a feature that allows callers that are on hold to hear music or other audio entertainment. A personal devotee of KCRW, Danni plugged an FM radio into her phone system, tuned it to KCRW and thereby treated callers to the KCRW broadcast to alleviate the tedium of being on hold.
First, this should be put in perspective. Radio stations from coast to coast promote themselves as "the station to listen to at work." They run advertising spots, promotions and contests with the specific objective of encouraging businesses to tune in - especially to the commercials. And it is not only radio stations that do this. Companies pay dearly, for example, to have their products placed in motion pictures. Did you really think that E.T.'s appetite for Reese's Pieces was an artistic decision? Or James Bond's selection of a BMW? Do NBA players choose their basketball shoes based upon which brand is more comfortable? Product placement is a huge industry.
When you are in the adult entertainment industry, however, things are different. Mainstream companies typically want nothing to do with adult entertainment for fear of being accused of endorsing sin. Thus, time and again the mainstream has sued adult companies for including their products, trademarks, and trade names in adult media without consent. It tends to "tarnish" their trademarks, in lawyer parlance. Props in X-rated movies therefore must be generic, perhaps with the exception of adult novelties. Clothing in such movies likewise must be bereft of designer labels or trademarks.
In sum, while vendors of products and services have the right to prevent others from exploiting their trademarks and copyrighted material, they normally do not enforce those rights owing to a desire for free advertising. Thus, if you own a sheet metal company, you probably can ameliorate on-hold boredom with any radio station in town, with that station's blessing. Not so with Danni.
A not-so-staid station might welcome Danni with open arms. Maybe one with a hard rock format will be more receptive than was NPR. Meanwhile, Danni should (and undoubtedly will) enjoy all of the free publicity that NPR is creating for her. But garnering the blessing of the radio station is not all the permission that Danni needs.
Radio stations do not have the authority to give permission to play any music. Music copyrights are owned by the record companies, the artists, and the writers. So Danni must obtain permission from those folks, too. The space taken by what follows is not warranted by Danni's circumstances; but it is warranted by the fact that anyone who streams music over a Website faces the same dilemma as Danni's music-on-hold system. That is, if you stream music over the Web, you will need permission from all kinds of people, and that permission is very expensive. The contours and the price of that permission for Web broadcasting of music has been the subject of a battle royal in Washington of late.
If you plan to broadcast only one tune, or a small handful of them, you may be able to secure the right to do so directly from the artist and/or recording company. But if you broadcast many songs, as a radio station does, it obviously is impossible to deal directly with a laundry list of artists, composers, and record companies.
As a practical matter, you can purchase the right to play most any song ever written. But both the composers and the record labels own rights that will cost you money.
First, there are the artists and composers to pay. The mechanism for obtaining permission to exploit copyrights owned by composers and artists involves dealing with three organizations, ASCAP, BMI, and SESAC.
ASCAP (the American Society of Composers, Authors and Publishers), which has been around for almost 90 years, purports to represent 140,000 American composers, songwriters, and publishers of music and hundreds of thousands of them worldwide. ASCAP creates a mechanism for authors to collect royalties and for users to pay them. In a nutshell, composers, authors, and publishers of music make deals with ASCAP whereby ASCAP enforces their copyrights. ASCAP, in turn, takes license fees from users of the licensed music and distributes them to the artists.
Classically, ASCAP sends their bounty hunters around shopping malls, restaurants, nightclubs and other businesses in search of places where music is played for the enjoyment of the customers but without permission from ASCAP. The ASCAP representative explains that businesses cannot play ASCAP music - which is most of it - without a license from ASCAP. If you don't get a license, ASCAP will sue you. If you purchase the license, you can play ASCAP music in your business to your heart's content. ASCAP now has some 85 categories of licenses, ranging from airlines to zoos. Some of the more traditional include retail stores and dance clubs; some of the more obscure include tractor pulls and volleyball. Of concern to Danni is the "music-on-hold" category; of more concern to readers of this column is the "Websites" category.
BMI is an organization parallel to ASCAP. BMI doesn't stand for anything anymore; like IBM (International Business Machines), BMI (Broadcast Music, Incorporated) has been reduced to letters. BMI claims to represent approximately 300,000 songwriters, composers, and music publishers. BMI, too, will sell Danni a music-on-hold license.
Finally, there is SESAC (Society of European State Authors and Composers, which also is known only by its acronym), which also represents songwriters and publishers.
However, the record companies are also in for their percentage. RIAA (the Recording Industry Association of America) is the trade group that represents the American recording industry. Sound Exchange is an unincorporated division of RIAA that administers statutory licenses for Internet broadcasting.
Over-the-air radio stations get a pass from RIAA because the Copyright Act says that performance of a sound recording is not one of the rights included in the record companies' copyrights. The theory is that such performances prime the pump for the sale of records, and people at home that record music off the air do not obtain particularly good copies, and can do that only with great difficulty.
However, as a result of laws enacted by Congress in 1995 and 1998, the free ride given over-the-air broadcasters does not extend to Web broadcasts (see Digital Performance Rights in Sound Recordings Act, P.L. 104-39 [1995] and Digital Millennium Copyright Act, P.L. 105-304 [1998]). As a result of that legislation, RIAA now has its hands in the Web broadcasters' wallets. The pitch that succeeded in accomplishing this change in the law was that digital transmission facilitates perfect copies and thereby will significantly eat into record sales.
RIAA has clearly won its political battle against Web broadcasting. After persuading Congress to execute the above modifications in the copyright law, it became the task of the Copyright Arbitration Royalty Panel (CARP) to establish licensing fees, because the interested parties were unable to reach an agreement. The Copyright Office has recently approved, for the most part, CARP's conclusion in a report consisting of 38 pages of very small print, which can be found at 37 CFR Part 261, 67 F.R. 45240 (July 8, 2002).
The RIAA fees as originally proposed were staggering for a small-time Web broadcaster. The minimum fee was $500.00 per year against a performance royalty of 0.07� per performance per listener, or $92 per listener per year, for an all-music station. That adds up fast. A tab of 0.07� doesn't sound like much, but when you start adding it up, it stands to cripple Web radio. Few could garner advertising revenue sufficient to support it, especially when that fee is atop ASCAP, BMI, and SESAC fees.
As this issue went to press, it was reported that an agreement had been reached between Webcasters and record labels calling for "significantly lower" royalties for online music broadcasts, but unless Congress acted quickly to change the law, Webcasters would be subject to three years' worth of back-royalties, due Oct. 20. Congress was also considering legislation to put the fees on hold while the Web industry can appeal (H.R. 5469 [Sept. 27, 2002]).
RIAA has an explanation for this that, as of this writing, was not accessible over the Internet for a rather amusing reason. Apparently as a result of RIAA's support for legislation introduced by Rep. Howard Berman (D-Calif.) allowing the "Copyright Industry" to flood file-sharing networks with everything from dummy files to viruses (see AVN Online, p. 45, Oct. 2002), RIAA's Website has been the subject of a denial-of-service assault by the Wild-Wild-West component of the Internet that objects to its attack on file sharing. It will be fascinating to watch this all evolve.
Clyde DeWitt is a partner in the Los Angeles, California-based national law firm of Weston, Garrou & DeWitt. He can be reached through AVN Online's offices, at his office at 12121 Wilshire Boulevard, Suite 900 Los Angeles, CA 90025 or over the Internet at [email protected]. Readers are considered a valuable source of court decisions, legal gossip and information from around the country, all of which is received with interest. Books, pro and con, are encouraged to be submitted for review, but they will not be returned. This column does not constitute legal advice but, rather, serves to inform readers of legal news, developments in cases and editorial comment about legal developments and trends. Readers who believe anything reported in this column might impact them should contact their personal attorneys.
