Are New Streaming Royalty Rates A Way To Backdoor DRM Into Copyright Law?

from the dangerous dept

We recently wrote about how different parts of the music industry -- the RIAA, NMPA and DMA -- had come to an agreement on new royalty rates, as well as designating royalties for "new classifications" of services. While the groups celebrated this solution for being "flexible" for new providers, the details suggest a different story. We already expressed concerns about what are apparently licensing requirements for services that shouldn't need any license (i.e., personal music lockers). However, that was just based on the press release. When you look at the full details (pdf and embedded below), it gets even more troubling -- to the point that the whole agreement should probably be rejected.

Here's the big concern. This is a settlement among a few parties, who certainly don't represent the entire industry. Yet, if the Copyright Royalty Board and their (typically out of touch) judges accept the settlement, the details of the settlement become law. And that's problematic, because this thing is pretty crazy with restrictions -- some of which are nearly impossible to understand. If you think the tax code is confusing, you haven't tried to figure out what you have to pay to license certain services. Let's just say you want to set up a locker service that allows users to buy music which automatically goes into the locker. Well, among a ton of other rules, try this sucker on for size:

In the case of a purchased content locker service, the percentage of subpart C service revenue applicable in step 1 of &sec;385.22(b)(l)(i) is 12%. For the avoidance of doubt, paragraph (l)(i) of the definition of subpart C service revenue shall not apply. The minimum for use in step 1 of &sec;385.22(b)(l)(ii) is the appropriate subminimum as described in paragraph (b) of this section for the accounting period, where the all-in percentage applicable to &sec;385.23(b)(l) is 18%), and the sound recording-only percentage applicable to &sec;385.23(b)(2) is 22%, except that for purposes of paragraph (b) of this section the applicable consideration expensed by the service for the relevant rights shall consist only of applicable consideration expensed by the service, if any, that is incremental to the applicable consideration expensed for the rights to make the relevant permanent digital downloads and ringtones.

That's on page 40 of 44 pages. And is just one paragraph. Good luck figuring out the rest of the rules without a cadre of lawyers (oh wait... perhaps that's the idea).

But the bigger issue is that this agreement is a way to actually sneak DRM into copyright law. While existing copyright law has anti-circumvention rules, it makes no statement on how DRM actually impacts royalties or requirements (beyond anti-circumvention). Yet, this "agreement" has multiple sections that define types of DRM and with different rules for those specific cases. That is, the agreement defines the idea of a "limited download."

Limited download means a digital transmission of a sound recording of a musical work to an end user, other than a stream, that results in a specifically identifiable reproduction of that sound recording that is only accessible for listening for—

(1) An amount of time not to exceed 1 month from the time of the transmission (unless the service provider, in lieu of retransmitting the same sound recording as another limited download, separately and upon specific request of the end user made through a live network connection, reauthorizes use for another time period not to exceed 1 month), or in the case of a subscription transmission, a period of time following the end of the applicable subscription no longer than a subscription renewal period or 3 months, whichever is shorter; or

(2) A specified number of times not to exceed 12 (unless the service provider, in lieu of retransmitting the same sound recording as another limited download, separately and upon specific request of the end user made through a live network connection, reauthorizes use of another series of 12 or fewer plays), or in the case of a subscription transmission, 12 times after the end of the applicable subscription.

(3) A limited download is a general digital phonorecord delivery under 17 U.S.C. 115(c)(3)(C) and (D).

Is this really what we want in the law? A specific legal definition of DRM that applies to others despite not being a part of the negotiations? The main issue is that this is a standard contract between private parties. That's fine if it only applied to those parties who were subject to the negotiation. But thanks to the CRB process, the end result may be to stuff this private contract between private parties directly into the law, and that will expand copyright in highly questionable ways.

There are lots of other concerns about the document as well. It has lots of "this or that" calculations -- all of which default to the "greater of" option -- meaning that the rates are going to keep going up. Also, the agreement repeatedly defines "minimums" but we'll be waiting a looooooong time for you to come back with where the "maximums" are. The whole thing is crazy confusing, and while it may be perfectly fine if it were just a contract among a few players, the second it becomes part of copyright law, we should be concerned.

Filed Under: copyright royalty board, drm, royalties, streaming
Companies: dma, nmpa, riaa