LET IT BE:
LICENSING DIGITAL MUSIC IN BRAZIL, MEXICO, AND THE UNITED STATES. A COMPARATIVE APPROACH.
A DISSERTATION
SUBMITTED TO STANFORD LAW SCHOOL AND THE COMMITTEE ON GRADUATE STUDIES
OF STANFORD UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF THE SCIENCE OF LAW
Let It Be: Licensing Digital Music in Brazil, Mexico, and the United States. A Comparative Approach.
Abstract
Internet and digital technologies have completely transformed the global music industry, including licensing practices. Long-standing copyright concepts and institutions that enable music markets have also been affected. These changes along with pre-existing “copyright fragmentation” pose important challenges for licensing digital music.
Using a qualitative case study approach, this thesis focuses on analyzing the licensing practices for download and interactive streaming used in Brazil and Mexico; two of the most relevant music markets in Latin America. The study further draws on a comparative analysis of the licensing practices in these countries and those in the United States. This kind of comparative approach reveals differences in how stakeholders in each nation have chosen to overcome licensing hurdles. It also illuminates how the role of the government and the regulatory framework in each country impacts efficient licensing.
This study identifies several trends in licensing music for download and interactive streaming uses. The first pattern consists of the economic rights that must be cleared to obtain these licenses. For downloads, the mechanical right, comprised of the distribution and reproductions rights, must be cleared. For interactive streaming, both the
reproduction and the public performance rights must be licensed. While some differences exist in the local laws regarding these rights, these differences do not impact licensing significantly.
The study also establishes that standardized practices for licensing digital music exist in all three countries. Digital music providers (DMPs) who need to obtain a license first clear sound recording rights and then, on a local basis, clear musical works rights. DMPs practices derive from the national processes for licensing digital music. The case studies demonstrated that licenses for downloading activities have a two-step process across the board: clearing mechanical rights for sound recordings and musical works. Nonetheless, licensing interactive streaming offers more variability and additional hurdles.
difficulties of identifying licensors for mechanical licenses; and other issues arising from the fragmentation of copyrights. Depending on the nature of the regulatory framework used in each country, it either enables stakeholders to solve their licensing issues or acts as a barrier to problem-solving. These findings suggest that private actors may be best suited to come up with arrangements to coordinate property and develop solutions to licensing problems. This premise is consistent with existing copyright literature, but further empirical testing is necessary.
Acknowledgements
This project is the result of several years of work, in which many individuals and institutions participated in some way. The multinational dimension of this work required the contribution of a myriad of individuals, companies, and institutions that helped me to surmount the enormous challenges found in cross-border research, which at times seemed daunting.
I am very grateful to my advisor, Professor Paul Goldstein, and the members of my committee, Professors Lisa Ouellette and Phil Malone, who were essential in guiding me through this process. Their support and advice provided me with an ideal setting to freely explore ideas while receiving keen advice in the most challenging times. I am also grateful to Professor Deborah Hensler, whose support and dedication to the JSD program have created an unmatchable environment to develop empirical legal research. Clara Lewis whose tutoring gave me wonderful guidance in carrying out this project. In addition, the support of my JSD friends, my family away from home, has been fundamental to the accomplishment of this long project. Belonging to the Stanford community has been one of the greatest privileges of my life. I am forever grateful to this community which has allowed me to grow as an academic and as a person.
I was fortunate to receive financial or other support from different sources at different times during this process. In particular, I want to acknowledge the MICIT-CONICIT, the Gregory Terrill Cox Research Fellowship from the John M. Olin Program in Law
Economics, and the Cañas-Peralta Fund at Stanford Law School, for their generous support.
Many individuals were also fundamental to the gathering of data. I especially want to thank Enrico Roberto and to Denis Solera. The most prominent acknowledgment goes to each of my anonymous informants, whose valuable insights and their generosity with their knowledge and time allowed me to understand their experiences in the music industry.
Table of Contents
Abstract ... iv
Acknowledgements ... vi
Table of Contents ... viii
List of Tables ...xi
List of Abbreviations ... xii
Chapter I. Introduction ... 1
1. The Puzzle: Licensing Music in a Changing Environment ... 2
2. Structure of the Study and Research Questions ... 7
3. Contribution to the Legal Scholarship ... 9
4. Delimitation of the Study ... 10
5. Principal Findings ... 11
Chapter II. Background and Conceptual Framework ... 14
1. Introduction ... 14
2. The Relevant Economic Rights ... 15
3. The Key Stakeholders ... 20
4. Contractual and Management Practices ... 24
5. Challenges for Clearing Rights: Fragmentation, Anticommons and Thickets ... 28
6. Territoriality of Copyright Law ... 31
7. Transaction Costs and Copyright Governance ... 32
8. Market Driven & Regulatory Approaches to Reduce Transaction Costs in Music . 35 9. The Case for Empowering Private Actors in the Digital Environment ... 41
Chapter III. The United States: A Highly Regulated Licensing Framework ... 47
1. Introduction ... 47
2. Economic Rights Implicated in Digital Uses in the U.S... 48
3. Licensing Digital Music in the United States Market ... 52
3.1 Musical Works Licensing ... 52
3.2 Licensing Sound Recordings ... 60
4. Challenges and Recommendations to Enhance the U.S. Licensing System ... 62
4.1 Licensing Efficacy and Transparency, and Data Problems ... 63
4.2 Disparate Treatments Under the Law and Unfair Compensation ... 66
4.3 The Role of the Government in Regulating Licensing ... 69
5. Conclusion ... 76
Chapter IV. Licensing Music for Digital Uses in Mexico ... 80
1. Introduction ... 80
2. Methodology ... 82
3. Mexico in Context ... 86
3.1 The Mexican Music Market ... 87
3.2 The Mexican Copyright Law and International Treaties ... 89
3.3. Collective Licensing in Mexico ... 90
4. Economic Right Implicated in Digital Uses in Mexico ... 91
4.1 Author Rights for Musical Works ... 91
4.2 Related Rights for Sound Recordings ... 97
5. Licensing Practices for Digital Uses: Main Challenges and Solutions... 102
5.1.1 A Single Window for Composers and Publishers ... 104
5.1.2 Identifying Fragments: Musical Works and Related Data ... 111
5.1.3 Rates for Musical Works ... 113
5.2 Clearing Rights on Sound Recordings ... 114
5.2.1 The Changing Landscape of the Market: Fewer Record Labels and the Rise of New Aggregators ... 115
5.2.2 Contract Negotiations: Main Aspects and Commercial Tensions ... 116
5.2.3 Confusion of the Role of Artists’ Organizations and their Legal Attributions . 118 6. The Role of the Local Law and International Practices ... 121
7. Conclusion ... 125
Chapter V. The Changing Landscape of Licensing Digital Music in Brazil ... 129
1. Introduction ... 129
2. Methodology ... 132
3. Brazil in Context... 137
3.1 Brazil’s Economy and Infrastructure ... 137
3.2 Brazil’s Music Market ... 138
3.3 The Brazilian Copyright Framework and the WIPO Internet Treaties ... 142
3.4 Public Performance and Collective Management in Brazil ... 144
4. Economic Rights Implicated in Digital Uses in Brazil ... 147
4.1 The Indisputability of Clearing the Reproduction Right ... 148
4.2 The Changing Interpretations of the Making Available Right ... 149
4.2.1 The Lack of Clarity of the BCL... 150
4.2.2 Judicial Decisions ... 151
4.2.3 The Role of IN2 in This Debate... 154
4.2.4 The Conceptual Discussion: Interactive Digital Transmissions as an Electronic Distribution Right or as Public Execution? ... 156
4.3 Clarifying the Law ... 163
5. The Changing Landscape of Licensing Practices for Digital Uses of Music ... 167
5.1 ECAD’s First Efforts in Licensing Public Performances ... 168
5.2 The Push Towards a Model Based on a Distribution Right Approach ... 173
5.3 The Move Toward Consolidating the Public Execution Approach ... 177
5.4 Current Licensing Practices ... 179
5.4.1 Sound Recordings Negotiated Directly with the Labels... 179
5.4.2 Musical Works Cleared on a Local Basis and Their Challenges ... 181
5.5 Stakeholders Adaptation to the Changing Landscape ... 185
6. The Idiosyncrasies of the Brazilian Case: The Role of Local Law and the Central Government in Influencing the Framework for Licenses... 186
6.1 The Consultation Process ... 187
6.2 Positions of Stakeholders ... 188
6.2.1 MinC’s Authority ... 189
6.2.2 Services Already Pay Royalties ... 190
6.2.3 Change in Licensing Practices to a More Complex System ... 191
6.2.4 Consumer Harm ... 192
6.2.5 Fair Remuneration to Right Holders ... 192
6.3 MinC’s Justification of Its Active Role ... 195
6.4 Effects of the Current ECAD Model to Address Licensing Problems ... 198
7. Conclusion ... 201
Chapter VI. A Comparative Analysis of Licensing Practices ... 203
2. Methodology ... 204
3. Economic Rights Implicated in Digital Uses ... 208
4. International Trends: The Approach of International Actors to Licensing ... 212
5. Comparative Practices in Licensing ... 214
6. Problems and Solutions in Musical Works Licensing ... 216
6.1 Hard to Identify Several Licensors for Mechanical Licenses ... 217
6.2 Right-by-right Licensing ... 218
6.3 Song-by-Song Licensing in Mechanical Licenses... 219
6.4 Data Problems ... 220
6.5 Lack of Transparency ... 222
6.6 Low Rates and Compensation ... 223
6.7 Antitrust Concerns ... 224
6.8 Common Trend: Private Actors Taking the Lead ... 225
7. Problems and Solutions in Sound Recordings Licensing ... 226
8. The Role of the State: Compulsory Licenses v. Private Schemes with Oversight 228 9. Lessons Learned and Policy Implications ... 236
10. Conclusions ... 238
List of Tables
Table 1: Gervais Copyright Restriction Levels ... 37
Table 2: Summary of Interviewees ... 84
Table 3: Digital Music Revenues by Format (US millions, trade value) ... 88
Table 4: Summary of interviewees... 134
Table 5: Digital Music Revenues by Format (US$ millions, trade value) ... 140
Table 6: Number of licensed digital music services in selected countries ... 141
Table 7: Comparison Chart of Uses in IN2 ... 155
Table 8: Arguments Supporting Electronic Distribution or Public Execution Approach ... 157
Table 9: Comparison of Economic Rights for Downloads and Interactive Streaming ... 210
Table 10: Comparison of Licensing for Downloads Interactive Streaming... 215
Table 11: Problems in Licensing Musical Works for Digital Uses... 217
Table 12: Types of Regulatory Schemes by Country and Right ... 229
List of Abbreviations
ABRAMUS Associação Brasileira de Música e Artes
AMAR Associação de Músicos, Arranjadores e Regentes
ANDI Asociación Nacional de Interpretes
ASCAP American Society of Composers and Publishers
ASSIM Associação de Intérpretes e Músicos
BCL Brazilian Copyright Law
BMI Broadcast Music Incorporated
CISAC Confederation of Societies of Authors and Composers
CMOs Collective management organizations
CRB Copyright Royalty Board
CRM Directive Directive on Collective Management of Copyright and Related Rights and Multi-territorial Licensing of Rights in Musical Works for Online Uses in the Internal Market
DDI Diretoria de Direitos Intelectuais
DMPs Digital Music Providers
DPDs Digital Phonorecord Deliveries
DPRSRA Digital Performance Right in Sound Recordings Act
ECAD Escritório Central de Arrecadação e Distribuição
EJE EJE Ejecutantes, S.G.C
EMMA Editores Mexicanos de Música, A.C. A. en P
EMMACSACM Union of EMMAC and SACM
EU European Union
HFA Harry Fox Agency
IAO International Artists Organization
IFPI International Federation of the Phonographic Industry INDAUTOR Instituto Nacional de Derechos de Autor of Mexico
IP Intellectual Property
ISRC International Standards Recording Code
ISWC International Standard Music Work Code
MCL Mexican Copyright Law
MinC Ministry of Culture of Brazil
MRO Music Rights Organization
NAFTA North American Free Trade Agreement
NMPA National Music Publishers' Association
NOI Notice of Intention
NSA Nashville Songwriters Association
PROs Performance rights organizations
SACM Sociedad de Autores y Compositores de México
SBACEM Sociedade Brasileira de Autores, Compositores e Escritores de Música
SESAC Society of European Stage Authors and Composers
SICAM Sociedade Independente de Compositores e Autores
Musicais
SOCINPRO Sociedade Brasileira de Administração e Proteção e Direitos Intelectuais
STJ Supreme Tribunal of Justice of Brazil
TRIPS Agreement on Trade-Related Aspects of Intellectual Property Rights
UBC União Brasileira de Compositores
UBEM União Brasileira de Editores de Música
WCT WIPO Copyright Treaty
Chapter I. Introduction
Recent technological advancements in internet and telecommunications offer higher quality and more portable content. These advancements have triggered rapid growth in content industries.1 On the one hand, these changes mean that consumers have more
access to content in different formats and on various devices. On the other hand,
traditional content industries have been disrupted. These changes have had a vast impact on the ways news media, fictional TV, and music are consumed and produced.
The music industry was perhaps the first to be disturbed by the onset of the digital era.2 In a little over a decade, the paradigm of the industry changed. The industry’s value
chain and distribution channels were utterly altered. The arrival of digital and file-sharing technologies and the extensive adoption of broadband connections undermined traditional sales models.3 Digital music almost entirely replaced physical records. According to data
from the International Federation of the Phonographic Industry [IFPI], global record sales rose from US$24.1 billion in 1990 to peak at US$39.4 billion in 1996.4 In 2003, however,
sales sharply decreased to US $32 billion,5 as users adopted digital file-sharing
technology pioneered by Napster in 1999.6
While Napster was found to be an illegal service in the United States,7 the MP3
format persisted beyond the platform. The music industry was cautious with the use of new digital formats,8 and, as at other times during its history, change was not easily
1 PIPPA NORRIS, DIGITAL DIVIDE:CIVIC ENGAGEMENT,INFORMATION POVERTY, AND THE INTERNET WORLDWIDE 4
(Cambridge University Press, 2001). Peter S. Menell, Envisioning Copyright Law´s Digital Future, 46 N.Y.L. REV. 63, 99 (2002) (explaining how technological developments and the deployment of
broadband led to the convergence of digital computer and traditional content.)
2 WILLIAM KRASILOVSKY &SUDNEY SHEMEL, THIS BUSINESS OF MUSIC:THE DEFINITIVE GUIDE TO THE MUSIC
INDUSTRY 7 (Watson-Guptill Pub., 10th ed. 2007).
3 OECD, Digital Broadband Content: Music, at 6 DSTI/ICCP/IE(2004)12/FINAL (Dec. 13, 2005). 4 IFPI,RECORDING INDUSTRY IN NUMBERS (2004).
5 Id. For a detailed account of the transformation of the music industry during the 21st century see
WILLIAM KRASILOVSKY &SUDNEY SHEMEL, supra note 2, at 3-12.
6 Alejandro Zentner, Measuring the effect of file sharing on music purchases 49,1 J.L.&ECON 63-90
(2006).
7A&M Records, Inc. v. Napster, Inc., 239 F.3d 1004 (2001).
8 WILLIAM KRASILOVSKY &SUDNEY SHEMEL, supra note 2, at 10 (“Initially, it opposed the introduction of
embraced by major record labels and industry veterans.9 Yet new players adopted the
technology and pushed for change.10
Today, after almost two decades of struggles with the changes brought by technology, the global music industry has started to grow again. But to survive, the industry
underwent major transformations, including embracing new business models that redesigned the industry.11Downloads and interactive streaming emerged as dominant
business models.12 Despite their different natures, both business models have an element
in common: they depend on new and complex licensing schemes, by which digital music providers [DMPs] obtain the necessary copyrights from several right holders to operate in the market legally. Thus, the use of licensing in the predominant business models of the digital era has increased exponentially. Licensing has also become an essential part of the business. These renewed licensing practices are the focus of this study, as they are
essential for the digital music industry.
1. The Puzzle: Licensing Music in a Changing Environment
Licensing music has always been a convoluted process. In the context of the digital environment, two major sets of factors contribute to the intricacy of digital licensing practices. The first one consists of the same changes brought by digital technologies that transformed the market structure of music. For instance, the new value chain of digital music opened space for the rise of new players such as DMPs and aggregators. Record labels are no longer in charge of distribution through brick and mortar stores; DMPs perform these tasks. As a result, the role and relevance of the stakeholders in the music industry have also changed. These significant shifts have provoked tensions in the
9 Many times, in history the music industry has been hesitant in negotiating rights in the upheaval of
new technologies, e.g., the appearance of sheet music, phonograms, and iPods. See WILLIAM
KRASILOVSKY &SUDNEY SHEMEL, supra note 2, at 414.
10 See Helen McLure, The Wild, Wild Web: The Mythic American West and the Electronic Frontier, 31(4)
THE WESTERN HISTORICAL QUARTERLY, 457 (2000). Shane Greenstein et al., Digitalization, Innovation and copyright: What is the agenda? 11 STRATEGIC ORGANIZATION 110, 111-2 (2013) (pointing out that online
music retailing was one of those first cases in which the industry had to reconvert. The prediction
was that intermediaries would disappear, but this didn’t happen).
11 In 2003 Apple Inc. stroke a deal with major record labels and launched the iconic iTunes store,
which marked a new era of music and licensing agreements. Apple was uniquely positioned to reach pioneer licensing deals with the music industry.
12 The business model of streaming is comprised of a series of micro-transactions, where the value
relationships among players and disrupted completely the industry. Other examples of the challenges brought by technologies and the new business models include the high
volumes of transactions and the explosion of data associated with it, which further complicates the licensing process.
The second factor that increases the complexity of today’s licensing practices feeds from an already cumbersome product: music. Because music is usually the invention of several creators, music licensing has always involved a myriad of right holders and intermediaries. These actors too have had to adjust their strategies for the digital era. The new digital business models have also led to the reallocation of power among right holders and intermediaries such that scenarios for clearing rights are now fundamentally different. In addition, copyright law, which is central to licensing, has adapted to cover digital uses, creating confusion about the implicated rights in digital uses.
In a nutshell, licensing music in the digital setting faces different challenges that range from those posed by the changing environment and technologies to traditional legacy issues that existed before the digital era. Nonetheless, the same technologies also offer solutions to simplify the convoluted processes of licensing. As new digital business models reshape the music industry, this study analyzes two issues that have arisen in licensing: (1) how copyright law adapted to encompass rights implicated in downloads and interactive streaming, which will be referred to as “digital uses;” and (2) how stakeholders adjusted their licensing practices in the digital space.
The international copyright framework provides useful guidance to analyze the first problem. With the changes wrought by online distribution and digitalization of content, copyright law faced significant challenges.13 The World Intellectual Property
Organization [WIPO] responded to these challenges in the 1990s by creating what are known today as the “Internet Copyright Treaties”—the WIPO Performances and Phonograms Treaty [hereinafter WPPT]14 and the WIPO Copyright Treaty [hereinafter
WCT].15 These treaties updated the international copyright framework by amending
preexisting rights and adding new ones that would incorporate digital forms of
13 PAUL GOLDSTEIN,COPYRIGHT'S HIGHWAY:FROM GUTENBERG TO THE CELESTIAL JUKEBOX (Stanford University
Press, Rev. Ed. 2003). ROBERT MERGES ET AL.LEMLEY,INTELLECTUAL PROPERTY IN THE NEW TECHNOLOGICAL
AGE 319 (Aspen Publishers, 3rd ed. 2003).
exploitation. The solutions negotiated in these agreements allowed flexibility to implement the rules nationally. As a result, domestic laws encompass digital rights differently. This study first explores what rights pertain to digital uses under the
international framework and then examines how such rights have been adapted to local law.
The second problem consists of the changes the industry has adopted to clear rights in a context of the radical transformation of the music industry. The United States Copyright Office explains this makeover and the challenges to licensing in this new setting:
This balkanized licensing scheme was not overly problematic during the analog age, when determining the boundaries between rights was relatively straightforward. In pre-digital days, radio and record distributors represented distinct commercial channels with different licensing needs. Today, however, digital providers often merge these roles. As a result, the demarcations between traditional licensing categories are no longer as clear—especially with respect to the relation between reproduction and distribution rights, on the one hand, and public performance, on the other. The current complexity of the music licensing marketplace is attributable at least in part to the blurring of the traditional lines of exploitation.16
This excerpt summarizes well the changes in the licensing landscape. In the analog era, the limits between distinct licensing categories were evident due to the distinct modes of exploitation. Traditional radio and physical music distribution were different commercial channels with different licensing realities. The music industry used a simple input and output procedure to create phonograms, where record companies licensed musical works rights directly with publishers. The distribution of the phonogram (a physical object) was in the hands of retailers who had no need to obtain a copyright license. Final consumers, then, could buy a copy of the phonogram for their private use. Other uses, such as those related to traditional radio and the right of communication to the public or performance rights, were usually collected by collective management organizations [CMOs] or performance rights organizations [PROs] on a local basis. This market structure, however, is not prevalent today. In the digital age, clearing rights has become a more work-intensive and intricate activity. The evolution of the musical market has blurred the lines between traditional modes of exploitation, combining these
16 U.S. Copyright Office, Copyright and the Music Marketplace, 25(Feb. 5, 2015), at
modalities in a single service. As a result, actors in the value chain of the music industry had to adopt practices to meet the challenges of this new environment.
Commentators acknowledge the challenges of obtaining licenses for digital uses in the changing landscape of the music industry,17 including the lack of transparency and
uncertainty in rights clearance processes.18 Musicians and DMPs complain of the
difficulties of licensing musical works,19 mainly because of problems related to the
structure of licensing, and the governance of copyright. In addition, practical challenges arise because of the cross-border nature of some of these transactions and the borderless nature of the internet that contrasts with the territoriality of copyright law.
Many of the licensing problems originate from the ownership structure that copyright law assigns to music. Scholars describe this type of ownership structure as “fragmentation,” which leads to the need of clearing many exclusive rights from different right holders. Intellectual property [IP] scholars also refer to IP thickets to describe the intricate design of rights that a user must obtain to use a particular IP asset, as it occurs in the musical field. The research literature associates certain shortcomings with unwarranted property fragmentation, including high transaction costs and the perils of the tragedy of the anticommons. Another concern is the anticompetitive behaviors that tend to manifest in this industry.
Copyright and economics scholars have also analyzed the options to minimize these problems and maximize the utility of copyright through licensing. Private solutions, such
17 Sacha Wunsch-Vincent, The economics of copyright and the Internet: Moving to an empirical
assessment relevant in the digital age, 9 WIPOECONOMIC RESEARCH WORKING PAPERS (2013). Jeffery W.
Natke, Collapsing Copyright Divisibility: A Proposal for Situational or Medium Specific Indivisibility, MICH.ST.L.REV. 483, 491–500 (2007). See also chapter III, section four.
18 See generally IVAN PITT,DIRECT LICENSING AND THE MUSIC INDUSTRY(Springer, 2015). Herkko
Hietanen, The pursuit of efficient copyright licensing: How some rights reserved attempts to solve the problems of all rights reserved, Lappeenranta University of Technology, 15-16 (2008) (“the level of
detail brings complexity which inflates transaction costs. Using specialists, who can handle the complexity, is a necessity when dealing with copyright licensing.”)
19Rebecca Thusnet, The Next Great Copyright Act Conference at U.C. Berkley, Rebecca Tushnet's
43(B)log, (April 3, 2014), http://bit.ly/2i3OhDV (“What do music people want? Artists complain they aren’t collecting enough; not getting enough from labels. Labels are concerned with illegal alternatives, fair rates. Publishers/songwriters: losing mechanical royalties, as physical and digital downloads peak; too little money vis-à-vis the record labels; reform of the consent decrees. Services: too complicated/takes too long to get a license; if you get it wrong damages can be crushing.”) Other stakeholders are concerned about piracy prompted in the digital environment. See Robert W. D. Veitch & Ioanna Constantiou, User Decisions Among Digital Piracy and Legal Alternatives for Film and Music, EUROPEAN CONFERENCE ON INFORMATION SYSTEMS (2012) (claiming that the availability of
as contracts and collective licensing schemes, have been some of the most used mechanisms, but legislators have also used compulsory licensing to address these problems. Scholars tend to argue in favor of private solutions while stressing the inconvenience of mandatory licensing systems.20 These prescriptions dominated in the
analog era, yet revisiting regulatory choices in the new landscape of this industry is important.
In the digital environment, rights clearances are even more complicated but can benefit from technologies that provide certainty, transparency, and traceability. Even though old industries and institutions tend to path dependency in the face of changing markets, music stakeholders seem to be making adjustments. Some long-standing
practices of private actors and government-designed institutions are changing. Yet, some claim these changes are inadequate, unbalanced, or unfair in their distribution of
benefits.21 Some proponents believe the only effective approach would be a more drastic
overhaul of the system, such as with the creation of new clearing rights houses that can clear all the rights in a single transaction.22 However, before suggesting regulatory
prescriptions, more empirical research is necessary to understand how the stakeholders of the music industry are adapting their licensing practices and governance structures to the digital environment.
Many stakeholders doubt whether national copyright frameworks can cope with the challenges posed by digital content and the distinct nature of these DMPs. For instance, the United States and the European Union [EU] directed public policy queries to study the law and consider amendments.23 In fact, the EU has launched several amendments to
the European framework, including the directive on collective management of copyright and related rights and multi-territorial licensing of rights in musical works for online uses in the internal market [CRM Directive].24 This Directive intended to empower rights
20 See infra chapter two.
21 Tilman Lueder, Working toward the next generation of copyright licenses, Fordham Conference on
International Intellectual Property Law & Policy, 4 (Apr. 20-21, 2006).
22 See infra note 145.
23 See generally U.S. Copyright Office, supra note 16.The European Union has launched several
consultations. See generally: http://bit.ly/2kqs833
24 Directive, E. U. Directive 2014/26/EU of the European Parliament and of the Council of 26
holders to have a say in the management of their rights that is performed by CMOs and to improve the functioning and accountability of such organizations. Moreover, the CRM Directive envisioned to facilitate the multi-territorial licensing of musical works for digital uses.
Before these amendments, the former EU Commissioner for the Digital Agenda, Neelie Kroes, noted several challenges in the European context: “We are also looking at copyright. That’s an area where I’ve long called for change. I’m fed up hearing from people who cannot legally access the music and films they love; from artists who can't reach the audiences they want; from scientists who can’t properly use modern research techniques.”25Even though the challenges in the EU are different due to the existence of
the European single market, Commissioner Kroes’ remarks pinpoint the concerns that exist elsewhere regarding the problems that copyright law face in the digital era.
2. Structure of the Study and Research Questions
In many other regions of the world, the problems associated with the transformation of the music industry and the new context for licensing digital uses have not been scrutinized. This study has a two-fold objective. First, the study generates an analysis of digital licensing practices in the Mexican and Brazilian markets—two of the most relevant music markets in Latin America. Second, the study draws on a comparative law perspective to offer new insights on the relationship between these countries’ licensing practices and the United States’ music market; and to contrast the responses of
stakeholders to overcome licensing hurdles in each nation.
To accomplish these objectives, this dissertation contains three independent descriptive and exploratory studies. Chapter two offers the necessary background to understand the music industry as well as a literature review to put in context the problems under analysis. This chapter includes a review of issues such as exclusive rights,
copyright fragmentation, and its perils, as well as public policy options to regulate the licensing space, namely market-driven or regulatory approaches. It also presents a
licensing of rights in musical works for online use in the internal market, Official Journal of the European Union, L 96.309 (2014): 29-3.
25 Neelie Kroes, European Commission Speech, Opportunity and Innovation: capitalizing on the digital
working hypothesis: if licensing for digital music is left in the hands of private actors with few interventions from governments, then private actors can attain better
arrangements that maximize the efficiency of transactions.
Chapter three introduces the United States case study, while chapters four and five present two individual case studies on the licensing practices in Mexico and Brazil. In addition, these case studies describe how digital copyrights operate according to local legislation and which stakeholders own such rights. Each case study answers the following questions:
i) Under local Copyright Law, what economic rights are implicated in digital uses of music?
ii) What are the current licensing practices for streaming and downloading digital music?
iii) How relevant are the local Copyright Law and the government in shaping these practices?
The first question is essential to determine what actors are involved in licensing music for online uses. In identifying the specific rights involved in these activities, this question helps generate an understanding of who benefits economically from music—a discussion that has been making headlines around the globe. Economic rights impact how royalties flow and who benefits from these royalties, which is not necessarily the original creator. The second question helps identify the licensing practices for digital uses, which is essential to understand how these practices have evolved. Finally, the third question permits discernment the role of the local law and governments in shaping these practices.
These two case studies look at local problems, policies, and practices. To portray a vibrant picture of the licensing practices for digital music in Brazil and Mexico, these case studies draw on qualitative data from publicly available information as well as in-depth semi-structured interviews with relevant stakeholders. A methodology section and a more comprehensive explanation of the data can be found in the respective chapters.
facilitates a discussion of public policy recommendations on how to best regulate the digital music market. The study’s comparative approach responds to the following research questions:
i) How do licensing practices for digital uses compare in Brazil, Mexico, and the United States?
ii) What is the role of the government in shaping these licensing practices? iii) What lessons can be learned from these cases to support a licensing system
that supports a balanced scheme between the interests of the stakeholders?
This chapter contains a full methodology section that details the study’s comparative approach, but it is essential to clarify a few methodological choices at the outset. The United States was chosen to be part of this study because it represents one of the most influential music markets in the world. The American case also shows an intense policy debate that offers the positions of international players that play a significant role in the global market; and puts forward interesting regulatory solutions to solve some of the problems of the marketplace.
The rest of the chapter answers both research questions and offers some recommendations on issues that should be considered when governments evaluate regulation on digital licensing practices. In the interest of attaining a balanced copyright system and to establish best practices moving forward, I offer specific policy proposals based on evidence from the case studies—what I refer to and present as an ideal system. It is necessary to acknowledge that these recommendations will benefit from future research that utilizes other methods, including quantitative analyses. Chapter eight offers a detailed consideration of the limitations of this study and presents conclusions.
3. Contribution to the Legal Scholarship
to fill this gap. The study describes licensing practices for digital music in these markets and how copyright operates in these transactions. This focus reveals both how actors in these marketsare behaving and how copyright law is used in practice.
Expanding the literature on comparative intellectual property law, this research provides new insight into how this licensing phenomenon compares across jurisdictions. A comparative view of licensing practices is critical since many of these practices are transnational in nature. For instance, companies conduct many contracts in a multi-territorial fashion, and many stakeholders operate internationally, creating cross-border practices that are often elusive when analyzed from a national perspective. In this sense, comparative study of this phenomenon allows understanding of the transitional practices at an aggregate level and sheds light on how global players (licensors and licensees) shape their businesses.
This study also contributes to the literature on copyright’s adaptation to new technologies, and provides insights into the problem of availability of content in different jurisdictions, as copyright-clearing processes can become a barrier of entrance for products and services. In addition, this research adds to the public policy discussions of how to regulate the music industry. The study concludes by considering whether a market-driven approach or a regulatory approach is more desirable in the context of the digital music industry.
4. Delimitation of the Study
This study is limited to the analysis of two different uses of music: downloading and interactive streaming—defined previously as “digital uses.” Downloads are understood as “a transmission of an electronic file containing a digital copy of a (…) work that is sent from an on‐line server to a local hard drive.” 26 Notably, for copyright purposes two traits
of download activities are relevant: (1) a copy of the original file is produced as a result of the transmission; and (2) the final user has the capability to control the file independently from the person or entity that initially made the work available.
In contrast, streaming entails an online transmission that “renders a work perceptible by the recipient as it is received by the client‐computer’s temporary memory.” 27
Different types of streaming services exist, but this study only considers the interactive kind. In interactive streaming, also referred to as “on-demand streams,” transmissions occur at the specific request of the end user. Even though the final user can hear or see the transmission, she has no control of the work nor can she make a copy of the work. The transmitter remains in control and possession of the work, and the work is only available when the transmitter decides to make it available.28
In addition, it is important to stress that this study analyzes the licensing practices that occur between copyright holders or intermediaries and DMPs. The research excludes licensing practices between final consumers or individuals that consume music for their personal use. This exception is essential as those licenses present other characteristics and escape the scope of this research.
5. Principal Findings
This descriptive and exploratory study identifies several trends in licensing music for downloading and interactive streaming uses across the three countries under analysis. The first pattern consists of the economic rights that must be cleared to obtain these licenses. For downloads, the mechanical right, comprised of the distribution and reproduction rights must be cleared. In the case of interactive streaming the reproduction and the public performance rights (with different names and origins) are the relevant rights to license. While some differences exist in the local laws regarding these rights, such
differences do not impact licensing significantly. International treaties have promoted the harmonization of copyright laws around the world, reducing variability of local laws. Nonetheless, differences exist and users seeking a license should look out for these differences.
27Id. at 74.
28 Daniel Brenner, Gently Down the Stream: When is an Online Performance Public Under Copyright?,
28 BERKLEY TECH.L.J.1167, 1175–77 (2013) (distinguishes two types of transmissions: (i) real‐time
multicast streaming, where a server sends out one stream to all users simultaneously in a manner similar to traditional aerial broadcasting (often used for simultaneous Internet transmission by
terrestrial radio stations); and (2) unicast streaming, where a session‐based one‐to‐one connection is
The study also establishes that standardized practices for licensing digital music exist. DMPs needing to obtain a license first clear sound recording rights and then clear musical works right on a local basis. To clear sound recordings, they seek arrangements with major record labels and aggregators that represent independent labels—who manage digital uses individually. As a second step, DMPs clear musical works usually on a local or a regional basis through CMOs that manage performance rights as available. This behavior of DMPs derives from the national processes for licensing digital music. The case studies demonstrate that licenses for downloading activities have a two-step process across the board: clearing mechanical rights for sound recordings and musical works. Record labels and aggregators directly license mechanical rights for sound recordings, whereas publishers usually manage mechanical rights.
Interactive streaming results in a licensing process of two steps in Mexico, and three in Brazil and the United States. Direct negotiation between user and record labels and aggregators—to obtain a license that includes the mechanical and performance rights of sound recordings—is the norm in all three countries. The licensing of musical works is what differs in these countries and what can be considered the most cumbersome part of the process. In the case of Mexico, these two rights are cleared in a single license obtained through EMMACSACM system—a private single window that was built upon agreement between publishers and the local CMO. In contrast, in Brazil and the U.S. these two rights must be cleared in two steps: the mechanical right through each publisher, and the public performance right through local CMOs or PROs.
This research seems to reveal an important trend: The more space the government and law provide to stakeholders to conduct their licensing operations, the more solutions seem to flourish that work to improve efficiency and reduce fragmentation. This
observation seems to suggest that private actors may be better suited to find arrangements to coordinate property and solve to licensing problems, which is consistent with existing literature. However, given the constraints of the design of this project, further empirical research will be necessary to verify this premise.
In this context, legislators should resist the temptation to implement solutions, such as compulsory licenses, that reduce transaction costs at the expense of severely constraining the options and ingenuity of licensees. Regulatory frameworks are hard to change and may not be responsive to the evolving conditions of the market and technology, which can impede actors’ ability to adapt. However, there are some areas in which private actors have not been able to solve their own problems. On these instances, limited government intervention to establish incentives that would encourage private stakeholders to correct the problems found in licensing would be ideal.
Chapter II. Background and Conceptual Framework
1. Introduction
Music is messy. Music is known to be an intricate business in part because of its collaborative, creative nature and, in particular, the way copyright divides property over a song. A single song combines two copyrightable works—the musical work and the sound recording—and in each of these two, there are several distinct rights, which often belong to different right owners. The musical work entails the composition and lyrics, if any, which belong to their respective composers and, in many cases, their publishers. The sound recording involves a fixed performance of a musical work that belongs to a broader range of individuals, including producers and performers (e.g., singers, musicians, and back-up singers). In addition, copyright law offers a bundle of rights to each of these right holders that further divide the property. The most relevant of these rights for digital music are the reproduction, public performance, and distribution rights, which in turn receive dissimilar treatments across different jurisdictions.
The copyright scholarship describes the system of copyright ownership in terms of “fragmentation,” or the number of individuals that own a song, for instance, from whom permission is necessary to exploit such song. Fragmentation is part of the design of copyright law, which creates a set of statutory rights that is susceptible to division among many different individuals, including not only the original creators, but also assignees or intermediaries.
The literature has identified many problems associated with excessive property fragmentation, including the increase of transaction costs and the dangers of the tragedy of the commons and anticommons. The intellectual property literature also refers to IP thickets to describe the complex layout of IP rights that a company or a user must obtain to use a given IP asset, such as in music.
established to clear performance rights that could not be managed directly by right holders or assignees. In some countries, these organizations were private; in others, they were created by law. Other countries have also created compulsory licensing systems to reduce fragmentation and minimize competition issues. However, scholars have traditionally favored private solutions to solve property fragmentation and its perils. The scholarly literature on copyright and economics, thus, provides important tools to understand the complexity of ownership of music and the regulation of copyright licensing.
The following sections introduce relevant background of the music industry combined with literature in copyright law and economics. This chapter considers the relevant economic rights, the various stakeholders involved, the predominant practices that the music industry has used traditionally to manage the economic rights, as well as the main scholarship that informs this research. The chapter concludes by explaining the working hypothesis of this study which argues that licensing, as a means to exercise copyrights should be left in the hands of private actors with few interventions from governments. This working hypothesis finds support in the literature briefed in this chapter.
2. The Relevant Economic Rights
Far from being an academic exercise, determining which exclusive economic rights, out of the bundle of rights that copyright law awards to creators of music, are relevant for a specific use is of the utmost importance. Identifying the specific rights involved in digital music businesses allows us to understand who are the actors that benefit economically from music and how royalties flow among stakeholders. Most experts agree that the relevant rights to clear for downloading and interactive streaming activities include the reproduction and the making available rights.29 Understanding the history of
29 KEA, Licensing music works and transaction costs in Europe 26 (2012), http://bit.ly/2nI0Zdw.
European Commission, Creative Content in a European Digital Single Market: Challenges for the Future -A Reflection Document of DG INFSO and DG MARKET 5 (2009), http://bit.ly/2iAOZ82 (“most online
distribution forms necessarily requires the simultaneous clearance of the digital reproduction right
and the making available right.”) See generally MIHÁLY FICSOR, THE LAW OF COPYRIGHT AND INTERNET.THE
these rights under international copyright law allows for a better grasp of how they have evolved around the world.
The reproduction right emerged internationally in the Berne Convention for the Protection of Literary and Artistic Works [hereinafter Berne Convention]30 and was
clarified in the WIPO Copyright Treaties for the digital environment.31 In general terms,
the right of reproduction entails the right to reproduce the work by making tangible or intangible copies. The common consensus is that the right covers reproductions made in the process of online distribution. Yet, countries have the discretion to exclude, from the scope of the reproduction right, temporary copies that are part of the digital communications process.32
The WIPO Copyright Treaties first coined the making available right for authors, performers, and producers.33 This right entails “the making available to the public of
works in such a way that members of the public may access these works from a place and at a time individually chosen by them.”34 The wording intended to cover downloads,
interactive streaming, and future technologies. These agreements also imposed certain requirements that must be met when implementing the right, such as that the right must be exclusive and must be described in technology-neutral terms.35 Another important
30For authors’ rights see Berne Convention for the Protection of Literary and Artistic Works art. 9,
Oct. 31, 1998, Pub. L. No. 100-568, 1988 U.S.C.C.A.N. (102 Stat.) 2853 [hereinafter Berne Convention]
(“Authors of literary and artistic works protected by this Convention shall have the exclusive right of
authorizing the reproduction of these works, in any manner or form.”) The reproduction right for
performers and producers is established in the Rome Convention (Article 9) and the WPPT (Arts. 7 and 11).
31 The agreed statement concerning Article 1(4) of the WCT clarified that the right of reproduction
and exceptions fully apply in the digital environment, in particular to the use of works in digital form.
32 Sidney SHEMEL &WILLIAM KRASSILOWSKY,THIS BUSINESS OF MUSIC 433-5 (Billboard Books, 10th edition,
2007) (Explaining that digital systems are distinct from common copies because there are many copies made as part of the process of playing and transferring a file. Nevertheless, specific temporary copies are exempted from the reproduction right in some jurisdictions, notably those that are necessary to run a computer program.) For instance, Article 5(1) of the Copyright Directive excludes temporary copies in Europe, and in the U.S., there is an exception for copies necessary to run a computer program. (17 U.S.C. § 117). See also Mihaly Ficsor, Copyright for the Digital Era: The WIPO Internet Treaties The Spring 1997 Horace S. Manges Lecture, 21 COLUM.-VLAJ.L.&ARTS 197, 204
(1996) (explaining the discussions regarding whether to exclude transient copies from this right.)
33 Jane C. Ginsburg, The (new?) right of making available to the public, in. Intellectual Property in The
New Millennium, ESSAYS IN HONOUR OF WILLIAM R.CORNISH, 234-47, (Cambridge University Press, 2004)
(debates whether this is a new right or a clarification of rights awarded under the Berne Convention.)
34 WCT, supra note 15, art. 8. WPPT, supra note 14, arts. 10, 14.
35 See U. S. Copyright Office, MAKING AVAILABLE STUDY |U.S.COPYRIGHT OFFICE (2016), at
https://bit.ly/2q5SUy3 (last visited Oct 21, 2016). (“For example, the making available right is
feature is that the right focuses on access to the work as opposed to receipt. Scholars agree that the scope of the right covers two acts, namely: the offer to access individually the work by the public; and the actual transmission of the work upon request of to a member of the public.36 However, the offer alone is enough to trigger the right,
regardless of whether the transmission occurs or not.
The negotiation history of the Copyright Treaties illustrates the extensive conceptual discussions that existed over how to materialize the making available right. This debate is instrumental in understanding the dynamics of copyright in the digital world. The
international community could not reach a consensus about how to grant an exclusive right37 due to the complex nature of interactive transmissions, where the distinctions
between reproduction, distribution, and communication to the public vanish.38 To
conclude the treaty and find some resolution to this conceptual discussion, negotiators reached a compromise referred to as the “umbrella solution,” allowing members to implement the right through existing rights—mainly the distribution right and the communication to the public right, or through a combination of existing rights.39
Importantly, history reveals that the umbrella solution was conceived differently for author rights in the WCT, and for related rights in the WPPT.40 Yet, freedom to
implement remains in both cases, so long as the minimum requirements of the treaties are
communicated, including downloads, streams, and any other existing or future developed methods of online transmission. The making available right also focuses on access rather than receipt. […] And,
the making available right extends to the delivery of works through one‐to‐one on‐demand
transmissions—i.e., those that can be received by members of the public individually in separate
places and at different times.”)
36 Jane C. Ginsburg, supra note 33, at 236.
37 Mihaly Ficsor, supra note 32, at 197–224. (“There was, however, no agreement on which one
should be chosen of the two main candidates: the right of communication to the public and the right of distribution). The discussion centered on the different type of acts that are involved in an
interactive transmission that, at the same time, received a different treatment in different
countries.”)
38 Mihály Ficsor, International Harmonization of Copyright and Neighboring Rights, in WIPO
Worldwide Symposium on Copyright in the Global Information Infrastructure, 374 WIPO Pub. No. 746
(E/S), 1995 (“The borderlines among the right of reproduction, the right of distribution, and the right
of communication to the public are getting blurred.”)
39 MIHÁLY FICSOR, supra note 29, at 208. (“The essence of this idea is to identify the said acts, make the
necessary clarifications, do away with Bern Convention gaps, but then leave as much freedom as necessary (and reasonable) to national laws concerning the specific legal characterization of the acts
(that is, the selection and combination of the specific exclusive rights to be applied).”)
met, such as providing for a technologically neutral exclusive right rather than a simple remuneration right.
Because the “umbrella solution” granted member countries the flexibility to implement the making available right by different means,41 this right differs around the
world and materializes either through a broad distribution right, a right of communication to the public, a combination of existing rights, or a stand-alone right.42 This solution,
therefore, resulted in greater differences between jurisdictions and the ensuing possibility of atomizing the right further.
Notably, the umbrella solution emerged as a compromise between two streams of thought regarding how the making available right should be implemented in the context of existing laws.43 The first current, led by the United States, promoted the view that the
distribution right could encompass the making available right,44 whereas the EU proposed
that the right of communication to the public could better incorporate such right. These countries defended the approach already used in their domestic legislation, as well as the commercial practices that private right holders had in place in each nation.45 Thus, the
parties decided to attain a flexible approach such as the umbrella solution to allow different ways to protect digital transmissions.
Generally speaking, the distribution right entails that authors, performers, and producers have the exclusive right of authorizing the making available to the public of the original and copies of their works through sale or other transfer of ownership.46 The
industry refers to this right paired with the reproduction right of musical works as the “mechanical right.” 47 Songwriters traditionally transfer the mechanical right to
publishers, usually on a song-by-song basis.48 For sound recordings, the distribution right
41 U.S. Copyright Office, supra note 35, at 12. Goldstein, supra note 13, at 313.
42 For a survey on how countries implemented this right U.S. Copyright Office, supra note 35, at E. 43 MIHÁLY FICSOR, supra note 29, at 233.
44 For a detailed study on how the US implements the making available right through distribution see
generally U.S. Copyright Office, supra note 35. MIHÁLY FICSOR, supra note 29, at 236.
45 MIHÁLY FICSOR, supra note 29, at 190-1.
46 WPPT, supra note 14, at Arts 8 and 12. WCT, supra note 15, at Art. 9.
47 The industry recognizes the mechanical right as a combination of the distribution and
reproduction right. JEFFREY BRABEC &TOOD BRABEC,MUSIC MONEY AND SUCCESS 33 (Schirmer Trade
Books, 2011). AL KOHN &BOB KOHN, KOHN ON MUSIC LICENSING 677 (Aspen Publishers, 2010). The term
“mechanical” was coined since the reproduction is heard through a machine.
48The mechanical rights and the “making available” rights are not necessarily managed in the same
first emerged in the WPPT, and no similar formulation was part of existing Treaties—the Rome Convention or the TRIPS Agreement.49
On the other hand, the right of communication to the public was built on more granular transmission rights granted by prior international agreements. Importantly, this right did not develop evenly for authors and related rights holders, which has important implications for the management of the right or their specific categories. For author rights, the Berne Convention created several specific transmission rights, such as broadcasting and public performance. Traditionally, collecting societies manage these rights on behalf of creators on a domestic basis. Further, the WCT systematized all of these transmissions-related rights of Berne under a broad communication to the public right, which also included the making available right under Article 8 of the WCT.50
In contrast, the WPPT did not incorporate a communication to the public right for related rights, and the treaty, instead, incorporated a making available right as a stand-alone right, without any reference to any form of communication to the public right.51
The negotiating parties were not ready to extend an exclusive right of communication to the public to performers and producers, thought they continued to provide a remuneration right, as previously granted in the Rome Convention.52 Thus, the making available right
was conceived independently from the communication to the public right for performers and producers. Even though the umbrella solution permits countries to implement the right through different means, it is important to note that the right must be an exclusive right and not a simple remuneration right.53 The design of the right of making available
49 WORLD INTELLECTUAL PROPERTY ORGANIZATION,GUIDE TO THE COPYRIGHT AND RELATED RIGHTS TREATIES
ADMINISTERED BY WIPO, 246 (WIPO, 2003). TRIPS: Agreement on Trade-Related Aspects of Intellectual
Property Rights, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1C, 1869 U.N.T.S. 299, 33 I.L.M. 1197 (1994) [hereinafter TRIPS Agreement].
50 Article 11 of the Berne Convention defined this right as the exclusive right of authorizing: (i) the
public performance of their works, including such public performance by any means or process;(ii) any communication to the public of the performance of their works. Scholars have agreed that, under Berne, the communication to the public right design was narrower and it was broadened in the WCT.
51 This key difference originates in the rights that prior agreements awarded to authors, on the one
hand, and to performers and producers, on the other. Earlier treaties recognized to authors specific communication to the public rights. Yet, no such rights were awarded for performers and producers.
52 WORLD INTELLECTUAL PROPERTY ORGANIZATION,supra note 49, at 249.
53 Congressional Research Service, World Intellectual Property Organization Performances and
Phonograms Treaty: An Overview, (1998) at 16 (“Although a reservation is possible on the public communication rights, no reservation is possible on the “public availability” right of Articles 10 and
under the WPPT was central for the record industry, as these companies license interactive transmissions directly.
Even though exclusive rights, in particular the making available right, have different configurations in each country, it is common to find a standard treatment for downloading activities under domestic laws around the world. Downloads typically trigger the reproduction and the distribution rights—the mechanical right. In contrast, interactive streaming activities receive different treatment across jurisdictions, as they trigger different rights depending on how legislators implemented the making available right locally. In most cases, the reproduction right is involved when the DMP copies the song in its database. However, the interactive transmission of the song is less standardized and can trigger a myriad of rights, depending on the jurisdiction and local laws, making rights clearances a hard task.
3. The Key Stakeholders
Many stakeholders are involved in the music market either as copyright owners, intermediaries, distributors (DMPs), or final users. This subsection clarifies who these actors are and the role of each in the value chain.
As mentioned, the collaborative nature of music and its two-layer character mean that for every single song, there is a myriad of individuals with a copyright interest. For instance, Despacito was one of the most popular songs of 2017 and serves to illustrate the complexity of music and the many layers of ownership in a single song.54 The musical
work contains lyrics and a composition that belong to three songwriters and composers— Ericka Ender, Ramón Ayala, and Luis Fonsi. In addition, several publishing companies appear to have a share in the musical work, namely Excelender Songs, Sony/ATV Rhytm, Dafons Songs, Sony/ ATV Latin Music Publishing LLC, and Cangris Publishing. Figures 1, 2, and 3 below show this information.
Composers and songwriters [hereinafter authors or songwriters], as original creators, usually enter into a publishing contract with a publisher to represent them in the market. Publishers typically collect royalties, license the works and promote the works. As a
54 As I write this section, this song is stuck in my head as it has played all summer. Regardless of its
result, it is not uncommon for publishers to obtain copyright interests in the musical work in exchange for these services, and become right holders. The participation of the publisher varies depending on the publishing contract, but it can be up to 50% of the copyrights.55 As can be observed in the case of Despacito, the one song has three
composers, which have different publishing companies and agreements. The multiplicity of individuals and entities with a copyright interest in a single song can create severe data and split problems.
On the other hand, the sound recording, which entails the specific performance of the musical work fixed in a phonogram or a digital file, belongs to the performer(s) and the producer of the phonogram. In the case of Despacito, Luis Fonsi and Daddy Yankee are the leading performers of the first iteration of the song. The performers own the copyright of their performances, while the producers own the copyright of the production of the song. The role of the producer is to manage the recording process and oversee the artistic vision of the creative project.56 In this case, the producers are three individuals, Josh
Gudwin, Mauricio Rengifo, and Andrés Torres. Nevertheless, through industry practices, chiefly contracts, the record labels typically retain and manage the copyright on the sound recording for creators, performers, and producers. Finally, non-featured artists and musicians may be subject to copyright for their performances depending on the country. However, more often these artists are contractors or work-for-hire schemes, who have already signed their copyright interests to the record label.
As Kohn explains, commercially successful records are often the product of contractual relationships between recording artists and labels.57 Through these contracts,
record labels retain copyrights and control the licensing of sound recordings. Record labels, thus, are critical players in the music industry. Importantly, there are two types of labels: majors58 and independents (indies). Notably, indies are not normally owned by
major recording companies.
In addition to copyright holders, whether original creators or entities that assist creators and retain copyright (e.g., publishers and record labels), other intermediaries that
55 AL KOHN &BOB KOHN, KOHN ON MUSIC LICENSING 329-44 (Aspen Publishers, 2010). 56 U.S. Copyright Office, supra note 16, at 21.
57 Kohn, supra note 55, at 1454.
