President of NMPA Calls for Blanket Licensing of Mechanical and Sync Rights

June 16, 2011

By Ed Christman (@edchristman), New York

At the National Music Publishers Association's annual meeting yesterday (June 15), president and CEO David Israelite urged members that now is the time to create U.S. blanket-licensing solutions for digital music service providers seeking mechanical and synchronization rights.

He said that music publishers are facing "three big challenges:" they have to continue to fight copyright theft and infringement; they have to help legal digital sites to prosper; and they have to make sure that publishers get their fair share of that prosperity.

But he said that prosperity could remain elusive if the industry continues to license the way it has been. "If you look at the challenges of the industry," the way we license doesn't work: it is broken."

As a solution, Israelite said that now is the time to revisit the SIRA Act (Section 115 Reform Act) of 2006, which never made its way successfully through Congress to become the law of the land.

He urged that legislation be crafted that would create designated agents to act on behalf of all music publishers for synch and mechanical rights. He said that it didn't have to be one agent, it could be a small number similar to the set-up of ASCAP, SESAC and BMI. As long as they agents were competitive and publishers had the right to align with any one of the appointed agents they so chose, and could switch if they wanted to, that would fill the void.

Otherwise, he warned, the music industry would lose out on creative business models, which might never launch because of the complicated licensing situation. Moreover, Israelite noted that the reform would only be in circumstances where the user requires blanket licenses. Publishers could still cut individual deals in situations that make sense.

He cited the Youtube litigation as a situation warranting some kind of mass synchronization vehicle. In that litigation, music publishers and other entertainment rights holders including Viacom are seeking to overturn a court decision in favor of the website. That decision said that when user-generated video's containing copyrighted materials are uploaded to Youtube by users other than the rights owners, the site is protected by the fair-use provision provided by the safe harbor element of the Digital Millennium's Copyright Act.

But what if Youtube conceded and wanted to be properly licensed? "We wouldn't be able" to provide them with an easy solution for mass synchronization licensing, he said. That's why its time to revisit the SIRA Act.

He made the point that in revisiting the SIRA Act, other music publishing issues might also be resolved. For example, music publishers don't think it is fair that they get only 9 cents from a $1.29 list-priced downloaded song while the master rights owners get 81 cents.

Later, Israelite told Billboard that the NMPA was working with record labels and digital companies on how to draft such legislation. "We are far along in concept, but there is nothing on paper yet," he said. The industry won't even reach out to Congress until everything is negotiated and ready to go. "This shouldn't be controversial [legislation]," he said. "We will all come together to support it."

Earlier, U.S. Immigration and Customs Enforcement (ICE) Director John Morton opened the meeting with a keynote address that began with the admission: "I am here because I feel your industry is under assault from IP thieves and counterfeiters,'" Morton said. "We haven't done enough about it."  But that has changed with the current Obama administration he said.

Among the steps the administration has taken is the creation of an IP Center in Arlington Va., which includes not only ICE staffers but personnel from Interpol and other agencies from countries like Canada and Mexico.

In one of its more controversial actions, ICE has been targeting infringing websites and seizing the assets.

As a result he said a lot of other sites came down just because they thought we were going to go after them. When ICE started putting seizure banners on sites, it had an unanticipated reaction. Even more people went to visit the sites to see the seizure banners. What ICE started doing was putting up educational messages about copyright infringement.

Ken Feinberg, the managing partner of Feinberg Rozen lawfirm, gave the other keynote address. He was appointed the special master of the administration of payout from the pending-and-unmatched funds. So far, $161 million has been paid out, to over 1,200 music publishers, he reported to NMPA members.

He called the pending-and unmatched settlement that he administered unusual because very rarely is he presented with a negotiated solution on the front-end.

There was one big problem, he conceded. That occurred when he realized there were over 2,350 songs with "conflicts", where ownership claims in each of those songs added up to more than 100% ownership. But today, through privately held negotiations, that has been reduced to 52 conflicts, which he labeled a tremendous achievement.

Finally, beyond the settlement, Feinberg noted that while there are thousands of trade associations in Washington very few have more input than the NMPA.