Reflections on the Need for Modernizing Copyright Law

On August 29th, 2014, screams, cheers, and emotional platitudes echoed throughout Soldier Field. While America’s oldest football stadium is no stranger to deafening noise and overzealous fans, the sixty thousand seats typically filled by Chicago Bears’ enthusiasts and football fanatics, were occupied by a more youthful, adolescent audience. That Friday night, as the sun set in Chicago, thousands of teenage girls, or “Directioners,” as many prefer to be called, powered on their homemade signs and illuminated the stadium with messages reading, “Harry Marry Me” and “Future Mrs. Payne”, while anxiously awaiting the arrival of the band Billboard Magazine dubbed, 2014’s artist of the year.

For ninety minutes, the crowd sang along as Niall Horan, Liam Payne, Zayn Malik, Harry Styles, and Louis Tomlinson, the five members making up English – Irish pop boy band, One Direction, serenaded the audience with their chart-topping hits. The band, which made an estimated seventy-five million dollars between June 2013 and June 2014, and is the first band in the United States to have their first four albums debut at number one, have sold more than fifty million records and performed for more than seven million fans worldwide.

As One Direction serenaded its Chicago audience with, “Story of My Life”, the crowd sang along, as the lyrics, chords, and melody reverberated throughout Soldier Field. Few can argue that One Direction fans are knowledgeable about the band members, but their understanding of the time, money, participants, and legal intricacies involved in taking lyrics and music, and birthing it into a smash-hit sound recording like “Story of My Life,” that can be sold on albums, performed during concerts, aired on radio, covered on YouTube, downloaded on iTunes, streamed on Spotify, and made available to a legion of adoring fans, is debatable.

While fans purchase albums and show up to concerts to support their favorite bands, without songwriters, artists would be left with empty records and music-less concerts. Yet, the songwriters and creators who this past year had music consumers singing about the “Girl Almighty,” while trying to find out exactly “Where Do Broken Hearts Go?” are not adequately compensated for the hits that helped perpetuate five, gawky teenagers trying out for a talent competition, to the five, powerful heartthrobs able to gross an estimated $127.2 million dollars in revenue during their 2014 North American music tour.

In an industry that generated nearly fifteen billion dollars globally in 2014, songwriters play a vital role in the sustainability of the music industry. Over the last two decades, technology has revolutionized the music industry, transforming the way consumers acquire and listen to music. The rise of computers as the primary means to record, distribute, store, and purchase music caused widespread economic changes and fundamentally changed the relationships between artists, songwriters, record companies, promoters, retail music stores, the technology industry, and consumers.

In 1991, the World Wide Web became publicly accessible, radically shifting the way individuals interact, while expanding the powers of communication and information sharing. The Internet made it possible for consumers to access, produce, and distribute exact reproductions of works that were historically protected by intellectual property laws. With the advent of the Internet, the music industry and the way society consumed music was forever transformed.

Eight years later, three college students, Shawn Fanning, John Fanning, and Sean Parker, launched Napster, a peer-to-peer file service that allowed users to easily share their MP3 files with other participants for free. Older songs, bootleg recordings, and even unreleased songs, such as Metallica’s, “I Disappear”, could all be found on the platform. Music fans no longer had to spend fifteen dollars on a CD to listen to one or two songs; entire music catalogs were instantly accessible for free.

Napster toppled the music industry and proved just how unprepared the business was for the digital revolution. Prior to Napster, the music industry’s business model was centered around selling physical recordings of music. Album sales alone accounted for $14.6 billion of revenue in 1999. By 2006, downloaded digital single sales outnumbered CD sales for the first time, and music industry executives were forced to admit the golden era of physical albums had ended. Once Napster hit the market, musical sales and licensing fell an average of eight percent each year, before plummeting to an all-time low in 2009.

Record labels watched as Napster demolished the system they carefully constructed. While the Recording Industry Association of America (RIAA) launched its legal action against Napster in December 1999, Napster’s following continued to grow, amassing over 80 million registered users with access to four million songs.

By 2001 Napster was forced to shut down, but the record labels had failed to combat music piracy or the subsequent damage caused by Napster. After Napster’s demise, peer-to-peer sharing services continued to pop up, including, Kazaa, LimeWire, and BitTorrent, despite repeated litigation attempts from the RIAA. To frighten the public and combat copyright infringement, the RIAA sued music fans for sharing MP3’s, which created further hostility and backlash between music consumers and copyright holders.

Music consumers had grown tired of record labels forcing them to buy entire albums when they only wanted one or two songs. Now they were empowered to stand up to greedy corporations and entitled musicians. Meanwhile, songwriters watched as the copyrights they depended on to earn a living were stolen and disseminated to the public for free. Overnight their livelihoods and professions were in peril.

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Before Napster closed its doors, Apple Inc. was launching the iTunes Music Store, an online music retailer that gave music consumers the option to purchase single songs or entire albums with the click of a button. Consumers no longer had to purchase entire albums; instead they could buy the individual songs they wanted. Even though the iTunes Store provided a “legitimate place to earn money from the sale of digital music”, the a la carte sales model continued to hurt music copyright owners by allowing fans to cherry pick the songs they wanted instead of buying entire albums. Consumers were spending less than a dollar for one song, instead of fifteen dollars for an entire album. Apple’s introduction of the iPod further depressed physical record sales, as consumers now required all of their music to fit in their pocket.

Napster transformed the private consumption of music into a public good and paved the way for legal music services like the iTunes Store, internet radio services like Pandora and SiriusXM, and streaming services like Spotify, Apple Music, and Prime Music. Today’s music consumers are better served than ever with access to forty-three million songs from various licensed music platforms.

Fifteen years later the music industry still feels the effects of Napster and its predecessors. In 2014, the global recording industry’s income fell below fifteen billion dollars for the first time in decades. Physical format revenues dropped 8.1%, single track downloads declined 10.9%, and digital album sales fell 4.2%. For the first time ever, digital and physical music consumption contributed the same proportion of revenues, $6.85 billion each. Meanwhile, paying streaming subscribers grew to forty-one million, contributing $1.6. billion in revenue.

Despite declining album sales and a depreciation of physical formats of music, the International Federation of the Phonographic Industry (IFPI) said in its 2014 annual report that “by meeting the needs of the consumer, by embracing change and by being resilient investors in music, record companies are putting our business back on the road to recovery”.

Artists and record labels were able to bounce back by strategically changing their business models to make up for the loss of album sales. Record labels required new artists to sign 360 deals, which provided the labels with a percentage of all artist’s revenue, including, merchandise sales, concert revenue, endorsements, and online activity. The loss of album sales was so damaging that Warner Music Group CEO, Edgar Bronfman, said the company would not survive without taking “a piece of the artist’s profits”.

Unlike artists and record labels, songwriters are not feeling “great optimism” for the future. The United States has the most prolific and powerful music culture in the world, but the structures that evolved in the previous century to facilitate the lawful exploitation of musical works are under significant stress and inhibiting songwriters from earning livelihoods using their copyrights.

Over the last ten years, our nation’s antiquated licensing system combined with the rise of streaming services and decline of physical music sales, has caused a disruption in the creative community. Like recording artists, songwriters have done their best to adapt and embrace new technologies and consumer expectations. While all players in the music industry are affected by outdated licensing procedures, songwriters are the most heavily regulated profession in the music industry. Current inequalities in payment structures impose a heavy burden on songwriters, who are struggling to survive.

Today, the deeply talented songwriters who are crucial to the music ecosystem, are forced to question whether a career in music is realistic under the current regime. The rise of digital music has led to a belief amongst music consumers that music has no value, yet music is being consumed at greater levels than ever.

The future of musical creativity depends upon strong copyright laws and the right of songwriters and composers to earn a living from their creative works. Copyright law allows songwriters, record labels, producers, and recording artists, to all be compensated differently. Music creators today are paid royalties through an ad hock patchwork of laws, industry conventions, and private deals, many of which date back decades.

Unlike other copyright holders, seventy five percent of a songwriter’s income is controlled by the federal government, which strips songwriters of their ability to negotiate for fare rates. The songwriter’s two largest areas of income, the mechanical license and public performance license are subjected outdated consent decrees and compulsory licenses that were enacted in the 1900s before CDs were invented. Even though the music industry just underwent the most dramatic transformation in 100 years with the birth of piracy, death of CDs, introduction of a la carte sales models, and birth of streaming services, Congress still has not made any changes to royalty rates or compulsory licenses despite songwriters needing this income more than ever.

For every artist you can name at the top of the Billboard music charts, there is a long line of songwriters who are responsible for writing the hits that transform singers into superstars. Unlike artists and record labels, songwriters do not have touring, record deals, merchandising agreements, or their celebrity to fall back on. Streaming has the potential to make the music business bigger than it’s ever been in history, but creators must be paid fairly. Without songwriters to create songs, streaming services would have no business model.

The laws governing the music business are broken. In the last fifteen years, Congress has failed songwriters and inhibited them from earning a livelihood. The glacial pace by which songwriter’s royalties have changed, in addition to songwriters having no leverage or negotiating power when new technologies appear, have forced songwriters to reconsider whether a career as a songwriter is realistic. According to the Nashville Songwriters Association International (NSAI), the number of actively working songwriters has plunged eighty percent since 2000. Songwriters contribute the single most important elements for recorded music: the song. It has been nearly twenty years since there were any major revisions to the Copyright Act. It is time for Congress to increase mechanical royalty rates, do away with consent decrees, create transparency in the music licensing scheme, enable songwriters to negotiate fair market values for their work, and allow songwriters to earn a fair return on the creative and business investment of their work. It is bad enough that we sat back and watched piracy nearly decimate the music industry; how can we continue to support a legal framework that allows songs to be streamed for nearly free, while undercutting the songwriter’s value?