The Future of Licensing Music Online: The Role of Collective Rights Organizations and the Effect of Territoriality

Abstract

The current licensing regime practiced by collective rights organizations (“CROs”) is preventing rights holders from being able to reap the financial benefits that the Internet and digital transmissions of music can provide. The problem is that CROs license online music on a restrictive, national basis where the online transmission of music is worldwide, unrestricted by national boundaries. This territorially restrictive licensing system began in the nineteenth century and was practical for geographically limited methods by which music was played and transmitted. However, licenses to transmit music online or in the digital environment in general are restricted on a national basis because of agreements entered into between the CROs that require them to grant licenses only on a national basis. These territorially restrictive agreements have no place in the licensing of online music where digital transmissions are not limited by national boundaries. The present licensing system is inefficient and costly, hindering the development of online music providers’ ability to distribute music to consumers and, ultimately, keeping rights holders from realizing the full financial benefit that the Internet is able to offer. This paper will discuss why the present system of territorially restrictive licensing of online music is unnecessary, reasons why the present licensing system is still used, alternatives to the present licensing system, recent attempts at a multiterritorial license, and a look at the future of licensing of music online.

Note: This version of the article varies only slightly from the version published by John Marshall. I made a couple of edits that were not done before the article went to the printers. Footnote 8, from the first version, has been removed, and some spelling mistakes were corrected.

Keywords: music, music licensing, performance right, copyright