49 Pages Posted: 1 Oct 2003
The crisis in the music industry has been brought about only in part by the digital revolution. The layering of copyright ownership interests and the complexity of copyright law, particularly as it applies to music, has also played a major role in the inability of the industry to respond to the rapidly evolving ways in which digital works can be distributed and otherwise exploited.
After detailing the tangle of legal rights in the music industry and identifying the vested industry players and their respective roles, this article describes the difficulties faced by users of new technology in attempting to comply with the law. These problems may explain, at least in part, the widespread phenomenon of what many in the industry see as infringement on a massive, and global, scale. Without low-transaction-cost solutions and reasonable absolute price for obtaining authorization for the digital activities of millions of users, we see a classic example of market failure. Users respond to this failure by effectively exiting the failed market, completely ignoring the overly cumbersome requirements of the law.
This article proposes concrete changes that should be implemented in the Copyright Act. First, the Copyright Act should embrace derivative work independence, eliminating the problems that result from the dual layers of copyright ownership in a final product utilized by downstream listeners. For such a consolidation to be effective in the music industry, however, two additional changes are necessary. First, the compulsory mechanical license for musical works, codified in section 115 of the Copyright Act, must be repealed. Second, sound recording copyright owners must be granted rights equal to those of musical work copyright owners. This package of three changes constitutes a significant modification in the structure of rights in the music industry that would result in a more efficient market for downstream use.
The article also recommends that copyright owners be granted a unified right to "commercially exploit" the copyrighted work, rather than the divisible rights that the Copyright Act currently grants in section 106. In the music industry, copyright owners routinely assign or exclusively license their separate rights to different industry players, dividing these legal entitlements and causing a fractionation of rights in a single copyrighted work. In the digital realm, each of the owners claims that a variety of uses implicates her rights and thus requires her permission. A unified right would take time to influence contracting behavior, but should create vested industry players divided by logical markets rather than clustered around the different statutory rights granted to the copyright owner.
Finally, the article explores the problems associated with industry consolidation and the existing and potential mechanisms to reduce the negative effects of the present consolidation. Congress has included provisions in the Copyright Act aimed at curbing potential abuses of monopoly power, such as the compulsory mechanical license. Over time, however, that compulsory license has significantly contributed to the complicated nature of the industry.
Keywords: Copyright, Music, Digital
JEL Classification: O34, K39
Suggested Citation: Suggested Citation
Loren, Lydia Pallas, Untangling the Web of Music Copyrights. Case Western Reserve Law Review, Vol. 53, Spring 2003. Available at SSRN: https://ssrn.com/abstract=424701 or http://dx.doi.org/10.2139/ssrn.424701