Dangers of Direct Webcast Licenses

Nashville attorney Fred Wilhems has launched a blistering attack on Tennessee Senator Bob Corker (R) with respect to his written statement presented to the Senate Judiciary Committee's hearing on "Music and Radio in The 21st Century."

Wilhelms argues that webcasters will ultimately avoid the high statutory webcasting rates set by the Copyright Royalty Board by entering into "direct licenses" with copyright holders (record labels). Under such a license, the broadcaster would agree to pay something less than the statutory rate under Section 114 of the Copyright Act. Labels would be happy with such a deal, "because the money comes straight to them, and doesn’t go to SoundExchange first. Under the Copyright law, they don’t have to split that money with the artists like they do on statutory payments. They can pay the artist whatever the artist contract calls for."

In addition to avoiding or reducing artist payments, Wilhelms says recording artists will suffer from the inevitable failure of smaller, niche-oriented webcasters, who simply cannot afford the rates set by the CRB. With less outlets for niche music, the webcasting landscape would start to look a lot like terrestrial radio -- constricted playlists, and control leverage exerted by the major labels with the lion's share of mainstream content.

Wilhelms' strident tone sometimes overwhelms his message, but in this case he's right on: It doesn't take a jaded industry lawyer to see the plausibility of this scenario, given labels' history of "artist relations."

All of which points up the importance of the manager's amendments offered by Representative Howard Berman (D-Calif.) in connection with H.R. 4789, the House version of the Performance Rights Act, which would extend sound recording performance royalties to traditional, terrestrial broadcasters. The amendments would require that 50% of "direct license fees" be paid to SoundExchange for distribution to recording artists, thus eliminating the direct license loophole.