It’s time to end compulsory licensing for digital music

by on March 8, 2013 · 4 comments

Last week, Pandora CEO Tim Westergren was at the Heritage Foundation, “trying to rally the conservative troops,” according to Politico. The company is pushing the Internet Radio Fairness Act, which would let government bureaucrats set the rates for the music it uses one way. Arguing for another (more expensive) way on Wednesday, was RIAA president Cary Sherman who, again according to Politico, was “ranting against the Internet Radio Fairness Act and condemning Pandora for its efforts to change the standard royalty rate.”

Essentially, they are negotiating through Congress; each side wanting to use the government to gore the other’s ox. In a new article at Reason.com, I make the case that the principled free market approach would be to get rid of compulsory licenses and allow the two sides to negotiate with each other. As I point out, this is yet another opportunity for the G.O.P. to take on copyright cronyism:

If a federal policy strips owners of their rights to dispose of their property as they see fit, institutes price-fixing by unelected bureaucrats, and in the process picks an industry’s winners and losers, you’d expect Republicans in Congress to be against it. But when it comes to copyright, all bets are off. …

If Republicans really care about copyright as a property right, they should treat it as property and allow copyright holders to decide to whom they will license their music. That would mean prices negotiated in a free market, not fixed by apparatchiks, and an end to politically determined winners and losers.

Read the whole thing here.

  • eshan

    If we recast IP as “intellectual privilege” and not true property, ending compulsory licensing would increase this privilege and not decrease it. It also works against the purpose of copyright: to encourage wide dissemination of new works.

    Compare markets where compulsory licensing applies and where it doesn’t. Any internet radio station, such Pandora, can have Metallica or The Beatles because they don’t have a choice in the matter due to compulsory licensing. As a result, there are multiple, complete service offerings.

    Then look at on-demand streaming services, where compulsory licenses do not apply. Rdio doesn’t have Metallica because their bigger competitor Spotify has an exclusive deal with Metallica. In return, Rdio has secured some smaller exclusives that Spotify doesn’t have. Nobody has The Beatles, because the rights holders have so far declined everyone. Consumers must choose between fragmented, incomplete services.

    While I wouldn’t want the government to set prices or otherwise interfere with the free exchange of real property, IP is not that. It is a government subsidy, a promise to interfere with what consumers can do with their actual property (copying CDs, etc) to benefit the creator. It should come with heavy strings attached.

  • http://jerrybrito.com Jerry Brito

    If that’s the case, then would you support compulsory licensing for all works?

    Also, dissemination is one purpose of copyright, but so is incentivizing creation. Query if we would not get more and better works if we didn’t have any compulsory licensing.

  • eshan

    I think we both agree that the incentive side can be rolled back a bit without major harm at this point. (I enjoyed your recent book on this topic, by the way.)

    As for compulsory licensing for all works, I have been wondering about it! While HBO is perfectly rational to only offer Game of Thrones bundled with cable service, should the government force them to sell it to me a la carte? Perhaps government copyright enforcement should only be offered to works that are sufficiently “in print”: either available a la carte at “fair” prices or available on multiple competing services in each medium where copyright enforcement is sought? The trend toward Netflix exclusives and Hulu exclusives and Kindle exclusives and so on concerns me. I already have multiple video game consoles, what next? I certainly don’t have a tidy solution figured out, though.

    I would ask you the reverse question: would you support ending all types of compulsory licensing? We have a robust market in cover songs only because there is a statutory rate for using someone else’s composition, no permission necessary. This may decrease the songwriter’s incentive to create, but it probably has been beneficial on net.

  • http://jerrybrito.com Jerry Brito

    You make a good point. The best distinction I can make is that compulsory licensing for covers facilitates the creation of new works (so does fair use, which in essence is a zero-price compulsory license). Compulsory licenses for distribution merely facilitate ease of access, which is a good thing, but I’m not sure we are starved for access. As with so much else in copyright, the question is a cost-benefit one: does the benefit of the compulsory license outweigh the inevitable shenanigans that will play out as government sets and resets the contours of those licenses.

    And thanks for reading the book, BTW!

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