The Sound Recording Performance Rights at a Crossroads: Will Market Rates Prevail?

01 January 2014
By Dr. Jeffrey A. Eisenach

In the US, federal policy has moved in the direction of a market-oriented approach toward sound recording rights, beginning with Congress' decision to create a sound recording performance copyright in 1995. In 1998, Congress provided that most statutory royalty rates, including the rates paid by webcasters like Pandora Radio, would be set using a market-based "willing buyer, willing seller" ("WBWS") standard. Since then, the WBWS standard has been applied in several rate setting proceedings, but complaints from webcasters that the rates were "too high" have led to Congressional intervention and, ultimately, to adoption of rates below market levels. Now, as a new rate setting cycle is about to get underway, webcasters have begun lobbying Congress to replace the WBWS standard with a new version of the so-called 801(b) standard, which promises copyright users a right of “non-disruption.” Adoption of the 801(b) standard - and the other changes favored by the webcasters - would result in rates below economically efficient levels, thereby distorting markets, slowing innovation and harming consumers. In this article from CommLaw Conspectus, Dr. Jeffrey A. Eisenach, Senior Vice President and Co-Chair of NERA's Communications, Media, and Internet Practice, examines the market for sound recording performance rights. Dr. Eisenach concludes that Congress should resist webcasters' pleas for regulatory favoritism and instead continue moving towards a market-oriented approach, starting with extending the sound performance right to terrestrial radio.