Transcripts For CSPAN2 Music Licensing 20140815

Good morning, ladies and gentlemen, the subcommittee on the property of the internet will come to order. Recess of the subcommittee at any time. We welcome all our witnesses today. Let me begin by adjusting my chair. Thank you. Good morning, welcome to the second of two hearing this, two weeks ago this subcommittee heard from your, Music Industry representatives about their concerns with the state of music licensing, the right was. Looking around the room, we can conclude you have more than a passing casual interest in this issue and welcome all of you here today. At the earlier meeting on mentioned my fondness for oldtime bluegrass and country. I dont know if that fostered the popularity across the country, probably hasnt but i will continue to try to do that and i will make my Opening Statement very brief because we have a long day ahead of us but witnesses in this panel may not agree on everything but they agree music and rich as the world in which we live. Since this is part ii of the music licensing hearing i wont repeat the music issues that Congress Needs to address. I hope the effort to improve the music licensing system we dont lose sight of the fact creators need to be paid for their work like everyone else in this room. Creative industries are the envy of the worlds but im not sure the music licensing system is. It may be time for a change. That will be exposed today as we go through this arduous journey of productive the journey. I yield back the balance of my time in welcoming back the gentleman for his Opening Statement. Thank you for holding the second hearing the music licensing under title 17. At the first hearing two weeks ago we heard from a Diverse Panel on performance songwriters and publishers, television licensees and Digital Music delivery service. There are varying points of view, it was widespread agreement in the of comprehensive reform. The current licensing system is rife with inconsistent rules and inequity that make no rational sense. No one could write the law the way it stands today. The Internet Radio compete against each other and different rules for compensating songwriters performances exhuming theyre paid for their work. And in the music echoes system with us today, they provide critical programming including news, weather and emergency alerts and strong Public Service partnerships in the communities they serve. Also represent Digital Radio such as serious sex them siriusxm and pandora providing using new innovative ways. We have differing views about how to present these issues but i presented discussion how to come together to improve the music licensing system. It is so haphazard, in large part they would develop at different times in response to different innovations of the music and technology industry. Rather than continuing to adjust the system in piecemeal fashion i believe we should take a comprehensive approach. At this years grammys on the hills event, the president and ceo close to the industry to coalesce behind a single bill, was later echoed by House Majority leader nancy pelosi who agreed to the time had come for congress to address these issues in one package. That is why it places the first hearing in music licensing to develop a comprehensive omnibus bill which some people the music bug copyright law that congress could get out of the business and create a level Playing Field. The lawsuit should be platform neutral and all music created should receive fair market compensation for their work. Theres a growing consensus the system is in need of reform. In addition to this committees ongoing copyright review the office is conducting music licensing study. This week concluded series of round tables around a country, in los angeles and new york. The Commerce Department of stating copyright including music licensing for the digital age. The department of justice is conducting a much needed review of the Consent Decrees that govern the bmi. Two Performance Rights organizations distributing royalties. I hope the deal is a worthy will be completed quickly as time is of the essence for all parties involved. Todays hearing is an important step in the review to update the music licensing system. We will hear from todays witnesses about specific issues they believe should be addressed about how to best enact meaningful comprehensive reform. I have no doubt the days discussion will be just as informative a useful as the discussion at the first hearing. Thank you, i yield back the balance of my time. I thank the gentleman. The chair recognizes the chairman from virginia, mr. G d goodlat goodlatte. Thank you for the impressive array of hearings we have held on copyright issues. I can see we have another full house so good morning to you all. Welcome to the Second Committee licensing hearing. I see the size of the witness panel, two weeks ago and number of licensing system that exists in reviewing the in testimony written in advance of this hearing they does seem to be agreement that a more robust copyright ownership database is needed. There also seems to be an interest by many in simplifying the divers licensing and ratemaking systems but disagreement remains on whether all those who use music should pay for it and what specific rate standards should be used among other regions. I mentioned two weeks ago as we consider challenges and potential solutions to the copyright laws related to music we should keep in mind ideas that incorporate more freemarket principles. We should be mindful of the tremendous role Digital Music Delivery Services play in the music ecosystem for consumers and creators of like a. I have long said the content community and the Technology Community needs each other. It is my hope we can identify improvements to our copyright laws that benefit both groups as well as consumers by maintaining strong protections for copyright works and strong incentives for further innovation. Thank you and appreciate you all making time to be here this morning and i yield back, mr. Chairman. The distinguished gentleman from michigan, the Ranking Members recognized for an Opening Statement. Thank you, good morning to our distinguished panel. I see faces i worked with before. We welcome all the supporters of the subject matter that i hear in the judiciary hearing room this morning. Since i agree with everything that has been said by my predecessors, the gentleman from new york and the chairman himself, i will put my statement in the record. It would be largely repetitive. Many of you know where i stand. I have supported music as an important and vital source in our national interest. It is in that spirit that i welcome you all to the Judiciary Committee this morning. I ask unanimous consent to put my statement in the record and yield back the balance of my time. I think the gentleman and the statement will be made a part of the record. Without objection. Let me introduce our panel of witnesses as we proceed with the business at hand. The first witness is roseanne cash, singer, songwriter, author and performer. She has relieved 15 albums and a grammy award, nominations for 12 putting the 11 signals, she completed a residency at the library of congress in december of 2013 and was given a Lifetime Achievement award in 2012. She has testified on behalf of the American Music association and as i mentioned earlier, also appeared before the subcommittee and we enjoy having him here as well. Good to have you here. Our second witness cant leave because of the impediment, i told you heartless for that. Chairman and chief executive officer of the Recording Industry of america and positioned, mr. Chairman, represents the interests of 7 billion u. S. Recording industry, received his bs from Cornell University and j. D. Degree from Harvard School of law. Our third witness, charles warfield, a 31 year veteran of the broadcasting industry and is here today on behalf of the National Association of broadcasters. He received his bs in accounting from hampton university. Good to have you with us, mr. Warfield. Our fourth witness is Darius Van Arman from family of america, independent reporting, in bloomington, ill. He has testified today on behalf of the American Association of independent music, a21m. He attended the university of virginia. Our fifth witness is mr. Ed christian, chairman of the Radio Music License Committee, rmlc. He teaches broadcast programming and radio operations at Central University of michigan. Central michigan university. You received his b. A. In excommunications and in management in Central Michigan university. Our sixth witness, Paul Williams, president and chairman of the board of the American Society of composers, authors and publishers, represent hundreds of thousands of music creators world wide. Mr. Williams is a golden club winning hall of fame composer and songwriter. Mr. Williams, you will be glad to know your friend mr. Gilmore from texas admonish 3 to be easy on you today. Looking at that from his state, will be careful to adhere to that request. Mr chris harrison, Vice President of business and assistant general counsel is also an adjunct professor teaching music lot at the university of texas school of law. And the university of North Carolina, i am pleased to say in Political Science from the university of North Carolina chapel hill. Good to have you in the room today. And mike huppe, in his position he is establishing longterm Strategic Plan and vision for the organization. He received his b. A. From the university of virginia and to j. D. From the Harvard School of law. I would like to follow mr. David prayer, chief executive officer of siriusxm, responsible for overseeing finance, itn Satellite Development operations, he received his m. B. A. From the university of michigan at ann arbor. Before we begin to hear from the witnesses i would like each of you to stand if you will land we will swear you in. To you testify the testimony you say is will be the truth, nothing but the truth so help you god . Let the record show all responded in the affirmative. We start with roseanne cash. If you can, comply with a 5 minute rule. When the topic light on your table goes from green to ambers that is your warnings that you have five minutes to go to reach the five minute pinnacle. You will not be severely punished if you dont comply but if you can stay with that, we try to comply with a 5 minute rule as well. The good news is i dont think there is going to be a vote until after noon so we wont be interrupted by 4 votes. Roseanne cash is recognized for five minutes. Thank you. Ranking members conyers and n v navv navver. Thank you for the opportunity to testify on behalf of the americanday music association. I want to address a few obstacles to making a living as a songwriter and recording artists today. Everything i say is guided by one principle. All creative people are entitled to fair market compensation when their work is used by others regardless of the platform. I have been both a professional musician and songwriter for 35 years. I grew up in the Music Industry in the age of major record levels and for tens more records stores. I have been signed to major labels since 1978 and currently on the esteemed blue note label. The climate among musicians at the moment is dispirited. We feel marginalized and devalued although our passion for our work remains unchanged. Every artist i know says regarding their work that they have no choice. We dont create out of lindsay, narcissism lack of ambition for more financially dependable professions. We are fuelled by an artistic sensibility that can be ruthless in its demand for discipline and in some ways we are in a service industry. We are here to help people feel to inspire, to reveal the secrets of the heart, to entertain and provide sustenance for the sole. Creating music is a collaborative effort and the creation of recorded music, co writers, producers, fellow musicians, recording engineers, background singers and various support people come together with the single purpose, to create one work. Among the problems facing us are one, the lack of a Public Performance right for terrestrial radio playbook for recording artists. The United States is one of a few countries including china, north korea and iran that lack a radio performance right for artists. The failure to recognize this right means that performers cannot collect royalties for their work even when it is broadcast in countries where the right exists, because the treaties the u. S. Has signed are reciprocal. Two, issues concerning how rates are set for licenses that songwriters offer for their work. Currently, the law prevents courts from considering all the evidence that might be useful in setting the fairest rates for licenses performing rights organizations offer, and royalty rates are not set on a fair market basis. This makes no sense. The songwriter equity act, introduced by congressmen collins and jeffreys, would address these issues, and i thank them for that. Three, the lack of federal copyright protection for pre72 sound recordings. There is a gap in copyright protection for sound recordings created before 1972 which Digital Services use as an excuse to refuse to pay legacy artists. I thank Ranking Member conyers and congressman holding for introducing the respect act to treat the work of legacy musicians fairly. For example, if my father were alive today, he would receive no payment for digital performances of his song i walk the line, written and recorded in 1956. But anyone who rerecorded that song today would receive a royalty. The injustice defies description. These are a few of the many challenges we face as performers and songwriters, and i understand Ranking Member nadler is considering legislation to comprehensively address these and additional concerns. Thank you, congressman nadler. Bottom line, copyright law should not discriminate among individual music creators. Each should be fairly compensated for their role in the creation and delivery of music to audiences. I see Young Musicians give up their dreams every single day because they cannot make a living doing the thing they most love, the thing they just might be on the planet to do. They deserve our encouragement t and respect. Musicians and artists of all kinds should be valued members of American Society, compensated fairly for honest, hard work. I believe we can find solutions so that artists and musicians can succeed together with both new and existing Music Services. And i thank you for this time. I thank you, ms. Cash. Mr. Sherman, lets start with you. Youre recognized for your statement. Chairman goodlatte and cobell and Ranking Members conyers and adler, my name is kerri sherman, im representing such iconic labels as columbia, motown, capital, atlantic to name a few. Our members have worked hard over the past two decades to build a viable, diverse and consumerfriendly Digital Music marketplace. Millions of music lovers can find whatever they want, whenever and wherever they want it. Digital models already account for more than twothirds of our revenue, and that number is growing. But before the music marketplace can realize its full potential, there remain serious, systemic issues to address. Records are the economic engine that drives the entire Music Industry. Its the recording invested in, marketed and promoted by record labels that produces real revenue for the songwriter, for the artist, for broadcasters, for Digital Music services. Record labels invest not just their financial capital, but their human capital, years of experience and expertise from the likes of clive davis, moe austin who work with artists to bring out their very best, resulting in music that not only captivates fabs, but also fans, but also drives benefits for everyone in the music value chain. Yesterday we released a report on the investments in music made by major Record Companies. In embracing digital distribution, record labels have revolutionized the business and streamlined their operations, all while revenues have plummeted. Even in tough times, however, as a percentage of u. S. Net Sales Revenue over the last decade, major label payments for artist royalties have increased by 36 , the mechanical royalties for songwriting have increased by 44 . Impediments to licensing impact the ability of record labels to sustain the investment that benefits the entire music ecosystem. Todays antiquated, complex and timeconsuming licensing regime undermines that system. And thats why we believe music licensing must be fixed, because behind the seamless experience provided to consumers lurks an inefficient and, frankly, broken system. Weve got to rethink it. Heres what we suggest. First, grant a broadcast performance right for sound recording. It is, frankly, inexcusable that the u. S. Still provides a special interest exemption for the benefit of am fm radio broadcasters, a uncitity which is taken out of the pockets of writers and their labels. Second, make sure artists who were recorded before 1972 are paid because sound recordings are covered by federal law after february 72 and state law before that date, some of our most cherished artists are not being paid by businesses who take advantage of the compulsory license. We are extremely grateful to representatives holdings and conyers and their other cosponsors who have proposed the respect act to fix this anomaly. Third, allow rights to be bundled and administered together. Owners of every other type of copyrighted work are able to license all the copyrights necessary for all uses. A Movies Streaming Service doesnt have to go to one entity to license the performance and a different entity to license the making of a server copy. So it should be with musical works. Fourth, create an acrosstheboard, marketbased rate standard. It goes without saying that every rights holder deserves fair market value for their work. We should have one fair market rate standard for all uses that remain under a compulsory license. Finally, consider a onestop shop for musical works licenses. We have filed an idea laying out one possible way to license musical works in this manner. It is a potential path towards simplifying the complicated way musical works must be licensed today. But we also understand as we stated repeatedly in our submission to no revision can move forward unless publishers, songwriters and all the relevant stakeholders in the Music Community come to a solution on which they agree. The goals of any solution should be to align the economic interests and incentives of music creators, insure that songwriters and publishers receive a fair portion of revenue from the licensing of the sound recording, avoid competition between record labels and Music Publishers for the same dollars from licensees, speed the licensing process making it quicker and easier for consumers to enjoy new Music Services and make royalty payments to songwriters and publishers more efficient and transparent. We welcome the opportunity to engage with our Music Industry partners on our idea as well as on any other ideas they may have to improve the status quo. The music business has reinvented itself, but our work is not done. We hope by working together with our Music Industry colleagues that we can find the consensus necessary to simplify music licensing and insure that all creators are paid fairly. Thank you. Thank you, mr. Chairman. Mr. Warfield. [inaudible] pull your mic closer. Good morning, members of the subcommittee. My name is charles warfield, and i am the joint board chair of the sash association of broadcasters. Over my 37year career, i served as president of one of the countrys first whollyminorityowned groups, and i even worked as an executive at a record label. Over that time i learned that broadcasters serve our listeners in many beneficial ways. Radio broadcasters inform, educate listeners to topics and emergencies, we entertain them with sports, talk and interviews, we are local, involved in our communities and serve the Public Interest. For those reasons i am proud to testify today on behalf of the thousands of free, local, overtheair Radio Stations. The Supreme Court has repeatedly held that the core objective of copyright law is for public good. The interests of the public at large. Unfortunately, in testimony before this committee some are arguing for fixes to copyright law that serve a very different goal, insuring that their individual constituencies receive greater compensation at the expense of both music licensees and listeners. Nowhere do they emphasize the need for balance or enhancements to competition, any one of which would promote the public good. In contrast, stepping back from any one piecemeal proposal before this subcommittee, it is clear that taken as a whole the timetested laws that promote the public good in three important ways. First, the existing law has enabled a locallyfocused radio industry that is completely free to listeners. Anyone with an am fm antenna can access our programming completely free of charge, especially in times of emergency. Radio is unique among entertainment mediums in that there is no subscription, no broadcast package or expensive wireless data connection needed for access. Second, the resulting popularity of radio has significantly contributed to a u. S. Recording industry that is the envy of the world both in terms of size and scope. While u. S. Copyright law may contain some critical differences from its international counterparts, those differences have postfostered fostered the largest Recording Industry in the world, one that dwarfs the u. K. , france, italy and germany combined. Our unique system has served both the broadcasting and Recording Industries well for decades to the benefit of listeners. The fact is that this all 37 years of my career, i have never had a record executive come to my station and say why are you playing all of my music . Ive never had a Promotion Department refuse to provide us with their newest record on the day it comes out. They show up at radio where they see the value and realize we are the greatest promotional tool for their artists, and were happy to proceed them for that. Third and most importantly, the communitybased nature has driven our industry to extraordinary levels of Public Service. New york citys wqht, hot 97, put its music on hold and broadcast throughout multiple Power Outages providing a muchneeded connection to life saving news. Then in the days following, they continued informational announcements providing critical information about Disaster Relief locations and assistance. Further, its hiphop has Heart Foundation provided blankets, clothing, hd radios and essentials to the residents of the afflicted areas throughout the crisis of hurricane sandy. This is just one example of our industrys commitment to service, and it is the norm, not the exception. Each of you knows this as you see the value of local broadcasters back in your districts every day. But make no mistake, the unique Community Focus of broadcast radio is only enabled by the current Legal Framework. I would urge this committee to tread carefully and resist piecemeal changes to law that might disrupt this delicate balance that has enabled our industry to serve the public good for decades. Turning briefly to streaming, i agree with others on this panel that the current Legal Framework governing webcasting imposes obstacles on every corner of the music ecosystem that currently prevents our businesses from collect irvly serving the public collectively serving the public good. The revenue that can be generated from streaming simply does not and cannot offset the costs, so many of our members simply do not do it. I urge this subcommittee to focus its music licensing review on changes to law that will promote a sustainable webcasting industry to the benefit of artists, songwriters and consumers. In conclusion, nab stands ready to work with you to insure a vibrant and competitive broadcast industry now and in the future to serve the public good. I am pleased to answer any questions and welcome your invitation to me this morning. Thank you. Thank you, mr. Warfield. Mr. Van around mono. Members of the subcommittee, thank you for inviting me to testify today on behalf of the small and mediumsized businesses that make up the American Association of independent music, a2im. I am darius van around men, and i am a entrepreneur. I am the cofounder and coowner of a group headquartered in the midwest of the United States. We have multiple gold albums and singles, one of our artists has won multiple grammys. Im also on the board of a2im representing over 330 independent record labels of all shapes and sizes from all over the u. S. From hawaii to florida. Our sector now comprises 34. 6 of the u. S. Recorded music sales market. First and foremost, the american independent sector wants nothing more than a free market with a level Playing Field. However, theres one thing standing in our way Big Companies using their power and resources to take what is not fairly due to them. Large Technology Companies use our music, but because of the safe harbors our current copyright law provides to them, artistcreators and independent labels are not being fairly or adequately compensated. Broadcasters are not paying anything at all to broadcast on am fm radio. This is not only unfair to us on the creator side, but it is also unfair to those Digital Services who do pay craters. And within our creators. And within our Music Industry, theres one imbalance that is the primary threat to enterprise, market concentration. Today just three major label groups exist comprising about 65 of the u. S. Recorded music sales market based upon copyright ownership, the largest two of which are subsidiaries of foreign corporations. Congress intended that copyright would stimulate new creative works for the Public Interest, for consumers. It did not intend the ability to make huge profits unfairly on the backs of creators. While we like the idea of a comprehensive approach to music copyright legislation, this music bus must be driven by all members of the music creator community, not steered by just a few major private interests towards only their goals. So what do we need . We need stronger copyright protections. The shape of copyright law now is currently subsidizing large Technology Companies. We need a broadcast performance right. Broadcasters must fairly compensate all creators so the creation process can continue. A broadcast performance right will also give Us International reciprocity and receipt of overseas radio royalties which will improve americas balance of trade. We need more transparency and more efficiency in our music licensing system. Our industry cant afford to unfairly take value away from artistcreators and those who invest in these creators. Finally, we need a stronger compulsory statutory license for noninteractive performances as it is the best friend of a level Playing Field. Creator pay must be based on actual music usage. The current music licensing system is broken. It provides incentives for the wrong behavior. Large Companies Take advantage of whatever inefficiencies exist in the marketplace to make an extra buck. So we need copyright law revisions that do the following increase the value of music, make copyright more equitable, reduce inefficiencies and enable creators to create what consumers desire. Our sincere hope is that we can come to these revisions in partnership with all industry participants. The vast majority of small and Medium Enterprises that comprise the independent sector are American Companies employing american citizens in american offices and directly supporting american creators. Almost every dollar that is earned by an independentlyowned copyright has a much greater impact on the u. S. Economy than every dollar earned by a foreigncontrolled major label copy rite. Congress and the Copyright Office should keep this in mind when it con contemplates revisions. American consumers, american creators and american enterprises. In the end, all the independent sector wants is a free market with a level Playing Field. We want to compete to provide the Economic Growth and job creation that our American Economy needs. Thank you. Thank you. Mr. Christians. Mr. Chairman, members of the subcommittee, my name is ed christian, and im chairman of the radio music licensing committee, the rmlc. Weve been in existence for well over 50 years and is a nonprofit that represents some 10,000 local Radio Stations in the United States with respect to music licensing matters. Over the years the rmlcs been involved in extensive music license negotiations with the two largest performing rights organizations, ascap and bmi. The mission of the Radio Music License Committee has always been to provide a competitive market for music licensing in which Radio Station operators pay a fair price for Performance Rights and copyright owners receive equitable compensation. The rmlc has historically cheap fare and licenses with ascap and bmi through a combination of industrywide negotiation and, as necessary, federal rate court litigation. More recently, the rmlc has found itself involved in antitrust litigation involving the maulest of the smallest in the u. S. , csac, in order to curb this companys anticompetitive licensing practices. Ill start by saying unequivocal my that concepts are misguided. The particular reference to the recurring demand by the Recording Industry for a sound recording performance right to be imposed upon terrestrial radio. Please understand that the radio industry is not some vast pot of riches that can be tapped as a bailout for Recording Industry that has failed to execute a Digital Strategy that addresses a decline in its own brick and mortar income. Congress unambiguously intended that an exchange for unique promotional support afforded record labels and artists, terrestrial radio should be treated differently from other transmission platforms. That premise has not changed. Local Radio Station operators are responsible for obtaining licenses or the Public Performance of copyrighted musical works. The vast majority of operators, in the equates to a blanket license that permits a station to air music from a particular pros repertory without having to account for actual usage. Traditionally, the administrative benefits of a blanket license has outweighed antitrust aspects associated with the structure that permits pros to aggregate musical works in a way that is the hallmarks of a monopoly. Given the large scale of the radio industry, the rmlc believes the retention of a collective licensing in some form is efficient and advisable. In this regard, the independent and experienced federal judges associated with the rate courts have been able to deliver appropriate ratesetting oversight. A purely free market approach to music licensing coupled with the absence of Consent Decrees monitored by the department of justice would invite market abuse and represent a step backward from a system that has served parties well for decades. Indeed, the fact that there are currently two antitrust cases in federal court is a testament to what has happened in the absence of government supervision of entities that wield the leverage of ago regated musical works combined with the club of statutory penalties for Copyright Infringement. Now, if congress is dedicated to bold reform that could lead to process efficiencies and enhanced royalty payment to creators, it might want to explore the prospect of a super licensing collective along the lines of what has already been proposed by other stakeholders. Outside of brazil, it is the hard to identify another country in the world that supports multiple licensing entities that administer a single right such as the Public Performance right in the musical composition. The fact that the u. S. Comets to maintain three organizations for this purpose ascap, pmi and csac sets up an enormously complicated system and likely guarantees that precious royalty payments due creators are being diminished in their journey from the licensee to the copyright owner. Indeed, this doesnt even account for the role of other licensing agencies that further contribute to the music licensing morass. Before we simply attribute the economic injustices ascribed to creators of musical workers to the level of fees paid by music users, the radio industry, we really need to carefully scrutinize the royalty distribution process. That dictates how and what creators are paid relative to incoming license fees. The rmlc brings longstanding and professional expertise to the table, and we stand ready to work with other stakeholders in fashioning a pragmatic music licensing regime that is fair to all and preferential to none. Thank you. Thank you, mr. Christian. Mr. Williams . [inaudible] mr. Williams, pull that mic closer to you, if you will. There we go. Good morning members of the subcommittee and visiting members of the larger, the larger organization. My name is Paul Williams, and i am a song item songwriter, i also have the great pleasure and honor of being president and chairman of the board of the American Society of composers, authors and publishers, we are ascap. They believed they could protect their rights as music creators more effectively if they joined together rather than going it alone, so, thank god, they formed ascap. Today more than 500,000 songwriters, composers and Music Publishers trust and depend on ascap to negotiate licenses, monitor Public Performances and distribute royalties all on a notforprofit basis. Ill repeat that, on a notforprofit basis. Im honored to appear before you today to speak on their behalf. Were here today because technology is changing in the world in wonderful ways. Were moving into a world where people no longer own the music they love, they stream it. Whenever and wherever they want. At the same time, the federal regulations that govern how music is licensed and, thus, how songwriters like myself are compensated for our work do not reflect the way people listen to music today. In fact, theyre stuck in the distant past, and its threatening the very future of American Music. Ascap is tbomped by a Consent Decree created in 1941 and last updated in 2001. Thats, incidentally, before the ipod ever hit a store. We all know the music marketplace has changed dramatically since then, and new sadly, new Music Services are finding ways to take advantage of this outdated regulatory system. Consider the fact that it takes one million streams on pandora for a songwriter to earn 90, 90 dollars. For some perspective, one of the most popular songs in 2011 was lady apt bell lumbars wonderful hit, need you now. For 72 million streams on pan doer la, the four songwriters earned less than 1500 apiece. Meanwhile, record labels and artists often earn 1214 times more than songwriters for the exact same stream. Such an imbalance would not happen in a free market where real competition exists and songwriters have more of a say over how our music is licensed, how our music is licensed. But under the current Consent Decree songwriter compensation reflects the true value of our work less and less even as our music is performed more and more. There is now a very realistic that major publishers will withdraw entirely. As a result of that voluntary collective licensing could soon collapse. It would make the system more complex, more inefficient and more expensive for everyone, including music fans, the people that love our music. Unless we do something to fix it. Now, i sit here surrounded by representatives of multibillion corporations that profit from our songs, and i find it beyond perplexing that american songwriters like rosanne and myself are the ones summit to the heaviest subject to the heaviest government regulation. Be that as it may, i believe all of us working together to modernize the music licensing system will allow songwriters and composures to thrive alongside businesses that revolve around our music. We want you to be a giant success. You are delivering our songs to the world. To that end, we are proposing several updates to our Consent Decree with the department of justice. We believe these updates can save voluntary collective licensing from the serious risks facing it to the benefit of music users, consumers and creators alike. First, we need, we need a faster, less expensive process for settling rate disputes, one that considers independent agreements reached in the free market as benchmarks. Second, songwriters need flexibility to manage our own rights. We should be allowed to grant ascap the right to license our music for some uses while maintaining the right to license other uses directly ourselves. Its our music. Doing so would foster greater competition in the marketplace. Finally, we can streamline the licensing process for thousands of music creators and users by giving ascap the ability to license all of the composition rights a Business Needs to operate their music in one transaction. Passage of the songwriters equity act introduced by representatives cl lins and jeffreys for which we are most grateful is another crucial piece of this puzzle. It is a simple and reasonable fix which will enable a court to consider sound recording royalty rates as evidence when establishing songwriter royalty rates. Working together to make these changes, im confident we can preserve the immense benefits of voluntary collective licensing. This will benefit businesses that license music and listeners who enjoy it while insuring that song writers, composers and Music Publishers are compensated for the true value for the true value of our music. The true value our music brings to the marketplace. Thank you for the opportunity to share this with you today. Thank you so much. Thank you, mr. Williams. Mr. Harrison . Thank you, mr. Chairman, Ranking Member nadler, chairman goodlatte, Ranking Member conyers and other members of the committee. Pandora appreciates this opportunity to testify at this important hearing. Without question pandoras delivering tremendous value to listeners, artists, songwriters and the Music Industry. 77 million listeners tuned into pandora last month and listened for an average of 22 hours. Every month pandora performs more than 1. 5 million songs by more than 100,000 recording artists, 80 of whom were not played on terrestrial radio. Pandora contributes hundreds of millions of dollars to a new royalty stream for artists that did not exist 20 years ago. Just nine years after launching, pandora will celebrate a major milestone later this summer. 1 billion in total royalties paid. As this Committee Considers opportunities to improve music licensing, pandora hopes the committee will appreciate the essential aspects of our Current System of statutory blanket licenses, including the Consent Decrees, which encourage innovation through simplified licensing procedures, protect music users from the anticompetitive behavior of big copyright owners and assure that artists receive their fair share of the hundreds of millions of dollars in royalties that Services Like pandora pay each year. In todays highly concentrated Music Industry with fragmented and to opaque ownership, to authorize the millions of copyrights and are are necessary to offer a Compelling Service to consumers. As the future of Music Coalition recently stated, quote the incredible growth of Internet Radio would have been inconceivable had fledgling webcasters been compelled to negotiate with all the Music Publishers individually. Without an easier way to obtain permission to play songs, Internet Radio might never have happened. Close quote. That being said, pandoras recent experience reflects the very real and continued anticompetitive behavior of major Music Publishers and the performing rights societies reflecting a continued need for government protection. As the, as concluded by the federal judge who oversaw pandoras Rate Proceeding with ascap, quote the evidence at trial revealed troubling coordination between sony, universal Music Publishing and ascap which implicates a core antitrust concern underlying the ascap Consent Decree. Closed quote. Statutory blanket licenses provide important transparency into how royalty payments are calculated. Without them, the royalty payment process would be controlled by record labels or Music Publishers where unrecouped advances are deducted and a smaller percentage of the royalty, if any, is passed through to the artist. While pandora believes that statutory blanket licensing should remain a central feature of copyright law, congress can improve the efficiency of determining the reasonable fees for such licenses. For example, several respondents to the Copyright Offices recent notice of inquiry noted the expense and burden of the current copyright royalty board ratesetting process. Highlighting, number one, the need for the application of the federal rules of civil procedure in evidence; two, the establishment of a unitary proceeding with ample time for discovery and presentation of evidence; and, three, the application of the socalled 801b standard. We would also recommend in order to foster Greater Transparency the creation of a single database of record hosted by the Copyright Office and housing all relevant copy right ownership information. Participation need not be mandatory, but congress could incent robust participation. For example, just as chapter four of the copyright act prevents a copyright owner from seeking statutory damages unless the work at issue is registered, congress could include a requirement that entitlement to statutory damages would be contingent on registering and keeping accurate ownership information in this database. This would help prevent copyright owners from Holding Services such as pandora hostage during negotiations, something we experienced directly in 2013 when a handful of major publishers threatened our businesses with massive Copyright Infringement penalties while refusing to disclose their repertory. To quickly ascertain who owns which rights to a work, a single database would also enable services to identify the owners of the songs that perform which would encourage real competition for distribution across all platforms. It is important to note that while transparency would help mitigate anticompetitive behavior, it would not alleviate such abusive practices entirely. Thats why the protection of statutory blanket licensing and Consent Decrees must be preserved. Thank you, and i look forward to answering your questions. Thank you, mr. Harrison. Mr. Hop by . Mr. Chairman and members of the subcommittee, id like to start by telling the committee something you probably dont hear very often. Congratulations to congress on getting it right. For over ten years now, sound exchange has administered the statutory license for sound recordings on Digital Radio that this committee created in 1995, and that decision shines as a true legislative success story. It provides transparency and efficiency that makes possible the Digital Radio services enjoyed today by over 100 million americans. It has led to a critical and growing revenue stream for sound exchanges 100,000 accounts which represent featured artists, labels and rights owners large and small. And the statutory license has provided a huge commercial benefit to the 2500 services who have used it to build their businesses, some of americas best known and Fastestgrowing Companies like pandora and siriusxm, providing them easy access to the product they needed to get off the ground. Congress greased the tracks, removed the barriers to entry, and a burgeoning multibillion dollar industry grew. And while youve heard many parties discuss problems elsewhere in the industry, mr. Chairman, everyone, everyone connected with the sound Exchange World which includes the entire recorded music side of the business artists, labels, unions, even the Digital Services themselves everyone uniformly supports the fundamentals of the system. But as we move forward, there is one core principle that should guide everything we discuss, and that is this all creators should receive fair pay on all platforms whenever their music is used. Period. Everyone who has a hand in the creation of music deserves fair market value for their work, and i mean everyone, mr. Chairman. Songwriters, publishers, studio producers and engineers, the artists who give compositions life and Record Companies who help artists fulfill their creative vision. Fair pay would insure justice for creators whose contributions form the soul of these services. Fair pay would level the Playing Field for Radio Services. And fair pay would insure a healthy, vibrant ecosystem for listeners and fans. With that guiding principle, id like to propose a few modifications to make this good system work even better. First, Congress Must address the current royalty crisis facing legacy artists with recordings made before 1972. The refusal of some Radio Services to pay royalties for this era of music makes no sense as a matter of policy and is surely not what this committee intended when it created the Digital Radio license. It is just wrong to pay nothing to artists who created the most iconic era of music in american history. And on behalf of sound exchange and all of the artists we represent, i extend our thanks to congressman holding and Ranking Member conyers and all of the members on this committee who joined them in supporting the respect act. I urge the committee to act now on this critical piece. Pre1972 artists simply cannot afford to wait. Second, Congress Must insure that all radio platforms pay all creators. This means eliminating the ancient and unfair loophole that allows the 17 billion am fm radio industry to pay nothing for the source of its life blood. Fm radio uses music to draw the crowd and make its profits, yet ignores the performers at the center of its stage. Fms tired and stale justifications for taking advantage of artists rings hollow and are unfair to other services seated with me here today. And third, mr. Chairman, once all platforms start paying creators, they should pay according to the same fair market standard. It makes no sense that similar radio platforms play by different rules, especially in todays world where those platforms may compete against one another in the same places over the same speakers to the same listeners. To quote Ranking Member nadlers Opening Statement, the governor the government must get out of the business of picking winners and losers in this industry. If we want innovation, the law shouldnt give favorable rates to some companies or breaks to older formats. Stated another way, mr. Chairman, these businesses should compete based on their legal appeal and economic value, not on the strength of their legal loopholes. So, mr. Chairman, what would success look like for music licensing Going Forward . It would be a system where many of the challenges were talking about here today would fade into the background, where the back office would work seamlessly and invisibly, where we are focused on Business Models and consumer offerings rather than rate standards and inequity. Success would mean a system where the entire Music Community worked cooperatively to address these issues for the collective good, and most importantly, success would mean a system based on the guiding principle that i set forth earlier; all creators receive fair play on all platforms whenever their music is used. In closing, mr. Chairman, the american Music Industry represents some of our best talent and our most cherished assets. All were asking for is something pretty simple, that those responsible for bringing these treasures to life be treated fairly when someone else profits off their work. Thank you, mr. Chairman. Thank you, mr. Huppe. Mr. Temporary . Chairman goodlatte, Ranking Members conyers and nadler and members of the subcommittee, thank you for the opportunity to testify today. My name is david frier, chief Financial Officer of siriusxm. Siriusxm is one of largest radio providers in the United States. We have over 25 million subscribers residing in every Congressional District in the continental u. S. , and we employ 2100 people around the nation. Siriusxm is well positioned to offer testimony on these copyright issues. In 2013 we paid approximately 325 million in royalties to Record Companies, publishers, songwriters and artists. We have paid over 1. 8 billion in music royalties since we launched service 11 years ago. Id like you to take away four key themes from my testimony. First, parity. Radio is radio whether it is am, fm, satellite or Internet Radio. All Radio Companies should pay for the music they use on the same basis, no exceptions. Continuing to exempt the terrestrial Radio Companies that dominate radio listening with over 90 of the market and generate over 15 billion in revenue is bad policy. Copyright law does not distinguish between am and fm radio based on technology, and it should not distinguish between am, fm, satellite or Internet Radio either based on technology. Second, todays copyright act creates an unfair digital disadvantage. Drawing any distinction based on the claim that some Radio Services are digital while others are not is based upon a false premise and produces a distorted result. Terrestrial radio began broadcasting digital signals over a decade ago, and they have routinely made digital copies in the ordinary course of their broadcast operations since the 1980s. Similar services regardless of the mechanism or medium through which they are delivered should be treated similarly. With each ratesetting proceeding, the digital disadvantage between terrestrial radio and other Radio Services just gets wider. The two pending bills, the songwriter equity act and the respect act, will only further widen this digital disadvantage. Third, protection from market power. The music business has never been more concentrated than it is today. Three Companies Control nearly 90 of the market for distribution of music, the same three Companies Control nearly 70 of the Music Publishing market. Two pros control over 90 of musical performance right, and one collective controls the sound performing rights. The Consent Decrees are crucial to protecting against noncompetitive rate demands. The Consent Decrees do not interfere with competition, they prevent activities that would otherwise constitute clear violations of the antitrust laws. Recent attempts by copyright owners to partially withdraw from ascap or bmi in an attempt to cherry pick entities who are relying on their pro licenses for access are troubling. Especially in light of the publishs refusal to provide the catalog data that would allow the services to remove the catalog from the air in the event they couldnt Reach Agreement on the fees. Fourth and finally, fair rates. The willing buyer, willing seller standard can have meaning only where marketplace transactions reflect the workings of an actual free market. There is no functioning free market in music licensing because of the unprecedented concentration in the Music Industry and the aggregation of power in the pros. Congress should instead adopt the 801b ratesetting standard for a broad array of music licensing purposes. That standard provides the copyright royalty board with wide latitude to insure that both copyright owners and users are treated fairly, including potential new users like terrestrial radio. The 801b standard is also a matter of simple fairness. Congress adopted that standard in recognition that services subject to those standards founded their services at a time when there was no sound recording performance right at all. To change the standard now would fundamentally undercut the reliance interest of those services. So in summary, while the 15 billion am and fm radio industry pays the pros approximately 300 million a year, they do not pay a penny for sound recording performances. By comparison, pandora and siriusxm are less than onethird the size of am and fm in terms of revenue, yet will pay more than two and a half times, nearly 800 million in music royalties this year. It is simply bad Public Policy to reward the biggest entities in the radio field with a competitive cost advantage while penalizing innovation and emerging services that increase Economic Activity and create jobs. As you consider new legislation, my hope that you will recognize the unbalanced Playing Field for the music licensing today and craft an equitable and durable solution. And i thank you for the opportunity to testify. Thank you, appreciate that. I want to thank the panelists for not abusing the five minute rule x for that im appreciative to you. We try to comply, too, so if you all could keep your responses as tersely as possible, we would be appreciative to you. Ms. Cash, let me start with you with a simple question, but i think it may be pertinent. Do you believe that the music licensing system should be set up in such a way that makes it easy or at least more simple for artists to understand how theyre being paid and whos paying them . I do. I think that transparencys essential, and thats the lack of transparency is a huge part of the problem. For instance, there was a petition going around not long ago from pandora asking knew is decisions to sign it, and it was very enthusiastic about how that would benefit us. We found that to be somewhat manipulative, not transparent and, in fact, they lobbied for lower rates for us. So if fans are confused which they are, they come to me all the time and say how do i buy your record, what is the decent thing to do, how can i keep supporting you so you keep making records if theyre confused and were a bit confused, i think transparency would go a long way towards clearing some of this up. Ms. Cash, you opened the transparency door, so let me walk through that door, and im going to put this question, if i will, if i may, to mr. Harrisson and mr. Williams. Transparency is a word this subcommittees heard repeatedly including ownership, transparency on who pays what and transparency on how royalties are divided. How should the congress, in your opinion, consider the issue of transparency as we consider potential changes to our music licensing laws . Is transparency just as important and vital as other issues . Starting with you, mr. Williams, then follow with mr. Harrison. [inaudible] i apologize, my hearing if i get the gist of what you said, and my hearing is not the best nor is mine, so i can relate. Your question, i think as much as i could hear, was related to transparency, and ascap is very proud of our transparency. We have a database for our members. If the love boat theme that i wrote is being played in lithuania right now, i can jump online and find out that its being played. I must, i have to disagree with mr. Harrison. I think he was perhaps misinformed of something that evolved in the pandora case with sony. I want to straighten that out, first of all. Were very proud of the fact that we are open and transparent on all cases. When pandora requested information on licenses, for example, we two days before the end of their, the trial, we immediately gathered that information, and after two days when we had it all together, we reached out to pandora and said would you like this information . We never heard back from them. I understand the communication in a multibillion Dollar Organization sometimes is not the best, perhaps that didnt reach the head office. But we had the information that they wanted, and we have it today. And i have to tell you, mr. Chairman, that i believe that any business that we do any licensee that we do business has the right to know what theyre getting for their money. So we have that information. Its open and available. We are proud of our transparency on all levels, and incidentally, there was never any finding of any improper coordination between ascap and any of the publishers. That, if it had been, im sure that the very capable judge would have brought it to our attention and would have filed on it. There was never any such filing. Thank you, sir. Mr. Harrison . Yes. Transparency is a key part, as mr. Be frier indicated, to any free and competitive market. The ability for users to understand who owns the content that is supposedly being licensed, and our ability to access that information, with due respect to mr. Williams, i dont want to get into a debate about what happened in a trial. Theres 136page opinion thats very detailed by judge coe, and if the chairman would like it, id be happy to provide it for you. Mr. Sherman, with the world going digital, is the time to finally resolve music licensing issues once and for all before us . Definitely. The opportunity has never been greater. Its when the system is in crisis that theres an actual opportunity to bring people together to actually try and make a difference. That time seems to be now. Anyone else wallet to add very briefly to that . Ill open the floor, the door if you want to, because my red light is about to illuminate. I recognize the distinguished gentleman from new york, mr. Nadler. Thank you very much. Let me just say, first, before i begin questions that weve heard a lot of testimony today. We heard testimony about the advantage of the, what do you call it, the free, the free air play for free Promotion System has served the industry, has served everybody well. And its, you know, its a good thing. Let me say i find that argument incredible. In a capitalist system, it may be somebodys judgment that not paying people for their performances because they get compensated through promotions, etc. , that may be a judgment. It may be correct. It may be equitable. But it should be the decision of the person whose services or is being broadcast. You wont go into a store and say i decide that the price of that is fairly such and such, therefore, im going to take it for that price. Someone who performs cannot be told that i dont want see how in any rational or can be told we have decided that for all these reasons you should be happy with just promotion. I dont see how equitably or morally anybody has the right to make such a decision and certainly not congress. Let me and so all the arguments based on that are simply nonstarters, as far as im concerned. Lots of debate on Everything Else and balancing considerations, but theres no balance in saying were going to take your work and not pay for it. Its not a balance. Its not a consideration. Mr. Huppe, many have said it is time for a unified, comprehensive approach to address the licensing problems of the Music Industry. Do you agree, and if so, what steps should Congress Take to help bring that about . Yes, mr. Nadler. First off, thank you for your comments on promotion. I could not agree more with the concept that the broadcasters believe they can take that right and not pay for it is as ludicrous as suggesting that a book could be made of a movie and yet the author of the book does not have to be compensated or that the nfl can broadcast games on national tv, yet the nfl doesnt have to be compensated. In terms of unification, i agree with you. We do need to streamline the system of licensing. One of the benefits of the statutory license that sound exchange operates under is that it is a system that is transparent and efficient. 90 of the royalties that come into our shop are out the door within 75 days, and we have the lowest admin rate. So having a coordinated and streamlined licensing system is urgent. Thank you. And briefly, how has it impacted artists in the overall marketplace . Artists are losing hundreds of millions of dollars over the course of the past several years not only in the United States where radio makes 17 billion, but compensates artists zero, but they also lose royalties overseas where because of the lack of reciprocity. Lack of of reciprocity. And if they got that money, what impact would that have on the broadcast industry . The overseas money . Here. It depends on what the rate is, mr. Nadler. If they got that money, it would go a long way towards compensating the artists who deserve to be paid for the central feature they play in these services. Thank you. Ms. Cash, would you comment on that question . I agree. The idea that im patted on the head and said, well, its promotional, you know, its good for you is i would rather have control of my copyrights. And rather be paid for that. Im a songwriter as well, so i live in both worlds. But the fact that they can use my songs on the radio, my sound recordings to make billions of dollars for themselves and basically use my work to sell ads is not only ludicrous, its insulting. Okay. And artists should have control of their copyrights. Thank you. Mr. Frier, you said there is no reason that satellite radio and Internet Radio should pay sound recording royalties while terrestrial radio continues to enjoy an exemption from that obligation. Should i take it there that that you would agree that everyone should get paid or that no one should get paid . I actually do feel everyone should get paid. Thank you. Let me ask there are different ratesetting standards applicable to different uses of music. Some are established under the 801b standard which many argue produce below market rates while others are set under the willing buyer willing seller approach. Satellite radio is subject to 801b while radio are set according to the willing buyer willing seller standards. How are these justified . Not sure who i should ask these of. They really shouldnt be justified. Everybody should be paying on the same rate standard regardless of the platform on which the music is appearing. It doesnt make sense to have different standards for different platforms. Its having Congress Pick winners and losers which is not what congress ought to be doing. Would anyone on the panel disagree with that . If i may, you know, the fact is there are so many different its Paul Williams, sir. Down here. [laughter] you know, ascap licensing many different platforms for our music radio, television, cable, satellite and happily now, pandora. You know, we operate, were one of the most efficient Performance Rights organizations in the world. We dont operate at the percentage that you do, sir, at sound exchange, because we have a much wider or group of people that were servicing with our music. The fact is that trying to operate under the Consent Decree as it exists right now is crippling to us. You know, we operate at 12 , 12 which is, would come down considerably if we could be relieved of some of the millions and millions of [inaudible] we spend in im sorry. What do you mean you operate at 12 . 12 of what . Let me ask if pandora will be kind and help me on [inaudible] 12 , 12 is our 88 cents of every dollar we collect dose to our writers. Wow. So that 12 takes care of a large group of people trying to keep track of everything that is going on. We do it more efficiently than anybody probably in the world. Were one of the most efficient, this rigorous honesty that is part of my recovery and a part of my oath today. But im proud of the way we operate. But when you look at a system where, you know, where the recording labels and the artists receive 1214 times more for the exact same thing that we get, something needs is broken. You can do two things for us at congress. First of all, you can support our efforts with the department of justice, and you can pass the songwriters equity act which will allow us to go into court and present both sides, both copyrights and information around what theyre both being paid. The huge, huge, you know, what congressman collins and jeffreys have offered is not a comprehensive its not going to fix everything, but its a beautiful inroad to putting some balance into the way we operate. Were so grateful for that. And i think that what we all want is to see, i mean, i want pandora to not survive, i want pandora to thrive, you know . I made albums that each my family didnt buy. I love the idea [laughter] that hes going to go out and make it available for anybody if they might want it. Thank you. My time has expired. I yield back. Thank you. Mr. Chabot. Thank you, mr. Chairman. Id first like to ask unanimous consent to insert into the hearing record house current resolution 16 which is the local radio freedom act which states in part that, quote congress should not impose any new performance fee, tax, royalty or other charge relating with Public Performance of sound recordings on a local Radio Station for broadcasting sound recordings over the air. Local Radio Stations provide promotion of the music they play at no cost to the listener. This concurrent resolution has 225 bipartisan cosponsors including myself which is more than a majority in the house. And i think its important to at least mention. I know weve had some kind of disparaging remarks about the Recording Industry from some of our panel members, and i certainly understand that, but i thought that should be at least part of the record. I would also, just a couple of comments before i get to a question. Mr. Huppe without objection, those documents will be entered into the record. Thank you. Is it mr. Huppe . Huppe, yes, sir. Okay. I just wanted to thank you. I think were at Something Like 7 approval now, and to say Congress Actually did something right, we dont hear that much around. Happy to oblige. Thank you very much. And, mr. Williams, weve had an opportunity to meet a number of times over the years. Youve been here, and youre a national treasure. Thank you for thank you, sir. Everything that youve done. Very kind, thank you. Make life better. Youve got some amazing songs, thank you. Lets see thank you. Mr. Frier being kind of an old cardiologier, i enjoy codger, i guess i, sirius is something we enjoy traveling around the country i thank you, congressman, and my daughters thank you as well. [laughter]. I would like to hear how recording artists view a free market system working. Do artists believe a free market model to be a better alternative than the licensing system that we have today with so much consolidation in the industry do you believe it is even possible for music to truly become a freemarket . A free market will dictate what something is worth in at the last thing that we need is less control of our music. The one area you can get a sense of what the free market is his licenses. Everything is always controlled in the consent agreement. Its about a 50 back 50 split. We can trust the business to work things out and incidentally you get a classic example of the two of us working together when i can hear what youre asking and he tells me and i trust you that hes telling me the actual question. [laughter] i left my sling at home and brought truth of the truth is ii represent 500,000 songwriters and publishers. What we do is reach into the center and try to write something that will affect peoples lives and comfort to thethemin sad times. All i wanted to do is write something that would make the young lady say yes when i asked to marry her and her thre threes that happened. [laughter] we can all Work Together. I can turn to pandora for help. Thank you for examining the system. Most of our money has come from traditional radio and the relationship weve had through the years where they give a piece of our Advertising Money weve been able to work out, roll up your speeds and strike a deal. But the fact is the world is changing. People dont want to own their music anymore they want to stream it and thanks to pandora and spot a fight the spot of lr my music anywhere in the world. Its a wonderful time. It should be the golden age of music. For the listener we care most about this is the time they should celebrate. It shouldnt be a nightmare for the men and women who create music. You should have brought the infamous stack of phone books we talked about a couple times. I conducted an orchestra. In this room i would stand up the bible. [laughter] as the cochair of the creative rights i truly belief that artists should be fairly compensated across the platforms but we know thats not the case in the u. S. Let me tell you about the story who provides a contrast between finland and the u. S. Shes a recording artist who lived there her first 18 years and became a professional singer at a young age in her home country. Then she moved to new york when she was 17 to take the next steps in her career. She achieved success with the top 40 radio hits but was shocked to find out they didnt pay artists for the radio airplay. They didnt pay the radio royalties but it turns out that it was the other way around. The u. S. Was the exception not paying the royalties. There are two other countries iran and north korea. Last summer she became a u. S. Citizen but in doing so she is the citizen of a democratic country that doesnt honor a am fm radio for its artists and she suffers significant income loss. This isnt the American Dream that she envisioned. Her story shows we need to fix the disparities in the system to make sure that artists are fairly compensated. If we dont we risk of the innovation for those because they will no longer have the incentive to create for the public and so i would like to ask a question to Paul Williams. One area of agreement between you and the music licensees on the panel appears to be the importance of preserving the voluntary collective licensing model that was pioneered. You have made the case that this is at risk of crumbling. That would be a bad result for the music licensees so bloated d that mean for the songwriters and composers. First of all, thank you for your advocacy. Youve been a great friend of music creators and we appreciate that. Our major publishers are looking to withdraw and if they do that it fragments the system and it becomes more expensive and less efficient. Essentially the entire Consent Decree at this point its not like thing in the battle with one hand tied behind your back your going to feed your family with. Incidentally as far as the performance and the sound recording i absolutely believe that everybody it is a sad story to hear somebody losing their loss of income when they become an american citizen. We believe that everybody that contributes should be honored. Its not an excuse to pay less to the people that create the music. We need to find a balance to what the fair market decide that for us. My next question is for chris to pandora and roseanne. Last year plan for a campaign on artists to sign a petition to congress in support of Internet Radio but it was during that time the internethe timethe intt was being debated in congress. What actually resulted in the cut to the artist royalties. The artist letter stated they simply wanted to have the artist voices heard and get from with some discomfort this was not the actual intent or the implication for the artists. Can you tell why pandora and listed the help of artists and what few in thlook you in the ct when this was happening . Part of my opening remarks i note that pandora plays 100,000 recording artists every monday and 80 percent dont get played on the radio. There is a large group of independent primary recording artists from singer songwriters who do value pandora because it is the only outlet Distribution Platform available for them to find an audience that loves their music. That is what a lot of us are calling the exposure argument that we are seduced into thinking that if we allow these performances without pay that we will get exposure and drive consumers to buy their records that may or may not be true but the point still remains we dont have control over the copyrights and we are not pay fair compensation. We are not paid fair market. And as i said before, there is no transparency about this. They use the music as Something Like a lost leader to draw people in and then they make the money. To confirm what mr. Williams said the place of the artists havthat the artistshave the mose sync licenses. Ive given my songs for free. My choice to College Students making their first film who want to use my phone. And then i negotiated a fair rate with Popular Television show that wanted to use my song. I have control over those things and that is the bottom line. That and fair compensation. Hopefully you can respond. First of all i would like to give each member a distinguished panel in opportunity to respond to my question in writing because there are too many and we will not get through them in a couple of minutes. If you would be so kind as to tell me in your opinion what a free market is and what a fair market is comparing the two because i hear those terms thrown around. Free market, fair market. I asked the last panel to do this and im asking you to do the same get that to me in writing if you care to do so. Ive been having meetings. My staff and i have been meeting with people that have a dog in this race. If someone hasnt been invited please contact my office and let us know because i think weve covered all the bases but there are many people involved in this. Im trying to get a consensus. I dont Want Congress to have to sit down and sort this out. This is very complex. Weve been studying this for months and talking to many people. Heres the reason why i do not Want Congress t the congress tof we can get a consensus among everyone that has a skin in the game. Im going to review a list of those individuals and i probably miss one or two. These are the parties become to the conclusiowe come tothe concn this excluding the public. Movies score composers, organizations, royalty collectors, sound exchange, artists, performers broadcasters, satellite radio, cable tv radio, Digital Radio, streaming, digital download record labels, music promoters, consumers publishers, collected these organizations. Music academies, recording engineers, Copyright Office is the playful extensions such as libraries, churches and im sure that i missed someone so the groupgroups and entities that we involved here now what im going to show you for the record without objection i have this fanatic in front of me of the licensed Team Marketplace and the songwriters and anyone else involved in the litany of names i just read off. I have a beautiful color display that youre not going to see that im going to hold this up and you may be able to understand some of it. This is an example of the breakdown and these are on both sides. We have three documents of the breakdown in the semantics is like the corporation to be set t up. President , ceo, etc. Look at the subcategories under the subcategories on both sides of the documents and o the third one that i hold up here as well whos going to be hated paying the housing and what are the courts going to do about this and i do not even have the courts cannot ask showing you the process that one would go through if there are appeals. So i think i got my point across about how complicated this is and how complex this is. From 1972 and prior that had something to do with state law which is an issue. As trying to be an individual that is learning as much as possible about this hearing from everyone. Some of you are disappointed because i havent said which way im leaning with this. As a prosecutor i want all of the information at my fingertips before i make a decision. But also im asking everyone that i mentioned here today to please think about sitting down with us in a group facetoface. Its more difficult to sit face to face and look at each other eyeball to eyeball and say no then it is you can get a consensus on this and that will result the issue. Its a Monumental Task that we will attempt it. My time has run out, so thank you very much. Thank you chairman. Let me ask Paul Williams this question. Do you believe the dissent decrease system for achieving competitive market rates for their works . Congressman you go to the heart of the reason that im here and to address something you spoke about, one of the things were denied because the dissent decrease the right to bundle rights you go to all these different places for all these wonderful pieces of the music. One of the things by changing the Consent Decree is what we are hoping would be given at some point is the right to bundle these so its exhausting for people to go from one place to another to another for these rights. You can handle the two copyrights for the original material and theres a copyright for the recording material. I think it is incredibly complicated what would be a great solution is to bring it back to us and let us control our future and our copyright. The last thing we need is to through this and the government slapped. So the decree has not accommodated the dramatic changes technologically that we are all talking about and we have to end up in a court on top of it all, and this is the new situation that we have been in the sense that decree and i am hoping that all of our members on the committee will take this into account the broadcast radio played an Important Role of the people all across the country. Broadcasts have added the important emergencies and a lovely new music including jazz and we will hear we want to work with the broadcasters and it continued to do this work. Oveof the nine witnesses here. Now that ive identified in the branded appropriately we will know how to proceed but i think you for your candor and frankness about this. Let me just ask im going to ask one of the hand raisers as the lack of the Public Performance right for the radio impacted the overall music marketplace . Ive been in this industry for over 37 years and was always been true is the relationship at Radio Stations in the record companieand recordcompanies havy supported one another consistently looking at an industry here even in the challenges that has just like the radio industry has its challenges its still the strongest Recording Industry in the world. Ive heard remarks and there are a record industr recorded induss larger than any industry. Do you think that it would address the payment disparity and do you think its important that we fix the loophole in the copyright protection for the sound recordings before 1972 which refuses to pay the artists . Thank you for introducing that bill. Of course we have to fix that loophole. The example i gave about my father royalties going to someone else who did a cover version of the song its hard to even understand how that could be possible. But peace artists some of them are growing older and they are ill. They have to go on the road when they would rather not to make up for the money they would have received from these royalties. Its heartbreaking. I see this all the time. Even though you have exposed a think you will be able to walk the halls safely. Im more worried about them. [laughter] i wont go there. The gentleman from california. The chairman said he wants to do comprehensive copyright reform and im going to take this opportunity to challenge all of you since you sort of represent a spectrum of the problem of music and the broadcast of the performance. We will go back as we often do for the nonlawyers who were here on behalf of the constitution to the cause. And im leaving words out because i only want to have to part related tthepart related td not related to the patent. We have the progress of useful arts for the limited time. We have exclusive right to the respective writing. The performance is in fact a part of the structure of writi writing. The constitution is an interesting document to go back to because sometimes it is illustrative of all of the mistakes that we on this side and president have made during their time doing our job. We totally screwed up your industry relative to the constitution. What we do granting exclusive rights is for the purpose of enhancing commerce. I dont believe the founders of her thought the promote would be to exclude a performance from being paid if in fact the odor of death that had the exclusive right which to me is the right to exclude didnt want it to be played for free yet we dont have that right. But i think theres a bigger problem here today and i would like you to comment on it from your perspective. If in fact the intent has always been exclusive rights and i will read that backwards, it belongs to the author or to the performer or the many people. Wouldnt we essentially eliminate all of these Court Decisions and consent judgments and most of the laws that we have held including the exclusions and we would be down to the congress determining that there had to be a fair use under the free speech in the salon we would want to have that sampling but not as a ring tone necessarily and wouldnt we then in power all of you to come together. Youre going to offer the right through pooling or individually the right to just say the beatles. Isnt one of the fundamental things we should consider here scrapping generations of legislation that now cause us to try to figure out whether in fact pandora can compete against broadcasters and effectively compete against satellite . Because im seeing all of you wanting to get a level Playing Field but not the advantage you have and i dont think the congress can do that. How did you see the possibility of a scrapping almost everything weve done and then giving the industry an opportunity to rebuild against the original intent of the constitution. The question itself gave me hope so thank you that was so well stated. Restoring was never there. Performance royalty would solve so many of these problems you could then build from the ground up to create a new paradigm. I dont know but i hope so. I know that for every nick jagger in the world of there are 10,000 editions in the trenches. They are all younger, too. [laughter] and they depend on the royalties they are not getting. The lack of a performance royalty i will just say this quickly is kind of the way of saying that music should be free. If music should be free im willing to have that discussion when musicians are not the only ones who are not being paid. I really do want to hear from the broadcasters because you have inherited your Business Model. The companies and owners box thats based on the value that when we tried to change the law was already bought and paid for and i want to be sensitive to everyone at the table have inherited. Who is most motivated to answer . Let me touch on what mr. Menino was talking about. A fair market is a free market with a level Playing Field but also serves the Public Interest so if we scrap everything and start from scratch, that should be the guiding principle. How do we make sure small creators and big creators and the public of the interests are wellbalanced . I think its something they should consider and it is part of that consideration. Please take into account the concentration of ownership in the Music Industry and as you think about who is sitting across the table to negotiate the right and who many cases its universal music and on both of the label side into the publishing side of the concentrations i go out every day to try to negotiate direct licenses and over the last six years ive negotiated 100 with the Music Industry is one of whom was major labels. Sorry to cut you off but the time has run out. The distinguished gentleman from florida. Thank you for holding todays hearing. Its really easy to decide for some the way things work today is the only way they can work in the future or what is by all accounts a complex system developed over the past 100 years reserves all the credit for the thriving cultural treasure that is the American Musical legacy. Certainly some aspects of helped but too many obstacles is growing stronger by simply working around. Frequently revisions of the previous decade have ended up being reactive and all too often parochial preserving one element without making enough effort to look at the music licensing as a whole and theres been plenty of that today. I think it is helpful to recognize that everyone has the opportunity, everyone in the panel has the opportunity to benefit from the growth in the markets if we can agree on a basic framework that rewards creators while giving companies who processed the music a fair and transparent way to do so. The goal has to be so everyone has an opportunity to succeed together and that new entrances have the opportunity to transform the way we listen to music in the future. So, thats how we ought to approach this. The 72 distinction for the youngsters in the crowd is an album. This includes legendary songs like old man and heart of gold. It was released on februar february 141972. The precise cutoff is february 15, 1972. That means any track from the bestselling album in 1972 can be played without paying for it but if it had been recorded and released just a day after its release of the songs from this album would be covered with full federal copyright protection. You said earlier you believe that everyone should be paid. Why shouldnt that include legacy artists . I think the congress has had two shots at this and has rendered its opinion both times first when it decided to distinguish for the reasons im not familiar with between the recordings before that date and after it and the second time 20 years ago when it granted the performance right and did not extend that right before 72. You would acknowledge that is consistent with what you said earlier that everyone should get paid. I would be supportive of closing the loopholes but does that include the radio . He said something earlier that i think helps us focus a lot on what we are dealing with. You said in your testimony that with particular reference to the recurring demand by the Recording Industry for sound recording are for right to be imposed on the radio, understand the Radio Industries and the part that can be tapped for that Digital Strategy that addresses the decline in its own brick and mortar income and the congress unambiguously intended the radio should be treated differently from other platforms and you see that premise hasnt changed then you go on to explain that any change would cripple the radio industry thats been treading water for years now. I suggest this is what we are trying to give today. There shouldnt be a performance right because the music guys havent been able to figure out their industry and we shouldnt impose it on the radio industry which you acknowledge as you put it has been treading water for years now. That doesnt help us solve the problem or address the position that we are in and as he was included in the document. It quotes a study from the law review article in 1974 in that you talked about the survey that found 80 of the albums were purchased because the particular drug was heard over the radio buthat survey was conducted in 1972 i acknowledge the role they played in the communities but for us to go at this issue as if where we stand today in 2014 is somehow unchanged from the industry as it existed decades ago i dont think it is appropriate or fair for all of the rest of the new physicians and the rest. I hope that as we go forward we can acknowledge the Important Role every one plays in furthering the Music Industry and providing unbelievable music and outlets for its cash and mr. Williams work. Lets do it in a way that recognizinrecognizes we are nevo come up with something that works for everyone. We are probably going to fail and that might satisfy some of you for a short time but we will be right back at this in a couple of years if we hadnt had a chance to take the full approach and i yield back. The gentleman from utah is recognized. Im glad to see that so many of you are having this discussion. I have an interest in Internet Radio and believe it is a big part of the future where i see my kids enjoying music they probably never would have seen otherwise. They wouldnt have been able to afford to buy the albums that we did in the generations past to even have a chance to understand was he that. Ive been exposed to artists i now enjoy on a regular basis that i never would have heard of before and i i am also deeply concerned that the marketplace for Internet Radio isnt working. We can point to one whos been highly successful and pandora i do enjoy them but it concerns me its not much more prevalent than that and even under their model they are not making the kind of money even though some people want to tax the ownership for making money along the way the reality is the copyright royalty board has twice tried to set the royalties into the Congress Needed to come in at the last hour and help save the deal and make it so that it would work. Anytime you have to go to congress to get a fix its probably not going to turn out the way that anybody wanted to. With that, i have deep concerns about how do we make this a viable model Going Forward so that everybody can win along the way . We have two standards which i think is grossly miss named to suggest it is a willing seller and not have all the information at your fingertips is misleadi misleading. So my question from what ive seen in my limited viewpoint its been a little inconsistent. On the one hand you sort of like it and on the other hand you dont like it depending website of the negotiation nor on. We said we are fine with changing it across all platforms we just want it to be part of comprehensive reform we dont want to pay one standard and not get paid on the same standard that we think the right standard is willing buyer and seller are all creatures across the platforms. And iinterested in the negotn having all the Information Available for all parties is there anything you would withhold from those negotiations . Certainly the crv process has all of the Information Available and how it can be disseminated when there are private deals it becomes more complicated. It seems to me if you are going to have willing buyer and willing seller have to have all of the information and not just hide parts of it what you agree or disagree . I dont think anything has been hidden because it becomes available to all of the parties and the layers who are litigating the case is a lot of the settlements take place after that information has completely circulated. One other thing i would like to comment about you talk about whether the Internet Radio is profitable but if you look at a company like amazon which has a 75 billiondollar profit, excuse me, Capitalization Rate everyone would consider them a huge success for the profit last year was 1 fro, 274 million on 70 billiondollar this is part of the concern that some of the biggest players in the music world on the one hand its a good thing to see amazon and apple get into this but when you saw Rolling Stone and mtv and other organizations whose forte is the Music Industry theyve never been able to make it and they started this and had to let go of it. My time is short. I need to go to mr. Harrison. I need to know what would happen to pandora is congress hadnt stepped in and fixed what happened. The rates are obviously part of the public record. They are multiples of what that initiated settlement was. I guess you have to do the math if we are paying 60 to 70 of the revenue. If they are two or three times that i am not a very good at math but i dont think 100 of the revenue can make it up on volume. What do we need to do to ensure transparency and why dont you have more competitors . Its an interesting question i think you touched on a little bit. The rates are in issue and the entrants weve seen recently are all engaged in other lines of business. Apple, google, amazon and it is a ancillary design to sell the primary service. Weve had east village radio which is a longstanding Radio Service and that recently went out of business because they couldnt afford the rate. If you look at the comments that came in from the copyright inquiry from a large number of constituents there is process improvements that need to be made in the copyright world that would approve the outcome. Thank you for the indulgence and the extra time. Thank you mr. Chair. My colleague asked a question and im not sure everybody got the chance to respond if we were to scrap it and start over what would you like to see change . What would you abandon the current law and i know several of you didnt have the chance to respond so if you didnt maybe you would like to take the opportunity now. We havent had much to say here today. We have not had an opportunity. Im hearing a lot of comments about the industry that provides the free play for the promotion and has been up to 80 years and we are talking about the comments that radio does not try to record sales. Theres a 2013 study that recently issued a dozen decatur very clearly more than any other part of her radio airplay does drive sales even on the digital platform. We have an industry here that has really helped put these other businesses given the opportunity to go out and create a new Business Model. Unfortunately even on the radio side we are not able to participate. We pay into the system as it is now hundreds of millions of dollars. We pay tens of millions of dollars to the sound exchange and participate on the digital side but many broadcasters cant make a go of that as other entrants in the digital arena found in the way that the wall is written today we cannot make money. We can spend money but we cant make model to become money and that wont help any of the participants here. So we would very much like to see the changes made in that rate standard so that all of them tha but have concerns can participate more fully and grow a platform that will benefit artists, writers, performers, labels, all participants. One of the things we would like to see is if you could define what the performance is nobody has been able to tell us what the performance is and if you listen to the sound exchange they will tell you it is three seconds long and whether it is in the beginning of the middle or the end so we are subjected to royalties that we cant even get a consensus especially on the Digital Stream part of it. We really must ask for oversight especially in the new performing rights organizations that are forming right now. There are no barriers to entry. We need composure as and unless those rights are protected for the aggregators or oversight we run the risk of finding this which is why it is more homogenous. We really do need this oversight for the industry. Weve got 10,000 different licenses to be administered which is why the blanket license is imported into the dissent decrees important because otherwise you can imagine the madness of trying to find a way to deal with individual Radio Stations in your home district in every district up here to give them a license and one final thing i want to move on before my time runs out. The transparency in terms of identification of the catalogs we need to be able to find out on a daily basis or whatever who the performers are and what it is. Thank you. You look like you want to respond. I would like to respond to our friends at radio. First the concept that sound recording Internet Radio business is it working i am not so sure that the proper image has been presented to the committee. The fact of the matter is that it is not just pandora who last year alone noticed the non gap profit and they announced just a few days ago that the ie heart radio that is simulcast on line as 50 million users and has made several hundreds of millions of dollars or hundreds of millions of dollars i assure you is in excess of the content. Second we have 500 more services now using the statutory license into sound exchange 500 more than worthy or 200 years ago. You know who the majority of those are . Broadcasters like those we were speaking about. Thanks to representative collins its been offered as an equity act that fixes a small part of a really large problem immediately. Its a wonderful way to come together and simplify the system for somebody like pandora who has 70 of the income that is rolling out for royalty payments and i have to remind everyone that it is getting about one or 2 of that. I undergo so i wont say that its 1 but its close to that. Its a tiny part of that. I wouldnt pretend to kill you how to adjust the Business Model but if theres a way to do this so music creators to create the one product you have that can be compensated. One thing ive tried in this whole process and many of you on the panel and on a second, third and fourth row back it is an issue that weve brought forth for the Performance Rights and two others also to try to be very consistent but the one thing i feel is the creator in the process i think i applaud this up in court this morning for inherently seeing that there is a Credit Property right. That does not mean that the broadcasters and i will always get along. Probably not. But thats okay there are things we can all look at. I was thinking about it a few minutes ago the one thing i tried to do i have interesting comments box to me that ive hearbut iveheard about it wheno other places so yes it comes back to take an arm from one end like from another but what i got in the last little bit is that what has to happen in this process is one bad Business Model five years ago could now be the bad Business Model today. And you dont need congress to come in and prop up either one of you. You need a process in which we can look at this and fix it from a holistic approach this way everybody is included. Everybody has a stake in the table. A lot of these went out because they couldnt afford the rate. There are a lot of businesses in the country that go out because they cant afford their call. That is an issue we have to deal with on the broadcaster and the digital side. The former and the copyright holders are in the middle. That is the one thing im looking at and one of the things that concerns me is that we are willing many times to fix to this problem. That is not my goal my goal is to fix the problem used the listen to that . But i think the radio and when im first listening to the tape as i told this morning it all develops so what you have to understand is that we come together you have to remember the bottom line there is a property right interested that you make very good money off of and that has to be re warded at all levels. And i appreciate you bringing in those background musicians and others. The problem is though if we continue in this round i have to protect my model and you have to protect yours then my question is where are we at 20 years from now on the panel may be looks completely different . Where are we act . So i will open up a question to you. I dont want your answer for today where they say look at the rate. Where will we be so im not coming back as my friend from utah said every time there is a problem we run into the congress to fix it. The last thing you want to do is have a judge makes a decision because in the end when the judge makes the decision both parties are unhappy. When you make the decision then we go. We have one minute ten seconds. You have 30 seconds and mr. Williams you have 30 seconds. Tell us how we can work this out so we are not propping up that models either way. There needs to be a look at the close digital rates. We think that helps all of the stakeholders are you the one thing i would ask the committee to keep in mind as we talk about the radio free that remains free. There is no additional cost. Lets keep them in mind as we talk about what these other businesses and how this is going to be more efficient for them and more cost worthy but the Consumer Needs to be considered also. We have an expression for recovery process. The fact is the people we need to think about today are the young songwriters starting out trying to have the kind of life that i had. My daughter is a social worker and she got that because i properly was paid for the hard work that i was doing. We can give more control back to the songwriters and we dont want a judge to make all these decisions that we can move back to an Arbitration Panel that makes it a more efficient way to deal with the problems. I think it is a process that is going to take longer than any of us wanted to take but the fact is if we dont fix and make that first adjustment people will wind up getting day jobs. The industry is moving forwards, not backwards. Youve all got to come to the table to be talking about this. The distinguished gentleman from louisiana and i say this to mr. Richmond if you promise not to show up at the ballgame tonight i will give you ten minutes. Let me just pick up where my colleague left off and that is i think that you mentioned the congress had two chances to get it right and the legacy. All i can promise you is if we solve this problem nobody is going to like it and its probably going to be wrong because we are not the subject matter experts. The technology moves so fast and we will probably screw it up but i say that to say you are all at the table and you should be in the room trying to figure out who can give and who can come to some sort of a solution. The other thing that i would tell you to be honest is that nobody has a better bargaining position because if we do, we will probably start from scratch and nobody will like the result. So that would be my recommendation. The comment was made earlier that for every make jagr there are 10,000 artists in the trenches. I think they all lived in new orleans by the way. I want to make sure that they have an opportunity to continue to do it follow their passion and their dreams. But at the same time, be compensated for it and i tell people all the time i speak of School Following your dream, do what you love and if you do it well you will make a living doing it. I want to be able to look them in the face and the performing arts schools and all those things in new orleans and actually mean it. It has benefited so many people in new orleans and i would like it to continue and to be there for the long term. Let me ask you a very direct question because we beat around the bush. What impact would it have to your industry if you all had to pay to performance, to pay the rights and royalties for what you play on the radio . I testify to the potential Financial Impact to the radio broadcast and ive been in the business 37 years in the Radio Stationof the radiostations tha. I worked for the Minority Owned Company that at one point was the 22nd largest broadcast company that no longer exists today and we made it clear at that point that we couldnt afford to pay the performance royalty if it wasnt posted upon the industry. There are severe Financial Difficulties the broadcasters would experience if that were the case. Ive been in this for 37 years to serve the communities that have the Station Service and the communities i came out of quite honestly in washington, d. C. Continue to do that but necessarily deserve the stakeholders but they all benefit from what we do as over the air broadcasters. The station that you talked about closed anyway. Do you think that this would put, for example, Clear Channel out of business . There are many different broadcasters. Im using Clear Channel. They are contributing and participating in the digital arena. We couldnt afford to do that tt any major way we couldnt afford the cost of participating and i think everyone up here would like to see the pie grow into the digital platform grow and that is the expense of the companies surveyed you mentioned that if everybody is contributing that 1972 was a number that Congress Picked. Are you saying that if we decided to pick another number that went back further as long as everybody had to pay that you are okay with it . Whether they dont want to find a way to compromise on this issue and im happy to work with the congress and im happy to work on sound exchange and the major labels to find some appropriate ground in the middle that as i said before i dont know why the choices were made and maybe there are other business reasons and good policy reasons why the choices that were made were made and we are open to this discussion. My time is about to expire. I would love to have balance on this and made sure that everybody at the table continues to thrive. We dont want to put anybody out of business and we certainly dont want to send anybody to bankruptcy or have anybody stop following their dreams. So help us help you and that means get in the room and figure out ways to come to some sort of a conclusion. With that mr. Chairman, i yield back. Gill billion in royalties . We will have paid one billion in royalties this summer. How is the that song writers and artist claim they are not getting paid . That is a great question. Today pandora is the highest paying form of radio. We pay higher than others and pay north of 400 million in royalties alone this year. The copywrite owners believe there is better allocation of the money we would say they are better situated to make that evaluation. Mr. Williams . I totally agree other people to make the decision and all. I said it again and again and we are a tiny percentage of that cost. We need to find balance. When the grammy winner song is performed 72 million time and they get less than 1500 a piece something is broken in the system. You could take we have a major, major problem with pandora and the balance of payment and we will not suggest how they adjust that but fair market will tell. Give us a chance. We dont have the right to say no and at this time we dont want to. We want our copy write owners to be paid properly was that song called . Need you now. 72 million . 72 million performances. To give you the exact rate of exchange. We get 9 cents for a thousand streams at pandora. Roughly less than 9 cents. You just dont build a kingdom on those kind of dollars. Ms. Cash, would you respond differently . If all of that money was paid out of pandora i dont know how it was distributed. It certainly didnt come to artist. And i want them to succeed. I see the future. I want all of us to succeed but i have to point out all of the gentlemen on the panel wouldnt be here had songs not been written and it is in their best interest to get us paid so we are inclined to give them more songs. The distinguished lady from Washington State is recognized. Thank you for being here. I think there is clear recognition across the board we are seeing the change of digital transmission in music. Even broadcasters are talking about the need to move to streaming. I wanted to ask you, you have folks who are streaming content and digitally providing content. How are you seeing the Business Model move to the Digital World . The rates we pay for the Digital Stream is probably double what others pay. It isnt economically feasible for most broadcasters, particularly the mom and pop, not the big guys, but what makes up most of the broadcast in the country isnt finding a way to pay the rates and be profitable so many have made the decision not to stream. So you are not seeing folks move that direction . We still reach over 240 Million People a week with radio. We still have the largest audience out there which is why radio is the number one driver of music sales whether it be sales in a Retail Outlet or digital downloads. Our audience is loyal to what they do. We provide more than plain music as well. Our audience supports the model we have and have been able to develop with the record indu industry. Given what we are talking about today would you say there is a change . We are talking about how folks are listening to music and would you acknowledge there is a change in way things are heading . All of us listen to different platforms. I have always listened to radio and i still buy music. There is a change but there is a basic broadcast industry that the listeners, audiences and communities reline and support. I have a convention for anyone who has an answer on this and we have talked a little bit about internationally laws versus our laws. Are there other models in other parts of the world that are good examples of where we should be headed . International models pay almost in every country of the world with very few exexceptice. We should follow that model. And beyond paying specifically are there other unique aspects of models you think would help . There are in which music rights are paid on a percentage base instead of cents and we can learn from that. There are definitely models we could look at to try to redefine something for the United States. A lot of questions are what specific changes would you make but the real answer is we have to change everything. You cannot pick one piece or problem. That is what we did for the last decade. We need a holistic solution. One of the things the europeans have is the limited grant of rights. First as right holders to be able to license some of our rights directly would be a great improvement. Yes, sir . And in just to echo what sherman was saying is that we dont have a broadcast right that is the big difference. We need a broadcast right. And it will unlock lots of money from the International Markets and our creators here will be able to get paid for their performances overseas. Thank you for your time. I yield back. This brings me back to what i attempted to do and succeeded in about 15 years ago with the fairness of music licensing act which was put in the copy write extension law. The people for my bill didnt have content over music like retailers or Restaurant Owners were but were nailed with a licensing fee and everyone was against it. I remember my good friend had a hearing in nashville on the subject and i had to be driven back with the United States marshal who stayed with me until the wheels were up. I had a long series of debates with sonny bono and that ended when he was shedding tears about the changing the music licensing law before the audience of the National Restaurant association which was sympathetic to my cause and after he was elegant i got up and turned around and said what mr. Bono is telling you is and i got you, babe. With this background, everybody on the table has a different viewpoint on the issue. And getting you together and getting on one page will happen probably two days after the sun rises in the west. That being said, let me ask mr. Warfield a couple questions. It goes as under the Current System of licensing and royalty payments, have recordsales gone up and do you believe that the freeovertheair music that you and your members broadcast have a lot of people going and actually buying music and paying royalty on the music they buy . What has been reported by the Recording Industry music sale is down through hard copies. Not through the fault of the radio. We continue to freely promote and play the music and our audience does continue to go out and buy the music. Within that system, between radio and records, we are still driving our consumers and lis n listeners to go out and get music. We are not stealing the content by recording it over the air and listening to it. There are alternatives but if they go there they have to listen. There is a digital model that none of us have found a way to make it work. We can all sit here and agree there is a challenge as a Business Model which can hopefully grow the various platforms and benefit the stakeholders and the Recording Industry. I am a simple, country lawyer. You say the existing system is that you give them free advertising by putting their music on air but you dont pay . Free air play free promotion. Promotion and advertising are the same, arent they . Okay. What i am hearing from the other folks and they want you to pay for free advertising. Is that a way to get to the bottom of this . I have heard that from some participants. But radio helped the record industry develop to be as vibrant as it is today even with the Financial Difficulties. We have always supported the writers of the music. And we help develop the careers of the artist we are talking about. To develop careers that in many cases may not be supported by record labels because of air play continuing to promote what they are doing they can tour. Whether they chose to tour or not they have the opportunity to do that and we continue to support them. The distinguished gentlemen from new york. I thank the chair and each and every witness for their presence today and in particular mr. Williams and ms. Cash for the Creative Community and behalf of your fellow artist and songwriters. Let me turn to the subject of internet satellite radio. I believe the success of Internet Radio is critical for the overall music eco system in terms of providing a viable, meaningful solution to the piracy that was ramped. I want to explore a few practices. Let me start with pandora and mr. Harrison. I believe you testified that one of your Business Practices is to ensure that artist receive a fair share. Is that correct . Thank you for the kind words about our service, first of all. I was speaking about the value that statutory blanket licenses have like pandora that allows us to license efficiently but the artist participate in the royalty streams. Am i correct that pandora however refuses to pay for the use of pre1972 recordings under either state or federal law . We do not pay under section 114 for the performance of pre72 sound recordings which is federal law. And you contest the rights of the artist to receive any compensation in state court, correct . We have pending litigation in the state of new york and we disagree with the claims the record labels make in that case. Pre1972 recordings are an important part of the model . Yes. You have a 60s oldies channel . Yes. And a motown channel . Yes. 50s rock and roll . I believe so. Golden oldies . I believe that is true. A classic soul channel as well . Correct . Now pandora doesnt pay anything for any of the sound recordings played on any of these six channels, true . If the records were made before 1972 that is correct. So for instance, respect which was recorded in 1965 by franklin, every time respect is played on pandora, franklin doesnt receive a dime, correct . Well, pandora wouldnt pay a performance royalty to the record label. She would be paid if she were a song writer. My girl was reported by the temptations in 1964. The temptations dont receive a dime of compensation every time this poplar song is played, correct . Talking about a payment to the record label that is correct. Songwriters get paid. And same for soul man recorded by sam more or changes are coming by sam cook, stop in the name of love by the supremes i would suggest the failure to pay recording artist for pre1972 recordings isnt it a fair business practice and in the context of this overall discussion it is a problem that should be resolved on voluntary but if not we should step in. And xm radio also refuses to pay for the prerecordings. There is no federal law. But on the state law you are in california trying to prevent compensation. There is no funding under the law. You stated granting a pre1972 Public Performance right would produce a wind fall to recording artist without any benefit to the public. That was in the california case, correct . Under the way the policy is written that statement is true. A wind fall is an unexpected, unearned or gain or advantage in paying the artist for their creative ways. I will yield back. The distinguished gentlemen from rhode island is recognized. I am proud to be from the bir birthplace of the National Center that reminded us the strength of our nation wasnt simply the power of our military or Economic Resources but our ability to honor the creative artist and the culture of this country and protecting the work of our artist is an important part of protecting our democracy. I think the witnesses for this important testimony. I want to begin with you. You mentioned and said i believe everyone should be paid. And i assume you believe that they created a product and are entitled to be compensated to that and that should apply to artist before and after 1972 based on the notion people are entitled to value on what they created. I am not a cop y write lawye but it doesnt make sense the differences were made between preand post 1972. It doesnt make sense they didnt give it to pre72 orders. And you agree all of that production should be compensated and in a fair amount driven by the market . I agree it has to be a working, com petive market. And you talked about the value pandora provides to millions of americans as a result of your service. But would you agree that there is some danger that if that provided without compensation that the product you sell could be imperil . I dont think i understand your question. You rely on a product you part of your inventory you dont compensate for the artist. If you are referring to the example ms. Cash used. Someone rerecording her fathers song and compensated but someone playing the original song isnt required to pay. That is not sensible. Copy write makes distinguish like this all of the time. A work by handy in 1920 is part of the Public Domain and isnt comensated. But if a modern day artist recorded that the they would receive a fund. We would support them changing the rules. So i understand the arguments, sir, but if Congress Makes the decision to federalize pre72 we would be happy to pay. Does anyone think the distinguishing of 1972 makes any sense . We agree it ought to be erased. There are complications in terms of how to do it. We have expressed a willingness to figure out with the office and other stake holders how to federalize pre72. This legislation that deals with legacy artist that need money no there is no reason action shouldnt be taken on that immediately. You argue this existing model ought to continue with free use of music and am fm. It strikes me. I am new to the committee and issue. But this is a curious argument that i cannot think in another context where the Creative Arts of the musician or artist should be used to build up a business and generate revenue without compensation. I am wondering you dont think the market place, assuming there is value to promotion, that the artist has the ability to understand the value and negotiate a price that made sense as the consumer of the music and the creator who created it. Why would the marketplace not provide the context for a Fair Exchange of that and why would we permit the practice to continue where that asset and creative product used for their Revenue Generation of a private enterprise. You are talking about the pre1972 . That doesnt apply to the radio industry. We dont have performer rights but we pay for performance in the era. I am talking about after 72. We believe that the promotional values apply to them. Our product is free. We cannot charge for our product. We provide a product it hundreds of millions of people with marketing and advertising. There is also promotion. I understand that. My question is i recognize your argument that it has promotional value. But why isnt it in the context of a free market and the artist and you to say this has value for promotion. Why wont the result of that be a fair price where the artist is compensated and you make money . The gentlemens time is expired i will deal with you directly on this at some point. The gentlelady from texas. Thank you for this hearing. I am excited to see so many i have worked with. Ms. Cash, thank you for the music i enjoy of your dad and family. Good to see mr. Warfield we worked together. Mr. Christian and Paul Williams and i can be considered brother and sister we have seen each other so much. Appreciate your work and thank you for teaching children about music. Chris harrison. That you can so very much. Let me put on the record that i hope this committee, if appropriate, will have a hearing on the directtvat t merger. My delay was provoked by the fact this is the Year Anniversary of the shelby case that mismantled the Voting Rights of the country and there is a hearing in the senate that is important and i would almost say many of the artist you represent benefited on their opportunities to vote because of the Voting Rights act. So i apologize for my delay in coming to the meeting. But this is no less than an important hearing and one of the reasons i dashed in here to be here. We have been through this before and i think i made clear that i think we have an issue that should draw the interest of all and the recognition of the talent of the artist but also to understand, i have tried to take some time to understand the workings of radio, and the expense that they incur so i am prepared to be in the fight for a way forward and i will pose my questions in that context. I ask mr. Warfield and the representative from pandora. Does the xm deal sound good in their construct for the pre72 artist . I heard diana ross thinks she has music pre72, was going to be at a venue in this area, and they said something about National Tour and felt confidant it would be standing room only. They are attractive and we love their music and will do in years to come. Mr. Warfield, if you would, i would appreciate it. We havent taken a position on the pre1972. I would say our members that are participating i would argue most are paying in the digital arena and are looking for ways to avoid that. We have some concerns on whether or not there maybe unintended consequences as a result of it. We are studying that issue but havent taken a position to oppose the bill. Great. Would you continue to study it for me . Yes, maam. Mr. Harrison . If congress decides this is an issue that needs to be resolved we would support the copy write office that suggests full federalization so not only do consumers get the benefits of the law, for example the right of fair use, but artist get the right to terminate under transfer three. You opened up the door on how we make what is most effective. If we approach from a comprehensive perspective, i would like someone to tell us what you want that the pass the house, senate and get signed by the president. Which is what i want to see happening and not go another decade without a response that is important. What would be good if we looked at the whole picture and wanted to answer everyones concern what is good to have in that comprehensive bill . We have to Work Together firstf of all. We create a product you deliver. And we are grateful for that. And thank you for your service this morning. What you did was important as well. I am 73. We operate under a Consent Decree that is a year younger than me. And everything on this 73yearold body works good there are parts of the Consent Decree that need to be worked with. We have no right of refusal so someone can start begin using our music before they even told us how they are going to use the music. To prepare an appropriate bill this is what your rating is going to be, we need information. People begin using our music before we have the information. There are degrees that can be changed with your support and the efforts at the doj are important. We need a faster and cheaper rate setting process. It cost millions to go to rate court and arbitration could be simpler. We are existing under an allin or allout rule that is upon us so the major publishers that want to license separate are not allowed to have that. Let me tell you thank you for your indulgence. I would appreciate if i could hear some of the comments in writing back to the committee so we can work on the things already laid out. I want to thank the panelist and those in the audience. We have been here for almost three hours. By the way the room must be cleared by 2 00 because of a scheduled hearing. But todays hearing has been concluded and thanks to all for atte attending. You will have five days to submit questions or materials for the record. The hearing stand adjourned