ASCAP, BMI & Harry Fox Licenses 101
In the United States, a copyright owner does not freely negotiate license rates and fees. Instead license rates and fees are set by Congress, the Copyright Office, and collective licensing organizations (CROs) that handle licensing on behalf of copyright owners.
CROs track and protect six different exclusive rights. The table below summarizes the those rights. The performing rights organizations, ASCAP and BMI, administer licensing for public performance. Similarly, Harry Fox Agency administers “mechanical licensing” for reproductions, derivatives, and distributions (discussed below). Finally, SoundExchange administers digital performance rights in sound recordings for internet and satellite radio transmissions. Although digital performance rights are not discussed here, they’re outlined in the table below.
|Exclusive Rights under 17 U.S.C. § 106||Collective Licensing Organization Involved||Situations where copyright owner licenses without using a collective|
|Reproduction § 106(1)||For phonorecords and “mechanical” licensing: Harry Fox Agency||Where publisher is not a member of Harry Fox and issues their own mechanical licenses, and situations other than phonorecords (e.g. sync and master licenses for film/tv)|
|Derivative Works § 106(2)||For phonorecords and “mechanical” licensing: Harry Fox Agency||Other than phonorecords: copyright owner (e.g. an arrangement of a musical work or a change in the lyrics).|
|Distribution § 106(3)||For phonorecords and “mechanical” licensing: Harry Fox Agency||Other than phonorecords: copyright owner|
|Public Performance § 106(4)||For nondramatic musical works – performing rights organizations: ASCAP,BMI, SESAC||For dramatic musical works: copyright owner (or where copyright owner chooses to license public performance themselves)|
|Display § 106(5)||Copyright owner||Copyright owner|
|Digital Performance of Sound Recordings § 106(6)||SoundExchange for streamed performances||Copyright owner for downloads.|
Public Performance Licensing
The 1897 Congress revised the U.S. Copyright Act for the first time to protect a songwriter’s exclusive right of public performance. However, many songwriters felt that the public performance of their songs was the best way to advertise the sale of their sheet music, which was their main source of income at the time.
So in 1909, Congress again revised the U.S. Copyright Act to require a license for the public performance of a copyrighted song if the performance was made “publicly for profit.” Initially, the 1909 revision was interpreted to mean that a license was required only if the performer or establishment charged an admission fee to hear the performance. Accordingly, this limitation exempted bars, restaurants, hotels, and other places that did not charge an admission fee and just played music in the background.
However, in 1914, Victor Herbert, a songwriter, voiced his frustration at having heard one of the songs he had written played at a fancy restaurant nearby. Herbert was upset that the restaurant could play his song without compensating him. So Herbert, along with Irving Berlin and John Philip Sousa, formed the first collective right organization (CRO) in the United States, the American Society of Composers, Authors and Publishers (“ASCAP”).
In 1917, ASCAP took a case to the U.S. Supreme Court, which changed how we now interpret “publicly for profit.” The case involved a New York restaurant that rendered an unauthorized public performance of the ASCAP musical composition, “Sweetheart,” by Victor Herbert. The Court held that: “when the service in question is offered for profit, such as a restaurant, then the playing of a song by the service provider constitutes a public performance.” This gave ASCAP the power to license any establishment or service provider that operated for a profit and played music.
In 1926, the emergence of coast-to-coast radio networks created a huge source of income for songwriters. Radio broadcasters and ASCAP began having more and more difficulties negotiating licensing rates, which led a group of broadcasters, comprised of major radio networks and independent radio stations, to form Broadcast Music, Inc. (“BMI”). Today, ASCAP and BMI represent the majority of songwriters and publishers.
Along with licenses for the public performance of a musical composition, there are mechanical licenses. A mechanical license grants record companies the right to reproduce and distribute a publisher’s songs in a tangible medium or through digital phonogram deliveries (downloadable music files). This is how it works: A music publisher will enter into an agreement with an agency, usually the Harry Fox Agency, which allows Harry Fox to grant mechanical licenses pursuant to section 115 of the U.S. Copyright Act to music labels or record companies. Harry Fox then collects mechanical royalties from the record companies, takes a percentage for its services, and distributes the rest to the publishers who in turn will give the songwriters their cut.
 Entertainment Law: Forms & Analysis § 4.03
 Neil Connelly, ARTICLE: THE FUTURE OF LICENSING MUSIC ONLINE: THE ROLE OF COLLECTIVE RIGHTS ORGANIZATIONS AND THE EFFECT OF TERRITORIALITY, 25 J. Marshall J. Computer & Info. L. 409, 414-417 (2008)
 Al Kohn & Bob Kohn, Kohn on Music Licensing 1312 (3d ed. 2002).
 Connelly, supra, at 415.
 Kohn, supra note 13, at 905. Note that the present law grants rights holders in a song the right of public performance whether the performance is for profit or not. 17 U.S.C. § 106(4) (2007).
 Connelly, supra, at 415.
 Id. (citing Herbert v. Shanley, 242 U.S. 591 (1917)).
 Id. at 416.
 Id. (citing Kohn, supra note 13, at 913.)
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