17 U.S.C. § 106 states:
[T]he owner of [a] copyright . . . has the exclusive rights to do and to authorize any of the following: (4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly; . . . and (6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
These two exclusive rights of copyright are at the heart of the worldwide business of music. They involve musical compositions and sound recordings, rights of copyright owners and limitations on those rights, and how creators and copyright owners are compensated.
In the world of traditional media—primarily radio and television—music licensing has evolved into a fairly straightforward process. For musical compositions, songwriters, composers, and music publishers join or affiliate with the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI), or SESAC, which are performing rights organizations (PROs) who negotiate license agreements for the use of music, collect the fees, and distribute them back to writers and publishers who have performances in specific media. If a PRO and a user cannot agree on license fees, courts intervene and determine “reasonable fees” for music use.
In the area of sound recordings, performances on traditional over-the-air radio are exempt from royalties and considered to be “promotional” tools to drive sales.4 A record company’s main source of income, other than record sales, comes from the licensing of master recordings to television series, feature films, and advertising commercials, among other uses. And then came the digital world—a technological revolution that changed everything.
This is a rather simplistic view of the music business, but one that serves as an appropriate starting point for an increasingly complex and changing business.