At Congress’s direction, Copyright Office opens inquiry on alternatives to compulsory licenses
While much attention in the MVPD/broadcaster world has recently been focused on the FCC’s inquiry into possible changes to the retransmission consent process, a separate proceeding is cranking up over at the Copyright Office that could eventually lead to far more fundamental changes to the must-carry/retrans system. The Copyright Office is exploring the possible elimination of the compulsory copyright licenses that form the core of the system that determines how, and by whom, over-the-air broadcast programming can be retransmitted. So while the FCC may be contemplating various changes, significant or otherwise, within the existing box, the Copyright Office is not just thinking outside that box; rather, it’s contemplating a situation in which that box no longer exists at all.
Are we surprised? Not at all (and not just because we have predicted eventual changes in this area as television delivery methods continue to evolve). Anyone familiar with the minutiae of STELA (i.e., the Satellite Television Extension and Localism Act of 2010) has seen this coming, because a provision (Section 302, if you’re looking) in STELA ordered the Copyright Office to report on possible “mechanisms” or “methods” that might be used to “phase-out” compulsory licensing requirements. Are we scared? Not really, since this is just a very preliminary step in a process that might go nowhere.
Nevertheless, when a majority of both Houses of Congress makes noises about “phasing-out” the compulsory licenses, attention should be paid.
It is perhaps easy to lose sight of the fact that the must-carry system arose from, and is designed primarily to address, copyright concerns. When an MVPD operator retransmits programming which it obtains from, say, an over-the-air broadcaster, the MVPD operator engages in a “use” of that material for which the programming’s copyright holder is entitled to royalties. Absent compulsory licenses, the MVPD operator wishing to retransmit broadcast signals would have to negotiate separately with each broadcaster (and, possibly, others holding the rights to the broadcaster’s programming). That would be an extraordinarily cumbersome process.
The compulsory license approach takes care of that. That approach requires that MVPDs pay royalties into a governmentally-administered fund which is then doled out (by a governmental tribunal) to program suppliers entitled to payment from the fund. There are quids and quos on both sides. MVPDs get access to programming without the burden in individualized negotiations, but they have to carry (hence “must-carry”) local stations; broadcasters are entitled to carriage, but they have to accept the governmentally-determined royalties. (This over-simplifies the system somewhat, but you get the idea.)
For anyone wishing to read the statutory provisions establishing the various compulsory licenses, check out Sections 111 (the Cable Compulsory License, covering cable TV carriage of local and distant broadcast signals), 119 (the Satellite Home View Act, allowing satellite operators to carry distant broadcast signals) and 122 (the Satellite Home Viewer Improvements Act, permitting satellite carriage of local TV signals).
STELA addressed aspects of each of the three. And, as noted above, it included a requirement that the Copyright Office produce, within 18 months of enactment, a “Report on Market Based Alternatives to Statutory Licensing”. The law was enacted on May 27, 2010. That means the report is due around the end of 2011. The Copyright Office (after procrastinating slightly, it seems) is now starting that process.
The Copyright Office isn’t necessarily advocating for extinguishing the compulsory licenses (and, lest there be any question about this, neither are we). It’s just trying to get a better idea of the current legal and business landscape, “exploring marketplace alternatives that would permit cable operators and satellite carriers to retransmit the entire broadcast signal just as they would have been allowed to do under the statutory [i.e., compulsory] licenses.”
The alternatives suggested by the Copyright Office include:
Sublicensing – Instead of a compulsory license allowing an MVPD operator to carry a broadcast signal in its entirety, this approach would move the rights clearance process further down the chain. Broadcasters would have to clear all rights in the programs they carry for ultimate performance by third party distributors. This clearly has an eye toward incorporating online streaming, as it provides more flexibility than the somewhat rigid and confining licenses currently in place. The FCC suggested this as a viable alternative as far back as 1989, as did the Copyright Office in 1997. Both pointed to the fact that sublicensing has been utilized in connection with carriage of nonbroadcast programming on more than 500 channels MVPD channels. But sublicensing is a market-driven process that is (to use the Copyright Office’s language) “impeded” by the availability of compulsory licenses. The validity of the analogy between nonbroadcast and broadcast programming which the Copyright Office draws is not clear: the NAB, for example, has noted that at least some broadcasters lack the core financial incentive to engage in sublicensing.
Among the more interesting questions the Copyright Office asks are:
Would sublicensing be an effective alternative to both the local and distant signal statutory licenses? (On the point, the Copyright Office specifically solicits comments about the current state of sublicensing of television programming in the United States)
Are broadcast stations truly different from cable networks, as the NAB suggests?
What percentage of the public views broadcast stations through their cable and satellite subscriptions rather than directly over the air?
Are there sublicensing examples from other countries that may be used as models in this regard?
Private Licensing – This allows a cable system or satellite carrier to negotiate with the copyright owner of a specific program for the right to perform the work. Of course, this market-driven process would appear to benefit the program producers to the detriment of the actual stations (and, we think, would pose a danger to local network affiliates, as we’d figure that cable systems and satellite carriers would try to negotiate with the most popular shows, especially network shows, to provide them as part of an “on demand” package). This alternative is also held back somewhat by the fact that the copyright owners of each individual program may be hard to identify.
Among the questions asked here are:
Would privately negotiated copyright licenses afford a plausible and effective marketplace alternative to the three existing statutory licenses?
How many private copyright licenses currently exist and how do they function”
Are there any successful private licensing models currently in operation outside the United States that the Office may study?
Collective Licensing – This involves copyright owners getting one or more third party organizations to represent them en masse. It is already employed on the radio side, with ASCAP, BMI and SESAC setting the rates and terms for performance of musical works. There is no equivalent on the television side.
Among the questions here are:
With respect to the development of a collective licensing body for audiovisual works, are there lessons to be learned from the experience with strictly audio works?
Are there collective licensing models around the world that may be relevant to this study?
In addition, the Copyright Office welcomes other ideas which might be successful. It also asks how it might transition from the compulsory licenses to another method. For example, would it be preferable to transition using: (a) a station-by-station basis; (b) a staggered approach which would phase compulsory licenses out in stages; or (c) a sunset approach (sunsetting to occur some years in the future) which would provide ample time for all parties to prepare for the transition)?
Again, this is a very preliminary, Congressionally-mandated proceeding. And, since the elimination of compulsory licenses would eventually require Congressional action, it’s clear that the Copyright Office does not have the last word here. But it’s also clear that the continued availability of compulsory licenses is at least on the table for the moment – and, as a result, so is must-carry. Broadcasters who depend on must-carry (because, for example, they believe they lack sufficient bargaining power to make retransmission consent workable) in particular should be aware of this. We expect that there will be further opportunities to comment on more specific proposals should the elimination of compulsory licenses move forward. But if you think you have information, insights or opinions to offer, you need to file comments with the Copyright Office by April 17, 2011 or reply comments by May 17, 2011.
