Congressman Lamar Smith 21st district of Texas

Contact: Blair Jones 202 225 4236

Washington, Jun 21, 2005 - Today the Subcommittee continues its inquiry into issues surrounding music licensing. However, instead of identifying the problems in the music industry, we will hear about a possible solution that has been suggested by the Copyright Office.

The music industry has evolved from simple business models focused around either the distribution of physical items such as compact discs or broadcasts on the radio to a dynamic digital marketplace where new business models evolve rapidly.

The laws that set out the framework for the licensing of musical rights in this industry are outdated, and some say beyond repair. The Copyright Office’s idea, therefore, represents a creative way for how mechanical and performing rights would be administered in this country.

Since the draft focuses on what the Copyright Office feels is the best approach to music licensing laws; it does not address any of the issues that would accompany the transition to such a system, nor does it address the operation of the music industry before the enactment of such legislation, if that were to occur.

The Copyright Office has not addressed such issues because it is more important to first determine whether the system suggested by the Copyright Office is worth considering than determining how best to accomplish the required transition.

Some issues that the Subcommittee would need to resolve, but that are not included in the draft, include how to handle any rate disputes that may arise. Should Copyright Royalty Judges’ decisions or other similar processes be used to settle rate disputes or should a pure free market approach rule?

We have already seen this issue arise in the context of the Television Music Licensing Committee’s dispute with SESAC that was debated during this Subcommittee’s public performing rights organizations oversight hearing last month.

Members of this Subcommittee have an open mind on how to reform American music licensing laws, but not on the need to do so. Music licensing reform is necessary.

If legal services are going to be able to compete with “free”, they must be able to quickly offer legal music. That does not mean that the music licensing laws should be written for the sole benefit of online services.

For example, some music groups have suggested the creation of one super agency to handle all music licensing. Others have suggested a direct negotiations approach. Whether or not it makes sense to create new entities will be considered as part of the process of developing legislation.

Finally, I would note for the interested parties following the testimony today that they have seven calendar days to submit written testimony for the record commenting on the Copyright Office’s draft and the testimony given today.