sorry, we have detected you live in another licensing area

December 6, 2005 2:47 PM

I'd like to understand more about how music licensing works (especially for online music downloads, which seems particularly maddening), how it relates to traditional pre-internet music licensing, and if there's any chance the system may change in the near future.

The question popped up after reading this other question, but I'd wanted to ask this for a while.

I have read some articles related to the issues for licensing music worldwide through downloads systems, but there is a lot I still don't know and don't get, so I'd appreciate any explanations or pointers to resources, articles, and such. Please bear with me as I am largely ignorant on the matter, I only know each country has its own copyright/licensing authority, beside its own taxes on music sales and such.

What I don't understand is exactly why you can order a CD (or vynil or any other format) from any country regardless of where you reside (whether or not you'll have to pay import duties and taxes), but you can't for instance access Rhapsody from outside the US, or download certain albums or tracks from a subscription service like Emusic, or buy music from the US iTunes Music store if you're not in the US, or from the UK store if you're in the US, and so on - and you can't even buy from, say, the French store if you're not in France, even if you're still in the EU. It doesn't seem to make much sense from a customer point of view.

I do know it has to do with that fact the licensing is on a national basis, but then why is that not a problem for music on physical media? Or is it, in some way I'm not aware of?

Also, is there any indication of plans to merge different national licensing systems at global level? Commercial interests? Legal obstacles? Practical feasibility?

Basically anything you can tell me on the topic, I'd be very interested. Thanks in advance.

posted by funambulist to media & arts (8 comments total)

I think the problem stems from the fact that music companies have much greater control over who sells digital music, and how it is authorized.

With a physical product, it's pretty well accepted that after you buy it, you can resell it to anyone, including someone overseas.

With digital music, this concept of "resale" is more difficult to understand and execute. The music companies don't want you sell your music, obviously, and are currently able to get away with making it very hard for you to do so, though it's probably still legal. (See the guy who was trying to resell an iTunes Music Store song by selling his account login.)
posted by trevyn at 3:03 PM on December 6, 2005

It's because digital downloads are licensed by the service, and one of the terms of the licence is a territory, whereas physical sales are (or can be) purchased by a store or wholesaler which has no obligations back up the chain.

Mail me if you want to go into detail - this is what I do.
posted by James_in_London at 4:24 PM on December 6, 2005

Since I work for a digital music service too (hi james), and much of the grief in my worklife comes from the complexities of licensing content across the world, I'll try to put out what I know.

As James mentioned, the primary issue is that a digital music purchase is a contract situation, and so different countries must have different contracts.

The difference between online music sales and physical music sales is much similar to the difference between buying a book, and buying the latest piece of mass-produced software. One is a physical item, the other is a contract that provides you with usage, without granting you ownership.

Of course the water is muddied because when most people talk about 'digital music' as an industry, they tend to think of iTunes-style sales, where they think one purchase equals one media-entity. With emusic and rhapsody, et.al, you are paying for a subscription, not a per-track-purchase. Even with itunes, you aren't purchasing a single file, so much as purchasing a service that is tied to a single file.
posted by nomisxid at 5:28 PM on December 6, 2005

buy music from the US iTunes Music store

Your question contains a category error. You buy music on CD, whereas you license a music service from Apple. The itunes downloads are not property and therefore do not acquire any of the various chattel rights explicit within different cultures.

The people who manufactured the CD that you own have licensed mechanical reproduction rights from an IP owner (usually, copyright) within a specific legal territory. Your licence terms and their licence terms are very different.
posted by meehawl at 5:33 PM on December 6, 2005

Check out http://entertainment.howstuffworks.com/music-licensing.htm. I had to learn this stuff recently for work and I found their tutorial extremely helpful.
posted by apark at 11:16 AM on December 7, 2005

In the previous thread I volunteered to explain in depth the reasons why it is usually not possible for an internet user in one country to purchase downloads from a store in another country.

First, some background.

Current music industry practices are based upon traditions that go back well over 100 years. Before the radio, before the gramophone, before the player piano there was sheet music - and some of the companies that grew fat publishing sheet music are contained within today's music industry giants. Every time a new technology has been created, new contractual and legislative battles have been fought - and this patchwork of ancient precedents still influences the way music can be sold legally.

Though copyright laws in both Europe and the USA have been amended slightly to reflect new technologies (for example the AHRA and the DMCA in the USA), the fundamental nature of copyright has not changed. And nor have the numerous traditions and metaphors around which music industry contacts are based.

Therefore while the internet might technically be an international medium, which in technological terms is able to sell music to any country from any country, the music business is not. It is simply not geared that way. And there is little evidence to suggest that the status quo is likely to be revolutionised any time soon to allow simple global licensing of music for the internet. Hence we have an international technology but a bunch of laws and contracts which are all strictly territorial.

Next, allow me to break into chunks some of the relevant issues.

There are two components to any recorded music you hear. There is the recording itself (ie, the audio as recorded in the studio) and the underlying composition (ie, the melody and lyrics, as written by the songwriter.)

Sometimes the recording and the song are created by the same person. But a song can be written by two people (musician and lyricist) or four people (a band) or indeed more people. This latter point is especially the case when pop songs have been re-written, or when they involve a sample or steal from another song. Even "Creep" by Radiohead has more writers than just the band, as it borrows a section from "The Air That I Breathe" by the Hollies.

The creators of a song, and the creators of a recording, are free to "sell" their created intellectual property. It is an artist or composer's right to choose whether they sell their work to respectively a record company or publishing company, but in the pop music world usually artists and songwriters have to do so in order to reach any significant level of exposure. Accordingly we have record companies (that own sound recordings); and music publishing companies (that own songs and compositions.)

Now you will recall that a song can be written by multiple people. Accordingly the song can also be owned by multiple publishers at the same time. Go to the ASCAP website and look up a few of your favourite songs and you'll notice that many are owned by two or three publishers.

In terms of recordings, it is more usual that one record company will have paid for and own the track. However, it is extremely common for tracks to be licensed or sold on to different labels in different territories. This is because, as mentioned above, music contracts are on a territory by territory basis. So for example a band might be on Warners for the USA and UK, but they might be on PIAS in France or Mushroom in Australia and so on.

In rare cases, if an artist is particularly hot when they sign their record contract, they can sometimes manage to sign a major record label in their home country but save back the right to the other countries in the world. This means extra money when they sign a deal in another country.

Even if an artist is on a big multinational label like EMI, that label won't necessarily own its own subdivisions in every single country in the world. Accordingly the record label will itself be responsible for licensing on the recording to third party labels in various countries. Those deals may differ from territory to territory and artist to artist. They won't necessarily be standard.

When a website or music service wants to distribute music, they need to get permission to do so in the form of licences from as many record labels and music publishers as possible. Alongside the four major record labels (Sony-BMG, Universal, EMI, Warners) there are hundreds or thousands more, particularly in the independent world. Though in the UK there is an organisation called the Association of Independent Music (AIM) which will do aggregate deals on behalf of all its members, AIM's member labels are not compelled to sign up to any deal it does with a music service.

So it is a long-winded process picking up record label licences just for all the record companies in one country. That's without even considering the fact that in another country, there may be a different set of labels that might own some of the material. Then you have to do the whole routine all over again to pick up permission from the music publishers.

It is for this reason that iTunes was not able to launch in every country in the world simultaneously. It had to get permission from all the record labels and publishers in the States, and then move on to the UK, and then most of the rest of Europe, and then it got stuck negotiating terms in Japan and Australia for a while, and so on. Quite a project.

Eagle-eyed observers will note that I'm over-simplifying here (believe it or not!) Yes, there are collecting societies - which I'll get on to next. There are also exceptions: examples of music services that have been able to pick up pan-global licences.

The one I'm thinking of is the original Emusic. Seven years ago when Emusic launched it (quite rightly) perceived that, as the internet is a global medium, its licences should also be global. Emusic realised that major labels not only couldn't but wouldn't go along with this. Emusic focused upon independent labels, or artists that owned their own copyrights entirely. And as far as I understand, Emusic managed to get them to sign deals which covered the whole world. So a downloader in Germany could visit Emusic, pay up, and download a Tom Waits track no problems.

However, fast forward to the present day, and Emusic now has territorial restrictions too. Certain tracks can not be downloaded by residents of certain countries. I don't know whether this was because partner labels or publishers refused to go along with the pan-global thing or because somewhere along the way (Emusic has been sold and bought at least twice) it lost its original licences.

Confused already? We're not even there yet.

To add to the mix there are collecting societies. These are organisations like ASCAP, BMI, Harry Fox in the USA and MCPS, PRS and PPL in the UK. (ASCAP and BMI are competitors in the States; a songwriter can sign up with either, one of the main selling points ASCAP uses is that it is "member-owned".) There are hundreds of collecting societies in the world and their job is to collect income from broadcasters, websites, retail outlets and all sorts of places where music is played or pressed up.

In music there are two main kinds of right for which the collecting societies collect.

There is the performing right - ie, the right to perform music to the public. Live music venues, radio stations, TV stations, websites which stream music: all of these make use of the performing right and must cough up money to a performing right society like PRS or ASCAP. In the US, as I understand it, only songwriters earn money when their music is broadcast on terrestrial radio. If I understand correctly, recording artists do not. However, recording artists in the UK can earn (a pitiful amount of) money when their records are broadcast, thanks to Phonographic Performance Limited or PPL. In the digital domain there have been moves to allow US recording artists to earn money from performances and SoundExchange handles that.

The second type of right is the mechanical right. This is all about the right to make a mechanical reproduction - ie, to make a copy of the music onto phonograph record, CD or download, and to distribute that copy on to the public. Most of all we tend to associate the mechanical right with songwriters, as the mechanical right is used to hand out the songwriter's share of compact disc income. Recording artists get paid their share directly by the record company. In the USA, record labels collect the songwriter's share and then pass it on to a mechanical collection society such as the Harry Fox Agency. Harry Fox then distributes the royalties on to publishers. In the UK, the MCPS fulfils a similar role.

The good news is that collecting societies act on behalf of a huge panoply of songwriters and publishers. So - once you have got permission to sell a music publisher's work - you can get your mechanical licence from one mechanical right organisation in each territory. That society deals with the onerous task of distributing that cash on to all the myriad publishers.

But there are performing and mechanical right societies in every territory throughout the world. There isn't one single global body which actively does all the deals. What tends to happen is that an online music service will sign up with a performing right society and a mechanical right society in its country of origin. In the UK, for example, Wippit would be with MCPS and PRS (in fact these two societies have created a partnership, so they're now called the MCPS-PRS Alliance.)

Then, there are reciprocal deals between different collecting societies throughout the world. This means that a UK society can collect money on behalf of a US society and vice-versa. The first reciprocal deal between ASCAP and the UK's Performing Right Society (PRS) was in 1919. Because there are reciprocal deals between collecting societies in all sorts of territories, a music service in London can get permission to use material which is administered by collecting societies from other countries. Lovely.

But there's a speedbump in the good news. The Barcelona Agreement, by which collecting societies negotiated some reciprocal arrangements, was questioned by European Union regulators. Arguably the reciprocal arrangement is anti-competitive - instead, music services and those wanting to use music should be able to shop around and collecting societies should compete for the trade. There are ongoing calls from music services that pan-European licensing should be available, but at the moment there is still a lack of clarity as to how exactly that will be achieved.

The fact that it has taken me 25 paragraphs to explain the situation for international licensing of music rights isn't just an indication that the author is verbose. Hopefully I have demonstrated that in music there are a lot of ways to cut the pie, and a lot of different organisations that have a stake. Throw into the mix the fact that we are dealing with millions of tracks/songs here and it should be apparent why it can be so complex for a music service to sort out its international licensing scenario.

Rhapsody has chosen to stick with the USA for the time being, and is busy acquiring all the rights it needs to have the biggest and best music catalogue in the States. Once it has done that it will need to do a lot of the work again for each country it wishes to enter. Though it gets easier in each subsequent territory a service enters, I don't blame 'em for not having launched abroad yet.

What is annoying is that, seven years after Emusic launched, there are so few pan-global or even pan-European initiatives for music licensing. A lot of it has to do with the fact that the major record labels in particular resisted the digital revolution. The collecting societies were relatively quick at noticing that music was about to go digital - this is partly because the collecting societies have long been under pressure to prove that they offer good enough value for money to publishers and composers.

But for years some execs at the major record labels hoped that the internet would just go away, or that a digital rights management solution would come along that would make everything perfect. Because of this they delayed in setting up the licensing strategies that would have been needed to get a proper international framework for digital distribution in place. Even now some basic facets of online music distribution, such as metadata schema and formal practices for delivering the music into services themselves, are not standardised. What was utter chaos a couple of years ago is organised chaos now. But we're still a long way from the day when music services can get a "one-stop-shop" for all their music licensing needs. Until that day, expect to be limited in what music services you can use in what countries.
posted by skylar at 12:28 AM on December 9, 2005 [1 favorite]

And in answer to your specific questions:

"What I don't understand is exactly why you can order a CD (or vinyl or any other format) from any country regardless of where you reside (whether or not you'll have to pay import duties and taxes)...

... I do know it has to do with that fact the licensing is on a national basis, but then why is that not a problem for music on physical media? Or is it, in some way I'm not aware of?"

Well, bear in mind that (at least in the UK and I guess throughout Europe) there are laws against parallel importing - in other words it is not legal for a CD store to import its CDs from Thailand or Indonesia, where the wholesale price is cheaper, than from its home country... and then to sell the CDs on to customers at the cheaper prices. UK store CD Wow has been told off for doing exactly that.

Also don't forget there is a difference between a physical product being sold and a licence to copy being acquired. You are allowed to buy a CD from a foreign store and have it mailed to you. You have a right of first sale allowing you to sell that CD on to anyone else. But you do not have a right to copy the CD. You don't have a right to distribute the music on the CD to the public in digital form. That is the main difference between selling a CD and acquiring the licence to operate a digital music service.


"Also, is there any indication of plans to merge different national licensing systems at global level? Commercial interests? Legal obstacles? Practical feasibility?"

Certain parties, particularly those who license music regularly (big music services like Yahoo) will want there to be a simplified structure for licensing music - ie the "one-stop-shop" I spoke of. I imagine that organisations such as EDIMA are probably lobbying for it right now.

It's up for debate as to who such an arrangement really benefits. There are the monopolistic issues, as raised by the European Union, and in today's age of competition some think it is a good thing to be able to acquire licences from competing societies, for example.

Some insiders - such as Jim Griffin and I suspect perhaps a few academic types like Lawrence Lessig - are calling for "blanket licensing" of digital music. The laws which allow collecting societies to collect from radio are blanket licensing regulations. They derive from the notion that it would be impossible for each individual publisher to collect from each and every radio station or music venue. And so collecting societies are nominated to do the job collectively.

Record labels must be terrified that blanket licensing will be forced upon them by the US or European governments. In my opinion if it were to happen it would be a brilliant thing for digital music. But it is not going to happen any time soon. Though I reckon long term the labels would make far more money that way, many major labels have become short-termist and don't want to change the status quo. There is a sense that blanket licensing would mean losing control, and labels don't like that notion one bit.


However, I think we will see more and more standard practices and frameworks for simplified licensing over time. Record labels and publishers surely cannot want the expense and complexity of all these negotiations. Because of the monopolies issues I don't think there will be collusion between labels and publishers to make it happen. Instead I think we are in the midst of a process of labels individually getting their acts together to sort out the contracts they have with artists and with licensees and partners throughout the world. Eventually it should be possible to go to each individual major label, and the Association of Independent Music, and get a one-stop licence for all their material. It won't happen immediately though. Five to ten years perhaps.
posted by skylar at 12:47 AM on December 9, 2005

Well, what can I say, skylar, that was exactly what I was interested in, the mechanisms and various passages as well as the political/commercial issues behind the restrictions.

Thank you, that was a very, very helpful explanation, and not hard to follow even for a complete layman like me. You broke it down so nicely, I think I finally get the basics of the whole business.

And, incidentally, interesting to hear that thing about Cdwow, I had been wondering how come it was so cheap but I'd never looked that up.

Thanks everybody else too, and apark for that link, I had missed that in my searches.
posted by funambulist at 8:44 AM on December 9, 2005