Proto-Case Study: New World Records Database of Recorded American Music

Digital Learning Case Study:

New World Records’ Database of Recorded American Music[1]

“We don’t believe that copyright stops at the campus gate.”

--Herman Krawitz, President, New World Records

Background: New World Records and the Database of Recorded American Music

New World Records (NWR; http://www.newworldrecords.org) is a non-profit corporation that sees itself as analogous to a university press for American music. Its mission is to promote awareness of and access to the works of U.S. composers who are not distributed on mainstream record labels by “circulating” their music. NWR prefers the term “circulation” to “selling” or “marketing” because its main goal is to ensure public access to the music, not to make a profit. A secondary goal of NWR is to display the history of the United States via its music.

NWR had its origins in a 1974 Rockefeller Foundation grant that supported the production of a 100 LP compilation of American music that was distributed free of charge to music libraries (the Recorded Anthology of American Music). When this initial project was complete, NWR received funding to continue functioning as a record label that would put out further releases of the same mainstream-neglected American music (music that either hasn’t ever been released commercially or has gone out of print). NWR does sell to the private sector, but its main market is libraries, which “subscribe” to NWR’s releases, meaning that they receive a copy of every album NWR puts out at a discounted rate.

Although library subscriptions have remained solid, NWR noticed several years ago that private sales, which had increased greatly after the switch from LP to CD, had begun to decline precipitously. NWR realized it would need a new revenue stream and hit upon the idea of a digital database for library and scholarly use, analogous to JSTOR and ARTstor—this became the Database of Recorded American Music (DRAM; http://dram.nyu.edu). NWR is now very committed to the idea that digital delivery is the future for music. Funded principally by the Mellon and Robert Sterling Clark Foundations, the DRAM is now a $2 million project.

NWR has been collaborating on the DRAM project with New York University (NYU), which hosts the database on its server and has been developing the software that will allow other institutions to authenticate authorized users. The DRAM was originally accessible only to students and faculty at NYU, and access was subsequently expanded to Dartmouth, Columbia, and Indiana University. NWR began rolling out the database in early 2006 and projects that 100 universities will participate by the end of the year, either as paying customers or on a free trial basis in the hopes that the schools will subscribe once they experience the DRAM’s benefits. Universities will pay for the subscription service as a flat fee depending on their enrollments (using the same classification model as JSTOR).

Copyright Law and Digital Delivery

The music contained in the Database consists of recorded selections already distributed by NWR through its catalog of CDs and those culled from partner labels with similar lists. The process of converting to a new method of delivery involved a review of the intellectual property rights already held by NWR and its partner labels, and the additional rights required for digital distribution.

A musical recording is protected by two separate copyrights. The copyright in the musical composition protects the song itself and vests originally in the songwriter or composer, who often transfers it to a music publisher. The copyright in the sound recording protects the fixation of a specific performance of the composition and is usually held by the record label. As a record label, NWR owns copyright in the sound recordings of the majority of selections in its catalog. (Some selections, particularly those in the original Recorded Anthology of American Music, appear in its catalog under license from other record labels; these are for the time being excluded from the DRAM.) Therefore, NWR’s main concern in establishing the DRAM was in clearing digital distribution rights to the musical compositions embodied in the recordings.

Digital delivery currently encompasses three main modes of dissemination. Non-interactive streaming, or Internet radio, describes a situation in which users simply listen over the Internet to recordings that are selected for them by the providers, without retaining permanent copies. Analogizing to traditional radio, compensation to music composers and publishers for this type of delivery is routed through the performing rights societies (BMI, ASCAP, and SESAC) that collect royalties for public performances.[2] Digital PhonoDelivery (DPD) describes a scenario in which users select a recording and download a copy of it onto a local device for unlimited future use. Analogizing to traditional album sales, compensation for digital downloads is calculated at the statutory mechanical rate and flows directly to composers or publishers. The third mode falls somewhere in between these two and provides more of a challenge of categorization. Known as interactive or on-demand streaming, it involves users selecting recordings, which are then played over their Internet connections but not retained locally for future use.

Because interactive streaming has features similar to both traditional radio and traditional album sales, the industry has struggled over where the revenue streams should flow—through the performing rights societies as public performance royalties, or through music publishers and the Harry Fox Agency (HFA, a collection agency used by many publishers) as mechanical royalties. In 2001, the Recording Industry Association of America (RIAA) and the National Music Publishers Association (NMPA) reached an agreement whereby record labels wishing to provide interactive streaming would pay publishers for mechanical licenses to the compositions. HFA is now granting these rights to RIAA member labels on behalf of NMPA publishers, and the labels have paid an advance on royalties, but the royalty rate has yet to be established. The expectation is that Congress will set the rate by statute, as it has done for compulsory licenses for traditionally delivered phonographs.

Meanwhile, however, performing rights societies have also been issuing licenses for interactive streaming of compositions, on the theory that this delivery method actually involves a public performance, rather than creation of a copy. Thus, uncertainty about the characterization of the right involved means that cautious entities may find it necessary to pay twice for the right to stream a composition interactively.

Clearing Permission for the Database of Recorded American Music

NWR’s original conception of the Database involved providing no-cost downloads of music files to professors for classroom use while limiting student access to interactive streams. Although the initial beta version of the database, accessible only at NYU, was developed before all permissions had been cleared, NWR’s intention was always to obtain and pay royalties for permission to include works in the database.[3] As a champion of underrecognized composers, NWR is committed to protecting the financial interest of composers and songwriters in their copyrighted works. Therefore, NWR’s main intellectual property goals have been to obtain licenses from the owners of copyright in the compositions that will allow it to provide the recordings via DPD and interactive streaming.

Non-HFA Publishers and Composers

Although the Harry Fox Agency dominates the collection of mechanical royalties in the U.S., more than half of the content in the DRAM is controlled by copyright owners not represented by HFA—an estimated total of at least 700 separate entities and perhaps as many as 900. Since NWR (and the partner labels it distributes) already had permission to distribute recordings on CD and was tracking and reporting royalties for those sales, it simply needed to extend those licenses to cover the new delivery methods. NWR approached publishers by letter accompanying a regular royalty report. For DPD delivery, the letter explained the goals and structure of the DRAM and requested that publishers sign and return an enclosed license that would allow NWR to distribute DPDs on the same royalty terms as traditional CDs. NWR also sent similar letters requesting permission to provide on-demand streaming. In this case, NWR intended to track usage figures but planned to delay payment of royalties until the legal system had clearly established where payments were to go and at what rate.

Many publishers and composers responded favorably to these license requests, but those that did not required follow-up communication. Tracking the progress of the effort required a significant investment of time and organizational skill. As NWR noted in its 2004 grant report, “each music publisher must be sent a license request for signature, and all returned agreements duly logged and filed; be flagged for further contact if there is no response, or if the initial reaction is unfavorable; and, in cases where consent is attained, be integrated into DRAM’s royalty accounting program for receipt of future payment. … [I]t is of paramount importance that our approach to these administrative tasks be as standardized and automated as possible.”

HFA-Represented Publishers and Composers

Clearing permission for the approximately 38% of DRAM works represented by HFA proved in fact more challenging, despite the centralized licensing source. NWR tried in vain several times to elicit a response from HFA to their request for permission for DPD or interactive streaming delivery. NWR noted in a report that it appeared HFA was disinclined to pay attention to such a low-volume, low-profit project: “A frustrating stumbling block appears often when we describe the function of New World Records and our activities as ‘not-for-profit’ and ‘educational.’”

Following the 2001 RIAA-NMPA agreement establishing payment to composers for interactive streaming rights, NWR again approached HFA for streaming permission, this time offering a royalty advance analogous to that offered by RIAA. In a parallel effort, NWR also applied for membership in RIAA, hoping to take advantage of the RIAA-NMPA deal from the inside. Mention of this application finally succeeded in attracting HFA’s attention. This led to acceptance of NWR’s request for DPD licenses and, after its RIAA application was approved, for interactive streaming licenses according to the RIAA agreement.

HFA’s license application process is entirely automated. HFA provided NWR with detailed instructions for formatting a computer file (such as an Excel spreadsheet) containing data about the songs for which it was requesting DPD or streaming permission. The file was to include 28 fields holding metadata for each song, such as title, songwriter, performer, record label, publisher, etc. If there was at least a 72% match with HFA’s data for a particular composition, HFA would recognize the song and grant permission.

A lack of established industry standards meant that the data NWR (and the partner labels it distributes) maintained on compositions in its catalog was different from the data tracked by HFA. However, a few days of processing enabled NWR to produce a file meeting HFA’s specifications. For both DPD and streaming license requests, HFA replied within five days with approval for 72% of the compositions requested. For successful matches, HFA also provided additional metadata from its files for each song. For the 28% that failed to align with compositions in HFA’s directory, HFA provided reasons for the rejection, and NWR was able to analyze each case, correct errors (often discrepancies in spelling, name transposition, and the like), and resubmit for another matching attempt.

NWR found that the automated systems it already maintained in-house for tracking royalty payments and for monitoring license acquisition from non-HFA composers greatly facilitated integration with HFA’s electronic permission system. Although the initial task of conforming NWR’s data to HFA’s specifications required some investment of labor, maintenance of the system going forward is relatively simple. NWR is also attempting to reform its internal data definitions to align more closely with HFA’s, to make permission requests in the future happen even more smoothly.

BMI/ASCAP

Although NWR believes that the current confusion as to rights for interactive streaming will ultimately be resolved in favor of payment to publishers and composers, it remains mindful that the performing rights societies also purport to grant permission for this mode of delivery, and it has therefore obtained licenses from BMI and ASCAP. Like HFA, these entities have yet to set a royalty rate for streaming licenses. In fact, BMI returned NWR’s latest advance payment, explaining that it was unnecessary since NYU (from which DRAM continues to be served) already possesses the necessary license. Nevertheless, although the royalty expenditures are not large, this situation means that NWR has often been in the position of securing two separate licenses to cover the same use of a composition.

Other Rights

While the processes described above account for the majority of NWR’s permission clearing efforts, miscellaneous other rights also required attention. For example, public performance of musical theater works is granted not through performing rights societies but through “grand rights” directly from the publishers. Thus, to obtain permission to include the music and lyrics for the handful of musical theater works in its catalog, NWR had to correspond individually with the relevant publishers. Since this is a much smaller and less standardized area, the clearance process often involved handwritten status logs and extended individualized attention. Obtaining permission for Cole Porter’s “Fifty Million Frenchmen,” for example, required eight separate communications with rights holders spanning four months.

Since it envisions the DRAM as a comprehensive scholarly resource, NWR wants to include not just the music itself but also supporting documentation, such as liner notes. Thus, it also sought to obtain permission to include textual excerpts used in the liner notes for some of its recordings in the digital format. This meant tracking down owners of copyrights that may have changed hands several times since NWR originally obtained reprint permission, often a labor-intensive process involving “letters returned by the post office” and research “via e-mail, ‘snail mail,’ telephone or the Internet” (DRAM IP Statement 10). Some publishers were amenable to offering reduced fees for an educational, non-profit enterprise, but other rights holders refused permission altogether.

Considering the wide range of rights holders involved and the confusion as to the status of certain digital rights, it is hardly surprising that clearing intellectual property for the DRAM required considerable effort and attention. NWR noted in its 2004 grant proposal that “It would be a challenge to overestimate the amount of administrative energy required to track down and obtain permission from every rights holder represented in the Database, to ensure that the agreements we reach with all parties are legal and lucid, and to further guarantee that all parties are compensated as appropriate for their willingness to participate” (DRAM IP Statement 7). During the process, despite its extremely meticulous and thorough approach to IP clearance, NWR felt uncertain enough about its position that it chose to protect itself from liability for accidental infringement by purchasing a media liability insurance policy.