How to Licence Music for Streaming

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If you want to stream audio or audio and video online, and want to include someone else's music in that stream, you need to understand what licensing might be involved. This article will start with an explanation of licensing, then outline a clear picture of what licensing is required for some live and on-demand streaming scenarios.

This will read a little formally to strive for accuracy. One of the defining multimedia lawyers with expertise in the music licensing world, John Enser, partner at CMS, provided indispensable fact-checking on early drafts of this article.Thanks too must go to Tom Frederikse, partner at Clintons, who is one of the most "in the trenches" legal minds, working for many well-known and lesser-known digital services, who similarly provided insights and corrections when needed. The folks at UK's PRS for Music could not have been more helpful and insightful, and they also revealed some changes happening to the available licensing that will affect stream producers worldwide.

The details and ideas presented are as accurate as can be in the spring of 2021. It is an evolving space, so things may have changed by the time you read this. Always review the latest information from the licensing bodies before you inadvertently fall foul of the law. 

Music licensing models and associated terminology can be highly nuanced by territory, and while much of what follows is applicable worldwide, this article does reflect a UK focus.

The laws are applicable to the individual (or organsation) that owns and operates the infrastructure from where the music is hosted and streamed, and in each case is enforced by national law. Each licence to use copyright content must be obtained from the relevant territorial rights holder—which in most cases means country-by-country, though there are exceptions (pan-European and pan-African licences are available). Territories for which a service cannot (or will not) get the necessary local licences should be geoblocked/georestricted to prevent access. 

If content is streamed into a particular territory without the necessary licences, the relevant rights holder may take action against the owner/operator (sometimes with support from local authorities) to stop that that local copyright infringement. This may include a claim for damages if the service is thought to have caused significant financial loss to the rights holder. 

World Intellectual Property Organization (WIPO)/UN treaties form a high-level framework for every country's national copyright law, though this is only for enforcement (not licensing) so most services are never aware of the overarching Berne Convention that underpins the global legal structure.

Safe Harbor

More importantly for the main services, the U.S.' "safe harbor" (and the EU and UK's "Mere Conduit") laws provide immunity from copyright infringement for any user-generated content (UGC) service that has "no actual knowledge" of the infringing content uploaded by its users. That lack of "actual knowledge" can be eliminated by alerting the service to a specific infringement and thereby forcing removal – which is known as the "notice and takedown" procedure. In theory this works well, but in practice it is a heavy burden on the rights holders; the UK's British Phonograph Institute (BPI) sends more than 200 million takedown notices to Google each year, i.e. several per second, 24/7.

The safe harbor system explains why a UGC service like YouTube has so much more content that Spotify/Apple and why YouTube makes so much profit while Spotify has yet to get into the black. Under the "safe harbor" provisions, the legal responsibility for music licensing technically rests with the end user (and, other than a few high-profile cases 10 years ago, rights holders generally do not sue their own end-user customers). This is why there is such a huge difference (known as the "value gap") between the profitable UGC services like YouTube (which seamlessly allow users to post and exchange the world's music) and the licenced services like Spotify (which need constant new investment to fund very high music licensing costs).

The safe harbor system is sometimes considered a form of "piracy" (even though is it legal) because rights holders regard YouTube and other UGC services as financially benefiting from unlicensed content—though at the same time rights holders rely on those services for promotion and have helped create a system for monetising many of those UGC streams (albeit at a very low price) via the Content ID system, not to mention that everyone knows it would be futile to try to shut the internet down to protect their commercial interests.

The safe harbor system is of course inappropriate for artists' purposes (they cannot deny "actual knowledge" of their own creations and posts), so musicians have no choice other than to engage with the formal establishment for licensing purposes. 

In 2020, as many live musicians turned to the internet to keep working during the pandemic, many discovered that it is not simple to live stream their own music to an audience without risk of copyright infringement. Any livestream on a social media platform is at risk of a "copyright strike" and/or being turned off mid-flow. Not a good place to start when hoping to make living from live online performances.

The Basics of Music Copyright 

Anyone seeking to offer their music online (live or on-demand) must either work via the big players like Spotify/Apple/YouTube/Facebook, or try to go it alone by streaming through their own platform (or their own channel on an existing site). But how can artists negotiate the tricky terrain of music licensing without risk? 

To begin with, some definition of terms: 

  • "Rights" are the entitlement of a creator to require licensing for use of the copyrights in their own masters and compositions.
  • "Masters" are sound recordings, sometimes known as "tracks" or "records", which are created by artists.
  • "Compositions" are the underlying written works within sound recordings, sometimes known as "songs" or "publishing," which are created by composers, aka songwriters.
  • "Rights holders" means any company or organisation (e.g. a record label, publisher or performance rights organisation [PRO]) that controls a large number of music rights which can be licenced by any user (aka "licencee")
  • "Publishers" means a company or organisation that controls a large number of compositions which can be licenced by any user (aka "licencee")
  • "Publishing rights" are rights to use compositions, which are granted by publishers in return for commercial licence fees.
  • "Royalties" are licence fees paid to rights holders for the use of rights.

Each licenced publishing right has a counterpart royalty fee levied by a publisher in consideration for the licence to use that publisher's compositions.

Publishing rights broadly encompass all printed sheet music rights, melodic rights, and other copyrights for lyrics and arrangements and so on. To make things very confusing, each has publishing agents focused on those specific media types, and each of these has different royalty models by which they licence the music. And they all differ widely—for example, the right to copy a composition in large numbers is known as a mechanical, the right to copy a composition in very small numbers (sometimes only once, usually with some sort of visual element) is known as a synchronisation right, and the right to stream a composition is known as a performing right. The first two are generally available only from a publisher, whilst the last is available only from a PRO such as ASCAP, BMI, and PRS.

From Physical Media to Download to Streaming

For streaming geeks, things get very complicated as we try to delineate where computational digital encoding of analogue voltage signals ends and the rather ambiguous definition of "playing music" begins. For example, if we change the codec, we might absolutely change what data structure is stored on the digital storage or is being transferred over a wire, while retaining the ability to deliver an identifiable piece of music to a listener. For this reason, intellectual property law often talks about embodiments of intellectual property, and the music publishing industry nuances this to fixations: in simple terms, this was for many years the unit of sales of vinyl singles, individual CDs, etc. 

Mechanical copy royalties in the era of physical media were fairly easy to collect on the basis of a single unit being sold (and piracy at scale involved capital to physically produce the pirate copies). Obviously, these royalty models became dated in the internet era.

A music download service 10 years ago was, for many, analogous to mail-ordering a CD. In those early days of legal download services, commercial models typically shoehorned CD and vinyl mechanical copy commercial models into the digital download world. The high cost of entry to negotiate with music publishers who were "not set up for digital" meant that few who tried were successful. Only those who had the financial capacity to force the publishers' hands could enter the game—iTunes above all—and those that did attached the established mechanical copy sales measurement to the concept of a file download as a digital sales unit, and the music downloads market opened up.

However, as streaming engineers will know, purchased audio is not moved over a network link (streamed or downloaded) from a seller to a buyer;  it is replicated from one end to the other, and not just once—that customer may replicate it to multiple devices too. The source end of the download or stream rarely deletes the file just because it has been downloaded. And of course, there is all the CDN caching and memory caching. Each listener of a streamed track from an online service may be responsible for driving the creation of numerous intermediating copies of the music in the distribution infrastructure, even if the end result is to listen to it only once. 

Online, there is no longer a simple unit of sale for mechanical copy licences. It is difficult in a digital world to count unitary fixations sold in any real terms. Arguably the best effort to measure digital music consumption was for some time a measure of downloads—but given these downloads don't always result from a discrete commercial transaction with a listener in the way a CD sale used to, in practice in the digital world there is only a broader audience interaction measurement to base licensing on, not a measure of movement of discrete physical items. 

This reliance on audience measurement data for licensing models finds more similarities with traditional performance rights than it does with mechanical copyrights.

To that end, and because audience measurement is somewhat more meaningful to advertisers and subscriber models, licensing for streaming in a non-interactive (i.e. radio) model relies more closely on those old advertising audience determinations, whilst licensing for streaming in an interactive (i.e. on-demand) model relies squarely on the old mechanical copy counting method. 

Obviously, these are fairly comparable to (respectively) live and on-demand paradigms, but there are nuances ("linear," for example, is usually a "radio" or "live" model, even though a livestream is sometimes just a scheduled broadcast of something prerecorded, and not actually live).

If you want to use music in a live / linear way and make recordings of that live/linear performance subsequently available on-demand, you will need to licence for two types of rights (live and on-demand) for every geographical territory where you may have an audience. You will need a copy licence for the on-demand side (mechanical and sync if copying music with video), and you will also need the Performance Rights licence for the streaming itself.

In terms of accounting for use of licenced content, all licences are tiered into two types: 

  • "Repertoire-specific licence": commercial licences for only a specific set of masters or compositions.
  • "Blanket licencing": Commercial licences for all masters (or all compositions) ever created. Obviously a blanket licence is far-easier to operate (because the service does not need to worry about whether or not it has licences in place for all music) but this type is available—for masters, only for linear/radio/livestreaming services; for compositions, only for national services operating in a single country.

The "limited online music licence" (aka LOML) is an example of a national cost-efficient blanket licence for compositions, which is offered by PRS for services operating only in the UK (it has no effect whatsoever outside the UK)—though conveniently it does not require any reporting and is available for a very small annual fee. A similar blanket licence is available from the PPL for use of masters only in the UK. Most other licensing schemes require the user to submit reporting on a monthly or quarterly basis.

Enforcing Music Copyright Online 

Obviously, Spotify, Apple, Mixcloud, etc, operate on-demand services which far exceed the blanket licence threshold for use of masters, so they must deploy technical systems to automatically identify ("fingerprint") music for reporting purposes. That same fingerprinting technology that identifies and logs rights uses ensures they remain compliant with their licences too, with the platforms themselves becoming a front line for antipiracy, as they scan content as it is published to their servers and automate handling rights. 

This enforcement was once something that was inconceivable. Historically it would have been a manual process, and given the scale of publishing going on through the major platforms, it would have been impossible to fight the claims of piracy without deploying this type of technology.

However today if you upload a DJ mix to Mixcloud, the entire recording will be scanned at the point of upload, and all the rights will be instantly identifiable and even produced as a track list displayed under the upload, and all that will happen in moments. In the past two years or so it has suddenly become extremely easy to police music piracy within these platforms.

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