THE ECONOMIC ASPECTS OF THE COMPULSORY LICENSE I. THE ECONOMIC NATURE OF COMPULSORY LICENSE Section 1(e) of the Copyright Act of 1909 provides that, once a recording of a musical composition has been agreed to by the owner of the copyright of that composition, then anyone may make a recording of the composition upon the payment of a statutory fee to the copyright holder. This type of provision, known as the compulsory license, is relatively infrequent in American law, except in connection with industries affected by a public interest, and in such cases usually only as a limitation on price; there is no such limitation in other areas of copyright. This specific provision places three limitations on the contractual freedom of the owner of the copyright to a musical composition; it establishes limits on (1) the persons with whom he may refuse to contract; (2) the times at which he may contract; (3) the price at which he may contract. Moreover, the copyright owner may not place any time limitation on the period during which the copyrighted property may be used, provided only that the statutory price is paid. Just as soon as one recording has been agreed to, anyone is free to record the same composition without time limit so long as he makes the required payments, known as "mechanical royalties." There are several possible variations on each of these three major aspects of the compulsory license provision. For example, the freedom to record might become effective only after a certain time period, or the statutory fee might be varied as a percentage of a price or it might be related to the fee paid by the first recorder. In addition, the compulsory concept itself might be limited to a fixed period after a specified event such as the signature to the first negotiated contract for recording. Also, a tribunal might be established to determine a "fair and equitable fee" to be paid by those taking advantage of the provision. Still other variations might be applied, such as a sliding scale of fees increasing as the number of sales of the record increased. In the present organization of the music business, recordings of various kinds are of increasing significance, and the compulsory license is important, particularly to the producers of popular records, where the large volume of sales creates the chance of large profits. Once a composition has reached the public domain, compulsory license is no longer applicable, of course. However, it is applicable to the copyrighted "standards," i.e., compositions which have been accepted more or less permanently into the musical culture, and to copyrighted classical selections, but since these latter make up a relatively small portion of the total record production, in this study emphasis will be placed on the music business as it treats popular recordings. II. THE FUNCTIONAL ORGANIZATION OF THE MUSIC-RECORDING BUSINESS A. COMPOSERS AND LYRICISTS The music industry starts with the composition of a tune; it may be designed for a particular purpose such as popular use, television use, or moving picture use. It is hoped, of course, that a specially designed tune will end up in all these uses and perhaps others. 1 A large number of the composers and lyricists who produce the tunes are organized professionally into the Songwriters Protective Association (SPA). This organization, now some 25 years old, functions primarily to protect the professional status of songwriters through the maintenance of a standard form of contract for use between individual songwriters and the publishers of musical compositions. In its most recent negotiations in 1947-48, it also established a "basic agreement" between the SPA and the Music Publishers Protective Association, which a music publisher must sign before he may purchase the compositions of SPA members under the 1947 Revised Uniform Popular Songwriters Contract. About 2,700 songwriters now belong to the organization and over 900 music publishers have signed the basic agreement. Although the SPA has used the group principle in dealing with music publishers, the standard SPA contract is applied individually by each songwriter to the sale of an individual composition to a publisher. There is no clear information available as to the extent of the influence of SPA. It seems to be generally agreed that it is composed primarily of writers who are are also members of ASCAP. * One industry source states that The majority of the (popular) hit songs are presently written by nonmembers of SPA and published by firms not having a contract with that organization. It may be inferred, an inference which is supported by some who are familiar with the industry, that most writers affiliated with BMI are not members of SPA, though some are. Also, there is a belief that regardless of the extent of the use of the SPA contracts (which are coprighted), the standards established by those contracts are generally effective as a "floor" in the relationships between all songwriters and music publishers. In contrast to the free-lance concept which dominates the SPA operation, the Composers and Lyricists Guild of America (CLGA) includes in its membership primarily those who write songs for the motion picture producers. The CLGA has about 500 members and there is a large overlap between its membership, on one hand, and that of SPA, the American Federation of Musicians (AFM) and the Writers Guild of America (WGA), on the other. There has been considerable talk about the possible merger of SPA and CLGA, but no merger has taken place. The CLGA has sought to become the bargaining agent for its members in negotiations with the motion picture producers, but the National Labor Relations Board has decided that, for 1 The name of this organization was recently changed to the American Guild of Au thors and Composers. For convenience we shall refer to it herein under its former designation. See, e.g., Billboard, June 23, 1956, and July 7, 1956; also Variety, Feb. 6, 1957. |