Congressman Watt’s FMRA Legislation is Music to Free Marketers’ Ears!

Rarely do people see Congressional action that doesn’t increase the size of government or create new ways to waste taxpayer money, so it is refreshing to see some new legislation being introduced in the House that looks to utilize free market principles to ensure intellectual property within the music industry is being recognized with compensation to those who deserve it: the artist. Rep. Mel Watt (D- N.C.) introduced the H.R. 3219, Free Market Royalty Act late September of 2013 and is a bill worth consideration and debate as it tackles issues of royalties, copyright, and licensing.  There is plenty of room for improvement in copyright issues to ensure a more open, free-market approach.

Introduced September 30^th in the House of Representatives, the FMRA would: “Amend title 17, United States Code, to provide copyright owners in sound recordings with the exclusive right to negotiate in the marketplace the performance of their works to the public by means of an audio transmission, and for other purposes.” So what exactly does that mean when applied to radio and musicians? Mercatus’ Technology Policy Program Director Jerry Brito described the existing problems with the compulsory licensing system being used now and how FMRA would change the licensing system entirely:

The problem with the compulsory licensing scheme is twofold: Not only does it rely on federal bureaucrats to set the rates that artists must accept for their music (rather than allowing a free-market negotiation take place between copyright holders and those who want to broadcast their songs), but it also allows Congress to pick winners and losers by assigning different royalty rate standards to different users. As I explained in Reason:

Watt’s bill would blow all this up, making terrestrial broadcasters, Internet radio services, and the rest to give up their price-fixed compulsory licenses and have to negotiate in a market the rates they pay. This truly levels the playing field, especially vis-a-vis interactive music services like Spotify and Rdio that have never benefited from compulsory licenses.

The current system relies on the government to fix prices essentially picking winners and losers, and meanwhile the musicians whose work is being enjoyed by the masses are stripped of any negotiating leverage and are forced to participate in a controlled atmosphere. This is clearly not the right approach. With the Free Market Royalty Act there would be far more competition and musicians would be compensated properly for their work. Federal bureaucrats gaming the system leads to less innovation and the goal should be to embrace the reforms in Rep. Watt’s legislation as an avenue to a free-market approach that would drive innovation and encourage more competition within the radio industry, as it applies strictly to only radio platforms.

The other important issue to take into consideration here is performance right, which is a major part of this legislation. TPA has long been a strong supporter of property rights, and when it comes to the issue of intellectual property, we are also firm believers in a property rights system that is fair to all parties, including distribution and attribution. Under today’s existing rules, a performer holds no rights to his or her product in terrestrial radio but the FMRA would fix that issue and TPA is on record opposing anything that would stop reform in this direction. Recently, Institute for Liberty spearheaded a coalition letter urging opposition to H. Con. Res. 16, the Local Radio Freedom Act (LRFA), essentially codifying this current system because “it closes the discussion about how best to protect property rights by resolving that terrestrial radio should never pay performance royalties on music broadcast on their stations used for raising advertising revenue.”

The changes being proposed with the FMRA will go a long way to making better a flawed and fractured system, while also ensuring that important aspects of the current system are preserved so that all radio companies including smaller independent groups may continue to have the same “one stop shopping” access to music they rely upon under the statutory license, if they choose. The FMRA will allow for more choices and competition in a market that is truly in need of reform when it comes to how licensing and copyright issues are handled. TPA hopes to see legislative action on the Free Market Royalty Act as soon as possible.