Digital Royalties

In the late ‘90s Napster changed the way the music industry operated, litigated and viewed its future. Eventually the issues raised by the Napster case would force the US legislature to change the law to start dealing with the digital environment and specifically the problem of file sharing. At this juncture few would have anticipated that the problems and solution that resulted from the file sharing revolution would impact so swiftly on the radio broadcasting environment in South Africa.

Podcasting is the distribution of an audio file over the internet that takes the form of a broadcast but is in fact a file transfer. To this end the difference between podcasting and netcasting is that, with a netcast, the show is broadcast live and cannot be manipulated in any way. The file is not downloaded but merely streamed live. With a podcast, the show is broadcast live but can also be downloaded onto an iPod (hence the name “pod”) or any other MP3 type player. It involves the transfer of data and files over the internet. The problem arises in that the show can be played, rewound, fast-forwarded and further distributed by the end user. This is commonly known as “listen at your leisure radio”.

One may ask how this differs from the old days of recording a radio programme to tape and re-recording onto another tape and distributing to your friends or simply listening on your walkman. The problem is that where before the potential abuse of rights lay with the end user, now the broadcaster is turned distributor, and is making files available for distribution, often to the irritation of the music industry.

The issue of digital rights management (“DRM”) has already emerged across various platforms such as cellular telephony and ring tones, and was bound to come to the fore eventually in South Africa. While other jurisdictions including the United States have gone some way towards dealing with some of the problems raised by the new technologies, no jurisdiction feels completely safe with the laws currently in place. Obviously, and as is almost always the case, the law follows the technology and is often way behind. No doubt, as the technologies unfold, the law will adapt

Some of the issues concerned in podcasting arise from:

  • performance rights;
  • publishing rights;
  • sound recording and label rights; and
  • limitations of blanket royalties currently payable.

Since file sharing has become such big business, the US promulgated the Digital Millennium Copyright Act. These amendments to the copyright laws now mean that internet transmissions appear to create a new digital copyright royalty which is payable over and above previous mechanical and performance royalties. While this royalty was put in place to deal with file sharing, it is now affecting the broadcast arena (unexpectedly). In South Africa the mechanical royalty is not paid for radio broadcasts where songs are copied.

With the download of a new file, the question arises whether a digital download constitutes a reproduction. In the US, further to the mechanical licence, there is also a master use licence to apply to the specific recording. Accordingly, the biggest problem for the future of podcasting does not only emanate from the mechanical licence issue and the master use licence issue, which, if implemented properly, would require huge royalties to be paid on podcasts, but it is also that a new royalty is now payable.

Notwithstanding this, the music industry needs to embrace the technologies in order to save themselves from the destruction that would occur if they ignored it. No doubt, in the future South African audiences will have a range of podcasts from which to choose, from both local and international markets. As the licence regulation is something that would take place behind the scenes, the end user will be spoilt for choice. A failure to deal with the issues of royalties now may see a hold up in the development of both the broadcast and music industries.

Mark Rosin is a founding partner and Greg Hamburger an attorney at Rosin Wright Rosengarten, a firm specialising in entertainment and media law based in Johannesburg. Visit the firm’s website at www.rwr.co.za.

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