Written Statement of David J. Frear
`Chief Financial Officer, Sirius XM Holdings Inc.
`
`Before the
`
`U.S. House of Representatives Committee on the Judiciary
`Subcommittee on Courts, Intellectual Property, and the Internet
`
`Hearing on Music Licensing Under Title 17
`
`June 25, 2014
`
`Chairman Goodlatte, Chairman Coble, Ranking Members Conyers and Nadler, and
`Members of the Subcommittee:
`
`My name is David J. Frear. I am the Executive Vice President and Chief Financial
`Officer for Sirius XM Holdings Inc. (“Sirius XM”), a position I have held since 2002. On behalf
`of Sirius XM, I thank you for the opportunity to offer testimony to the Subcommittee.
`
`Sirius XM, with an estimated 40 million listeners, is one of the largest radio providers in
`the United States. We employ over 2,100 people at our facilities in New York, Washington, DC,
`Florida, New Jersey, Texas and California. Since our inception, we have operated pursuant to
`licenses from ASCAP, BMI, and SESAC for the public performance of musical compositions,
`and we operate under the Section 112 and 114 statutory licenses with respect to the public
`performance of sound recordings. We have also fully litigated two rate-setting proceedings
`before the Copyright Royalty Board.
`
`In 2013 alone, we paid approximately $325 million to record companies, publishers, song
`writers, and recording artists. We have paid well over $1 billion in sound recording performance
`royalties since we launched in late 2001.
`
`This experience has provided us with great insight into the issues before the
`Subcommittee, including what works and what does not work within the music licensing market
`as currently structured. My testimony, builds on that experience – as well as similar comments
`Sirius XM recently submitted to the Copyright Office as part of its music licensing inquiry – and
`centers on four key points:
`
`1.
`
`2.
`
`The Need for Platform Parity: There is no reason that satellite radio and Internet radio
`should pay sound recording performance royalties while terrestrial radio continues to
`enjoy an exemption from that obligation.
`
`The Importance of the 801(b) Rate-Setting Standard: The 801(b) standard provides
`the Copyright Royalty Judges with both the ability to examine potentially relevant
`marketplace transactions and the flexibility to balance the interests of both the copyright
`owners and licensees. The 801(b) standard has proven far superior to the “willing buyer
`willing seller” standard championed by the rights-owner community. It should be
`maintained.
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`3.
`
`3.
`
`The Continued Necessity of the Consent Decrees Governing ASCAP and BMI: The
`antitrust consent decrees are not outdated “relics” that prevent competition or copyright
`owners achieving fair market value for their works, but a necessary antidote to the
`extreme concentration that persists in the market and would, absent the decrees, violate
`the antitrust laws. In short, they help ensure that rates are set fairly.
`
`The Significant Problems with the Proposed RESPECT Act for Pre-1972 Sound
`Recordings: The proposed act would further exacerbate the irrational disparity between
`digital services and terrestrial radio (which would remain exempt from paying
`performance royalties for any recordings), create a new payment obligation on a narrow
`set of licensees, and bestow a one-sided windfall on owners of recordings created 70 or
`80 years ago, without advancing in the least the foundational purpose of copyright law:
`providing an incentive for the creation of new recordings.
`
`As may be evident, a common-theme pervades my comments. In statement after
`
`statement, copyright owners suggest that the current regulatory framework – including the
`statutory licenses, the 801(b) rate-setting standard and the antitrust consent decrees – artificially
`interferes with the normal working of a free and competitive market. The unmistakable tenor of
`the conversation is that copyright owners are being unfairly forced to subsidize licensees with
`below-market rates. But these sorts of comments conveniently overlook the reality on the
`ground in the music licensing marketplace.
`
`On the publishing side, for example, we confront two collectives (ASCAP and BMI) that
`
`each control distinct repertories approaching 50% of the market, and a third (SESAC) that, while
`smaller, makes outrageous fee demands under threat of statutory infringement claims while
`refusing to identify the works it is licensing. On the record-label side, we see three major labels
`that likewise control distinct repertories ranging from 20% to nearly 40% of the market each –
`and over 85% collectively. These entities control separate catalogs of works that are not
`substitutes for one another. They do not compete with one another as that term is typically
`understood. A “free” market in licensing – if by that term one means giving copyright owners
`free rein to exploit the market power they enjoy by having amassed massive repertories of works
`– would be neither fair nor competitive, but be plagued by rates approaching monopoly levels.
`
`By contrast, the regulatory framework that has developed over the years, rather than
`
`forestalling competition or preventing copyright owners from achieving fair market value, helps
`to achieve the opposite result: ensuring that rates paid by entities like Sirius XM are at least
`somewhat insulated from the incredible market concentration that would otherwise push them to
`monopoly levels.
`
`
`
`I.
`
`My comments below provide additional detail on these points.
`
`Platform Parity Is Vital
`
`As the Subcommittee no doubt is aware, music services in the U.S. operate under a
`
`patchwork of statutes, rules, and regulations that distinguish audio entertainment services based
`upon the mechanism or medium of delivery. This framework is the product of historical
`compromises and trade-offs between interested parties that no longer make sense and, as many
`
`
`
`2
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`participants noted in the June 10th hearing before the Subcommittee, it is a framework that no
`one would readily choose again today.
`
`The current framework exempts traditional “terrestrial” radio from the obligation to pay
`performance royalties to sound recording owners, while requiring other radio services that offer
`essentially the same service to make such payments. Further, drawing any distinction based on
`the claim that some services transmit digitally while others do not is nonsensical: terrestrial
`radio began broadcasting digital signals over a decade ago and has made use of digital copies of
`sound recordings to further their broadcasts for 30 years. It is antiquated, inequitable, and simply
`bad public policy to reward the biggest entities in the radio field with a competitive cost
`advantage while penalizing innovators whose services increase economic activity and create
`jobs.
`
`To start, similar services – regardless of the mechanism or medium through which they
`
`are delivered – should be treated similarly. Copyright law does not distinguish between AM and
`FM radio based on technology, and should not distinguish between terrestrial and satellite radio,
`or terrestrial and Internet radio, either. The playing field – that is to say, the requirement that
`performance royalties be paid, and the standard under which royalty rates are set – should be
`leveled for all participants in the radio market. In short, “radio is radio,” regardless of whether it
`is AM/FM radio, HD radio, satellite radio, cable radio or Internet radio. See, e.g., In re Petition
`of Pandora Media, Inc., No. 12 Civ. 8035 (DLC), at 14 (S.D.N.Y. Mar. 18, 2014) (Opinion &
`Order) (explaining that the “radio experience has remained constant through the years, regardless
`of whether radio programming is transmitted by broadcasting, through a cable, from a satellite,
`or over the internet”).1
`
`Continuing the distinctions between various forms of radio established in 17 U.S.C. § 114
`
`– whereby AM/FM radio is exempted from any sound recording performance right obligation,
`while satellite, Internet, and other audio services (including simulcasts of those very same
`AM/FM broadcasts) are not – is bad and unjustified policy. Chiefly, it has the effect of
`subsidizing the largest entities in the industry – the $15 billion/year AM/FM radio station market
`– and is exactly the opposite of what the public would expect: accommodations to new entrants
`to encourage growth and entrepreneurship. Such a policy punishes digital pioneers with massive
`royalty obligations not borne by their established and entrenched competitor. For example,
`Sirius XM, despite enjoying a subscriber base of nearly 25 million, went 18 years until it
`achieved profitability in 2010 – and then only after running up cumulative net operating losses of
`$8 billion, merging the two predecessor companies, and narrowly surviving two brushes with
`bankruptcy. At the same time, it paid well over $1 billion in royalty payments to the recording
`industry, while AM/FM radio stations paid precisely zero.
`
`
`1 We do not mean to suggest by this that all services should pay the exact same fees, but rather
`that similar services should have their fees set pursuant to the same rate-setting standard and
`process. As we discuss below, the 801(b) rate-setting standard provides the Copyright Royalty
`Judges with the necessary and appropriate latitude to account for variations between particular
`services or service categories in the rate-setting process.
`
`
`
`3
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`That sort of inequity hampers innovation and job creation. While Sirius XM survived,
`
`and while most AM/FM stations continue to offer some form of simulcast, one need only survey
`the graveyard of services that have tried and failed to establish viable standalone digital radio
`businesses (including major companies like Yahoo! and AOL) to see the depth of the problem.
`Winners and losers in the audio entertainment field should be selected by the market on the basis
`of innovation and the entertainment and other value they provide to consumers, not historical
`anomalies or cost-side inequities created by statute.
`
`II.
`
`The Importance of the 801(b) Rate-Setting Standard
`
`Copyright owners have stated that 17 U.S.C. § 801(b) provides an artificial subsidy to
`
`services and suggested that the “willing buyer-willing seller” (WBWS) standard be applied to all
`Section 114 licenses, or that the 801(b) standard be altered, for example by removing the
`“disruption” factor found at 801(b)(1)(D). They are wrong.
`
`To start, it is important to highlight the continuing importance of the statutory licenses for
`
`national services using thousands (or tens of thousands) of sound recordings. Negotiating with
`each and every copyright owner would be extremely difficult and costly for at least two reasons.
`First, any service would need to be able to identify and then negotiate with the copyright owners
`of hundreds of thousands (or even millions) of songs. Second, the service would be forced to
`confront a record industry that has become incredibly concentrated, with three majors (and the
`smaller independent labels distributed by the majors) accounting for over 85% of the market.
`This concentration provides those record companies with tremendous negotiating leverage, as
`each major is a “must have” that many services cannot do without.
`
`
`
`For similar reasons, the 801(b) standard should be retained as written. Copyright owners
`blithely characterize the 801(b) standard as devoid of marketplace considerations. But the
`801(b) standard requires the Judges set rates that are “reasonable,” and in prior proceedings the
`Judges have started their rate-setting analyses under that standard by first identifying a “zone of
`reasonableness” defined by market benchmarks, and only then using the 801(b) policy factors to
`identify a rate within the marketplace range.2 Moreover, as the economists who have testified on
`behalf of the industry have argued repeatedly to the Judges, the 801(b) factors – such as the goals
`of ensuring a fair return and fair income for the parties, and recognizing their “relative
`contributions” – are those that parties to a marketplace transaction would themselves consider.
`The 801(b) standard thus allows the Judges to consider marketplace benchmarks and
`considerations as part of their determinations, but also provides the Judges with the latitude and
`flexibility to consider the enumerated policy factors (for example, in the Satellite I proceeding,
`the disruption that Sirius XM would suffer at the rates proposed by SoundExchange, as well as
`Sirius XM’s need to spend hundreds of millions of dollars in satellite-related expenditures).
`
`
`2 That approach has been blessed by the D.C. Circuit. See Recording Indus. Ass’n of America,
`Inc. v. Librarian of Cong., 608 F.3d 861, 865 (D.C. Cir. 2010). See also 17 U.S.C. §
`114(f)(1)(B) (specifying that “the Copyright Royalty Judges may consider the rates and terms for
`comparable types of subscription digital audio transmission services and comparable
`circumstances under voluntary license agreements”).
`
`
`
`4
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`The WBWS standard, by comparison, has proven to be a failure. In the absence of
`
`marketplace benchmarks involving non-interactive services, the Judges have been forced to rely
`on agreements between record companies and completely different categories of music users
`(e.g., interactive services) and adjust them for application to non-interactive services – an inexact
`science at best, and one that causes the Judges to apply all manner of imprecise “interactivity”
`and other adjustments. In the wake of the Webcasting II decision, Congress was compelled to
`enact two Webcaster Settlement Acts to allow the record industry and various services to
`negotiate “voluntary” agreements (the so-called “WSA” deals) at rates other than those set by the
`Judges, which would have bankrupted most services. By the time of the Webcasting III
`proceeding, some 95% of the market was operating under such agreements (i.e., not operating
`under rates set according to the WBWS standard), and only one commercial service of any size
`participated in the proceeding. Meanwhile, the three largest providers (Yahoo!, AOL, and
`Microsoft) all exited the market.3 In contrast, the decisions pursuant to the 801(b) standard have
`not resulted in the participants rushing to Congress for legislative relief.
`
`Retention of the 801(b) standard is justified not only because it is fundamentally superior
`
`to the WBWS standard, but also as a matter of simple fairness. Congress implemented (and later
`retained) that standard in recognition that services subject to those standards founded their
`services at a time when there was no sound recording performance right at all. To change the
`standard now would fundamentally undercut the reliance interests of those services.
`
`To those who would argue that anything other than a free-market standard amounts to a
`
`perversion of their property rights and an unfair subsidy from the recording industry to the digital
`services, it must be remembered that the statutory license was an integral part of the bargain
`reflected in the Digital Performance Right Act in 1995. Namely, sound recording record
`companies were provided with a digital audio transmission right against non-interactive services
`only on the condition that such services (who were being hit with a new royalty not borne by
`terrestrial radio) have access to a statutory license4 -- and, in the case of satellite radio, the
`801(b)(1) rate-setting standard. Sound recording owners present their right to public
`performance royalties as a given, and the statutory license as a burden on that right; but that
`position fails to recognize that the statutory license was the price for receiving the performance
`
`
`3 Similar problems plagued the satellite television market. After Congress shifted the Section
`119 compulsory license to a “fair market value” standard in the Satellite Home Viewer Act of
`1994, the rate increase implemented by the CARP was so drastic that Congress was compelled,
`in the Satellite Home Viewer Improvement Act of 1999, to slash rates by 45%. See Register of
`Copyrights, Satellite Home Viewer Extension and Reauthorization Act § 110 Report, at 8-11
`(Feb. 2006).
`
`4 This is compared to the interactive services – the providers of the so-called “celestial jukebox”
`– which Congress feared would substitute for CD sales and which drove the legislation. Sound
`recording owners, who had never enjoyed a public performance right in the U.S., received a full
`digital performance right as against on-demand streamers, but not as against non-interactive
`services that were not viewed as creating the same threat of substitution. Several CARP and
`CRB proceedings have lent further support to this distinction, as the record industry has failed to
`present any credible evidence that non-interactive services substitute for record sales.
`
`
`
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`right in the first place. See H.R. Rep. 104-274, at 14 (describing need for “balance” among
`interests and resulting “limitations” on the performance right, including the statutory license).
`
`III. The ASCAP and BMI Antitrust Consent Decrees
`
`Sirius XM operates pursuant to blanket licenses from ASCAP, BMI, and SESAC
`
`covering the public performance of musical works. In our experience, the ASCAP and BMI
`consent decrees and the licensing process that they mandate work relatively well. As a result of
`the mandatory license requirement, Sirius XM is assured that it has license coverage for the full
`repertories without needing to contact and negotiate with every single songwriter and publisher
`featured on its service. Each side has the opportunity to pursue rate-court litigation if it feels the
`other side is being unreasonable. Despite that possibility (or likely because of it), Sirius XM has
`enjoyed relatively amicable negotiations with each of ASCAP and BMI over the past decade,
`and has not needed to litigate. The publishing community, for its part, has received hundreds of
`millions of dollars in royalty payments from Sirius XM.
`
`The recent trends in this area, however, are disturbing. The first such trend is the
`
`publishers’ increasingly strident suggestions, in the press and on Capitol Hill, that the consent
`decrees are a relic of the past that should simply be dispensed with. Changing times, however,
`do not change the facts. As noted in the introduction, ASCAP and BMI collectively represent
`close to 50% of the market each – and a distinct 50%. A music service like Sirius XM must take
`a license from each of those entities to operate effectively – they are not substitutes for one
`another. ASCAP and BMI do not compete against one another on price, as one would expect to
`find in a typical “competitive” market – i.e., Sirius XM can’t tell ASCAP that if it doesn’t lower
`its price, we will purchase the rights we need from BMI instead. As is obvious, this gives each
`organization a tremendous amount of market power over licensees who need a license from each
`to operate a successful service.
`
`As a result, what was true in the 1940s when the consent decrees were adopted, and
`
`reiterated throughout the decades, remains just as true now: the PROs’ blanket licensing
`practices are “inherently anti-competitive,” reflecting their exercise of “disproportionate power
`over the market for music rights.” United States v. Broad. Music, Inc. (In re Application of
`Music Choice), 426 F.3d 91, 93, 96 (2d Cir. 2005); see also United States v. ASCAP (In re
`Application of RealNetworks, Inc.), 627 F.3d 64, 76 (2d Cir. 2010) (explaining that “ASCAP, as
`a monopolist, exercise[s] disproportionate power over the market for music rights”) (alteration in
`original) (citation and internal quotation omitted).
`
`While the efficiencies of the blanket licenses and one-stop shopping may justify the
`
`PROs’ existence, the consent decrees are crucial to protecting against the inevitably non-
`competitive rate demands (and the ability to shut a service down that does not accede to those
`demands) that result when publishers are allowed to negotiate collectively. Put simply: a “free”
`market in this context – i.e., one where publishers are given free rein to negotiate collectively
`and wield their market power without constraint – would be neither “fair” nor competitive” as
`the copyright owners like to suggest. The consent decrees do not interfere with competition;
`they prevent activities that would otherwise constitute clear violations of the antitrust laws.
`
`
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`The existence of national music services playing tens of thousands of songs in reliance on
`
`blanket licenses makes the consent decrees all the more necessary. Given the practical
`impossibility of a service identifying and negotiating privately with every copyright owner
`featured in its programming – ASCAP alone purports to represent over 500,000 songwriters and
`publishers, while services such as Spotify (to give just one example) advertise libraries of
`millions of tracks – a music service could face dramatic exposure to infringement liability (and
`statutory damages) absent the compulsory licensing mechanism of the consent decrees.
`
`Sirius XM's own experience with SESAC (which, unlike ASCAP and BMI, is not bound
`
`by a consent decree) drives home the importance of the consent decrees. In prior negotiations
`with Sirius XM, SESAC has demanded oversized fees that are totally unsupported by the
`information available regarding its catalogue, and always with the implicit threat of infringement
`liability. At the same time, it has refused to identify its catalogue of musical works, meaning that
`Sirius XM cannot (as it could with a single copyright holder) simply remove the tracks at issue
`from its service. This combination of concentrated ownership and either an unwillingness or
`inability to be transparent as to what works are actually in the repertory creates a completely
`untenable situation.5
`
`Such anti-competitive concerns have been exacerbated by recent attempts by publishers
`
`to withdraw from ASCAP and BMI. As detailed by Judge Cote from the record of the ASCAP-
`Pandora litigation, publishers that control hundreds or thousands of smaller catalogues (and
`millions of songs) under one licensing umbrella – making them effectively private PROs five or
`ten times the size of SESAC – have (a) insisted on the ability to partially withdraw from
`ASCAP; (b) made exorbitant fee demands, under the threat of litigation, to force direct licenses
`on services who no longer have access to those publishers’ works via the PROs; and (c) refused
`to provide catalog data that would allow the targeted service to diminish or stop performing the
`works of those publishers absent a more reasonable fee demand.
`
`To the extent PRO withdrawals become a regular feature of the music licensing
`
`landscape, complete transparency with respect to copyright ownership – i.e., what exactly is in
`the catalogues of each publisher – is an absolute must. Congress should insist on a
`comprehensive, up-to-date public database of musical work and sound recording ownership
`information that is available freely to all potential licensees. Second, licensees should enjoy a
`safe harbor from statutory infringement exposure for copyright owners in such situations who
`fail properly to identify their works and allow reasonable and sufficient time to remove them
`from the service’s servers and playlists. It is a travesty that a company can assemble millions of
`copyrights under a single licensing umbrella, insist on an exorbitant fee, but then not tell the
`licensee which copyrights it is forcing the service to license or stop playing.
`
`IV.
`
`Pre-72 Recordings
`
`Sirius XM has been the target of a spate of recent lawsuits regarding its use of sound
`
`recordings fixed before February 5, 1972 ("Pre-72 Recordings"). Three suits involve a putative
`
`
`5 Judge Engelmayer recognized this exact problem in his recent summary judgment ruling in the
`television broadcasters’ case against SESAC. Meredith Corp., et al. v. SESAC, LLC, No. 09 Civ.
`9177 (PAE), 2014 WL 812795 (S.D.N.Y. Mar. 3, 2014).
`
`
`
`7
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`class of record companies suing Sirius XM in California, Florida, and New York seeking
`damages and license fees under the law of those three states. A fourth suit involves the major
`record companies and ABKCO (coordinated by the Recording Industry Association of America)
`suing Sirius XM in California for damages and license fees pursuant to California law. Those
`same Plaintiffs have also sued Pandora in state court in New York.
`
`Simultaneous with these state-law cases, SoundExchange – the entity that collects and
`
`distributes royalties for copyrighted (i.e., “Post-72”) recordings pursuant to the statutory licenses
`found at Sections 112 and 114 of the Copyright Act -- has sued Sirius XM in the District of
`Columbia for failure to pay for the same performances of Pre-72 Recordings under
`the federal statutory license. SoundExchange has also lobbied for introduction of the RESPECT
`Act, which would force statutory licensees like Sirius XM and Pandora to pay for performances
`of Pre-72 Recordings under the (federal) statutory license.
`
`
`
`
`Respectfully, the RESPECT Act is riddled with problems.
`
`First, and worst, by adding a new royalty obligation solely to digital services that
`currently pay for performances of Post-72 recordings under the federal statutory license, it
`only further exacerbates the above-described disparity between other audio services and
`terrestrial radio stations, which would continue to be exempted from performance royalties, not
`only for Post-72 recordings, but for Pre-72 Recordings as well.
`
`
`Second, the bill as drafted does not actually grant federal copyright protection to Pre-72
`Recordings: it simply forces statutory licensees paying for Post-72 recordings to pay royalties
`for Pre-72 Recordings as well, without creating any underlying entitlement to such
`payments.6 The bill thus effectively exempts Pre-72 Recordings from the limits that typically
`apply to works covered by the Copyright Act: for example, the need to register works prior to
`litigation; a limited term of protection; the “Homestyle” exemption at Section 110 (which
`shelters small business establishments and religious facilities from public performance liability);
`and, significantly, the DMCA safe harbors at Section 512 (which protect Internet services from
`infringement liability if they respond promptly to takedown notices from copyright
`owners). These limitations are crucial to the purposes of the Copyright Act, which seeks to
`strike a balance between copyright owners and the interest of the public in gaining access to
`copyrighted works. Owners of Pre-72 Recording should not gain the benefits of copyright
`protection (royalty payments under Section 114) without being subject to these important limits.7
`
`6 To the extent the Act is predicated on a purported state-law performance right in sound
`recordings, no such right exists. After months of litigation in three different states, the record
`companies have failed to demonstrate that such a right exists in those states, much less in the 47
`states in which no such litigation is taking place.
`
`7 The music industry has fought tooth and nail to deny the Section 512 safe harbor to services
`that offer Pre-72 Recordings – and succeeded – on the ground that a federal statute cannot shelter
`infringements of non-federally-copyrighted works. (See, for example, the UMG Recordings v.
`Escape Media case in New York). And the RIAA came out strongly against the federalization
`of Pre-72 Recordings in response to a recent Copyright Office inquiry on the subject, no doubt
`hoping to avoid the limitations in the Act. They cannot have it both ways.
`
`
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`8
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`
`More generally, the RESPECT Act does not serve the fundamental purpose of the
`
`Copyright Act: to serve the public interest by providing only the protection necessary to
`incentivize the creation of works in the first instance before allowing them pass into the public
`domain.8 Demanding a new and retroactive royalty obligation for recordings created 45 or more
`years ago will not, and by definition cannot, serve that purpose. Clearly, the protections that
`existed prior to 1972, which did not include the prospect of performance-related income, were
`more than sufficient to prompt the creation of such recordings. And no doubt the same was true
`of the period between 1972 and 1995, where there continued to be no public performance right –
`and millions of sound recordings created nonetheless.9 Absent any public performance right,
`recording artists continued to make recordings, expected that radio stations would play them, and
`in fact encouraged radio to do so because they knew it would help them sell even more records.
`
`
`
`In short, demanding payment now for what radio has never, in 100 years, had to pay for
`will merely create a windfall that the artists did not expect when they created the works. Sirius
`XM, by contrast, will be confronted with tens of millions of dollars in a new, unforeseen, and
`significant payment obligation that was not part of the rights framework in place when it started
`its business – money that will no longer be available for improving our products and services,
`innovating, or hiring new employees.
`
`
`* * *
`In conclusion, I would like to thank the members of the Subcommittee once again for the
`
`opportunity to submit this testimony. Sirius XM stands ready to provide any additional
`information or testimony that the Subcommittee would find helpful as it continues its
`consideration of these important issues. It is crucial that all participants in the music industry
`
`
`8 The Court of Appeals for the Second Circuit reiterated these basic principles just this week:
`“As the Supreme Court has explained, the overriding purpose of copyright is to promote the
`Progress of Science and useful Arts. . . . In short, our law recognizes that copyright is not an
`inevitable, divine, or natural right that confers on authors the absolute ownership of the creations.
`It is designed rather to stimulate activity and progress in the arts for the intellectual enrichment
`of the public.” Authors Guild, Inc., et al. v. HathiTrust, et al., No. 12-4547-cv, at 10-11 (2d Cir.
`June 10, 2014) (internal quotations and citations removed).
`
`9 The Sound Recording Act of 1971 was passed by Congress specifically to remedy the specific
`problem of record piracy, which was forbidden by laws in certain state laws but not in others.
`Congress thus intentionally withheld a public performance right, which it recognized had never
`existed at the state level (clearly radio stations were not paying performance royalties, and never
`had). Notably, the 1971 Act also bestowed federal reproduction and distribution rights solely to
`those recordings created after enactment on February 15, 1972. The effect of this was that once
`the Act was passed, recordings created even a few months earlier were left completely
`unprotected as to public performance rights, and unprotected with respect to unauthorized
`reproduction and distribution in states that had no record piracy laws. In light of this long
`history, the current complaints that Sirius XM and Pandora are acting unfairly or even
`“shamefully” by not paying performance royalties for pre-72 recordings ring hollow.
`
`
`
`9
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`Fraunhofer Ex 2023-9
`Sirius XM v Fraunhofer, IPR2018-00681
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`ecosystem – digital services as well as content creators – have a seat at the table as reforms are
`considered and debated.
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`10
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`Fraunhofer Ex