Exploring Compulsory Licensing for Spoken Word

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The emergence of collective licensing for the literary works underlying comedy and other spoken-word content has disrupted traditional licensing for these works. Audio streaming companies like Spotify and Pandora have never paid royalties to the owners of the underlying literary works in spoken word recordings. New collective rights agencies, Word Collections and Spoken Giants have challenged this lapse in federal court. Streaming companies must obtain licenses to play these literary works, but it’s still unsettled how the copyright owners or the public will be affected by the outcome of this dispute under the existing licensing scheme. To balance the interests of the public and creators and to reduce the transaction costs of licensing, the performance of literary works embodied in sound recordings should be subject to a compulsory license and set rate.

A.    Introduction

Comedians and other proprietors of spoken word recordings are challenging licensing industry norms. By forming collective rights organizations and suing major streaming services to enforce their exclusive copyright entitlements, these creators have made it clear that they will be appropriately compensated for their work. To further this movement while also balancing copyright policy goals, a critical next step in spoken word licensing is to establish a compulsory licensing scheme for literary works. This paper discusses the strengths of compulsory licensing in the music industry and its potential to create balance in the spoken word industry. The scope of this paper is limited and does not extend to a discussion of rate setting, sound recording licensing, or potential antitrust implications in forming performing rights organizations.

B.     New Literary Works Licensing

In July 2022, comedian Lewis Black filed a lawsuit against internet radio streaming company Pandora.[1] Black is a stand-up comedian famous for his signature rants, which often highlight absurdity in current events.[2] In suing Pandora, Black appears to have channeled one of his gripes into a legal battle that may forever change the way spoken word recordings are licensed.

Black’s complaint alleges Pandora has infringed copyrights of 68 of his original works contained within five comedy albums.[3] It accuses Pandora of willfully performing and broadcasting the albums without obtaining a license to the underlying literary composition of the works.[4] As a result, Black alleges he has received no royalties or payments of any kind for the literary works that are embodied in these albums, although he has received royalties for the digital performance of the sound recordings.[5]

In addition to pleas for attorney’s fees and an injunction against further unlicensed use of his work, Black claims he is owed future royalties and actual damages for past infringement.[6] In the alternative to these profits and damages, he claims statutory damages totaling over ten million dollars.[7] Black asserts that Pandora willfully exploited the literary works without a license,[8] citing the company’s September 2013 public filings with the Securities Exchange Commission, in which the company identified the unlicensed use of comedy as a risk:

In May 2011, we started streaming spoken word comedy content, for which the underlying literary works are not currently entitled to eligibility for licensing by any performing rights organization in the United States. While pursuant to industry-wide custom and practice . . . . there can be no assurance that this will not change or that we will not otherwise become subject to additional licensing costs for spoken word comedy content imposed by performing rights organizations in the future or be subject to damages for copyright infringement.[9]

Black’s basic argument analogizes the licensing of spoken word to that of music. The comparison goes like this: In music licensing, one musical recording encompasses two separately licensable works:[10] The musical work is the underlying composition and lyrics authored by a songwriter or composer that may be fixed in forms like a sheet music or a recording.[11] The sound recording is comprised of the sounds that make up the recording itself.[12] In the modern music industry, it is common for sound recordings and musical works to be “created, owned, and managed by different entities,”[13] meaning different entities own exclusive rights to each part of a single song or album, and will therefore receive separate streams of revenue for the exploitation of that song.

Moreover, different entities are in charge of the administration of each right in the exclusive rights bundle afforded to copyright owners: Performing Rights Organizations (“PROs”) such as American Society of Composers, Authors, and Publishers (“ASCAP”) and Broadcast Music, Inc. (“BMI”) blanket license the public performance rights in musical works,[14] Sound Exchange collects royalties for sound recording performance from certain entities under § 114 of the Copyright Act,[15] and the Mechanical Licensing Collective (“MLC”) and the Harry Fox Agency (“HFA”) administer rights to reproduce musical works, including through covers and certain sampling, which is called a “mechanical” license.[16]

As a literary work is the spoken word equivalent to a musical work in a song, it follows that the same bundle of rights should need licenses for each use of the work. It is well-established that streaming services like Pandora must obtain public performance licenses and mechanical licenses for the musical works in songs they stream.[17] However, until the last few years, literary works underlying spoken word content have been streamed without their rights being analogously licensed.

Black’s lawsuit, among other comedians’ lawsuits, is one leg of the legal effort to force streaming services to obtain literary works licenses for spoken word. Backing up that effort are two new PROs, Spoken Giants and Word Collections, who purport to administer blanket performance, mechanical, and synchronization licenses for literary works in their repertoire.[18] This movement to license literary works aligns the spoken word industry with the music industry, but it is missing one essential component: the compulsory license.

C.     Compulsory Licensing in Music

Rapid technological advances in the music industry have created a whiplash in the legal landscape for music licensing. Among recent disruptors is digital music streaming, which has driven traditional methods of music dissemination to become mere novelties.[19] The shift to streaming dominance has also disrupted the power balance between copyright owners, music distributors, and consumers.[20] Albeit slowly, copyright law has adapted to technological changes by creating “safety valves” to preserve the policy goals of copyright: to ensure public access to works and to maintain incentives for creators to keep creating.[21] One of these safety valves is the compulsory license.[22]

Copyright’s first compulsory license was the “mechanical” license for the reproduction of musical works, now embodied in § 115 of the Copyright Act.[23] At the start of the twentieth century, music composers sued the companies that invented the player piano for infringing their copyrights by reproducing musical works on these new machines.[24] Congress eventually stepped in, and in an attempt to ensure composers got paid while also ensuring the public could benefit from the unprecedented access to music this new technology afforded, it created the compulsory mechanical license.[25] The mechanical license allows anyone to obtain a license to reproduce a musical work without the express permission of the copyright owner, so long as the licensee pays a pre-set royalty.[26] The compulsory license is non-exclusive, and parties are allowed to privately negotiate for a different license.[27] The safety valve role of the compulsory license is to guarantee that a copyright owner’s monopoly on ownership of the work does not inhibit public access to that work.

Compulsory licensing has come to play another important role in the modern music licensing landscape, which is to reduce the transactional costs of licensing individual works. Compulsory licenses allow “licensees to bypass costly or unfeasible negotiations . . . with a large number of individual music copyright owners.”[28] The compulsory license “permits the transfer of an entitlement in exchange for a fee set by a court or regulatory body using an external, objective standard of value.”[29] For music disseminators who aim to reproduce a large mass of works to create more value for listeners, compulsory licensing makes certain that the cost of contracting with individual parties does not outweigh the benefits of the transaction itself.[30]

Both rationales for a compulsory license for musical works (and for sound recordings under § 114) also apply in the spoken word context. To reduce transactional costs and serve the policy goals of copyright law, Congress should create a compulsory license for the reproduction and public performance of literary works embodied in sound recordings.

D.    Compulsory Licensing for Literary Works

Spoken word should be subject to a compulsory license for both the mechanical reproduction and the public performance of the underlying literary work. As an amendment to the current law, the new compulsory license should mirror the mechanical license of § 115 of the Copyright Act. Once a sound recording of a literary work has been distributed to the public under the authority of the copyright owner of the work within the US and territories, a compulsory license for the reproduction and performance of the literary work should be available to anyone who is authorized to distribute the sound recording and who has paid required royalties.

Two theories to justify compulsory licensing for literary works. First, it would act as a safety valve that balances the normative goals of copyright. Second, it would reduce the transactional costs of licensing individual works.

1.     Balancing Copyright’s Normative Aims

Copyright is a legal construct that “propertizes” intangibles to serve the constitutional mandate of promoting the useful arts.[31] Copyright law serves this mandate by creating a careful balance between two competing interests. First, copyright law gives creators exclusive rights to profit from their work to incentivize the creation of new works. Second, the law draws limits around those exclusive rights to guarantee public access to enjoy and build on those works. Compulsory licenses generally are created to serve these goals, and a literary works compulsory license would be no exception.

Copyright policy has recognized the value of innovation in the dissemination of the arts, and so it has created certain safety valves. One well-known safety valve in copyright is the fair use doctrine, which allows for the transformative use of a copyrighted work, unlicensed and at no cost.[32] Compulsory licenses are another example. The mechanical license for music was created to prevent copyright owners from harming efforts to develop new forms of music dissemination by charging exorbitant licensing rates. In the case of literary works embodied in sound recordings, a similar risk exists.

Owners of spoken word works recognize both the benefits and drawbacks of having the work shared through streaming services. On one hand, the works are being shown to a wider audience, creating valuable exposure to their works. Additionally, these owners receive royalties from the performance of the sound recording, and if they were to license the literary works, royalties from those rights as well. However, streaming is a threat to other forms of revenue for many of these works, and many argue it leaves creators tragically undercompensated.[33]

Until the early 2010s, stand-up comedy was primarily distributed through major traditional on-air networks, including HBO and Comedy Central.[34] During the 2010s, the biggest comedians started distributing their work direct-to-consumer, either on their own websites, on YouTube, or on networks that began to adapt their own online direct-to-consumer services.[35] Now, some of the most popular forms of comedy distribution are through streaming, social media, and other non-traditional forms of direct-to-consumer platforms. The landscape is constantly changing, and because of this innovation on behalf of both copyright owners and distributors, it is now easier than ever for listeners to access comedic and spoken word content.

With the breakneck shifts in methods of comedy distribution, literary works owners are anxious to maintain control over how their works are licensed and paid for, but copyright policy insists that this control must not impede innovation. In the analogous music industry, “only four publishers control almost three-fourths of the most important musical compositions in copyrights,”[36] amassing a collective power in negotiations with distributors. Compulsory licensing is essential to this dynamic. Literary works owners likely do not have the same kind of market power that music copyright owners do;[37] however, their ability to collectivize through PROs may change this power dynamic and create a necessity for a safety valve like compulsory licensing.

Opponents of compulsory licensing schemes argue that they diminish the power of copyright owners too much by squashing their ability to exclude if they disapprove of the use or payment.[38] However, compulsory licenses, unlike the fair use safety valve, do still require compensation for valuable use. Under the current literary works licensing scheme, there is no existing royalty paid to copyright owners because the unchecked market has allowed unlicensed use to proliferate. A compulsory license could resolve the currently contentious disputes between copyright owners and streaming services and get creators paid efficiently.

2.     Reducing Licensing’s Transactional Costs

A compulsory license for literary works recordings can also alleviate transactional costs within the licensing industry. Although the primary purpose of compulsory licensing is to further copyright’s normative goals, compulsory licensing also serves the increasingly relevant purpose of simplifying the intricate process of licensing. Without a compulsory scheme, negotiating and obtaining licenses for the use of literary works in sound recordings could become a complex and time-consuming process, involving multiple stakeholders, extensive legal documentation, and intricate negotiations that cost more than the transaction is worth to the involved parties. Ultimately, the greatest harms from transaction costs fall on the public, who is deprived of the wider distribution of valuable works. 

The negotiation of a license for any work has at least two parts. First, the copyright owner needs to agree to license the work, and second, the parties need to agree on a price for the license. On a small scale, these negotiations would not be overly complex, but in modern licensing, where multiple parties own and administer different rights in one work, the process can quickly become excessively burdensome, especially for licensees who are new to the market.

Licensing literary works to streaming services is currently not overly complex (relative to music streaming, which is very complex[39]), in part because only the sound recordings are currently being licensed. However, introducing literary work licensing adds new layers, especially where multiple rights in one work must be licensed. Moreover, whereas the music industry has become nearly monopolized by a few companies, comedians and spoken word artists are much less likely to belong to such a consolidated group of publishers, meaning streaming services would need to negotiate with a greater number of publishers on much smaller transactions. This could quickly devolve to become a cost that neither party is able or willing to take on. Compulsory licensing alleviates these costs. By setting predetermined rates and terms, compulsory licensing eliminates the need for protracted negotiations and cuts down on time and legal expenses.

E.     Limitations

Although the scope of this essay is extremely limited, it is worth mentioning the plethora of surrounding debates that may take place in the same context. Rate setting, sound recording licensing, and antitrust concerns are three of the most relevant additional concerns.

Rate Setting. Comedian Gianmarco Soresi has joked, “Spotify took my album off their platform, but luckily I found a penny on the street today, so I won’t notice the difference for a couple years.”[40] It is no secret that all content creators who have their work streamed on Spotify, Pandora, or any other streaming service have complained of dramatic undercompensation, and streaming services have their own concerns about their ability to pay any increase in royalties.[41] Where there are compulsory licenses, there are rate setting debates, and where there are rate setting debates, there is a variety of rate setting philosophies. The Music Modernization Act (“MMA”) and recent rate setting regulation have focused almost exclusively on recreating an arms-length price, but prior tests like the use of the § 801(b) factors have emphasized copyright policy goals.[42] A new licensing scheme for literary spoken word works is an opportunity to craft a fresh approach to rate setting.

Licensing of Sound Recordings. Some argue that there should be a compulsory licensing scheme for digital sound recordings on interactive services to help regulate the power dynamics between disseminators and copyright owners.[43] Whether or not this is regulated will affect the licensing of literary works and would be an essential component of the licensing ecosystem for these works.

PRO Antitrust Concerns. It is beyond the scope of this paper to discuss the antitrust implications of the formation of these spoken word PROs. ASCAP and BMI have been subjected to government consent decrees because of concerns over their inordinate market power.[44] These concerns may also arise in the context of literary works PROs, which could alter the current trajectory of licensing.

F. Closing

I hope to engage further in this topic area as it is ripe for additional exploration. Comedians and other spoken word authors are shaking up the licensing world, and it could be an excellent opportunity to re-approach some of the themes that consume the licensing industry more broadly. Please contact me if you have thoughts or feedback on this preliminary approach to the subject matter. Thank you for reading!

Notes.

[1] Complaint for Copyright Infringement, Black v. Pandora Media, LLC., No. 2:22-cv-04634 (C.D. Cal. July 7, 2022), https://perma.cc/94WQ-QSG7

[2] About Lewis, Lewis Black.com, https://www.lewisblack.com/pages/about-lewis (visited July 27, 2022).

[3] Complaint for Copyright Infringement, Black v. Pandora Media, LLC., No. 2:22-cv-04634, 4-5 (C.D. Cal. July 7, 2022), https://perma.cc/94WQ-QSG7.

[4] Complaint, supra note 3 at 11.

[5] Id. at 12.

[6] Id.

[7] Id.

[8] Id. at 9.

[9] SEC Form S-3 Filing for Pandora Media, LLC, SEC Edgar 21 (Sept. 16, 2013) https://www.sec.gov/Archives/edgar/data/1230276/000104746913009097/a2216690zs-3asr.htm. Pandora identified this risk in its filings from 2011 to 2017 but stopped doing so after being acquired by Sirius XM. See Complaint, supra note 3 at 9.

[10] Office of General Counsel, U.S. Copyright Office, Copyright & The Music Marketplace 18 (Feb. 2015) [hereinafter The Music Marketplace], https://www.copyright.gov/policy/musiclicensingstudy/copyright-and-the-music-marketplace.pdf.

[11] Id.

[12] Id.

[13] Id.

[14] Staffan Albinsson, A Costly Glass of Water: The Bourget v. Morel case in Parisian courts 1847-1849, 96:2 Swedish J. Music Research 59, 62 (2014).

[15] Jacob Victor, Reconceptualizing Compulsory Copyright Licenses, 72 Stan. L. Rev. 915, 955 (2020).

[16] Music Modernization Act § 102(a)(4), 132 Stat. at 3684 (codified at 17 U.S.C. § 115(d)(1)(A)).

[17] American Bar Association, Digital Dilemmas: The Music Industry Confronts Licensing for On-Demand Streaming Services, https://www.americanbar.org/groups/intellectual_property_law/publications/landslide/2015-16/january-february/digital-dilemmas-music-industry-confronts-licensing-on-demand-streaming-services/#:~:text=A%20digital%20streaming%20service%20must,ASCAP%2C%20BMI%2C%20and%20SESAC (Accessed Dec. 21, 2023).

[18] Spoken Giants, Licensing, https://www.spokengiants.com/licensing (Accessed Dec 15. 2023); Word Collections, https://www.wordcollections.com/ (Accessed Dec. 21, 2023).

[19] See Victor, supra note 13, at 972; see also John Seabrook, Revenue Streams, NEW YORKER, (https://perma.cc/3R2Q- CM5L).

[20] Victor, supra note 13, at 976.

[21] See Jeanne C. Fromer, Market Effects Bearing on Fair Use, 90 Wash. L. Rev. 615, 620-21 (2015).

[22] Victor, supra note 13, at 921.

[23] 17 U.S.C. § 115 (2018).

[24] Howard B. Abrams, Copyright's First Compulsory License, 26 Santa Clara Computer & High Tech. L.J. 215, 218 (2009).

[25] Victor, supra note 13, at 975 (“[T]he mechanical license was originally created to prevent copyright owners who had previously relied on a specific form of dissemination—sheet music publishing—from frustrating the development of new, spillover-generating forms of dissemination: the player piano and record player”).

[26] 17 U.S.C. §115(b); § 701.

[27] 17 U.S.C. §115(c)(1)(D).

[28] Victor, supra note 13, at 919.

[29] Victor, 928.

[30] See Mark A. Lemley & Philip J. Weiser, Should Property or Liability Rules Govern Information?, 85 Tex. L. Rev. 783, 786-787 (2007).

[31] U.S. Const. art. I, § 8, cl. 8.

[32] See 17 U.S.C. § 107 (2018); see also Victor, supra note 13, at 930.

[33] The Music Marketplace, at 75.

[34] Variety, Comedians Skipping Traditional Distribution to go Straight to Fans, https://variety.com/2014/tv/news/comedians-skipping-traditional-distribution-to-go-straight-to-fans-1201223045/ (Accessed Dec. 15, 2023).

[35] Id.

[36] Victor, supra note 13, at 977.

[37] In 2021, amidst the initial demands from comedy PROs to Spotify for it to pay for the underlying literary works of comedy content, the streaming service temporarily removed a number of popular comedy albums from the service without consulting with the performers. Many see this as an attempt to demonstrate the market power that streaming holds, or at least once held, over comedians. See CNN, Spotify pulls some comedy content amid royalties dispute, https://www.cnn.com/2021/12/05/business/spotify-royalties-haddish-williams-mulaney-comedy-streaming-dispute-scli-intl/index.html#:~:text=Spotify%20is%20not%20joking%20around,to%20rights%20agency

%20Spoken%20Giants. (Accessed Dec. 15, 2023).

[38] Jeffrey A. Wakolbinger, Compositions Are Being Sold for a Song: Proposed Legislation and New Licensing Opportunities Demonstrate the Unfairness of Compulsory Licensing to Owners of Musical Compositions, 2008 U. Ill. L. Rev. 803, 821 (2008).

[39] Jeff Price, The Definitive Guide to Spotify Royalties, https://medium.com/@JPriceOfMusic/the-definitive-guide-to-spotify-royalties-dc5960862c00 (Accessed Dec. 21, 2023).

[40] Gianmarco Soresi, Twitter, https://twitter.com/GianmarcoSoresi/status/1465880092278767616 (visited Dec. 17, 2023).

[41] The Music Marketplace, at 75; see also Victor, at 977-978.

[42] Copyright Act of 1976 § 801(b)(1), 90 Stat. at 2594-95.

[43] Victor, supra note 13, at 977-978

[44] See United States v. BMI, 275 F.3d 168, 171–72 (2d Cir. 2001); see also Antitrust Consent Decree Review, U.S. DOJ, http://‌www.‌justice.‌gov/‌atr/‌cases/‌ascap-‌bmi-‌decree-‌review.‌html.