Last Thursday, the House Judiciary Subcommittee on Courts, Intellectual Propery, and the Internet held a hearing titled “Innovation in America: The Role of Copyrights.” This was the latest in a series of convenings at the subcommittee since US Register of Copyrights Maria Pallante called for a comprehensive review of copyright law in March 2013. (You can see our coverage of the first hearing here; check out Pallante’s keynote from our 2011 Summit here.)

The hearing generated big news even before any of the witnesses spoke, as Rep. Mel Watt (D-NC) announced his intentions to introduce a bill recognizing a performance right for sound-recordings on AM/FM radio — meaning that performers and sound recording owners (usually labels, but sometimes the artist) would finally get paid when their songs are played (currently, only the songwriter and publisher is paid.) Watt said that he would introduce the bill “before the August recess.”

Watt’s bill will mark the first attempt at closing this exemption since 2009’s failed Performance Rights Act. It also comes at an opportune time, as the performance right has been identified by Pallante as one of the first things Congress should consider fixing. Pallante has called the exemption for broadcast radio “indefensible.” We couldn’t agree more — the absence of a performance right for terrestrial radio puts us in the company of North Korea and Afghanistan; it also means US artists can’t collect royalties for radio airplay abroad, leaving countless millions of dollars on the table that would otherwise go to American performers. This should be a non-partisan no-brainer: it’s a classic trade imbalance that weakens America’s economic position on the global stage, and disadvantages American producers. (But we digress!)

Witnesses at the hearing included representatives of Copyright Alliance, American Society of Media Photographers, Getty Images, and  2D-to-3D film conversion outfit Stereo D. We were particularly interested in hearing the testimony of Tor Hansen, a co-founder of the Yep Roc record label. Yep Roc is a well-regarded indie with a reputation for treating artists and consumers fairly; Hansen is also co-founder of Redeye Distribution, an indie distributor that works with a broad array of independent labels like Thrill Jockey and Kill Rock Stars, and a board member of the American Association of Independent Music (A2IM), a trade group representing indie labels big and small.

Sandra Aistars of the Copyright Alliance opened the witness testimonies by emphasizing that copyright and technology should not be framed as warring interests with lawmakers setting the balance. But it took Hansen to explain what this concept looks like in real life. Asserting that the internet has been a “great equalizer” for independent labels working to create, promote, market, monetize and introduce new music, Hansen made the case for technology as a powerful tool, but not without its downsides. Some are fond of claiming that labels are merely trying to defend “legacy” business models, but Hansen touted the indie music industry’s embrace of internet-enabled technologies. He was able to do this credibly: his business was born in the internet era.

That embrace of new technologies doesn’t mean ignoring the challenges associated with unauthorized downloading or the importance of creating systems that ensure fair compensation when creative work is used. Hansen’s written testimony (worth reading in full) lays out a straightforward case. He notes that unlike major labels, indies “do not have the financial means or resources to house a stable of systems people and lawyers to monitor the Internet and bombard users with DMCA takedown notices for seemingly endless illegal links to our musical copyrights. Our members have limited budgets and whatever revenues and profits they can eke out are directed toward their primary goals, music creation by their music label’s artists and then the marketing and promotion of this music to the American public.” Certain protections for online services are undoubtedly important to innovation, but it is important to consider how the independent creative community is faring under existing law.

Hansen’s testimony also supported the way money is collected and distributed by SoundExchange for radio-like non-interactive digital services (think Pandora and other webcasters). Under federal law, compensation is split between artist and label, with the featured performer’s share (45 percent minus 5 percent to background performers) going directly to them, and not subject to an artist’s “debt” to their label. If, as is becoming more common, the performing artist owns their sound recordings, or masters, they get 95 percent. (For more info, see our SoundExchange fact sheet.)

The subtext here is that the growing number of direct licensing deals have the potential to undermine how the broader category of artists and labels are paid for the use of their work. And Hansen joined the chorus of voices calling for a performance right, noting that “every country in the world holds royalties to our copyrights because we do not pay out.”

Later, Rep. Jason Chaffetz (R-UT) confronted Hansen with an awkward line of questioning about where he promotes Yep Roc’s artists, suggesting the label might advertise in The Yellow Pages. Hansen seemed a little puzzled by the question, but dutifully named a number of ways Yep Roc tries to reach audiences, including various kinds of media and in venues around the country.

Chaffetz seemed to be attempting to get Hansen to tout the promotional value of outlets like radio, and Internet radio in particular. Chaffetz, as you may remember, was a sponsor of last year’s Internet Radio Fairness Act (IRFA), which would have changed the way internet radio rates are calculated, likely resulting in a reduction in revenue for performers and sound recording owners. (Of course, the fact that a particular use of a sound recording or composition may have some promotional value does not automatically exempt anyone from paying for that use. We’ll have a lot more to say about that in a forthcoming post.) 

Overall, witnesses attempted to highlight the experience of working-class creators, implicitly making a case that copyright isn’t fundamentally about lining the pockets of huge corporations.  In the past, large corporate concerns like the RIAA and the ever-consolidating major labels have been the dominant voice. Their absence from this largely non-contentious hearing allowed for a breath of fresh air. (It also neatly sidestepped the usual swarm of RIAA-hating online commenters re-litigating Napster-era conflicts and attacking the now-retired strategy of suing individual file-sharers — dialog that has the potential to distract from the present task of establishing a functional 21^st century copyright regime). As the major labels shrink their rosters and focus more on supporting the careers of superstars, indies account for a larger share of the population of recording artists. This is why their needs should be closely considered.

At the same time, we also agree with Rep Judy Chu (D-CA) who noted of a call for artists themselves to be more directly part of the process of considering and shaping copyright laws. It’s absolutely vital for the concerns and perspectives of a wide variety of working musicians to be considered as debates move forward. Nonetheless, the fact that a representative of a mid-sized indie label would be tapped to offer some music industry perspectives represents a major step forward towards a healthier and more relevant conversation.

Unfortunately, the hearing was cut short due to a floor vote, meaning many important issues were left undiscussed. The length of copyright terms, procedures for renewals, orphan works, and DMCA revisions will have to wait for the next hearing (which happens to be Thursday, August 1, 2013).

Of course, it didn’t take long after Watt’s announcement of a new performance rights bill for the National Association of Broadcasters (NAB) to once again misleadingly call the performance right a “tax.” (NAB is the primary backer of the curiously-named Local Radio Freedom Act, a non-binding resolution expressing opposition to any expansion of performance rights.) The NAB’s Washington presence is powerful and well established, so Rep Watt will have quite a battle ahead — we’ll have a full analysis of his bill upon its introduction.

Meanwhile, stay tuned for the next hearing on Thursday, which will focus on the role of technology companies in innovation. We’ll be covering it once again, live on Twitter, with a recap right here.