A Primer on Licensing Music For Digital Distribution

A digital download is functionally similar to the sale of a CD single. Therefore, the licensing of musical content for this purpose varies little from the traditional process for albums and songs. The user must obtain both a master-use license from the owner of the sound recording and a mechanical license typically from the publisher for use of the song.

Regarding permanent downloads, “there's been an understanding in the business that if a record company has an existing mechanical license [to record a particular song] that enables them to manufacture and distribute CDs and CD singles, then that mechanical license should cover downloads,” says Tuhin Roy, Managing Director of the Digital Rights Agency. However, Lauren Apolito, Vice President of Business Development at The Harry Fox Agency notes that in Rodgers and Hammerstein Organization v. UMG Recordings Inc., 60 U.S.P.Q.2D (BNA) 1354, the U.S. District Court for the Southern District of New York ruled that a mechanical license did not necessarily extend to all online uses. Although UMG Recordings Inc. had obtained compulsory mechanical licenses from the Harry Fox Agency for the public distribution of sound recordings, use of the recorded compositions by UMG subsidiary Farmclub.com on its Web site was not acceptable. Rather than distributing recordings “to the public for private use” as is permitted by Sec. 115 of the U.S. Copyright Act, the Web site allowed users to listen to recordings of their choice in a streaming audio format. The district court further ruled that the defendant was not permitted to store the sound recordings on its servers. Because Farmclub.com's “server copies [were] neither intended for distribution to the public nor part of a process for distributing digital copies of the existing phonorecords, Section 115 would not give the Defendants a right to a compulsory license for the server copies,” the court concluded.