When Eminem recently sued five ringtone companies, he placed a bright spotlight on the raging music industry debate over ringtone royalties. At first glance, it would seem there is not much to debate. Ringtone companies using songs without the artist's permission are violating copyright. Right? So, why is Eminem up in arms?
At the moment, ringtone companies charge users between $1.99 and $5.00 to download their favorite song. Some ringtone companies, like Jamster, have adopted the Netflix strategy and work by subscription. By paying a monthly fee, subscribers can download a set number of ringtones per month.
And if Billboard¨ magazine is any indication of popularity, riding the ringtone wave is where it's at for musicians. Billboard currently publishes a list of the 40 Hot Ringtones. With all the buzz around ringtones (and the money to be made), the clash between these catchy sound bites and the Copyright Act is clearly a battle that's looming.
Violating the Copyright Act
Music publishers and artists control or own the copyright in any musical composition that is made into a ringtone. The owner of a copyright has the exclusive right to reproduce or copy the work as well as the right to perform the work. So where does the violation occur?
When a piece of music is converted into a ringtone, it is reproduced. Under copyright, the right of reproduction allows the musical author to decide whether or not someone else can reproduce the work. If the ringtone company does not first seek permission before they transform music to cellphone signal, copyright has been violated.
According to artists, when a ringtone provider takes a copyrighted work and allows the consumer to try out ringtones, the right of public performance is what's on the table. And this right is violated if the ringtone provider does not pay a licensing fee on that performance of the work.
Music publishers could also argue that ringtone providers violate the right of distribution. This is the right to make your work available to the public.
Many ringtone providers have sought to avoid violating copyright laws by obtaining the individual licenses to the underlying works. However, the complexity of the laws have led other companies to sell ringtones that are not licensed, in clear violation of the Copyright Act.
Who is policing violations?
The Harry Fox Agency is responsible for mechanical licenses for nearly 30,000 U.S. music publishers. The Fox Agency recently announced that it would begin representing its members in licensing compositions for ringtone use. The agency has offered its members a few different licensing options. What no one knows yet is whether or not American music publishers have agreed to these licensing arrangements.
Regarding the public performance aspect, ASCAP and BMI (two of the largest performing rights societies in America) have announced their agreements with ringtone companies. ASCAP has opened the floodgates to its 7 million copyrighted works to ringtone provider Sonera Zed.
Ringtone revenues - salvation for the sagging music industry?
Record labels and artists have already begun to create licensing deals directly with cell phone companies. In fact, the music industry hopes that skyrocketing ringtone sales will boost declining CD sales. The industry hopes that the popularity of these 20 second soundbites will drive buyers to purchase the whole CD. But with consumers adopting and dropping ringtones at the drop of a hat, the longterm sales potential for CDs remains unknown.
But labels, artists and publishers are wisely trying to make the most out of their copyrighted work. And with 180 million cellphones ringing in the U.S. today, it's easy to see how ringtone revenues are one call the music industry doesn't want to miss.