New York, NY – April 4, 2009 – Despite the Copyright Royalty Board’s (CRB) amended determination on mechanical royalties for limited downloads and interactive streams, the leading trade groups involved in the June 2008 settlement that provided the basis for the rates say they plan to abide by the original settlement.

But how will the amended determination affect the business dealings between industry players and publishers that weren’t part of the settlement?

Publishers not affiliated with the Harry Fox Agency want to maintain their rights to negotiate and settle these past and future uses with the various digital entities, says John Barker, president of Evergreen/ICG, which collects mechanical royalties on behalf of hundreds of publishers, many of which don’t license their works through HFA.

Indeed, the CRB itself observed in its final determination that “virtually no one uses Section 115 to license reproductions of musical works” since most licensing is done through negotiated agreements, not compulsory licenses. But the CRB also said its determination “exerts a ghost-in-the-attic-like effect” and will have considerable impact on negotiated rates.

One prominent and controversial exception to this rule is the licensing services provider Music Reports of Woodland Hills, Calif., the company that created would-be SoundExchange rival Royalty Logic and has challenged the constitutionality of the CRB (Billboard, May 31, 2008; billboard.biz, March 19).

Music Reports licenses music through compulsory licenses for limited downloads and interactive streams by sending a “notice of intention” (NOI) to publishers on behalf of digital service providers. The copyright information that accompanies its NOIs comes from its Songdex Database, which senior VP of business affairs and business development Les Watkins says contains copyright information on more than 13 million musical works. He calls it the “largest database of music copyright information in the world.”

For one of its clients, Music Reports licensed 252,000 songs directly from the majors, which accounted for 40.8% of that client’s 617,244-song catalog, and licensed another 270,500 songs, or 43.8%, through NOIs to indie publishers. That implies that the remainder of the client’s catalog was licensed through HFA.

Referring to the high number of indie songs that Music Reports licensed through NOIs to indie publishers, Watkins argues that digital services that rely exclusively on HFA and the majors to license music are “infringing indie publisher copyrights on a massive scale.”

Watkins is clearly positioning Music Reports as a vital partner—if not necessarily an alternative to HFA—in reaching all music publishers.

HFA president/CEO Gary Churgin counters that his company usually can’t process licensing requests from Music Reports because the information it provides is “typically incomplete.”

Churgin says Music Reports often doesn’t follow up and resubmit its licensing requests with the necessary data, which he says could explain the low percentage of tracks it clears through HFA.

“When you look at the majors and us, the coverage is somewhere in excess of 90% of what’s being represented,” Churgin says. Moreover, HFA has expanded its capabilities so that publishers can use it just for digital licensing, while service providers can use it to research the publishers not affiliated with HFA.

Other publishing executives told Billboard that when Music Reports sends out NOIs, they often contain incorrect data. Others question whether Music Reports correctly implements its compulsory licensing, expressing doubts that the services it represents are properly licensed.

Watkins responds that “it is impossible to have a 100% up-to-date accurate database,” because song information constantly changes due to reversions, sales and split disputes, among other reasons. But he says Music Reports is always updating its database.

Patrick Sullivan, president of RightsFlow, a New York-based royalty payments and licensing company, says he prefers to negotiate licenses directly with HFA and the thousands of publishers not represented by HFA.

“In the end,” Sullivan says, “all parties function best when the labels, music services and their representatives, such as RightsFlow, approach the publishers with the olive branch of free-market licenses rather than the club of NOIs.”