NARM Articulates Its Position On Music Sampling Licenses

It is NARM’s position that no license is required if the use is limited to promotional use in support of sales of the same sound recordings.  If you are in the business of selling packaged sound recordings or providing licensed digital downloads, and if the 30-second samples are used for the sole purpose of promoting the sales or downloads you offer, then it is NARM’s view that you do not need a license because use of such samples would fall within the parameters of "fair use" as set forth in Section 107 of the Copyright Act.

We caution, however, that some record companies have begun offering licenses for such uses, in some cases at nominal or no cost, and in at least one case at a prohibitively high cost.  This is a radical departure from firmly established industry practices. 

BMI maintains that a 30-second clip is not exempt from licensing fees for the public performance. 

BMI's web site at http://www.bmi.com/licensing/webcaster/webans2.asp states on its second “FAQ” page: "There is no exemption for [a song clip that is] 30 seconds or less under U.S. Copyright Law."

We agree with BMI that there is no automatic exemption for use of a 30-second clip.  For example, there may be circumstances in which 30-second clips are used in a manner that directly exploits the copyright, such as to accompany a commercial for something else.  But where a retailer is selling lawful copies or downloads of sound recordings, whether in its physical stores and over the Internet, 30-second sound clips constitute fair use.  For all practical purposes, they are essential to the retailer’s ability to effectively market and merchandise the sound recordings.  Thus, it is NARM’s view that restrictions upon a retailer’s ability to offer song samples is a direct impairment the retailer’s rights under Section 109 of the Copyright Act, which guarantees the retailer the right to sell the sound recordings without the consent of the copyright owner.

In physical stores, customers can examine the packaging directly, and may lawfully listen to the entire album for evaluation purposes.  To facilitate similar opportunities over the Internet, retailers offer a small picture of the package and a chance to listen to only 30 seconds or so of each song.  It is hard to imagine a more reasonable approach, and it certainly does not impair the copyright in any way because there is no consumer market for 30-second song samples. Thus, while it may be the case that not every use of a 30-second clip constitutes fair use, we believe that a retailer's use of such clips solely to promote the sale of sound recordings at the point of sale would constitute fair use.  Moreover, if the retailer chooses to outsource such service, it continues to constitute fair use for a third party to provide that service as an accommodation to the retailer.  That is because the third party is not profiting from the intellectual property in the 30-second sound clips, but only from offering a service to the retailer to facilitate the retailer's fair use of the clips.  In other words, if it constitutes fair use for the retailer to prepare the sound clips in-house, the fact that it may be more convenient or cost-effective to out-source that service does not change the analysis.  The bottom line is that the only use of the song samples is to help the copyright owners make more money by selling more of their music.

We believe our position makes good sense and is entirely consistent with comparable practices in the marketing of other copyrighted products.  For example, book publishers neither demand a public performance royalty when the book’s copyrighted cover is displayed publicly, nor charge the retailer if patrons are permitted to leaf through books in the store.  Similarly, a soup can label may be protected by copyright, but the grocer is free to copy that label in newspaper advertising for next week’s sale on the soup.  When record companies place their sound recordings into the retail sales channel, they implicitly give each retailer the right to reasonably use those sound recordings to promote the sale of those very same sound recordings.  This presupposes, of course, that the clips are being used solely for point-of-sale promotion of the sound recordings being sampled, and not to promote other products or to draw visitors to an unrelated site.

Given that it is in the copyright owner's interest for retailers to heavily promote their music, it troubles us that retailers are being told they need permission (and perhaps a payment) to advertise what they sell.  Why would a copyright owner insist on a license to do something than can already be done?  One reason may be to try to establish a new "industry practice" of requiring such a license, and thereby give copyright owners greater control over distribution.  That is, if several retailers or their sound clip service providers sign license agreements, an argument might be made at a later time in court that this conduct is not fair use.  The argument might be: “Your Honor, it cannot be fair use because the industry practice is that these samples are licensed.  Just look at all these license agreements.” 

Another reason for this abrupt change may be part of the larger effort to control distribution.  Under the first sale doctrine, the owner of lawfully made sound recordings is free to resell them without the copyright owner's consent, so a requirement that consent be obtained in order to advertise them through sound clips would give copyright owners a powerful tool to control distribution.  Such a license could, in effect, control who can advertise the sound recordings, and how.  And, whoever controls the retailers’ right to advertise also controls the retailers’ ability to sell.  This type of control is particularly alarming when retailers are increasingly finding themselves in direct competition with retail ventures of the record companies.  Indeed, some of the new digital distribution models would allow the copyright owner to control every major element of the retail transaction, including the price.  It is for these reasons that retailers and distributors presented with "no cost" licenses to do what they may already do without a license should carefully examine the cost to them and to the music industry of agreeing to such terms. 

Although this is NARM’s position, and NARM opposes efforts to require our members to obtain a license to advertise the products they sell, we do not intend this position statement to be taken as legal advice.  Consult with your own counsel, look at the big picture, and make the business decision that is best for you.