The Cover-Song Business
I just learned that, by US statute, music publishers cannot prevent artists from recording and selling cover songs. According to CDBaby,
The Copyright Act provides for what is called a “Compulsory License” for downloads and CD sales, which means that if you follow the steps set forth by statute, you can distribute your recording of that song on a CD or over the internet.
Federal Judge Richard Posner writes that in the case of the compulsive license,
the licensee does not have to negotiate with the licensor, and so licensing costs are zero. The fee that the licensee under a compulsory license must pay is not meant to defray the licensing costs, in whole or in part, but to compensate the copyright owner for the value of his property (more precisely, the value represented by the copyright) . . . [L]ike fair use, compulsory licensing is a further testament to the perceived significance of intellectual property licensing costs as a barrier to the efficient allocation of such property.
The statutorily mandated royalty for selling an individual cover song is 9.1¢ if the song is under 5 minutes, plus 1.75¢ for each additional minute of duration.
After learning how small cover-song royalties were, I was a little puzzled that a market for cover songs has not developed. What would seem to me to be a cunning business model would involve producing near-identical recordings to popular hits and selling them at a discount. With iTunes downloads at 99¢, one could sell the covers for half price (49¢) and still make 40¢ of revenue from each download after paying the royalty. Alternatively, one might create a near-identical cover of a popular song and release it on the internet for 10¢, democratizing the market for popular music while recouping royalty costs.
One might be concerned with meeting the costs of producing a near-identical duplicate, but those would be negligible in comparison to the sales of most popular recordings.