HARD OF HEARING?

March 18, 2015

 

Peter Smyth

Recently the Senate Judiciary Antitrust Subcommittee held a hearing on the consent decrees governing the performance rights organizations, better known to us in radio as ASCAP and BMI.  Exciting, you say?  It may prove to be not only exciting but extremely disruptive to the broadcast industry if the big music publishers have their way.  To fully understand the impact of this seemingly inside-politics hearing, some history is in order.

We have to go back to the Roosevelt administration, when the music publishers were trying to hold radio stations hostage over the amount they were paying to broadcast songs.  The performance rights organizations had so much control over so many songs that they tried to dictate outrageous rates for their public performances on the radio.  The government stepped in and threatened to invoke the Sherman Anti-Trust Law.  The confrontation ended with a consent decree that established “fair and equitable” royalty payments to all songwriters and appointed a court to oversee adherence to the terms of the decree.  It has worked remarkably well over the more than 60 years the order has been in place.  The rights organizations allow broadcasters and other users, including streaming audio services, to license whole libraries of songs for public usage without having to negotiate with individual publishers or songwriters, and the organizations distribute the royalty checks to the composers.  It is an efficient system to clear performance copyrights.

A significant aspect of the existing structure is that most record companies have their own publishing houses and in fact, are the holders of those rights.  Since the advent of digital and streaming technology, they have been looking for openings to extract more revenue from the changing marketplace.  They now want to be free to negotiate directly with individual music users like radio, TV and online, on a case by case basis, and they are beginning with the digital rights.   It goes without saying that this would throw the current licensing system into chaos.  In fact, Pandora had to file suit to stop Sony Music from withdrawing the digital performing rights to part of its library without telling them which songs were being removed.  What happens when you broadcast a song for which you don’t have the rights?  The fines can run up to $150,000 per infringement!

At the root of these machinations is the music industry’s ongoing effort to extract more dollars from everyone else in the music delivery and promotion ecosystem.   They’re looking for a bigger slice of a changing pie.  To that end, they are lobbying for a way to loosen the current rules or throw out the decree all together.  In that effort, they attempt to charge unrealistically rich royalties or try to reconstruct their business model of the past when they charged premiums for CDs or albums and there was plenty of money to go around.  The problem for the music industry is that today’s consumers are listening on a song by song basis to more eclectic musical choices on more platforms than ever before. They know what they like and how they want to access it.  If renting music via streaming rather than purchasing to own is what the consumer desires, the market will follow them and we all will have to adapt to the new reality.  The solution is not simply to try to squeeze more money from those of us who continue to provide distribution, exposure and promotion of music on a daily basis.

Any changes to the consent decrees are opposed by the NAB and virtually all other businesses that pay royalties, and consumer and public interest groups as well.  This includes Pandora, the Consumer Federation of America, Public Knowledge, The Consumer Electronics Association, the Digital Media Association and the Computer and Communications Industry Association.  That’s not a commonly-seen list of players.

This brings us to the recent hearing by Senator Lee’s Judiciary Subcommittee.  This was an opportunity to make the case to the Senators that, for once, they should leave well enough alone.   Both sides presented their positions and the questioning was lively. Broadcasters were well-represented by Mike Dowdle of Bonneville and we thank him for his testimony.   We should all be concerned about the lack of transparency and the lack of competition among the performance rights organizations and their attempts to change a longstanding solution that works.

We are glad that the committee is taking an interest in this issue and support the NAB for making the case on behalf of broadcasters.   We need to continue to educate both legislators and the public on issues such as these that are vital to the health of our industry and to consumers as well.