Fighting a Fair Fight: The Music Industry Gives the Justice Dept. an Earful Share Thisi
The U.S. Dept. of Justice recently opened a review to examine whether the it’s decades-old ASCAP and BMI consent decrees should be amended or eliminated. These decrees (including many rights and obligations that were developed in the mid 1960’s) regulate how Performing Rights Organizations (PRO’s) operate.
So what does this review mean for us?
It’s a fairly technical discussion, but in a nutshell, these hearings are asking the Justice Department to untie our hands in the new digital world, and allow the free market to decide what music is worth.
Right now, many of the digital rights (e.g. streaming) are bundled in blanket agreements with PRO’s. These PRO’s, such as BMI & ASCAP, collect traditional performance income (e.g. revenue from radio, TV, and live venues). For a publishing company like us, about half of our income flows through these PRO’s.
Here’s where it gets tricky.
The trouble is that these PRO’s operate under the governmental “Consent Decree” mentioned above, and are regulated by two rate-court judges in a New York district court. Believe it or not, these judges are NOT allowed to consider a “willing-buyer willing-seller” standard, when they establish rates for Digital services like streaming.
So instead, they are using some arbitrary, bizarre, standards that were originally meant for radio or live venues – and were established decades ago. It’s kind of insane. This loophole allows services like Pandora to pay almost nothing for the songs, used to build these massive listener bases.
There are 3 major publishers (Sony, Warner, Universal) that own over 50% of the content. Last year, these major publishers tried to “un-bundle” their digital rights, and withdraw them from under the PRO agreements, so they could separately negotiate these rights with the digital services. At the end of 2013, the rate court ruled that these digital rights could not be “un-bundled” from the contracts. Since the publishers have no alternative mechanism to collect their other traditional income (e.g. radio and live venues) – they are now stuck in the PROs – and Consent Decrees – and a pretty pitiful rate standard from a lone judge.
Then National Music Publishers’ Association (NMPA) gave a pretty clear indication of how this hurts the industry on Wednesday when they released 2013 revenue data:
“Revenue across all income sources totals $2.2 billion. However, NMPA also estimated that roughly $2.3 billion is lost every year due to outdated copyright law and government regulations.” (“What’s New”)
So Pandora won that 2013 battle, but now it’s raised several sleeping giants who are out for blood. Now all these major publishers, PRO’s, NMPA, RIAA, etc. are using all their political muscle to fight this issue. Their testimony is very well orchestrated and they’ve used their political clout to force these hearings in less than 6 months.
A major publisher like Sony knows that a Pandora or Spotify can’t exist if they don’t play Beatles & Michael Jackson catalogs. So a Sony has enormous muscle, if they can negotiate fair rate standards.
So ultimately, they either need to be allowed to pull their rights out from under the “Consent Decree” …OR … they need the rate judge to be held to a “willing buyer, willing seller” standard.
This could be great for a publishing company like us in either case, but it ain’t gonna be pretty in the meantime!