It would be hard to calculate the outrage that would result if Bernie Madoff were caught running another Ponzi scheme from prison and then launched a high profile lobbying case to get the DOJ to set him free.
That is precisely what the big music publishing corporations and performing rights organizations (PRO) are doing and rather than being outraged both the Obama Administration and Congress are considering setting them free to run their next scheme.
In the case of the PRO’s their sins were less Ponzi and more of the anti-trust variety. They were both found to be abusing their absolute control over 90 percent of the worlds music to extort higher rates from music users. As a result, since 1941 the two biggest PRO’s, the American Society of Composers Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) have been required to operate under what are known as “consent decrees” intended to restrain their monopoly behavior and protect music users.
Think of a consent decree like probation for a someone who has violated the law: a particular set of rules they are required to follow and a set of prescribed consequences if they don’t. Together these things are intended to prevent the lawbreaker from repeating the behavior that got him in trouble in the first place.
But without a genuine desire to change, rules are just a system to be beaten. That is precisely what the PRO’s and publishing corporations have spent many years and many millions of dollars trying to do: beat the system; even blatantly violating the consent decrees and attempting to rewrite the royalty laws to extract the rates they would have otherwise been able to extort.
The latest instance of the industry’s recidivism was on display earlier this month when the DOJ announced that ASCAP was paying a $1.75 million fine for violating the terms of the consent decree. The DOJ found that ASCAP was engaging in anti-competitive behavior in violation of their consent decree by requiring exclusivity contracts that forbid content owners from engaging in free market negotiations to license their music outside of ASCAP.
ASCAP’s exclusivity contracts show more than disregard for the consent decrees. They show the same contempt for competition that was exhibited in 2012 when ASCAP and Sony Music Publishing colluded in an attempt to extort Pandora into paying vastly higher than market rates. This too was an egregious violation of ASCAP’s consent decree, the terms of which ultimately enable a federal judge to step in and put an end to their illicit plan.
It is this same contempt for market competition that is driving their top legislative priority—the Songwriters Equity Act (SEA).
The SEA is the industry’s attempt to attain through legislation what the consent decrees are currently prohibiting: excessive and punitive increases in the royalty rates the digital platforms pay to license music. It seems of little consequence to the industry that royalty payments already consume over two-thirds of these companies’ revenue or that such an increase would likely put them out of business.
As justification for both SEA and their demands to be released from the consent decrees, the industry likes to dispatch individual songwriters and artists to Washington to plead the its case for equity. They often cite statistics about how little some songwriters get paid and attempt to paint the picture that the industry as a whole isn’t taking in enough money. They malign music users as villains who are getting a free ride.
The culprits aren’t the music users that are each already paying hundreds of millions of dollars annually to license music. The problem also isn’t that the industry is woefully underpaid. ASCAP alone takes in over a billion dollars a year and overall revenue across the music industry is at all-time record breaking highs.
The problem for artists and songwriters is the industry system where mega corporations take mega chunks of the royalties along with any number of other players such as agents who take their toll before the final payments trickle down to the actual creator of the content. Giving these corporations the power to kill off digital streaming music platforms and raise costs for small businesses, restaurants and the like with exorbitant rate increases won’t change any of that. Even if the industry somehow finds another way to rake in massively more revenue, equity for songwriters would still only be found by addressing the formulas for distributing the billions of dollars being collected by the PROs.
The industry’s other favored argument is to point out how long the consent decrees have been in place—over 75 years now. Unlike probation, consent decrees don’t come with an expiration date. So whether they’ve been in place 75 years or 175 years as long as the conditions remain the same, the need from them to remain in place continues. None of the fundamentals of the PROs have changed. ASCAP and BMI still control the rights to 90 percent of the world’s music. As evidenced by their continued contempt for the competition mandated by the consent decrees neither have the PRO’s and music publishing corporations.
Just as violations of probation should be punished not rewarded so should the industry’s flouting of these consent decrees. Rather than considering ways to set the industry free, the DOJ and Congress should be incensed at the industry’s audacity and exploring ways to reign it in and create more of a market for music licensing. Consumer demand will continue to drive future of music consumption towards increasingly diverse delivery platforms and technologies that will require a robust and flexible licensing model. But left unchecked the industry’s insatiable appetite for ever more money and their disdain for market principles would prevent all that and not only kill off current technology beloved by music aficionados all over the world, but would snuff out future advancements.