Jimmy Buffett likes to tell the story of when he first started hearing his songs on jukeboxes. It was exciting people were listening to his music, he said.
But he didn’t make a dime out of it, he said, because jukeboxes back then were controlled by the mob. “You didn’t get paid, and you didn’t ask questions,” he said.
It’s funnier when he tells it obviously, but the point he makes is not funny at all. The music industry is not the auto industry. The people who make our music and the composers who write it are wrangling with major corporations for the rights to their work. They’re vulnerable to exploitation and outright theft.
And, in the case of composers, the only thing standing between the songwriters of today and Jimmy Buffett’s jukebox experience 40 years ago is that the industry has been structured by courts to ensure fairness, ease entry and access to the marketplace and promote transparency.
The two top performance rights organizations (PROs) – The American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) – control more than 90 percent of all music. They license large categories of music to the businesses where you hear songs every day – stores, bars, restaurants, hotels, coffee shops and even radio stations.
Because of a record of anticompetitive behavior, both ASCAP and BMI operate under consent decrees established by judges in 1941 and administered by the Department of Justice since. These consent decrees allow the two collectives to operate as monopolists but provides restraints against monopoly pricing.
Two years ago, ASCAP, BMI, and their largest publisher member went to the Justice Department and asked to ease the market protections of the consent decrees. Despite record revenues – ASCAP disbursed more than $1 billion to owners of music compositions in 2015 – the two rights organizations and their largest publishers wanted to water down the consent decrees in a way that would drive up the price of music.
They pushed moving to what is known as a “fractional” licensing system, under which businesses would have to negotiate music rights with all owners of rights to a song. Now, one owner is sufficient to license a song, the licenses are not exclusive so other co-owners can seek their own deals, and all proceeds must be distributed fairly.
These are the rights to the compositions themselves, not just the playing of the music. So we’re not talking about a four-piece band but about potentially 10-20 or even more people involved in writing a song. Today, restaurants, bars, etc., buy libraries of millions of works from which to choose. All those deals would be out, and they then would have to negotiate separate deals with every member of every team of writers for every song.
Obviously, this would grind the industry to a halt. It would expose millions of businesses to increased infringement liability and likely seed a cottage industry of copyright trolls – people who would buy up musical rights solely to disrupt negotiations and drive up prices. Plus, how would the restaurants know they had paid all the songwriters involved? What if people walk in off the street and demand payment? What then?
The Justice Department considered the request by the largest publisher and the PROs and determined no changes should be made to the consent decrees. Even Sen. Mike Lee, R-Utah, no friend of government intervention in the marketplace and the chairman of the Senate subcommittee that handles antitrust actions, praised Justice for the thoroughness of its review.
ASCAP, BMI, and their major publisher members rushed to Congress to push for a legislative fix and convinced a court to look at the Justice Department decision. A judge in U.S. District Court for the Southern District of New York overturned the Justice Department’s order in a surprise move during an initial pretrial conference with little testimony.
The Justice Department, in turn, appealed that decision to the 2nd Circuit Court of Appeals, where it is expected to get the New York ruling overturned as it defied long-established precedent.
If not, expect to pay a lot more for the music you hear in your life … or to hear a lot less music.
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