ARA Newsletter on Consent Decrees

Big news for songwriters in Washington this month in the Justice Department review of the ASCAP and BMI Consent Decrees. August 9 was the deadline for the initial round of public comments and all the major stakeholders including songwriter organizations, publishers, music services, and lobbyist groups like the MIC Coalitionrepresenting businesses that profit off music weighed in. (Just kidding — here’sMIC’s real website.)

That sets the stage for action by DOJ to sunset the consent decrees and give creators more control over their work and the power to negotiate higher songwriting royalties.

Background

Under US copyright law, anyone who wants to “publicly perform” a song — on the radio, streaming, at a live gig, or as background music in some bars or restaurants — needs to pay the songwriter and publisher for the right to do so.

ASCAP and BMI each manage huge portfolios of songs, selling “blanket licenses” to their catalogs and collecting and distributing the resulting royalties to the songwriters and publishers on their roster. SESAC and GMR are much smaller, but they do the same thing — license compositions to music services, radio stations, bars, and restaurants.

In the 1940s, the Justice Department was worried that ASCAP and BMI had too much power in the market and could overcharge music users, basically because they controlled the rights to so many songs. They sued ASCAP and BMI under antitrust law (which bans monopolies and anticompetitive business practices) and ultimately settled the cases with formal court orders called “Consent Decrees” that have been in place ever since. That’s right — for over 80 years the way songwriters get paid and how much they can charge for their work has been determined by an archaic court settlement and a bunch of judges in New York!

Songwriters and publishers have argued for many years that this system drives down royalties and undervalues their work — the “rate court” judges do their best but don’t have much feel for the music business or the value of songs. In marketplace negotiations, it would be songwriters and their own chosen representatives going toe to toe with digital services like Pandora, radio chains like iHeart, and the hospitality groups that run restaurant groups like Olive Garden and Applebee’s — deep pockets that can afford to pay market value for the music they use. As songwriter and artists’ advocate David Lowery haswritten, “the consent decrees take valuable rights to negotiate” away from songwriters and “pus[h] the price of the song below market value.”

For several reasons, the Justice Department is now considering doing away with the consent decrees. Mostly, the music ecosystem has just changed in massive ways since the 1940s, with the rise of streaming and a much more free and open marketplace. Last year’s Music Modernization Act was a step towards a more market-based approach to licensing and putting creators in charge of their own works. The internet creates a lot more data points — more negotiations as benchmarks — allowing music creators and music businesses to conduct better informed negotiations. And strong competitors like SESAC and GMR are also in the market and undermine the idea that ASCAP and BMI — and the songwriters they represent — are monopolists that must remain chained by the Consent Decrees.

ASCAP and BMI issued an open letterearlier this year explaining their views and urging an orderly transition to a new market-based system. Another prominent songwriters group, the Nashville Songwriters Association International, has suggestedthat the Justice Department go slow, perhaps leaving the status quo in place while recent changes to the rate court system made by last year’s Music Modernization Act play out. On the other side, the MIC Coalition arguesthat eliminating the regulatory structure provided by the consent decrees “would lead to chaos” and wants the status quo.

Respected music journalist Nate Rau at the Tennesseancaptures the state of play and argues that repealing the decrees would be a ”second landmark victory” for songwriters following on the heels of last year’s MMA legislation.

Where Things Stand

In general, the Artist Rights Alliance supports ending the Consent Decrees and giving power back to songwriters and their publishers. The market for music licensing is competitive and vital, and it is changing and innovating so fast the rate court just cannot keep up. We want control of our work and believe that global businesses like Google, Pandora, Clear Channel, and the big corporate restaurant chains can afford to pay fair market value for music.

There is a crisis in songwriting and the next generation of writers simply won’t survive if we don’t have fair royalty systems that deliver full market value for creative work everywhere it is used. Since 2000, the number of full-time songwriters in Nashville, for example, has collapsed by 80%.

And in significant ways, those arguing in favor of the status quo are being dishonest. They argue that local bars and restaurants will not be able to get affordable licenses for background music or cover bands and will simply shut the music off rather than pay market value. But federal copyright law alreadyexempts virtually all small bars and restaurants from paying songwriter royalties (the author of the 1998 Fairness in Music Licensing Act reportsthat, as of 2016, it exempts 70% of US eating and drinking establishments from the need to pay!). The question isn’t whether your local will have to pay, it’s whether chain companies like Darden Restaurants(Olive Garden, Longhorn Steakhouse, 2018 revenue $8.5 billion) and Brinker International(Chili’s, Macaroni Grill, and others, 2018 revenues $3.14 billion) will have to pay for music just like they pay for everything else they use in their highly profitable hospitality businesses.

At the same time, we recognize the concerns of the NSAI and agree that the MMA was a step forward that should lead to improvements. And we share NSAI’s worry that the broadcasters and bars and restaurants will turn to allies in Congress to delay things if they fear having to pay fair market value for music.

We hope for an orderly transition to a market-based system that protects small and independent songwriters and empowers creators to negotiate on their own behalf and defend their own interests rather than subsidizing giant, corporate businesses that earn billions using music without paying what it is truly worth. But it’s too early to tell if the DOJ’s expected proposal will meet that test or how Congress will respond to it. Surely, as NSAI points out, more input from songwriter advocates is needed to inform DOJ’s proposal. We will be monitoring developments and proposals closely to make sure any proposed reforms pass those tests and that, at a minimum, whatever happens does no harm and does not set creators back overall.

Written by

Artist-run, non-profit advocating for musicians, performers, & songwriters in the digital landscape. (Formerly the Content Creators Coalition or “c3”)

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