The Department of Justice has announced plans to review the rules that govern music licensing companies Ascap and BMI, which remain unchanged since the antitrust investigation that spawned them in 1941. That was six years after some jerks copyrighted “Happy Birthday to You,” now the property of Warner/Chappell Music. If you’ve publicly performed that song since World War II, you owe Warner royalties. If you streamed it on Pandora, though—presumably as part of your Postpone Violent Rampage station—the publisher already got its share, pegged at 1.85% of total Pandora revenues. Ascap and BMI argue that rate is unfairly low, as are the the rules that prevent them from leveraging their power to raise it.
One of those rules is the consent decree, which prevents Ascap/BMI from allowing publishers to make “partial withdrawals” of their catalogs from licensing agreements—that is, they cannot selectively remove songs from Pandora’s library and force the company to negotiate separate royalty rates for, say, “Milkshake.” Ascap’s and BMI’s 1941 agreements with the Department of Justice require the publishers to license their songs to anyone who wants to buy them.
According to Judge Denise Cote’s ruling in Pandora’s lawsuit against Ascap, executives at the publishing company made “not too veiled” threats to withdraw the licenses for certain songs and artists from Pandora if the streaming company did not agree to higher rates. The publisher also refused to provide a list of the potentially revoked licenses, so that Pandora would be vulnerable to copyright lawsuits for any accidental streams. Incidentally, Judge Cote described Ascap executives’ testimony on this subject as “not credible.”
So it turns out that the giant company that does not write or distribute music but does systematically purchase the intervening legal authority is kind of greedy. Still, they make a compelling argument. According to Ascap and BMI, low royalty rates from streaming services translate to unfairly low payments to artists. For example:
In 2012…when Pandora’s former chief executive testified at a congressional hearing on music licensing, songwriters protested on Capitol Hill. Five writers of hits by stars like Beyoncé and Christina Aguilera showed that 33 million plays on their songs on Pandora yielded just $587.39 in royalties for them.
In a just society, the guy who writes songs for Christina Aguilera would either be fined or get millions. The federally-regulated deals that Pandora and similar streaming services get from Ascap/BMI sell songs cheap. Individual copyright holders have tried to negotiate their royalty payments directly with Pandora et al., but that violates the consent decree. Ascap/BMI already administers their copyrights, and they have to license the whole of their catalog at a set rate to anyone who will pay for it. So yes, DOJ regulations of Ascap and BMI are impoverishing songwriters, but only because those two antebellum publishing conglomerates exist.
And why do they exist in 2014? Back in 1941—when, as the Times helpfully points out, “Chattanooga Choo Choo” was a monster hit—sheet music was still a significant part of the industry. Sales of home phonographs were increasing, but the bulk of popular music, including showtunes and big-band standards, was distributed as printed music and performed live by local bands.
In this context, publishing royalties were very important, because the written song was the fundamental unit of music. With the rise of music radio, the recording of a particular artist playing the song became the fundamental unit. In this industry, publishing conglomerates like Ascap and BMI were of dubious importance, but they still provided a useful service. Recording artists had no efficient way of knowing which radio stations played their music and how often, so the giant licensing corporations performed a valuable administrative function. They did what middlemen are supposed to do, in that they made their industry run more smoothly.
Now the majority of recording artists do not play on airwave radio, and the sheet music for “Believe Me” is remarkably hard to find. The particular sound recording remains the fundamental unit of music, though, and services like Pandora know exactly how many times they play each recording. They got a computer what counts it. The concept of owning the idea of the song but not the actual recording is already an outmoded model, which Ascap/BMI augments with the now obsolete service of keeping track of plays. These two federally regulated, trust-bending megacorporations are not economically necessary.
Maybe the DOJ should lift Ascap’s and BMI’s consent decrees. That might set into motion the extinction of these dinosaurs, and recording artists—or, less inspiringly, the individual music labels who own their recordings—could finally negotiate with internet radio directly. The distribution networks and accounting tools are already in place. Without Ascap/BMI, Pearl Jam might be powerless against people who get up onstage and sing “Jeremy” as part of a play. But without consent decrees, these multibillion-dollar publishing middlemen won’t be able to hide behind the argument that Pandora is impoverishing artists, when they handle all the money first.