Future of Music Coalition’ public comment on collective management rules review

Direct deals by consolidated music publishers are de facto anticompetitive, lacking in transparency and potentially harmful for songwriters. At the recent round of music licensing hearings before Congress, BMI addressed the issue of “interim licensing.” Both ASCAP and BMI have the ability to negotiate interim fees. While FMC acknowledges that the addition of interim licensing may be an equitable solution, any modification regarding interim licensing or fees must preserve direct payments to songwriters, the 50/50 splits, and promote greater transparency for the benefit of songwriters who require accurate royalty statements and services seeking clarity on what repertoire is available to perform. FMC, however, also acknowledges that interim licensing could shift the “holdout” problem, demotivating PROs to come to reasonable fee agreements. Combined with the proposals for mandatory arbitration, interim licensing could potentially leave songwriters and end-users in a dead-zone without any recourse, stuck with payments under new interim licenses and lacking any bargaining power to arrive at reasonable licensing through an equitable or meaningful grievance mechanism.

There must be transparency at all levels of music licensing to create a healthy and sustainable industry that nurtures songwriters, allowing PROs to continue their important collective licensing obligations on behalf of not only the major publishers, but also their songwriter members. Lastly, transparency under any licensing framework is essential to promote competition, diversity and to serve a public that benefits from the ability to hear music performed in a range of venues, including new and innovative delivery platforms. It is essential for the health of the music industry that PROs maintain accurate and transparent repertoires. Songwriters deserve to know the usage surrounding their works and how their royalty payments are calculated. Music platforms, broadcasters, and webcasters should be able to rely upon their PRO licenses and ability to access repertoire data when publicly performing musical works, to minimize the risk of copyright infringement and litigation.

Publishers’ partial withdrawal of rights will only compound the issues surrounding repertoire transparency. As noted in the recent Pandora litigation, both ASCAP and major music publisher Sony refused to comply with Pandora’s requests for repertoire lists. The music platform was left to guess which works were still with the PRO, thereby risking litigation for possible copyright infringement or to not perform any music at all. FMC applauds and promotes the direct payment of public performance royalties to songwriters and the 50/50 publisher-songwriter splits and acknowledges the need for greater transparency regarding administrative fees, sampling decisions, and general song usage and points allocations. If direct negotiations and deals between the major consolidated music publishers and licensees become the trend, songwriters will suffer deteriorated access to audits, sampling and usage information and licensees will lack a true alternative to blanket licensing, facing infringement, litigation, and stigma without access to repertoire information.

ASCAP’s concerns over potentially losing the performance repertoire for what was at the time one of the four largest music publishers (further consolidation has reduced the number to three as of 2014), led the PRO to amend its Compendium in 2010 to allow members to withdraw only the right to license works to “new media” users, including Internet radio. While the large, consolidated publishers were generally enthusiastic about this development, songwriters and independent publishers expressed nervousness about the new arrangement. Unquestionably, songwriters and publishers deserve to have their work valued appropriately, but a balkanization of the marketplace is a real danger with direct deals. It is imperative that creators are fairly compensated; songwriters must not be compelled to trade leverage and transparency for the mere hope that the big consolidated music publishers will negotiate in the artists’ interests. There are serious concerns regarding threats to transparency and industry-wide standards if major publishers are allowed to withdraw partial catalogue and directly negotiate. These deals will be arrived at privately and with no requirement for transparency.

While the major consolidated music publishers may have a large enough market position to successfully negotiate with licensees, independent publishers will certainly not be in the same position and will be unable to compete in the new regime. If partial or limited granting of rights is allowed, independent publishers will likely be stuck with the weakened PROs with substantially less ability to make their catalogues available as their multinational peers, ultimately harming the songwriters who publish with them. There is also a practical risk to songwriters under partial publisher withdraw of rights in that there are often numerous songwriters within a single musical composition. As The Music Managers Forum recently pointed out, if publishers are allowed to withdraw partial rights and directly license, a co-writer not under a contract with the withdrawing publisher and thereby not covered by the direct license is left in a highly vulnerable position. This would be an unacceptable situation for songwriters, and runs counter to the objectives of collective licensing, in which multiple parties receive maximum benefit by pooling resources under mutually agreed-upon standards.

The major publishers and PROs support moving the rate court rate-setting process to a mandatory arbitration process, but arbitration lacks the transparency that is so crucial to a viable music licensing system. Instituting a mandatory arbitration system could turn out to be a step away from transparency that may, in fact, exacerbate anticompetitive behaviour. Arbitration records and judgments are typically sealed or confidential, thereby precluding public disclosure and future records for evidentiary or precedential purposes. This is absolutely the wrong direction for music licensing and runs counter to the purposes of transparency. Like direct deals that often contain nondisclosure agreements, this lack of transparency would keep songwriters and artists at an arms-length distance from key information, denying them essential knowledge as to how their rates are negotiated and delineated. Finally, arbitration as a derivative of contract law, allows the parties to have more flexibility and control over the proceedings by choosing the rules which will apply to the process, selecting the arbitrator(s), and deciding what evidence (if any) will be heard.