Public comment on collective rights management rules review by the Council of Music Creators

The Consent Decrees of ASCAP and BMI were originally devised to prevent either of the PROs from exercising too much market power over music users and raising prices beyond a level which they might achieve in an open market. For nearly 60 years they achieved this purpose, providing users with an efficient way to license a vast repertory, music creators and their publishers with an efficient system for the collection and distribution of license fees, and consumers with access to the repertoire of protected works.

The music business itself was relatively stable during this period: the business operations and types of music usage of licensees were generally known to the PROs, the number of new market entrants was limited, new technologies for delivering music fit within established paradigms and were purveyed by known entities, and fluctuations in license fees were incremental. While licensees always thought they paid too much, and music creators and publishers always thought they received too little, the Consent Decrees helped the market for performance rights achieve and maintain relative stability.

The advent of the internet and the revolution it brought in the music marketplace changed every rule and every role, including those of the Decrees. As a result, today all parties face a profoundly altered landscape. Sophisticated users have launched services with new business models built on the not unrealistic assumption that the cost of music will not only be held below market value, but that rates may well fall. These entrepreneurs are armed with new technologies and legions of lawyers that exploit arcane provisions of the Consent Decrees to delay the determination and payment of license fees for as long as possible –in some cases until well after the founding entrepreneurs have cashed out of businesses that have gone bust. Some of these new breed of licensees have used the enormously expensive and time-consuming process of the rate court (or even the threat of rate court litigation) to keep the fees they pay below market value.

The net effect of this performing rights licensing tu1moil has been a bonanza for consumers who enjoy unprecedented access to the copyrighted work of songwriters and composers at below-market rates, and for the companies that pay low licensing fees to purvey this music through a variety of technological gadgets and delivery systems, while increasing their market capitalization and planning their IPOs.

On the other side of the transaction, major music publishers, who are understandably dissatisfied with the rates they have been granted by the rate court, are threatening to withdraw entirely from the PROs, so that they can protect their copyrights and establish realistic rates for performances that are more in line with an open market. And of the three parties, songwriters and composers are left in the worst position, with many of them seeking other avenues of work, disillusioned with the corporate greed and governmental bureaucracy that is robbing them of their opportunity for just compensation.

The Consent Decree requires ASCAP to grant a license to anyone who requests one, whether or not the applicant has provided any information to ASCAP about its use of music or not, or whether or not a fee has been negotiated. It can sometimes take months for ASCAP to obtain the necessary information from a potential user in order to determine a reasonable license fee. Even though no fee has been paid, the user has complete, unrestricted access to the entire ASCAP repertoire and can perform that music – and can financially benefit from such performances – without fear of infringement.

The Decree should be amended to require applicants to provide complete and accurate information about their intended use of music over the license period for which they are applying. Until ASCAP has received all of the information necessary and a successful negotiation between licensor and licensee has been completed, the applicant should not be considered licensed and should not be permitted to perform the ASCAP repertoire without fear of infringement. The mechanism prescribed by the Consent Decrees for the resolution of disputes over license fees is the federal rate court. The rate court should be abolished in favor of arbitration.

Every writer and publisher knows and understands that when a dollar comes into a PRO, it is split into two equal parts: a writer’s share, divided among writers, and a publisher’s share, divided among publishers. This simple but essential mathematical truth provides music creators (and administered publishers) with a degree of certainty unavailable in direct licensing deals.

Some publishers have recently made the argument that writers will be better off if publishers are permitted to issue direct performance licenses to users in certain segments of the market. But the notion that music creators will be better off if publishers collect the writers’ share of performance royalties is questionable, at best. What is certain is that widespread direct licensing by major publishers will have a chaotic impact on the music marketplace and a devastating and irreversible effect on almost all music creators and independent publishers.

If major publishers withdraw from the PROs the right to license certain market segments, the affected music users will suddenly be forced to negotiate with individual publishers, each demanding higher rates for the music they claim to control. The resulting market confusion and lack of rate certainty will create a logistical nightmare.

The situation for composers of music for film and television is perhaps even more dire. Virtually all agreements for the composition of music for audio-visual works are based on “Work For Hire” laws, which grant the benefits of authorship to the corporate entity hiring the composer. In a tradition developed over decades, such agreements almost always grant back to the composer the right to collect the writer’s share of performance royalties, usually with the stipulation that the composer shall be entitled to receive “the writer’s share of performance royalties paid by the Performing Rights Organization to which the writer may belong.” However, these contracts rarely contain provisions for the payment of the writer’s share to the composer in the event of a direct performance license, and no mechanism for the composer to audit or claim his/her share. This places in jeopardy the future income of thousands of film and television composers.