SGA’s public comment on collective rights management rules review

The four points on which SGA lends its full support to the PROs are: (1) the need to shift performance royalty rate-setting from rate court judges to private arbitrators; (2) the imperative for recognition of an evidentiary presumption that direct, arms-length licenses (the terms of which are fully disclosed) voluntarily negotiated by copyright holders who have withdrawn rights from a PRO provide the best evidence of reasonable market rates; (3) the related Congressional adoption of the “willing-buyer/willing seller” standard in rate setting for musical compositions, and; (4) the extension to PROs of the ability to license bundled rights beyond the singular right of public performance to new media services.

It is SGA’s belief that granting such a “partial withdrawal” concession to music publishers, without guarantees of (i) full disclosure and transparency throughout the entire direct licensing process and (ii) direct payment from the source of gross royalties due to music creators through their PROs, will result in catastrophic losses to songwriters and composers due to obfuscation and oversight inability and failure. Moreover, SGA also believes that this concession would all but guarantee the eventual economic collapse of the PRO collective licensing system that for over one hundred years has served the needs of the U.S. music creator community.

In sum, SGA has determined that allowing partial withdrawal would be devastating to creators and PROs because it would likely cause following distinct categories of harm:

  1. the elimination of any semblance of transparency by music publishers in any direct performing rights licensing deal of their choosing, enabling them to completely obfuscate licensing terms from music creators including such crucial information as the inclusion of advances, administrative fees, equity interests, and other remuneration in which music creators have a rightful expectation to share;
  2. the shifting of all low-overhead, high-yield collection and licensing functions from the PROs to in-house music publishing staffs, leaving only the most costly, labor intensive administrative functions to the PROs (and thereby shifting hugely burdensome, per transaction costs to the remaining members within the PRO);
  3. the providing to music publishers of the means to recoup advances issued to music creators out of an income stream (the writer’s share of performance royalties) for which the music publisher did not bargain in setting the amounts of the advances and the terms of the publishing deals, and over which it has had no expectation of control after more than a century of collective licensing precedent.

It should be noted that industry custom and practice have long dictated that the musical performance right consists of one half “writer’s share” and one half “publisher’s share.” The writer’s share is always paid directly by the PRO to the writer or his or her heirs. The publisher’s share is sometimes paid in full to the music publisher (which then keeps or splits such share with the songwriter according to the terms of the music publishing agreement), and sometimes paid by the PRO-pursuant to the instructions of the parties-in partial shares directly to both the music publisher and to the songwriter’s self-owned and administered business/ publishing entity.

Music publishers sometimes sub-license their entire catalogs to third parties, such as administrators and sub-publishers in territories outside the U.S. To ensure that their songwriters have no ability to share in the advances and monetary guarantees received by the music publisher under such sub-licensing arrangements, music publishing agreements with songwriters almost invariably and explicitly exclude the songwriter from participating in such catalog-wide advances, providing that songwriters will be paid only when royalties are actually earned on a title by title basis under such sub-agreements.

SGA urges DOJ not only to reject concessions to music publishers to allow partial withdrawal from PROs (an action that will inevitably increase the practice of direct licensing by permitting music publishers to exclude certain lucrative categories of licensing while still retaining the right to unfairly take advantage of collective licensing through the PROs), but to look closely at potential safeguards that might be put in place to prevent the opaque nature of any direct licensing deals from depriving music creators of the royalties due them from music publishers.

Moreover, SGA agrees with the PROs about: (1) the need to shift performance royalty rate-setting from rate court judges to private arbitrators; (2) the imperative for recognition of an evidentiary presumption that direct, arms-length, transparent licenses voluntarily negotiated by copyright holders who have withdrawn rights from a PRO provide the best evidence of reasonable market rates; (3) the related Congressional adoption of the “willing-buyer/willing seller” standard in rate setting for musical compositions, and; ( 4) the extension to PR Os of the ability to license bundled rights beyond the singular right of public performance to new media services.