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CTIA’s public comment on collective rights management rules review

The market for music performance rights is not competitive and the Consent Decrees continue today to serve important pro-competitive purposes. Direct licensing is an important check on performance rights organization (“PRO”) market power under the Consent Decrees, but it cannot replace the Consent Decrees due to the high market concentration of the major music publishers and the lack of competition among them.

First, ASCAP, BMI and SESAC aggregate huge numbers of musical works that would, in a competitive market, compete for use. Second, the large music publishers have been allowed to merge to the point that the publishing industry is now highly concentrated. Three major publishers control the rights to vast majority of musical works.

Third, copyright law allows rights to be licensed separately. Thus, when programs or commercials that are intended for public performance are produced, the producers obtain only reproduction and distribution rights and need not obtain public performance rights. Indeed, the PROs typically will not grant public performance rights to program producers because they do not actually perform the programs they produce. Thus, it falls to the entity making the performance to clear the performance right.

Unfortunately, however, once a program or ad is produced, or “in the can,” the entity making the performance is unable to engender competition among possible suppliers of the performance right. The performing entity must take the program as is and cannot alter it. This gives the licensor of the performance right the ability to exercise “hold up” power – the licensor can seek to charge up to the full value of the entire program or ad, unconstrained by the actual value contributed to that program or ad by the licensor’s music.

Fourth, the PROs typically offer only licenses to their entire repertory. Thus, they effectively eliminate any competition that may exist among their members, among the PROs, between the PROs and their members, or, for that matter, between the use of music and other programming matter.

Fifth, these problems are compounded by the near-impossibility of identifying the potential licensors of any particular performance right. Although the PROs offer on-line searches of their databases, they do not provide a reliable or effective means of identifying the content of each PRO’s repertory.

As a result, it is effectively necessary for an entity engaging in substantial numbers of public performances, such as a wireless carrier or a service making streamed performances, to obtain licenses from all three PROs. The major publishers, of course, understand the anticompetitive effects of the same behavior.