Rumors are flying around about the US Department of Justice (DOJ) potentially changing the rules that govern how performing rights organizations (PROs) ASCAP and BMI negotiate, collect and distribute publisher and songwriter royalties.
ASCAP and BMI operate under so-called consent decrees that the government put in place to curb anticompetitive behavior by the PROs. The “blanket licenses” enabled by these consent decrees allow a music service or venue—from AM/FM radio to Internet and satellite radio to clubs and restaurants—to obtain a license and play anything in the repertoire without having to negotiate permission from each and every publisher.
ASCAP’s consent decree was put in place in 1940; BMI’s in the 1960s. They have been amended as recently as the early 2000s, but the major publishers have been pushing hard for further modifications, including the right to withdraw certain catalog in order to license directly with music services.
Keep in mind that we’re only talking about musical works (the underlying composition embodied in a recording). The recordings themselves belong to the labels (though sometimes they’re owned by the artist).
Together, just three major publishers, Sony/ATV, Warner/Chappell and Universal Music Publishing, control the majority of musical works the planet. Their stated claim for wanting to withdraw catalog from the PROs is that they can negotiate higher rates. However, direct licensing would also allow them to receive deal sweetners, such as most-favored nation status (they always get the best deal ahead of competition), large cash advances and non-play related income (such as money divvied up by listening hours or perceived market share) and even equity ownership in a service. History has shown that this money is rarely, if ever, shared with artists. Worse, these deals can actually result in lowered per-stream rates that everyone else has to live with. Publishers may also be keen to revise the longstanding 50-50 splits that guarantee direct payment of the writer’s share through the PRO.
This might sound like a parade of horribles, but we’re hardly alone in ringing the alarm bell. An international coalition of songwriters recently published an open letter in Billboard echoing many of the concerns we listed above. As we wrote in our own Billboard op-ed, the songwriters rightly state that, while they want to be paid more, they require fundamental transparency to ensure they’re being paid fairly.
Unsurprisingly, the major publishers—through their Washington DC trade group, the National Music Publishers Association (NMPA)—refused to even have the conversation:
…the response we received from the NMPA was disappointing. In a letter from NMPA’s General Counsel, we were told that the talks we were seeking would be “inappropriate” and would “prove fruitless.” Because we believe there is still much to be gained from an open dialogue with publishers, we are reaching out to each of you directly seeking immediate discussion between our communities.
Like FMC has pointed out countless times, songwriters worry that publisher withdrawals could undermine their ability to choose who manages their rights and who collects and distributes money owed to them, as well as knowing the terms of deals that determine their compensation.
…we feel strongly that the songwriters, composers and others we represent maintain their right to decide who collects and administers performing rights royalties on their behalf.
Further, we feel that any direct performance licenses negotiated by publishers require complete transparency concerning both the full terms of any direct licensing arrangement, and complete information necessary to determine the royalties each music creator is owed.
We couldn’t agree more.
We’ve written extensively about transparency in the music industry and have particular perspectives on artist compensation and managing data around musical works. We support third-party organizations that compensate composers and songwriters fairly, transparently and efficiently. To us, that means viable PROs with songwriter representation on the board of directors. We also support the growth of a legitimate digital music marketplace that performs more music—and therefore pays more writers—than commercial FM radio. This is why we’ve urged caution in any modification of the existing consent decrees.
It’s important to keep in mind that none of this is a done deal. In fact, the DOJ has yet to make any formal announcements about their recommendations. And even if they do decide to allow partial publisher withdrawal or other modifications to the consent decrees, the proposed amendments would still need to be blessed by the PROs and accepted by the two federal judges who oversee rates for ASCAP and BMI.
For all we know, the major publishers may have planted these rumors as a way to make their preferred outcome seem inevitable. It’s probably easier than responding to criticism from actual songwriters.
Whatever the DOJ recommends, we believe that the industry across the board needs to do a better job of being transparent and accurate in both rights ownership and artist compensation. The future of music depends on it.