Change Is In The Air, by Ron Mendelsohn

ron mendelsohn consent decrees

Few would contend that the world hasn’t changed since 1941, yet remarkably ASCAP & BMI still operate under “consent decrees” handed down in that year from the Department of Justice.

In those days, the PROs were widely seen as wielding a monopoly over music licensing and it is therefore somewhat understandable that the DOJ imposed restrictions on the scope of their operations in an effort to curtail their power and make music more available and affordable to licensees such as radio stations, TV stations, bars and restaurants.

However nothing could be further from the truth today. Online streaming services and digital platforms such as Pandora, YouTube and Spotify pay paltry amounts to the PROs for performing rights due to the antiquated structure of the consent decrees, which allow any broadcaster or digital service the right to perform music even before a rate is established; such rates are ultimately determined by a rate court which effectively eliminates the negotiating power of the PROs. It is for this reason that several major publishers (EMI, Sony/ATV, Universal, BMG and Warner Chappell) recently sought to partially withdraw from the PROs in order to be able to negotiate fairer rates directly with digital platforms.  Not surprisingly, their attempts to withdraw were ultimately denied by the respective ASCAP & BMI rate court judges.

Why do these major publishers believe that their performing rights are being undervalued? One only needs to look at the recorded music side of the business which, unhampered by government-imposed consent decrees, collects more than 10 times the amount from these same digital services. In the case of Pandora, for example, record companies collected over $313 million last year, whereas the PROs collected only a tiny fraction of that amount: $26 million for writers and publishers.

Unlike 1941, we now live in a world where music rights are under assault on multiple fronts, where piracy is rampant on the Internet and where technology interests continue to argue that music should be free.  This is a far cry from any semblance of monopoly, not to mention the fact that there are now three PROs in the U.S. (ASCAP, BMI and SESAC) that compete openly for both members and repertory. If the consent decrees remain unchanged the major publishers will likely withdraw from the PROs altogether, further weakening these organizations, and music licensing will become even more confused and splintered. Each new digital service will need to negotiate separately with multiple entities for different catalogs and different rights clearances. This is clearly not good for the industry, not good for business and not good for the consumer.

It is time to reform or jettison the antiquated consent decrees and empower the PROs to negotiate the fair value of their repertory in a free market. It is time for composers, songwriters and publishers to receive fair and adequate compensation for performances of their works on digital platforms on a par with the recorded music side. Finally, it is time to seize the opportunity to simplify and streamline the arcane music licensing landscape and allow the PROs to evolve into centralized hubs for administering all (or most) music rights: performance, mechanical and synchronization. Having bundled rights administered by centralized entities will help protect and maintain the value of music in the digital age and greatly simplify the licensing process for all. The recent announcement that SESAC may be in talks to acquire HFA (the Harry Fox Agency) is already an indication that the industry is moving in this direction.

Let’s hope that the DOJ ultimately comes to the same conclusions during its review of the consent decrees over the coming months. The alternative – inequitable compensation for songwriters and publishers, a further splintering of rights and the continued erosion of music values- is simply unacceptable.

Ron Mendelsohn
June 8, 2014

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