‘Music mafia’ is at it again

When the Copyright Royalty Board issued its rate increases last winter, it seemed like the battle over reasonable royalty rates for music was finally settled. But the music labels were furious because they were banking on extracting far more from yet-to-be-profitable digital music services, so they could enjoy even higher margins at the rest of the industry’s expense.

Undeterred, the publishing arms of these foreign-owned behemoths, already raking in record revenues from streaming services, now want to leverage their monopoly control over musical works to extract higher royalty payments to further enrich themselves instead of the songwriters they represent. But they’ve run into an obstacle: their collection goons, ASCAP and BMI (aka the performance rights organizations, or PROs) are limited by federal antitrust consent decrees.  

{mosads}And that’s a good thing. The Department of Justice originally sued ASCAP and BMI – which together control use of approximately 90 percent of all music – for collusive, anticompetitive behavior more than 70 years ago. Today, the consent decrees are the only obstacles keeping these cartels from throttling the growth of innovative music platforms.  

And yet the music mafia is begging the DoJ to bless the very kind of collusive behavior that landed them in antitrust court in the first place; behavior that the consent decrees safeguard against.   

Today, when a digital music service (or anything else that plays music) negotiates a license with the PROs, they get the full use of the song even if ASCAP or BMI controls less than the full ownership stake in that song. In other words, any partial owner of a song can license the entire work (they just need to share revenues proportionally with other owners). This is known as “100 percent licensing,” and is a bedrock of the current blanket licenses.  

What the music mafia is proposing is more like Three-Card-Monty: the PROs want anyone who gets a license from them to be covered only for the partial share of ownership in the song that that they control. Meaning the music service (or the bar or local broadcaster) would be forced to negotiate with each partial owner of that song prior to use. There may be two owners – or ten. The industry term for this is “fractional licensing.”  

The harm that fractional licensing would create in the music marketplace is hard to overstate. If a music streaming service (or a hotel, winery, or local baseball league) doesn’t obtain a license from every fractional owner of a song, they are at risk of infringement lawsuits that could threaten their entire enterprise. They would be forced to either pay the music mafia their protection money or stop playing music. And stop paying royalties to songwriters. Hardly a recipe for growing a sustainable music marketplace.  

And yet, these large, multi-national, multi-billion dollar corporations are pressing DoJ and lobbying others in Washington for permission – through modifications to the consent decrees – to engage in fractional licensing, despite the harm it would have on innovation and consumers, not to mention diminished revenues to songwriters.  

Incredibly, the latest salvo comes via the U.S. Copyright Office, which has come out in support of fractional licensing, and against the DOJ’s reaffirming the practice of 100 percent licensing.  Of course, the music mafia was quick to support the Copyright Office’s position, claiming that blanket licenses create legal and policy problems.

A fractional licensing scheme will create new, heightened barriers of uncertainty and risk for digital and other music services, just when we need to be encouraging rather than stifling the growth of new and innovative ways for people to enjoy music.  

This is just the latest example of the extreme myopia plaguing the beleaguered music industry. Songwriters complain that they are not making enough money from streaming, which is a legitimate concern. But supporting changes to licensing laws and regulations that actually discourage growth of digital music platforms is not the answer, especially when the music mafia is raking in record profits thanks to streaming.  

Sadly, artists aren’t benefitting from this growth. ASCAP and BMI each collected $1 billion in royalties last year. Universal Music Group brought in $5.66 billion, with 24 percent coming from streaming. Yet the writers behind hit songs are counting in pennies while the music mafia counts by the billions. 

The solution isn’t to harm the tech companies behind the industry’s renaissance, but to preserve the protections offered by the consent decrees, reject fractional licensing, and require additional transparency in the marketplace.  Such a plan will benefit artists, consumers and innovators – everyone but the music mafia.

Montgomery is executive director of CALinnovates, a technology advocacy coalition based in San Francisco.