Senate Examines Songwriter Compensation In Effort To Determine The Worth Of A Song

Since May 2013, the House Judiciary Subcommittee on the Courts, Intellectual Property and the Internet has undertaken a comprehensive review of the entire Copyright Act, including many issues of importance to musicians and songwriters.

Guest Post by Kevin Erickson of Future Of Music Coalition

But the Act is not the only regulatory structure that impacts how creators are compensated. On Tuesday March 10, the Senate Judiciary Committee on Antitrust, Competition Policy, and Consumer Rightstook a look at another piece of the puzzle: the “consent decrees” that govern America’s two largest Performance Rights Organizations (PROs), ASCAP & BMI (Check out our factsheet for the full background on these decrees.)

At the hearing’s outset, Senator Mike Lee (R-UT) did a great job of laying out the issues at stake. His opening remarks amount to a very strong summary of the history of the issue, and we recommend watching the video as an introduction. Among the things Senator Lee made clear: performance rights organizations play a vitally important role for the entire music ecosystem. Far from being middlemen standing in between artists/rightsholders and their royalties, PROs are key to making music licensing work, and thus, crucial in getting songwriters paid:

“The market could not function if every neighborhood restaurant had to go look for every author of every song it wanted to play and negotiate with each one of those authors the license fees. Nor do individual copyright holders have time to contact every bar in American and ask them for license payments. As a result, for more than 70 years, publishers and songwriters relied on performing rights organizations, or PRO’s as they’re known in the industry to license music on their behalf, and then collect and distribute the royalties.

Sen. Lee went on to explain that the US Department of Justice is currently reviewing possible changes to the consent decrees, which would allow publishers the ability to withdraw their digital rights from the PROs, thus allowing them to negotiate higher rates for their works:

On one hand, the publishers say that partial withdrawal will allow them to negotiate prices with internet companies in a free market, and surely the most striking feature of the current system is that there is no free market at work. On the other hand, others believe after partial withdrawal the market will not really be free because a few music publishers control most of the licenses and they’ve been accused in the past of colluding to drive up prices for consumers.

Six witnesses testified before the committee: Mike Dowdle of radio broadcaster 
Bonneville International
, representing the National Association of Broadcasters; Jodie Griffin of public-interest group Public Knowledge, Chris Harrison of non-interactive music streaming service Pandora, Beth Matthews, CEO of ASCAP; acclaimed songwriter Lee Thomas Miller, of the Nashville Songwriters Association, and Matt Pincus, founder of independent publisher SONGS. At times, each of them made some substantive points.

Songwriter Lee Thomas Miller emphasized that songwriters don’t typically have access to many of the alternative revenue streams available sometimes suggested by industry observers as a “solution” to declining royalty revenues. He called for making some modifications to the consent decrees, including the allowance for bundling, and arbitration over rate courts.

ASCAP’s Beth Matthews agreed. She also acknowledged that the conversation over digital performance royalties for compositions was happening against a background of lost income from mechanical royalties from sales/downloads, a difference that digital performance royalties can’t make up. And she was admirably candid about the difficult position PROs are in, as well—in face of the very real threat from major publishers of withdrawing their entire repertoires. We agree with Matthews that if blanket licensing is destroyed and PROs are crippled by withdrawal of the major publishers, it’s a loss for everyone.

Pandora’s Chris Harrison pointed to evidence of past anticompetitive behavior as a reason to keep the consent decrees in place, as when a US District Court Judge found coordination between ASCAP and major publishers Sony/ATV & Universal Music Publishing Group. These are also real concerns, exacerbated by the lack of transparency in the licensing of musical works.

It was a little weird that the major publishers who created this dilemma for the PROs by threatening withdrawal weren’t on hand at the hearing. Instead, we had Matt Pincus of Independent Publisher SONGS, which, by his account, has not engaged in some of the questionable practices of the major publishers, and is likewise committed to transparency. It is good to hear from independent voices, and Pincus made an impassioned case that the current arrangement prevents him from obtaining a fair rate from digital performances. He didn’t have much to say about the fact that the three major publishers—Warner/Chappell, Sony/ATV and Universal Music Publishing—hold vast catalogs that often intersect with independents. We are concerned that publishers like SONGS could be shoehorned into sub-publishing deals for compositions that are partially owned by majors under terms they are not privvy to. We hope he will join us and our songwriter allies in our continued push for transparency, no matter what theDOJ decides.

Senator Orrin Hatch (R-UT), a songwriter himself, raised an excellent question: if publishers get the ability to make direct deals, how will songwriters know what the terms and rates are? This echoes concerns that we’ve raised elsewhere.  For a preview of what things could look like in a post-consent-decree world, Public Knowledge’s Jodie Griffin pointed to things that have been happening with on-demand streaming services on the sound recording side: the biggest record labels have the ability to withhold their catalog and thus extract equity stakes, advance payments, and other bonuses, and those monies rarely make it back to artists, who are still stuck with low per-play rates.

Senator Al Franken (D-MI) was critical of the low rates currently afforded to songwriters, saying: “This ain’t no way to make a living!” but also brought up what could be the elephant in the room: the lack of a public performance right on AM/FM radio; he suggested there was room for harmonization between different types of services, although witnesses did not seem eager to advance ideas on how that might be achieved. We’d go even further: the fact that broadcast radio is able to get away with not paying performers distorts and deflates the entire public performance marketplace, to the detriment of both composers and performing musicians.

While we find efforts of the National Association of Broadcasters to preserve that loophole completely inexcusable, we did agree with one point made by Mike Dowdle of Bonneville, testifying on NAB’s behalf, that “if the consent decrees are modified at all, they need to be modified in a way so that they create better transparency throughout the system, both for licensees, for songwriters, for PRO’s for that matter. We ought to know what it is that is being licensed, what is being paid, by whom and to whom, so that this is all public.” In this regard, we’re less concerned about the needs of large commercial stations, and more concerned about community/college stations and internet upstarts who play the kinds of music that big broadcasters won’t touch, online and offline. Artists need broadcasters like these to be able to access audiences.

Overall, it was a substantive hearing with fewer of the more flamboyant excursions that we sometimes saw in the House copyright review hearings. But it also demonstrated the difficulty of talking about one piece of the system in isolation. These debates are likely to continue, as the Songwriter Equity Act has been reintroduced. It’s encouraging to see Congress’s attention to the needs of songwriters, who are all too often overlooked in music industry discussions. But as we consider what changes to make to help songwriters achieve a better rate, it may be wise to look beyond changing the consent decrees, since those decrees also afford songwriters some important protections. 

We were reminded of a hearing last year where witnesses were asked to distinguish between a “free market” and a “fair market” value. Darius Van Arman of indie label consortium Secretly Group put it very well: to paraphrase, a fair market serves all creators, including small creators, as well as serving the public interest. Apply this thinking to the question “how much is a song worth”—and you start to see why it’s troubling that the answer to that question could hinge on whether you have a big corporation backing you up.