A Digital Music History Lesson | Commentary

Posted March 11, 2015 at 10:00am

By Mark Cooper This week, the House Judiciary Committee held a hearing on the antitrust orders that apply to ASCAP and BMI, the performing rights organizations that license songs on behalf of music publishers, and require them to license song rights at a fixed price to all comers. These consent decrees have been to a boon to everyone from cover bands, to bars, to radio stations because they provide an easy, efficient way to clear copyrights. These consent decrees have also been critical for the artists who are not part of the Billboard Top 100 to get their music heard and be compensated. The ultimate beneficiaries are consumers, who get to hear music in a wide variety of venues.  

But the multinational music publishers that govern the boards of ASCAP and BMI say they are getting short-changed and want the orders, which date from the 1940s, to be changed or abolished outright.  

But history is clear: to keep digital music consumer-friendly, we need robust antitrust enforcement and these consent decrees should not be modified.  

The Consumer Federation of America has been analyzing digital industries for longer than anyone else in the public interest community. In January of 1990, we published a major paper on the Internet concluding it would be a uniquely consumer and citizen friendly place as long as dominant incumbents were prevented from erecting barriers to the flow of information. At the time, we focused on the Internet Service Providers, who controlled the market for access to the Internet. In the late 1990s, we supported the Department of Justice in its antitrust case against Microsoft, who had a clear monopoly pricing power in the personal computer industry. And we encouraged the Supreme Court to uphold balance between copyright and technological innovation in our amicus brief in the Grokster case. We have continued to analyze the music sector as the bellwether for the consumer benefits of digital disintermediation and have filed comments or amicus briefs in just about every major proceeding or court case involving this issue.  

Our most recent analysis shows the music sector is moving toward an economic equilibrium much more friendly to consumers and the vast majority of artists than the music sector was in the 1990s. The copyright holders, who have abused their market power at every opportunity for more than a century, were disintermediated by a powerful new technology.  

The copyright holders hated the digital technology when it first appeared on the horizon in the 1990s and they have resisted it ever since. At first, they argued that piracy was the villain, but the facts never supported their case. Now, they complain about streaming, even though it is delivering billions of dollars of revenue. (At this point, I’ll offer a note of congratulations to the ASCAP, who recently joined BMI in reporting more than a billion dollars in revenue this year, driven by digital music.) Digital technology is not the problem, it is the solution in an industry that has been granted a monopoly and abused it whenever it can get away with it.  

The consent decrees and the compulsory licenses they oversee are a perfect example. Shortly after the 1909 Copyright Act went into effect, the business practices of the music copyright holders attracted the attention of the Department of Justice. About 20 years after the Copyright Act, the DOJ began entering into consent decrees with the professional rights organizations.  

The recent behavior of the major labels when they thought they could get out from under the consent decrees by claiming digital rights are not covered, demonstrated beyond a shadow of a doubt that the consent decrees are still necessary. While technology changes, abusive business practices do not. The theory of the consent decrees is just as sound today as it was in the radio age. Publishers who gain control of a large number of copyrights have market power and they will abuse it. The problem of high transaction costs in an environment where individual copyright holders have to negotiate for rights remains. The solution is to allow PROs to create economies of scale in transactions, but prevent them from abusing the market power that they possess. The evidence at trial showed it is the big music publishers that are trying to extract more from consumers, not the smaller publishers or the individual artists.  

To the extent that there are problems in the music copyright space, they will only be made worse by strengthening the power of the copyright monopoly, if the antitrust oversight of the industry is weakened.  

Mark Cooper is director of research at the Consumer Federation of America.

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