Without writers, there would be no songs. And if songwriting was no longer one of the most heavily regulated industries in America, there might be more happy songs.
While most music today is heard on modern technologies such as streaming services and mobile devices, the remuneration to songwriters is governed by ancient laws. Songwriters must rely on performing rights organizations (PRO), such as BMI and ASCAP, to negotiate blanket licenses, collect royalties, and enforce intellectual property rights on their behalf due to the immense number of entities that use music.
These PROs are governed by Department of Justice (DOJ) consent decrees issued in 1941, which deny songwriters and music publishers the ability to negotiate the value of their intellectual property in a free market. If an agreement on a negotiated rate cannot be reached, then the PROs must ask a rate court judge to determine the compensation that a songwriter will receive. Each PRO is assigned a specific rate court judge, who adjudicates that PRO’s rate negotiations.
Under the current regime, songwriters receive about $170 per million times a song is streamed over the internet, or slightly more than one-fourth of one-thousandth of a cent. Songwriters are required to agree to have their music performed even before the rate for the song is agreed upon. This is like selling your house to someone before you have agreed on a price, and then having the buyer move in immediately.
Consent decrees generally are supposed to be periodically reviewed, so in 2014, ASCAP and BMI asked the Department of Justice (DOJ) to review the consent decrees for performance royalties on digital music services, such as Pandora and Spotify. The PROs asked DOJ to give songwriters the ability to remove their catalogue from digital licensing services, since they were getting such abysmally low royalties.
On June 30, 2016, DOJ rejected this request, maintaining the status quo. To make matters worse, the department also decided to address a matter that was not raised by ASCAP and BMI. The DOJ arbitrarily and capriciously created new restrictions on fractional licensing, by deciding that each PRO could license 100 percent of a song for use, with little regard for whether all the writers of a song were represented entirely by that PRO, or the contractual agreements that bound them to a division of the royalties amongst themselves. This bizarre determination created an even greater disadvantage to songwriters trying negotiate fair market pricing for their licenses.
While PROs like ASCAP and BMI have always competed with one another, other PROs have entered the U.S. market, including SESAC, foreign PROs and GMR, who are unregulated and unconstrained by consent decrees that regulate the amount a songwriter can charge for their license. No other country imposes these regulated consent decrees on their music industry, putting the U.S. out of step with the rest of the world.
On Sept. 16, 2016, the BMI rate court judge, Louis L. Stanton, overturnedDOJ’s decision, finding that the consent decree, “does not address the possibilities that BMI might license performances of a composition without sufficient legal right to do so, or under a worthless or invalid copyright, or users might perform a music composition licensed by fewer than all of its creators.”
Judge Stanton further noted that, “The Consent Decree neither bars fractional licensing nor requires full-work licensing.” Following the BMI rate court decision, 18 members of Congress wrote to then-Attorney General Loretta Lynch on Sept 28, 2016, urging her to overturn DOJ’s ruling on the 100 percent licensing determination.
The House Judiciary Committee has been reviewing copyright laws during the past two years as part of an effort to modernize the U.S. copyright system. The committee should also review and modernize songwriter compensation and equity, so that songwriters across the nation can enjoy the same fair market rate standards as most artists and record labels, which would make everyone happy.
Thomas A. Schatz is president of Citizens Against Government Waste.