Songwriters: The DOJ Got It Right. Your Sky Is Not Falling.

The DOJ Is Handing a GIft to Songwriters

100% licensing: Another gift from the DOJ to songwriters.

The publishers’ press machine has declared that the “DOJ has dealt a massive blow to America’s songwriters.”  But, what they really mean is: the DOJ withheld from publishers a huge windfall.

The DOJ rejected the publishers’ plea for direct licensing of digital rights.  This is excellent news for songwriters. The publishers argued that they could achieve “free market value” for all songs if they were allowed to supplant ASCAP and  BMI at the negotiating table.  But, “market value” for songs has been foreclosed by pre-existing label deals that siphoned 50% of gross revenue (and authorized the “free tier”).

There is a finite pot of money that any streaming service can pay out in royalties — after paying label payments, enormous overhead costs in technology and maintenance, and profits to the investors.  Direct licensing would not increase the pot.  But it would have opened the door for publishers to extract label-size huge advances (that would not be shared with songwriters) and structure deals with the streaming services that would minimize the flow-through of writers’ share of these royalties.  The only way for songs to achieve royalty parity with recordings is for the labels to give back part of the royalty pool.

But it’s the other DOJ decision that sent the press machine into overdrive: ASCAP and BMI must license (to users like streaming services) 100% of each song.  The PROs have been licensing just their fractional interest in any particular song, so users have needed to get multiple licenses for the same song if co-writers were members of different PROs.

An endless chorus of horrors followed the DOJ announcement:

“Users will shop around for the PRO that will offer the lowest license rate.”

But why would a PRO race to reduce rates — and reduce its commission?  ASCAP and BMI control the vast majority of all songs in the US and they have already condemned the decision — and, presumably, will continue to fight for higher royalty rates.  So which of the remaining, less significant societies are the pundits worried about?  Don’t those outlier societies boast that their free-market status gives them greater bargaining leverage to extract higher royalties?

More importantly, the grant of rights to the PROs is not permanent.  Songwriters can easily terminate the agreement with a misbehaving PRO and sign up with another one that prefers more royalties rather than less.

“It will discourage songwriters from co-writing with writers signed to another PRO.”

But why?

Because the songwriters don’t want the “other” PRO to collect their share of performance royalties?  There is a legitimate concern that there could be a delay in getting paid.  But, there is no reason why the collecting PRO could not pay the “other” songwriter (and his publisher) at the same time it pays its own writer.

Hence, no delay.

The PROs will complain that this solution would create a new administrative burden to enlarge their databases to include payment data for all writers and publishers, in addition to the already-affiliated portions.  It is correct that there will be an initial expense to add such data for existing songs for the non-affiliated writer; they already have addresses for every publisher.

In fact, this element should hasten the creation of what has been promised and then neglected for years: a single database for all published songs, available to all interested parties. If that is the consequence of this DOJ decision, then everybody’s a winner.

“It will violate the terms of private agreements that give one writer full ‘administration’ rights to a song and thus undermine the administrator’s right to choose the PRO.”

It won’t change anything.  A sole administrator of a co-written song currently has the right to collect 100% of the publisher’s share of the song; however, to currently do so, that administrator must register a publisher affiliate with each of the PROs to which each co-writer is affiliated – to enable each co-writer to be paid by his designated PRO.

The DOJ ruling eliminates the need for such multiple publisher affiliations.

The DOJ ruling does not grant administration rights where they don’t otherwise exist.

The DOJ ruling means only that the non-controlling writer will be paid his writer’s share from the “other” PRO.

Lastly, the unspoken bugaboo: “Some PRO commissions will decrease.”

With “fractional” licensing, each PRO issues a separate license — and extracts a commission — for the same song for the same use.  This system obviously creates unnecessary duplicative administrative activity.  It’s highly uneconomical.  It’s a wasteful cost in a world of diminishing revenue.  No one should mourn the demise of a system that perpetuates such redundancy.

100% licensing: Another gift from the DOJ to songwriters.

11 Responses

  1. Musicservices4less

    Hi Jody:

    I am an independent publisher for many decades and have managed to administer fairly active musical composition copyrights over the years. I am confused how the DOJ decisions will benefit my small company. Perhaps you would be kind enough to answer my questions from the small, independent publisher point of view as opposed to the “Angel (Tech) Investor” side. You formerly headed up one of the major publishers which has pretty much unlimited funds to make vast administrative changes. I don’t. Having said that, here are some of my concerns and why. I have put in quotes your points. (Apologies for the length)

    “But, “market value” for songs has been foreclosed by pre-existing label deals that siphoned 50% of gross revenue (and authorized the “free tier”). . . There is a finite pot of money that any streaming service can pay out in royalties — after paying label payments, enormous overhead costs in technology and maintenance, and profits to the investors. . . .The only way for songs to achieve royalty parity with recordings is for the labels to give back part of the royalty pool.”

    I disagree that the label deals “foreclose” obtaining the “market value” for songs. What has foreclosed the market value for songs (as opposed to recordings) is the total buy in by the entire record and music community that tech distributors must pay on the basis of revenue as opposed to a negotiated penny rate per use. That basic change would obviously have numerous effects on any negotiations. And this is why I stated in the past that “Steve Jobs destroyed the financial end of the music business.” It had nothing to with the consumers cherry picking cuts from albums. There is nothing wrong with that. But it is the red herring that Apple is sooo generous by giving labels and publishers a combined 70% of its revenue. Why should the supplier of the content, the one thing that tech distributors need the most, take all that risk on that basis? I will tell you why the tech distributors like it because it insures for the “Angel Investors” that they can run their businesses at a loss and wait to see if they can get enough time to cash out. Boy, I wish I can run my business at a loss for years and then be able to cash out at a profit!

    “The PROs have been licensing just their fractional interest in any particular song, so users have needed to get multiple licenses for the same song if co-writers were members of different PROs.”

    Oh, what a terrible administrative headache. Having to get blanket licenses from what, 2 to 4 PROS? Oh my god, no one has ever been able to do that. Really, Jody, former EVP of Sony.

    “Users will shop around for the PRO that will offer the lowest license rate. . . But why would a PRO race to reduce rates — and reduce its commission?”

    Let see on this one. If I can non-exclusively control all the shares of a song but all my competitors can do the same, how would I even get business for my company? Do I have better songs? Can I deliver it better, is that even applicable in this situation? Oh wait, I know, I will sell it cheaper!! Oh, but the tech distributors do not want the cheapest access to all songs because they want to make sure writers get paid a living wage. Right, that’s it! I have another answer that I know will work because I always follow the law just like the tech distributors. I will get together will all my competitors and we agree on the same rate and then may the best man win! Eureka, that is it! I can stay in business. Uh oh. There is a knock on my door. Who can that be? Renata Hesse. Who is she? She works for Google. No, that was her former job. Now she is the Principal Deputy Assistant Attorney General for Criminal and Civil Operations. Having previously served as the chief of the Networks and Technology Enforcement Section of the Department of Justice’s Antitrust Division, Renata is considered one of the country’s preeminent technology antitrust attorneys. Wow, thank G-d I have done nothing wrong. She must be going after the Tech Distributors.

    “Songwriters can easily terminate the agreement with a misbehaving PRO and sign up with another one that prefers more royalties rather than less.”

    You’re kidding, right?

    “But, there is no reason why the collecting PRO could not pay the “other” songwriter (and his publisher) at the same time it pays its own writer.”

    You’re kidding, right?

    “It will discourage songwriters from co-writing with writers signed to another PRO.”

    Yes, writers when creating songs always talk about these kinds of things. Right.

    “The PROs will complain that this solution would create a new administrative burden to enlarge their databases to include payment data for all writers and publishers, in addition to the already-affiliated portions. It is correct that there will be an initial expense to add such data for existing songs for the non-affiliated writer; they already have addresses for every publisher.”

    Oh goodie, the Angel Investors will cut me a check for all this work. Whew, and I thought I would have to pay for it. Can I have your number and the number of your accounts payable department so I can invoice you?

    “In fact, this element should hasten the creation of what has been promised and then neglected for years: a single database for all published songs, available to all interested parties. If that is the consequence of this DOJ decision, then everybody’s a winner.”

    Yaaa, I won!

    “A sole administrator of a co-written song currently has the right to collect 100% of the publisher’s share of the song; however, to currently do so, that administrator must register a publisher affiliate with each of the PROs to which each co-writer is affiliated – to enable each co-writer to be paid by his designated PRO.”

    And here we get to the legal core of the problem. Some young lawyers who work for Ms. Hesse and most likely Ms. Hesse herself, are in the ‘West Coast Tech Bubble’. They read the copyright law and it says there, any co-owner can non-exclusively license a song. They know nothing about the day to day operation of the music business. This “decision” by DOJ will provide the precedent for joint writers/publishers to quote and license (non-exclusively) for both writers/publishers synchronization licenses as well. Which will lead to a lot of litigation. Thanks Jody. I have numerous litigation lawyers on my staff.

    ”With “fractional” licensing, each PRO issues a separate license — and extracts a commission — for the same song for the same use. This system obviously creates unnecessary duplicative administrative activity.”

    You are right but the commissions generated are based on monies collected so the bottom line currently is that the net cost to writers/publishers will basically not change.

    I welcome your response as this is an extremely important issue for all writers and publishers. Keep in mind that it is my very strong belief gathered from decades of day-to-day work in the music industry that the life blood of our industry is the truly independent writer/publisher/artist/record label. We must work very hard every day to keep those people in a profitable business.

    Reply
    • Sarah

      Gotta say, whether it’s fair to writers or not, the PROs set themselves up for this 100% licensing requirement.  

      Music licensing is highly technical.  The typical licensee – often a small business owner with no knowledge of the music industry – doesn’t know how licensing works.  

      To them, a song is a song.  To them, a license to the song is a license to the whole song.  In their marketing materials, the PROs have been taking advantage of this lack of knowledge for a very long time.  

      The PROs’ marketing materials and websites are carefully designed to foster the inaccurate impression that they already do 100% licensing.  That’s implied as the huge benefit of the PROs: get a license from BMI/ASCAP, and you’re covered for any song in BMI/ASCAP’s repertoire.  

      For example:

      “A music license with another performing right organization allows you to perform only copyrighted music represented by that organization.  It does not cover public performances of the award-winning music licensed by BMI.  This is because each songwriter or composer may belong to only one performing right organization at any given time, so each PRO licenses a unique repertoire of music.”

      That answer is deliberately misleading, taking advantage of the licensee’s probable lack of knowledge.  It implies that the only reason you need multiple PROs is because they each license “a unique repertoire of music,” so if you want to be covered for all music, you’ll need all the PROs.  

      Again, to a typical licensee (or anyone not in music, for that matter), a song is song: “a unique repertoire of music” means “a unique group of songs.”   In their mind, it does not mean what it actually means—“a unique group of songs and parts of songs.”  

      The answer, as well as the remainder of the marketing materials, should indicate that BMI’s repertoire contains songs that BMI cannot fully license (e.g., “We can license only 50% of Song X to you”), because BMI does not represent all of the writers of that song.  

      In other words, BMI’s “unique repertoire” includes many partial songs, such that a license from BMI is, in fact, not enough.  Again, you need highly specialized knowledge to understand this distinction, and the PROs know that the typical small business owner doesn’t have that knowledge.

      Or let’s look at ASCAP’s website:

      “One of the greatest advantages of the ASCAP license is that it gives you the right to perform ANY or ALL of the millions of the musical works in our repertory.  Whether your music is live, broadcast, transmitted or played via CD’s or videos, your ASCAP license covers your performances.  And with one license fee, ASCAP saves you the time, expense, and burden of contacting thousands of copyright owners.”

      Any reasonable, ordinary licensee would interpret this statement as meaning “ASCAP gives you 100% licensing of performance rights for our catalog: pay our blanket license, and you have full rights to play our songs in your business.”

      ASCAP’s is actually worse than BMI’s.  ASCAP literally says, “buy our license and you have the right to play ANY or ALL of the musical works in our repertory.”   For non-music-industry folks – the people that the PROs make money from – that has a pretty plain meaning: “Pay us and you’re totally covered for our songs.”  Because to an ordinary licensee, a song is a musical work and a musical work is a song: they’re the same – especially because in practice, a business owner plays ONLY musical works that are in fact songs.

      Lest you think that this is only a website marketing issue, I’ve met with BMI to discuss blanket licenses.  And absolutely everything they said implied they were doing 100% licensing.  They didn’t literally lie at any point, but let’s just say that there’s a lot of wiggle room in such a technical topic, and they’re very skilled at presenting their product in the best possible light.  Fortunately, I already knew about fractional licensing, but if I hadn’t, I would have left that meeting under the reasonable but incorrect impression that I would be 100% covered for all of the songs in BMI’s repertory – exactly the misconception they wanted me to come away with.  

      Now, we all get what’s going on.  Their represented works effectively include many “partial” songs.  But that’s industry-specific, highly technical knowledge – and obviously it is inappropriate to assume that typical small business owners, to whom they are trying to sell licenses, understand it.

      It’s much more inappropriate to deliberately craft their marketing to take advantage of the potential licensee’s lack of technical licensing knowledge.  

      If the PROs were being honest, rather than intentionally misleading, then the statements would read something like this:

      “We represent and license millions of songs.  For the songs where we represent all of the writers, you’re fully covered with a license from us.  But for the many songs where we do NOT represent all of the writers, we obviously can’t give you a license to the whole song.  For any song where we don’t represent all the writers, we can give you a partial license, and you’ll ALSO need to obtain a license from the other PRO(s) that represent the other writers, in order to be fully covered for that song.  Therefore, getting a blanket license from us does NOT necessarily give you the right to play ANY or ALL of the songs in our repertory.”  

      They don’t do that because it’s clearly not as strong of a sales pitch as “Our one license covers you for everything in our repertory.”  

      What’s the big deal about the fact that the PROs have been deliberately marketing their blanket licenses this way?  

      It’s deceptive.  

      This would be like buying a Honda at a local dealer, and then having them deliver it to you without seats or mirrors or headlight.  It’s still technically a car, right?  It still goes, and you can drive it.  They sold you a car and they delivered a car, so what’s the problem?  The problem is that, based on your ordinary, reasonable understanding, “I’ll sell you a Honda Accord for $X” means “I’ll sell you a Honda accord with everything standard that you need to actually use it.”  If standard parts are not included, then in order to make an honest sale there, you have to say, before the car is sold, “Hey, it’s a Honda Accord, but it doesn’t have seats or mirrors or headlights.  You’ll have to go to this other dealer to get those.”

      PROs have been selling cars without seats or mirrors or headlights, and deliberately obfuscating that fact in their marketing.  A “fractional license” to a song is in no way the same as a 100% license to a song, and typical licensees have no reasonable basis for understanding that “representing a song” means “representing a part of a song” – just like an ordinary person who goes to buy a car from a local dealer has no reasonable basis for thinking that “selling a car” means anything other than “selling a car with everything standard that you need to actually use it.”  

      (Which, of course, is why car dealers don’t do that.  When you’re dealing with a tangible object like a car, rather than an intangible one like a license, those omissions would be obvious upon delivery.  With a license, you can’t readily see what’s missing.)

      100% licensing is the right call here for one simple reason: if you go out and poll a bunch of ordinary small business owners who have blanket licenses from the PROs, most of them will think that the PROs already do 100% licensing specifically because of how the PROs choose to market their products.

      And this is where it sucks for writers and publishers, because the fact that they represent you guys doesn’t give the PROs a pass on adhering to standards of honesty that all other businesses follow (and are in fact required by law to follow) when selling a product in the market.  

      They’ve been doing fractional licensing while intentionally making it look to their buyers like 100% licensing.  So now they’re being asked to live up to their marketing.  That’s pretty damned fair — demanding honesty from businesses is always fair.  

      Well, it’s fair as between the PROs and their licensee-customers.  As between the PROs and their songwriters?  The writers have good cause for being pissed – just not at the DOJ this time.  

      Reply
      • Troglite

        After some time and reflection, I think you’ve raised a completely valid perspective. Partial licenses should probably be excluded from the PRO’s blanket licenses. I don’t think this negates all of the other challenges and potential conflicts of interest that have been raised. Rather, its an additional and equally important consideration. I sincerely thank you for raising it. I honestly haven’t seen anyone else try to speak to this directly.

        Reply
  2. Anonymous

    the other point that is whitewashed in here is the cost of administering payments to outside songwriters, which will be burne by the writers. ASCAP and BMI are not going to do this for free. This will be beyond the commission the PRO charges to its members to administer their royalties and will a hidden tax on songwriters.

    Reply
  3. PiratesRus

    “But, there is no reason why the collecting PRO could not pay the “other” songwriter (and his publisher) at the same time it pays its own writer.” I read where the PRO would pay it’s client 100% and that the writer would have to pay the other writer. You’re kidding, right?

    Reply
  4. dhenn

    This is ridiculous! DOJ deal is bad business for indie songwriters period!

    Reply
  5. Troglite

    Thanks for the reminder. No matter what system is in place, bad actors in both the private and public arena will attempt to abuse or circumvent it fir their own benefit… often at the expense of independent/individual musicians and songwriters.

    Reply
  6. Michael Eames

    I am surprised to read this post from someone who worked (at a high level – EVP) at a major music publisher for 8 years.

    I can only surmise that Ms. Dunitz as an investor must only be interested in investing in the users of music than the creators and caretakers of the music.

    The DOJ has ignored how an entire business segment has operated since its inception (i.e. fractional licensing) – and it’s not like they weren’t told about it ( https://www.justice.gov/atr/ASCAP-BMI-comments-2015 , the great majority of these public responses eloquently speak to how 100% licensing is negative). How 100% licensing is a gift to the songwriter is baffling to say the least. The true gift would have been to get rid of the consent decrees entirely – they have existed for 75 years and are not reflective of the current business reality. In the absence of these consent decrees, songwriters and publishers could say NO to their music being used if they want. I’m sure as an investor Jody would only invest in a business that had the real ability to determine how its product was used and what price was paid for it. The consent decrees take away the ability to say NO and judges that don’t know (or perhaps care about) the music business determine what rate is to be paid. To quote Spock, that is illogical.

    I am an independent publisher and have very serious concerns about how the business would react and have to adapt should this 100% licensing be forced upon us in the final analysis (and the DOJ is trying to force it, as they did not allow any other requested amendments to the decrees). It creates chaos, more cost, and more confusion – none of which should exist in a business that Jody would likely invest in.

    And if the songwriters felt this were a gift – they would be celebrating it. They are not. Publishers are not. The DOJ enacted these consent decrees because they felt in the 1940s that the public needed some protection from the supposed monopolistic policies of ASCAP and BMI. Perhaps the DOJ needs to step back and consider the voices from an entire segment of an industry who are telling them that what they are trying to do is not how business is transacted (and has been for 75 years!) nor should be transacted.

    I would have expected more from Ms. Dunitz – but now we know where she is investing – it is not with the songwriters.

    Reply

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