The Argument for Regulating Music Publishers…

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The following guest post comes from Sherwin Siy, Vice President of Legal Affairs at Public Knowledge, a consumer advocacy group that works in telecommunications and intellectual property, including music licensing and the media business.

It’s undeniable that the music industry is highly concentrated.

While there are more people making music than ever before and more ways for people to find it, the majority of what we listen to passes through bottlenecks that are controlled by a select few powerful entities.  Broadcasters, webcasters, and streaming services are all dominated by one or two big players.

This means that any musician who wants to be heard must go through one of these players to reach listeners.

On the other side of this, anyone who wants to compete with these dominant players by launching their own radio station or Pandora-like streaming service must now strike deals with the “Big Three” major music publishers: Sony, Universal and Warner Music. And the industry keeps consolidating, too; the “Big Three” were the “Big Four” until 2012, when Sony merged with EMI Music Publishing.

These problems with the concentrated music licensing market are far from news; for years, members of Congress have tried to resolve this morass, but its intricacies and interrelationships have so far stymied such reforms. Amid all of this market concentration, it’s surprising that antitrust authorities aren’t stepping in more—in fact, they seem to be doing the opposite, such as letting music publishers exempt themselves from the competition rules of the Justice Department’s consent decrees governing ASCAP and BMI.

ASCAP and BMI each gather the rights of songwriters together and set prices for anyone who wants a license to play a selection of songs—whether you’re a bar playing music for your customers or a startup trying to jump into the streaming market.  But while gathering these rights can create a convenient place for licensors to go to, bringing would-be competitors together to set prices the way that ASCAP and BMI do is classic anticompetitive behavior.  This is why ASCAP and BMI came under intense antitrust scrutiny by the Justice Department in 1941 and 1964, and why they agreed to the now-famous consent decrees, which require them to offer a fair deal to both songwriters and anyone trying to play those songs.

Now, though, major publishers like Sony are asking for the ability to discriminate in how their songs are licensed by ASCAP and BMI.  Specifically, they want to let the collectives continue to gather royalties on their behalf from bars, restaurants, and radio stations, while withholding their songs from digital services.

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There are two things driving this move.  One is that the publishing market consolidation has now reached a point where each can affect the market alone—the publishers no longer need the collective of ASCAP or BMI to act.  With so few players, any one major publisher raising its licensing rates could provide a de facto signal to the others to do the same.  The other factor driving the push for withdrawals from digital services is the belief that music streaming is only going to increase as a force in the music industry, and the various players all want a piece of that pie.

The publishers are reaching for that pie by trying to withdraw from the safeguards that the Justice Department placed on ASCAP and BMI for licensing to digital services.  That means services like Pandora will have to negotiate directly with each of the major labels independently, without the protections that the consent decrees provide against monopoly pricing.  That’s bad news for Pandora, the biggest player in the music streaming market.  But it’s even worse news for anyone else trying to compete with Pandora.

If the major publishers can force Pandora into a deal that works to their advantage, what possible leverage would a startup have in securing a fair rate, or even getting a license at all?

Probably none.  In other words, the publishers have no reason to let any new services launch, unless these startups can do one of two things: offer more money or give the publishers equity in their company.  The only companies that seem able to pay more than Pandora are tech companies like Apple or Google—companies that are already potential or actual bottlenecks in another part of the industry. Having the biggest players in music sales, mobile devices, or search engines also be the biggest players in streaming music doesn’t sound like the best recipe for competition.  And things are no better if a startup offers its own shares as payment instead of cash; that just means the market power of the major publishers gets expanded into a new market. The system has now reached a critical point – where the publishers could decide the winners and losers in streaming music.

In the end, what the Justice Department decides to do with these consent decrees could well determine who controls how we get our music in the future. So how do we make that future a good one?

One way would be to strengthen the protections in the consent decrees.  Even if some withdrawals are allowed, the existing flaws in the remaining parts of the consent decrees can be fixed—requiring better reporting and more transparency, for instance.  The Justice Department, and Congress, should keep a close eye on how publishers end up using their digital market power—and put in place the means for authorities to know if there are abuses.

Recent controversies over music streaming and licensing are showing us that these issues are as relevant as they’ve ever been. Now is not the time for enforcers of free and competitive markets to take their eyes off the ball.

Image: “Man Controlling Trade,” a statue by Michael Lantz, positioned outside the Federal Trade Commission (FTC) in Washington, DC.  Top image shot by Tim Evanson, middle image modified from a shot by trxckster; both licensed under Creative Commons Attribution 2.0 (CC by 2.o).  

21 Responses

  1. T. Cooke

    Do me favor. Take a step back.
    -You’re pushing to clamp down on already outdated copyright law. Take a seat.
    -Independent labels and artists having control to be apart of the publishing system and also not allow their music to be streamed on digital platforms, or at least having increased leverage: sounds good.

    Do me favor. Refund the money.

    • No, You Should Do YOURSELF a Favor...

      You really should take a step back and actually think this through, TCooke.

      If the three largest music publishers are allowed to withdraw their licensing from ASCAP and BMI, that most definitely will NOT lead to “Independent labels and artists having control to be apart of the publishing system and also not allow their music to be streamed on digital platforms, or at least having increased leverage.”

      First of all, ASCAP and BMI are entirely, 100% voluntary organizations, so, artists and small publishers “having control” is NOT the issue.

      There is absolutely NO requirement or obligation for ANY artist or music publisher to sign up with ANY of them. Any songwriter or music publisher can go it alone, if they choose. Clear?

      Moving on to the reasons why they don’t elect that option and instead sign up with the collectives, anyway: It’s because they get a better deal with the collectives. Think about it for a minute, TCooke: What happens when SONY/ATV removes all of their top-tier songs from ASCAP and BMI and negotiates a better deal, for ONLY their catalog?

      Several things: a) Services like Pandora and Spotify won’t really come looking for all of the smaller, independent artists because they will be able to satisfy the bulk of their listeners with the major catalogs, b) Even if they DO want to get some non-major stuff in there, they won’t want to/be able to pay the same high price for that non-major repertoire and c) The value of the remaining collective that everyone else is left with (i.e. ASCAP and BMI – minus the massive SONY/ATV catalog) will be far lower.

      The article is correct that the ONLY people that will win with partial withdrawals will be the big publishers.

      Everyone else loses.

      So, do yourself a favor. Think about this stuff a bit more.

      • No Help, In That Department

        I don’t need to help you, doing that.

        I really don’t think you’ve thought this though.

  2. Save Ferris

    Songwriters, don’t be fooled by this! The consent decrees need to change as they are 65 years old and ensure below-market rates for music. Just what the streaming and media companies want…

    • Not Really

      What I do know is that the article contains this clearly anti-Google observation:

      “The only companies that seem able to pay more than Pandora are tech companies like Apple or Google—companies that are already potential or actual bottlenecks in another part of the industry. Having the biggest players in music sales, mobile devices, or search engines also be the biggest players in streaming music doesn’t sound like the best recipe for competition.”

      Some “shill” for Google, huh?

  3. Michael Eames

    Sherwin – given that Pandora pays out 55% of their income to rights holders and that payment is going 51% to record labels and 4% to the publishers, how can you even suggest that publishers need to be regulated more?!?! It is the consent decrees that are preventing publishers from being paid fairly!! Even with Spotify, 59% of their income is going to the labels (plus the labels have equity in Spotify) and the publishers only get 10.5% due to the statutory rates. How is this fair????

  4. David I

    Don’t be fooled by this garbage coming from a group funded by the giant tech companies that benefit when songwriters are regulated by the federal government and paid a fraction of their worth. NMPA will be responding today.

  5. Reality

    As soon as we remove the consent decrees or raise these rates that so many of you uninformed artists think are too low or unfair; there will be no more money flowing. No more companies interested in distributing music by those means. Because there will be no incentive of actually making money.

    So let’s do it. Let’s raise the rates up. Then we’ll watch as any streaming company will drop every single record from their catalogue that could now be considered a “waste of money” and you’ll see just a small handful of streaming services using a small handful of records. And guess what, not one artist who reads DMN will be in that handful. Only major label catalogues will be deemed worthwhile for those small few streaming services who want to make the necessary investments.

    WAKE UP!!! All you unsigned and independent artists do when you echo the propaganda of major labels and publishers is ensure they keep making money and keep being the only standard for success. Today we are edging closer to any artist being able to succeed but its actually uninformed artists mostly holding up that evolution.

  6. Oh c'mon

    Isn’t it interesting that the head of the lobbying group that represents the interests of the three major music publishers (one owned by a Japanese electronics company, the other a French telecom and the third by a Russian oil and coal oligarch) jumps in to cast aspersions on someone trying to make the basic–though hamfisted–point that abuse of market power by these massively consolidated companies is an inevitability absent some checks on their leverage in a free market?

    Never mind that this lobbying group doesn’t represent songwriters. They represent PUBLISHERS.

    Songwriters do want to be played on radio (and that’s what non-interactive services are: radio). They have to be played to get paid. Terrestrial radio only plays a handful of artists. Digital radio plays some 80 percent more, and pays a higher per-play royalty. It is clear that the reason so much pressure is being placed on radio-like services is because of the collapsing market for mechanicals. But that’s not justification to Balkanize the landscape putting songwriters at peril due to a lack of transparency in the deals that would inevitable be struck on their “behalf.”

    One needn’t look any further than what the major labels are able to compel from interactive services, namely large cash advances, equity and breakage–no doubt horse traded for LOWER royalty rates that the rest of us have to live with–income that is very likely not shared with artists, to see what the big publishers’ game is.

    Why not meet with songwriters when we ask you? What are you hiding?

  7. Simple solution

    1. Sunset the consent decrees
    2. Allow PRO bundling
    3. Enshrine writers 50 percent in statute
    4. Move ratesettng for performances to Copyright Royalty Board, which also handles mechanicals and digital performances of sound recordings.
    5. Allow evidence from sound recordings proceedings to be admissible in ratesetting for performances.

    THAT’s how you get to a higher rate without blowing up the entire marketplace.

    Unless the major publishers want to do that to be able to collect more money for non-plays related activity and not pay songwriters their fair share.

  8. so

    So consolidation is the problem, but we solve it by consolidating publishers under the umbrella of ASCAP and BMI? Isn’t the “ability to discriminate” the opposite of consolidation and “concentration”? Look, the PROs and the users of music are essentially going to wind up joining forces – ASCAP and BMI don’t want to lose the massive amount of revenue flow that they’re taking a piece of, and music users want to keep rates down. This is what you’re hearing in this article.

    • So....


      “So consolidation is the problem, but we solve it by consolidating publishers under the umbrella of ASCAP and BMI?

      No. The publishers have historically been consolidated under ASCAP and BMI for the last 75+ years. Wew don’t solve the problems attendant to consolidation by simply moving the area of consolidation. We solve the problems of consolidation through regulation. Read that as: “Consent Decrees.”


      “Isn’t the “ability to discriminate” the opposite of consolidation and “concentration”?”

      No. The ability to discriminate comes DIRECTLY FROM consolidation and concentration. You’ve got it, literally, backwards.

      Finally, your assertion that “PROs and the users of music are essentially going to wind up joining forces” is ludicrous. If anything, you might see smaller music publishers and independent songwriters moving towards more direct deals with music services, in order to maintain their position in the market and visibility into usage and payments.

  9. David I

    Hey Oh c’mon – NMPA represents 445 music publishing companies, including every important independent publisher, and their songwriter partners. Not a lot of courage hiding behind a fake name. Why not stand up? Guessing I know why.

      • Indie Publisher

        If you think NMPA only listens to one publisher then I think you need to pay more attention….

  10. Me2

    So, who would be in a position to effectively fight for the value of songs, if not PROs and Publishers associations?

  11. PROs are good

    PROs aren’t the problem. They serve a vital purpose. We need viable third-party royalty collection and distribution agents with songwriters within governance. Could they be more transparent? Absolutely. And they can be encouraged to be, as there are incentives TO be.

    Less so with the major publishers who are trying to hold the market hostage to their singular advantage. Makes sense from a business perspective; bad for writers and the growth of the a music marketplace where more songs are performed and royalties generated for writers.

  12. @Simple Solution

    Lots? I mean, it’s happened throughout history.

    For performance royalties, the only place where the 50-50 split is enshrined is in the member agreements with the PROs. It’s not in statute. You’re probably right that the big pubs—for now—wouldn’t try to move the splits, but how long before they start subjecting perf royalties to recoupables?

    The point is, there’s a way to get to the market rate without chipping away at hard won and longstanding author rights.