Promoting Innovation and Competition in Music Licensing

As any musician or songwriter will tell you, music copyright law is a headache.

Today, ITIF filed comments with the Department of Justice (DOJ) to address the consent decrees of Performance Right Organizations (PROs) such as the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc. (BMI). These PROs manage licensing for public performance rights for compositions, the rights to play an artist’s music in a public place, or transmit it to the public via a medium, such as radio, television or the Internet. In 1941, the PROs settled a lawsuit brought by the DOJ with a consent decree designed to stop them from participating in anti-competitive behavior created by the accumulation of public performance rights held by their member songwriters and music publishers. We argue that DOJ should rework these decrees to assist in modernizing the way music copyrights are licensed in the digital age, keeping an eye on innovation, competition, transparency, and fairness.

These organizations are a small part of the complex web that is the U.S. music licensing system, which includes mechanical licenses, synchronization licenses, and sound recording licenses that are all licensed by separate entities, as shown in the diagram below. This complex system fails to create competitive rates for compulsory licenses, and while the responsibility to fix many of these issues resides in the halls of Congress, DOJ can sow the seeds of change by pushing the PROs to adopt several directives as part of these consent decrees.

                        

 

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In short, we recommend the DOJ do the following:

1. Create an open central database or a series of databases for all performance rights licensing with a searchable capability.

With a one-stop-shop database, potential licensees would be free to find and pick what licenses they wish to purchase, and third-party developers could build applications on top of the PROs’ databases to facilitate music licensing. This open database would promote fairness in negotiations by increasing transparency, and would provide a platform for future innovation in the music industry

2. Allow copyright holders to set royalty rates for individual works.

The current system fails to produce competitive rates for compulsory licenses by assigning a single rate for every song, devaluing some songs to the benefit of others. DOJ should move to implement a dynamic, market-driven rate-setting system for the PROs’ rates with the comprehensive licensing database at its center.

3. Allow the PROs to license additional rights.

A musical composition copyright guarantees public performance rights, mechanical rights, and synchronization rights, all held by separate entities. By opening up compulsory licensing to competition and increased transparency, as detailed above, this restriction will no longer be necessary. By allowing PROs to license additional rights to music services, DOJ can streamline the process and create a system that makes all parties involved better off.

4. Push for faster dispute resolutions.

If negotiations between the PROs and music services fall apart, a rate court steps in to solve the dispute. This process is slow, expensive, and creates prolonged uncertainty for everyone involved. Expediting dispute resolutions over rates will reduce this uncertainty and allow mediators the flexibility to adjust to the fast-moving music industry.

We note in our filing that DOJ can only do so much. To truly create the type of innovative and dynamic pricing for music that we would like to see will require Congressional action. To this end, we argue that Congress should make some needed changes including uniformly applying the performance copyright for sound recordings to all broadcasts; creating an open database for all licensing rights, not just performance rights, to ease adoption and promote innovation; and modifying the compulsory license to permanently allow separate royalty rates for all types of copyright licensing. By implementing these proposals, Congress could truly reform the outdated licensing system, simplifying these complex processes, providing consumers with more listening options, and giving copyright owners fairer compensation for their works.

These recommended changes would make the whole system less complex, more transparent and ultimately better for music rights holders, performers and licensees. The DOJ should move to dispatch our songwriter’s headaches once and for all.

View our full filing here.