When the government grants a monopoly, it shouldn’t surprise the monopoly that strings come attached.

The music business is exactly such a monopoly.

For more than 75 years, entities called Performance Rights Organizations – two of which, the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Incorporated (BMI) together control about 90 percent of the publishing rights to all the music that’s ever been published – have agreed to the terms of a federal consent decree that specifies what they can charge businesses for broadcasting/playback rights.

The PROs then pay the individual composers and singers a percentage of that as royalty income.

While not a perfect system, the consent decrees have tempered the PRO’s monopoly status and made it possible to manage and make available vast catalogs of songs at reasonable prices without businesses having to negotiate playback rights for each individual song and with multiple individual copyright holders.

Now ASCAP and BMI are pressuring the Justice Department and the new Attorney General, Jeff Sessions, to change the “terms and conditions” of the consent decree to allow something called fractional licensing – a game changer that would do exactly that – force broadcasters (this includes streaming music services such as Pandora as well as restaurants and bars; basically, any business that plays background music, such as department stores and hotels) to negotiate separate deals with every partial copyright holder for playback rights.

The problem – one of them – is that many songs have multiple individual/partial copyright holders; for example, a lyricist might hold a copyright on the words of a song while another might own rights to the “bridge” – the part of song in between the verse and the chorus. Some songs have a dozen different copyright holders.

Under a fractional licensing system, individual deals would have to be negotiated with each and every one of them before that particular song could legally be played back.

It will keep the lawyers busy for years.

The courts, too – as fractional licensing is certain to increase “gold-digging” copyright infringement claims from distant/hazy/partial stakeholders who may or may not have legitimate copyright claims to a given song – and who assert that they were overlooked by the fractional licensing regime.

Meanwhile, there won’t be much to listen to – on the radio, on streaming radio, in hotels, bars and restaurants. Whether because of the cost of the music – or because of the cost of litigation – actual as well as potential.

The logistics alone are daunting. Imagine the licensing deals for 90 percent of the recorded music in existence having to be renegotiated on a fractional basis before playback rights are granted.

And imagine the costs involved.

Which of course the PROs won’t be paying. Instead, they’ll be transferring those costs to their captive market – in the form of higher licensing fees and so on, exactly what the long-standing consent decrees they agreed to were designed to prevent them from doing.

But the PROs keep on pushing for the DOJ to “adjust” the consent decree to allow them to charge for playback rights based on fractional licensing – because record breaking profits (more than $1 billion annually) aren’t enough, apparently.

Not that there is anything wrong with profits . . . in a free market.

Keep in mind that the PROs are leveraging their government-granted monopoly status to artificially inflate their profits and doing so at the expense of the listening public, which is for all purposes a captive audience.

Remember: The PROs enjoy a legal monopoly – tolerated by the DOJ – on roughly 90 percent of the country’s music catalog; what they are seeking via fractional licensing is to multiply their monopoly profits by maneuvering themselves into a position such that they can charge multiple playback fees – rather than a single set fee for general playback rights.

So far, the DOJ has resisted ASCAP and BMI’s importuning – including an announcement last year by the department’s Antitrust division that rejected the PRO’s demand to alter the terms of the consent decree. But the PROs refuse to take “no” for an answer – and are now trying to game the courts to get what the DOJ wouldn’t give them.

Last fall, they appealed the DOJ’s ruling and found a receptive federal circuit court judge – Louis Stanton – who sided with ASCAP and BMI.

The DOJ can appeal Stanton’s decision – but must do so before a fast-approaching May 18th deadline.

ASCAP and BMI are hoping to buffalo Attorney General Sessions into not appealing the court’s ruling – based on bogus claims that such an appeal would amount to “regulating” private contracts between the PROs, the songwriters and singers and businesses seeking playback rights.

But this is disingenuous given the PRO’s crony capitalist, government-granted monopoly status. And it is telling that pro-market conservative lawmakers such as Mike Lee (R, UT) support the consent decrees – and oppose plans to alter them. Last fall, Lee praised the DOJ’s decision, stating that the consent decrees ” . . .ensure that prices for music remain competitive for consumers.”

This should tell Attorney General Sessions something – assuming he’s not already well-aware of it himself.


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