David Israelite in FORBES: Regulations Are Killing The Songwriting Stars

March 18, 2016

GUEST POST WRITTEN BY David Israelite Mr. Israelite is president and CEO of the National Music Publishers’ Association. Today, songwriters are the most heavily regulated part of the music industry. A stunning 75% of their income is controlled by the federal government. This started more than 100 years ago, when in 1909, the sale of copies of compositions were put under a compulsory license—meaning anyone could use them, for a government-mandated rate. At that time, the rate was two cents. Now it is only nine cents. Adjusted for inflation it should be 50 cents today. This is the result of government interference. As if this weren’t bad enough, around WWII the main non-profit organizations that license songs and distribute royalties to songwriters, ASCAP and BMI, were dealt a massive blow by the Department of Justice (DOJ) in the form of forced regulations called consent decrees. The reason these companies, called Performing Rights Organizations, exist primarily is efficiency. They issue licenses to millions of businesses like bars, restaurants and stadiums to play music and then they track when that music is played. To do this on a nationwide scale without such collective organizations would be extremely difficult. However, for them to function efficiently, they naturally must represent thousands of songwriters. Around the 1940s, the people who wanted to use the music they license thought ASCAP & BMI were getting too big, but make no mistake, they certainly did not want to lose them. The result was the tying of these organizations hands through consent decrees—forever preventing songwriters and music publishers from selling their work in a truly free market. Consent decrees have devastated the songwriting market Today, many decades later, these consent decrees have devastated the songwriting market. Songwriters make so little from digital streaming services like Spotify that some artists like Taylor Swift have pulled their music from them altogether in protest. Meanwhile the “underdog” companies like Google who need DOJ to “protect” them from songwriters and are lobbying DOJ to keep the consent decrees in place, continue to benefit from below-market royalty rates. Finally, with the advent of the Digital Age, the DOJ has acknowledged that the market cannot continue down this path, and has opened a formal review of the regulations governing ASCAP, BMI and the thousands of publishers and songwriters they represent. Music publishers want the government out of its business Songwriters hope this review will allow them to license some of their work in a free market—something all other property owners are allowed to do. Music publishers, their PROs and songwriters can no longer accept the depressed rates that result from the consent decrees, or the craft of songwriting and the songwriters themselves will continue to suffer dramatically, until there are fewer and fewer songs to enjoy. Some articles, such as Forbes contributor Christopher Versace’s recent piece “Music Publishers Are Once Again Looking For Government Favors,” mislead people into thinking that music publishers are looking for anything other than to get the government out of its business. If government must interfere, then publishers would like an update in the regulations that were promulgated before the Internet, iPhones, satellite radio and even space travel. The piece also claims that organizations like ASCAP and BMI “manipulate” the market. But how can they when the PROs required to license the songs they represent upon request have no ability to negotiate rates and royalties often set by a court? Who really has the money to influence Washington? Huge tech companies would love to paint music publishers as power-wielding giants, but the reality is the entire publishing industry is worth around $2 billion annually, while Spotify alone was recently valued at over $8 billion. Or take the largest online music site, YouTube, which is valued at over $70 billion. (Don’t forget that it’s owned by Google, who spent almost $17 million in 2014 just on lobbying.) It seems absurd to insinuate that music publishers and songwriters could possibly have more influence in Washington than some of the largest companies in the world. Meanwhile, hardworking songwriters fuel the entire music industry while suffering under WWI and WWII-era laws and regulations. There’s a window for hope, however, and much of it rests on the Department of Justice’s willingness to relax the 70-year old shackle of the PRO consent decrees, finally allowing ASCAP and BMI to license music creators’ songs in a free market by allowing music publishers and songwriters to withdraw certain rights from these PROs to negotiate directly with digital companies like Pandora. Of course digital companies oppose this—they are the happy beneficiaries of policies made before the transistor radio was invented. Everyone who wants to use music wants to do so as cheaply as possible, but the government cannot continue to subsidize companies with combined valuations in the hundreds of billions of dollars at the expense of songwriters. Ultimately, if we want music to continue to be made, the federal government must stop punishing those who make it. The National Music Publishers’ Association is the trade association representing all American music publishers and their songwriting partners.