Music Creators Seek Reform of Consent Decree

In his recent testimony before congress, songwriter and president of ASCAP Paul Williams remarked that it was astonishing to realize that he and fellow witness, songwriter Rosanne Cash, were subject to more government regulation than the multi-billion-dollar corporations whose interests were represented in the same hearing.  What Williams was referring to with that remark is the fact that licensing fees for certain public performances of works by composers and songwriters are still predicated on a WWII-era consent decree between ASCAP and the DOJ.  This decree granted a federal judge (aka the “rate court”) the sole right to set rates for these public performances, but for a market that looks nothing like the one we have today.

It is thanks to these outdated licensing terms that we continue to hear from various music composers and writers that, for instance, millions of plays of their songs on a streaming service like Spotify is worth less than a couple-hundred bucks.   And as the songwriters and composers presently lobby for change, we’ll surely be hearing plenty of hew and cry from Pandora, Spotify, and Google.  After all, when these tech companies evangelize new models, innovation, and disruption, they only really mean it if it’s good for their bottom line; so if a half-century-old law or system allows them to exploit someone else’s work in order to add a few million to their own coffers, then “old models” sound just fine. They won’t come out and say “leave the old system in place;” that would be too regressive-sounding and too bluntly honest.  Instead, they’ll try to scare consumers in one way or another that their streaming services will cease to operate or have to adopt new pay models or charge more for access, and so on; but the reality is that while these services dangle cheap and free in front of consumers in the short term, failure to reform the present system may result in higher prices, disenfranchised licensees, and/or decreased diversity in production over the long term.  Meanwhile, there’s no question songwriters and composers are getting pretty well hosed, shackled to an obsolete model from which they can neither effectively opt out nor negotiate within as free agents in a normal supply/demand market.

This matters now because streaming is how consumers want to listen to music, and why wouldn’t we?  If I’m in the mood to listen to a song I haven’t downloaded, I launch Spotify just like anyone else. Who wouldn’t want such on-demand convenience?  And for free?  But our convenience is presently subsidized by the dramatic underpayment of songwriters and composers who are increasingly dependent on revenue from this new way we want to listen to music. At the same time, these creators of the music we love are the folks without any other source of revenue.  They don’t tour, and they don’t sell merchandise.  Elton John is a big damn star and a knight and all that, but I don’t think anyone ever bought a Bernie Taupin tee shirt, if you know what I mean.

Music licensing can be confusing.  There are multiple ways to use music and different rights associated with each use as well as multiple stakeholders with any given track.  Readers will thank me for not attempting to wade too deeply into all the variables; I’d probably get some of it wrong, and it’s not exactly spellbinding.  Suffice to say that the rights associated with the consent decree and its reform are public performance rights covering uses like radio broadcasting, music streaming, live performance by musical artists, and uses in venues like bars, restaurants, and theaters.  Licenses for these types of use are granted automatically upon request, and they are generally bulk licenses covering tens of thousands of songs for a single, annual fee paid to a performing rights organization, commonly called a PRO.

ASCAP was the first PRO (founded in 1914) and is the largest of these organizations, followed by BMI, but in the present landscape, other PROs have emerged that are not subject to the consent decree.  Still, a PRO the size of ASCAP enables hundreds of billions of typical public performances for users through a collective licensing and fee structure that compensates the organization’s membership of composers, songwriters, and publishers.  For instance, the coffee house where I’m writing at the moment has a sign on the door with the logos of the three leading PROs because this place hosts open-mic nights and other live performances, and it has music playing continuously during normal hours.  A little venue like this pays a relatively low licensing fee that provides blanket coverage for this type of public performance, allowing any local musician to come in and play any cover she wants for whatever size crowd will fit in here.  In a similar way, if I wanted to use music incidentally on this blog site, I could get a license with the three major PROs for a few hundred bucks a year and have the use of just about every song in existence.

Without reform of the consent decree, the PROs could see the resignation of major publishers from membership, effectively abandoning collective licensing.  This would mean individual negotiations between publishers and new media services, which would almost certainly increase costs that would be passed on to consumers one way or another and would also create unnecessary burdens for traditional licensees like my local coffee house.  It is not hard to imagine a future in which the full adoption of music streaming wipes out a whole class of professional music creators. After all, nobody can argue that a sustainable market can be built on a model in which “success” in the primary market buys a half-order of groceries once in a while.  And regardless of what the Pandoras etc. may say in defense of the current system, there is simply no way they can promise that a world without professional songwriters and composers will not be a world devoid of the kind of music we’ve been lucky to enjoy so far.

Adding insult to injury, many start-up Internet companies offering music streams as the foundation of their business model are employing stall tactics to avoid paying any licensing fees at all.  The Silicon Valley culture has a long tradition of steal now, apologize and pay something later, and the PROs are seeing this first-hand with various web businesses.  Once the request for a license is made, it has to be granted; but then the PRO requests information about the applicant’s use, audience, etc. in order to set a fee.  ASCAP and the others are seeing a trend in which these companies stall on providing information and, therefore, stall on paying any fees while freely using all the music they want in order to grow their business.  (Man, I’d like to see somebody try that with construction and the cement supply company.  Just once.)  The recourse available to the PRO in this case is federal court, which is costly and time consuming.

Presently, the songwriters, composers, and publishers are proposing certain reforms to congress that release them from this outdated consent decree and enable them to negotiate (still through the PRO) more flexibly in response to current market realities.  For instance, ASCAP proposes shifting cases from the purview of the federal rate court to a more expedited process of private arbitration; and it calls for voluntary rather than compulsory licenses in order to create bundles of works, allowing the PRO to license music more complexly than the all-or-nothing model that exists now.   With these types of reforms, the PROs feel they can negotiate sustainable fees for songwriters and composers while keeping intact the collective licensing paradigm that keeps public performance licensing easy and affordable for tens of millions of users.

Toby Mundy’s Defense of Books

I draw your attention to this wonderfully unsentimental yet passionate defense of books by Toby Mundy.  The publisher at Atlantic Books, Mundy offers his personal views on the devaluation of the medium for the thought-provoking site Medium.com.  Specifically, of course, he draws our attention to Amazon and its Wal-Mart-like ability to muscle publishers (and by extension authors) into lowering prices toward the existential threshold.  But from a cultural perspective, Mundy makes a sound plea to consumers not to confuse the book with the information it contains and, thus, not to be lulled by artificially cheap prices into setting fire to the basic economics that make a diversity of books possible.  Mundy writes:

“To price a book in the way information is priced is based on a rather one-eyed view of its value. As any textbook author will tell you, Information is undoubtedly part of a book’s utility. But that is only part of the story. A second purpose is to provide readers with transporting Experiences, usually from reading fiction. A third is to impart current Knowledge. When TS Eliot asked plaintively in ‘The Rock’, ‘Where is the knowledge we have lost in information?’ he was reminding us that these two things are not the same. Knowledge comes from the interpretation of information, experience and facts. It comes from the stories we tell about those things. Perhaps it is the capacity to create these stories that make us human.”

By contrast, Mundy opens his piece quoting Russell Grandinetti, Amazon’s VP for Kindle, who accurately says that books compete for our time with other things like Facebook, Twitter, and Candy Crush Saga.  But this somewhat common market view is only a half truth whose half-lie leaves out exactly the point.  There may be individuals who read books and play Candy Crush Saga, but I am confident that they do not value both equally.

See Toby Mundy’s full editorial here.

New Study: Impact of Pre-Release Piracy

People like to quibble about the harm done to the motion picture industry by online piracy. They split hairs over things like whether or not each pirated view represents a lost sale or chime in with arguments that piracy is a form of promotion or a natural market reaction to outdated practices.  If a lot of the arguments for piracy sound like rationalizations, it’s because they are.  And when you hear rationalizations you’re hearing the voices of people who know that what they’re doing is wrong.  But even if we were to take any of the pro-piracy rationalizations as serious analysis, they fall completely apart the moment we’re talking about one of the more obnoxious practices in the whole paradigm — pre-release piracy.

It’s happened a lot, but most recently, The Expendables 3 was leaked online three weeks before it was scheduled for theatrical release.  There’s no other way to put it:  pre-release piracy is a dick move.  It says to everyone who worked on the film, most of them regular folks with regular jobs, that you’re actually eager to see the film but that your own narcissistic desire to be ahead of some imaginary curve is more important than all the investment of money and labor that made the film in the first place.  More than any other form of piracy, pre-release piracy is a huge middle-finger to the grips, electrics, camera department, wardrobe, props, etc. that their jobs mean nothing compared to your need to see a mediocre-quality version of the film on a small screen before anyone else sees it in the theater where it was designed to be released.  Okay that’s my opinion, but what about the impact?

A new study by researchers at The Technology Policy Institute at Carnegie Mellon University is the first to examine the effect of pre-release piracy on revenue. Their conclusions state that, on average, predicted box-office revenues can be reduced by 19% by pre-release piracy compared to post-release piracy.  Theatrical release is the one window when there are no other legal means of viewing a film, and market changes caused by digital technology advances have closed that window considerably.  DVDs go on sale much sooner than they used to after a theatrical release, and some films are released in theaters and through VOD channels simultaneously.  Audiences for big, action films like the Expendables franchise tend to want to see these movies with friends, in theaters, and on big screens.  Profitable opening weekends are a critical slice in the pie-chart of returns investors are seeking when they fund these rather expensive films.

People reading this will, no doubt, have various reactions, including at least a few sentiments directed against big, Hollywood action movies; but that is a flawed lens through which to view the problem.  The Expendables 3 isn’t necessarily my kind of fare per se, but that is entirely beside the point.  What matters in the macro view is whether or not the effect of piracy poisons the ground where legitimate business should otherwise thrive.  When that happens, it’s detrimental to the entire, economic ecosystem in the industry.  Anyone who thinks they can cherry-pick-pirate what they consider the “corporate” fare out of existence and protect whatever their idea of a “better” film might be, is sorely mistaken.

In the big-movie market, if investors are scared off major motion picture investment because pre-release piracy threatens the most critical phase of first sales, that means fewer films get made overall and that the only big films that do get made employ financial models to offset expected losses.  In other words, if it can’t be in a Happy Meal, it won’t be on the screen.  But the smaller movie market has similar challenges with regard to windows of opportunity to recoup investments, and that translates into the probability of making the next film.  If those windows are artificially closed by piracy that preempts the real market from voting with its pocketbook, this will not result in a healthier industry by whatever measure, economic or cultural, you prefer to use.