Music Corporate Cronyism is Not Conservative

Don't Sing to Big Music's Tune

Next week, Sen. Mike Lee (R-UT) will hold a hearing on music licensing and a potential decision by the Justice Department that will impact all those who like to listen to music on the radio and a computer. He wants to know whether the crony capitalists of Big Music are using their lobbying influence to try to disrupt the market and make it harder for you to enjoy the music you love.

In an age of crony capitalism, perhaps no one has perfected the game more than the music industry. From extending copyright terms well beyond anything envisioned by the Founders of the Constitution to effort to outlaw market-changing technology, the recording and music publishing industry has honed their crony skills over a century. That’s why its so disconcerting, yet not surprising, to see Big Music setting their sights on the destruction of streaming Internet music.

Unlike efforts to outright ban the gramophone or outlaw the VCR, Hollywood and the recording industry are trying a different tact against popular streaming music sites like Pandora and Spotify — they want to bankrupt them. Their plan centers on a campaign to lift a long-standing agreement with the government the music publishers cannot use their monopoly power to force royalty rate hikes.

Typically complicated legal matters on the issue of music licensing and royalties do not get much attention but the issue will take center stage next week as Sen. Lee of the Senate Judiciary Committee holds a hearing on whether the Department of Justice is seriously contemplating abandoning a consent decree that has been in force since the 1940’s. The well funded and coordinated effort by the American Society of Composers and Publishers (ASCAP) will harm the consumer choices and threaten technological advances giving the music corporatists a virtual monopoly over all music and their pricing. That, in turn will affect most every song in American — whether it is played on the radio, on television or streamed over the Internet.

When the publishers attempted to force radio stations to pay higher fees for the music they played on the radio and in theaters before World War II, the Department of Justice (DOJ) threatened to haul them to court. Instead of losing, the music publishers signed a consent decree ensuring that those seeking to play music could not be held hostage by the power of ASCAP — which is part of a triumvirate of Performing Rights Organizations (PROs) that control about 99% of all music rights. The industry agreed to offer licenses for all songs and would abide by a system to negotiate royalties fairly.

The establishment of the consent decrees was not accident of the law. Due to the unique nature of copyright law and the nature of how the music industry abuses that area of the law, the power of the music publishers has proven immense and hard to fight. Without an agreement in place, market competition would be harmed by the collusion and market power abuse inherent to collective music licensing.

Despite the consent decree, just a few years ago, Sony Music tried to force Pandora Radio to pay higher rates by withdrawing some of their music licenses and then refused to tell Pandora what songs they could play. Playing the wrong song would have result in massive fines that could quickly total in the tens of millions of dollars. A court case ensued and a federal judge found that ASCAP was working with Sony to pressure Pandora. Federal Judge Denise Cote called the actions “troubling coordination” between ASCAP and Sony that “implicates a core antitrust concern.”

Rather than continue to abide by the agreement, the music industry is now asking their friends in the White House and Congress to rip it up. It would impact television broadcasters who use music in commercials and on television shows and radio stations would be negatively impacted. Worse of all, millions of ordinarily consumers could see their favorite way to get music today — streaming music killed in its infancy. The financial viability of streaming music, which already struggles to profit because more than half of their revenue goes out the door in royalty payments would be in peril. More than 70 million Americans enjoy streaming music, and the wrong decision by DOJ would essentially kill a growing technology.

Sen. Mike Lee (R-UT) 100%‘s inquiry is an attempt to determine whether the pressure and lobbying campaign is working. Will DOJ give the monopolists in the music-publishing world the power to set their prices without the give and take of market forces? Giving a hundred year old track record of insider power it would not be shocking to discover that consumers could be scarified on the altar of crony capitalism. We will know more next week.

Thank you Sen. Mike Lee (R-UT) 100% for standing up to Big Music on behalf of the consumers of streaming music.  There is nothing conservative about cronyism and its good to see that a free-market stalwart refusing to dance to their corporatist tune.

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