The Record Industry’s Political Theater

Political theater in American has become its own art form. Not surprisingly, few have perfected it better than Hollywood and the recording industry. Their skillful creativity is on full display surrounding a piece of legislation recently introduced known as the “Songwriter Equity Act” (SEA).

Countless articles have been written, interviews given and speeches made about the plight of the individual songwriters.  Recording artists are making millions and the poor powerless songwriters are being swindled. Supporters of SEA claim the bill simply intended to give songwriters equity with those recording and profiting from their songs.

It would be a great story if it were only true.

The focus on individual songwriters is misleading. Few songwriters act as individuals. Most assign their copyright to one of three major publishers that control the vast majority of all musical compositions. These major publishers, then become “members” of one of three Performing Rights Organizations (PRO) that controls effectively 100% of the market. These PRO’s then negotiate the price of royalties for the publishers and songwriters.

As a result, the songwriters and publishers have long been the 800 pound gorilla in the industry. The power of the publishers/songwriters is so great that two of the three  PRO organizations the American Society of Composers, Authors and Publishers(ASCAP) and Broadcast Music, Inc. (BMI) have been deemed true monopolies by the government and have been forced to operate under a federally mandated consent decree since the 1940’s. It seems as though the PRO’s were using their absolute control of the copyright to songs to manipulate and artificially drive up royalties for songwriters/publishers. Under the terms of this consent decree, if market negotiations break down between these two PRO’s and those seeking to license their songs, the rate is set by the  U.S. Court for the Southern District of New York. The third PRO, the Society of European Stage Authors and Composers (SESAC) is currently in the midst of anti-trust trial and well on the way to a consent decree of their very own.

Despite the consent decree, the PRO’s and songwriters/publishers have continued to attempt to use their government granted monopoly to distort market prices and extort more money from music distributors.  The most egregious example of late is the case between ASCAP, Sony and Pandora.

When Sony sought to drive up the royalties Pandora pays to air its songs by negotiating directly with Pandora, they withdrew from ASCAP the right to control the royalties on digitally streamed music.  Time was running out on Pandora’s existing license so they requested a list of Sony properties so they could remove the songs from their repertoire. Sony refused to tell Pandora which songs they owned leaving Pandora with the choice of shutting down, risking exorbitant copyright infringement fines or paying whatever ransom Sony demanded. The situation was more akin to an episode of the Sopranos than anything resembling free market negotiations.

Fortunately, Pandora was able to get the courts to weigh in and put an end to Sony and ASCAP’s monopolistic power play. The court set rates for Pandora using a predetermined formula for estimating fair market value in an industry segment where there is literally no competition.

That’s where SEA comes into play.

Far from generating equity, the SEA is an attempt by the publisher/songwriter/PRO monopoly to re-rig the rate setting mechanism used by courts.  The publishers previously rigged the system in the 1990‘s to prevent the rates of the then new performance royalty for recoding artists from influencing the publishers royalty rates. But now, publishers want the artists rates to be used in their own calculations. But the bill is a hypocritical one-way street as it also forbids the consideration of the publisher rates to be used in setting rates for artists. These two are either relevant to each other or they are not. The industry is trying to have it both ways to artificially redefine “market rates” to achieve the increases they failed to get in their monopolistic shenanigans with Pandora.

This increase in cost would of course come at the expense of all music platforms, restaurants, coffee shops, any other business that uses music and ultimately the listeners themselves.

In the end, despite the political theatrics being put on by the industry, the reality is that Pandora and others have stood up to the 800 pound publishing bully and won even in a system already rigged for the recording industry. SEA is just the next attempt by the biggest bully on the block to gain more unchecked power and game the system. There is absolutely nothing equitable about that.