It’s never been easier to find and enjoy the music of one’s choice, nor more convenient to do so at virtually any place or time. Such innovation has occurred in part because of limits established long ago to prevent anti-competitive behavior within the industry.
Now, after failing to persuade the Department of Justice to overturn its long-standing consumer protections, the two largest Performance Rights Organizations (PROs) have turned to the courts to get their way, and a judge’s decision last month could threaten consumer access to music.
Justice has long overseen the licensing practices of the two largest PROs — the American Society of Composers, Authors and Publishers (ASCAP), and Broadcast Music Inc. (BMI) — due to their history of anti-competitive behavior. While the federal government often uses consumer interests as an excuse to regulate unnecessarily, this is not one of those cases. The protections are necessary to balance consumer interests against the benefits bestowed on producers through copyright law, itself a form of market intervention — a government-created monopoly.
Copyright and other intellectual property protections in theory encourage innovation by ensuring creators can benefit financially from their works. However, that benefit comes at the cost of competition, requiring the careful balancing of competing interests.
For years that has been done through antitrust consent decrees between the PROs and the Justice Department. They allow ASCAP and BMI to operate as monopolists — by holding between their catalogs the rights to almost every piece of music — in exchange for certain market protections, including restraints on monopoly pricing. Recently, the PROs have waged a lobbying campaign to scale back the restrictions in the consent decrees, allowing them to increase the prices they charge to those who license music. That will affect everyone from restaurants to online music services.
These groups also want to use something called “fractional licensing,” which would require a business to license a work with every owner of a song, no matter how small their share of the rights. That will give any one of what might be more than a dozen credited writers the power to holdout and grind the market for music licensing to a halt. This is why 100 percent licensing — where any owner is able to license a non-exclusive right to a work, while of course distributing the appropriate share of profits to all co-owners — is typical in copyright law.
Even songwriters, who the lobbyists claim are struggling despite the PROs pulling in record profits, would see negative consequences. Making it harder and more costly for businesses to acquire rights to music with multiple owners will give a huge advantage to those who have full ownership of a particular song.
After a two-year review of the consent decrees governing the performing rights organizations, the Justice Department laudably decided to stand for consumers over industry, and rejected calls to neuter the decrees. The review involved careful consideration of market evidence and legal precedence, determining that the best outcome for consumers would be to keep the consent decrees in place. They also affirmed the importance of 100 percent licensing for PROs to remain in compliance with the consent decrees.
Yet in a surprise twist, a judge last month overturned Justice’s ruling on fractional licensing during a preliminary conference with little testimony. This decision runs counter to Supreme Court precedent and is likely to be appealed. However, in the meantime, it could make licensing music more costly and complicated, harming consumers who have grown accustomed to easy access to the music we love.