Recently, a federal judge in New York ruled against the free market and the way music is controlled. This ruling handed down by a single judge could cause millions of businesses to be exposed to huge increases in licensing fees.
The Department of Justice has conducted a two-year investigation into the antitrust consent decrees that have ruled the music industry for years. They were interested in the way businesses such as restaurants, retail stores, and many others get their music to put customers in the buying mood. Businesses of all types must pay license fees for the right to play music. Standard way of doing things for years.
ASCAP and BMI, the two largest music power players operate under antitrust consent decrees with the Department of Justice. The consent decrees both give ASCAP and BMI immense power to control music supply, but they also protect consumers from monopolistic pricing. The big boys have been lobbying the DOJ to soften the consent decrees so they can raise prices on businesses all over the country.
The two behemoths of music have been hitting record revenues in the last few years, so it is not a case of profit margin being too tight. They simply would like to make more -- much, much, more -- and run up the prices on products everywhere in the process.
One of the little gems they are lobbying for is called “Fractional Licensing”. It basically would require each business to negotiate its own licensing agreement for each and every song it plays and with everyone who has a stake in a song. The difficulty of obtaining that type of licensing would be cost prohibitive for most businesses, especially when considering the fact that, say, 1 percent and 5 percent copyright shareholders of a song would have the same influence as a 94 percent shareholder. Not to mention that a restaurant or a bar must license millions of different works to ensure they won’t get sued for copyright infringement.
The current way of doing things is called “Whole Work Licensing”. It has worked for decades and has kept a balance between copyright protection for the song owners and allowed businesses to gain licenses to use the music they want at a fair price. The new plan will literally upset the apple cart.
Businesses will incur major headaches in the form of difficulty managing playlists, costs of licensing, and liability and infringement problems. The disruption to business would be felt across the board, from large stores to Main Street. Songwriters will find that playlists will shrink and they will have less money in their pockets. And, listeners would have less access to the music they love. So why do this?
Millions of dollars for Big Music, of course. The major music publishers (owned by the same parents as the major record labels, which make a business of suing teenagers and grandparents) view fractional licensing as an easy way to manipulate prices and pad their pockets.
After years of deliberation on this topic, in August, the Department of Justice decided to punt! They made no changes to the consent decrees and did not allow a move to fractional licensing.
That is why it so stunning that several weeks ago one judge has thrown all that away. In a classic case of legislating from the bench, Judge Louis Stanton from the Southern District of New York has ruled that the Department of Justice is wrong. This judge’s activist ruling flew in the face of long-held industry practice and all legal precedent. Worse yet, it appears that the decision might have been “pre-baked”.
The big boys of the music industry are ecstatic, while many of the new streaming platforms and businesses are set to take a hit. The power of one judge to alter the entire landscape of the music industry is rather scary.
Hopefully, for businesses and music fans across the country, this decision will be reversed on appeal.