Remarks from ASCAP CEO Elizabeth Matthews to DOJ Workshop on Competition in the Licensing of Public Performance Rights in the Music Industry (July 28, 2020)

July 28, 2020

The Department of Justice (DOJ) held a virtual public workshop on July 28 and 29, 2020, to discuss competition in the licensing of public performance rights in the music industry. ASCAP CEO Elizabeth Matthews spoke at the proceedings on behalf of ASCAP. 

 

Read the full remarks below. 

 

 

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Good afternoon everyone,

 

My name is Beth Matthews and I am the CEO of ASCAP, the American Society of Composers, Authors and Publishers.

 

Before I begin, on behalf of ASCAP I wanted to thank Makan Delrahim and his team at the U.S. Department of Justice for providing us with the opportunity to discuss the modification of the ASCAP and BMI consent decrees.

 

ASCAP is an unincorporated membership association formed by songwriters back in 1914 – over 106 years ago. 

 

We operate on a not for profit basis and we have over 750,000 songwriter, composer, lyricist and music publisher ASCAP members.

 

Every time you hear a song, two separate copyrights are implicated. The musical Composition and the Sound Recording. 

 

ASCAP and BMI license only the public performance rights in the musical composition.

 

If you hear a song performed publicly, then it is more likely than not that the music user has a blanket license from both ASCAP and BMI.

 

Together with BMI we account for about 90% of the U.S. market in public performance rights.

 

We aggregate shares of musical compositions & license them directly in the US on all platforms:  AM/FM & satellite radio, broadcast & cable TV, streaming music and audio visual services like Spotify, Amazon and Netflix, bars, grills, and restaurants

 

At ASCAP, we license the music, collect the money and then we take digital performance files, identify, process and match over a trillion musical performances each year in order to pay the correct ASCAP member their royalties by using our proprietary matching algorithms. 

 

Both ASCAP and BMI license our music through a network of over 100 not for profit Collective Management societies all over the world.

 

All of these CMOs are connected to one another via digital tools and tech platforms to help us manage and track our data and musical performances so that we can legally license U.S. musical repertoire on a global basis and pay the right ASCAP member their share of royalties from other countries.

 

Because foreign collection management societies do not operate under consent decrees, they are typically allowed to aggregate intellectual property rights other than the right of public performance such as mechanical and synchronization rights in order to drive market efficiencies for both buyers and sellers.

 

For every dollar that ASCAP collects in licensing revenue, nearly 90 cents is returned to our ASCAP creator and music publisher members in the form of royalties.  The remaining 10 plus cents covers our overhead.  As the United States Supreme Court noted in the CBS case, the model of collective licensing or aggregated clearance of copyrights is an extremely efficient market tool because it is a business of scale at low transactional cost for both buyers and sellers.

 

For creators & music publishers, collective licensing is essential. They don’t have to worry about licensing hundreds of thousands of US businesses, collections or matching and processing performances and, instead, they can focus their efforts on the creative process and keep creating the music that we all love. 

 

For licensees, collective licensing is essential. It is simply not practical for a licensee to transact separately with two million ASCAP members and BMI affiliates in order to avoid claims of copyright infringement and figure out how to get all of those stakeholders paid.   By entering into Blanket license agreements with ASCAP and BMI, they have immediate access to 90 percent of the world’s greatest music.

 

It is common for most people to assume that the person who sings the song actually wrote the song, but this is often not the case.

 

Songwriters and composers are typically not famous and you probably would never recognize their name unless they are also a recording artist.

 

They are the unsung heroes behind American music. 

 

Without songwriters, recording artists would have nothing to sing and streaming services would have nothing to stream.   

 

Without composers, your favorite TV shows and movies would be not be as compelling because their music actually drives the story.

 

Songwriters and composers are dependent upon ASCAP and BMI because they often do not have salaries, health care benefits and other reliable sources of income.    

 

Composers in particular are at risk because they are subject to work for hire agreements and they are often pressured to accept buy outs or lose an opportunity to find work.

 

Usually, royalties from ASCAP and BMI are a music creators’ only source of income. 

 

The problem is that it is becoming harder and harder for songwriters and composers to make a living – and without songwriters there is no music. 

 

One of the primary reasons that the marketplace is no longer working for songwriters and composers is that both ASCAP and BMI operate under consent decrees that were entered into in 1941 when the marketplace was entirely different.

 

Consent decrees are supposed to sunset after ten years, pursuant to DOJ policy in place since the 1970s. 

 

Our consent decrees, however, have been in place for almost eight decades.

 

Back in 1941, there was:

 

(1)   Very little competition in the public performance space;

 

(2)   Terrestrial radio was the only form of mass media;

 

(3)   The antitrust laws were quite different; and

 

(4)   There was a genuine concern that ASCAP and BMI had too much leverage over licensees.

 

Fast forward 80 years and the world looks very different. 

 

Today:

 

(1)   Competition is alive and well in the music marketplace.  There are more PROs and more licensees than ever before.

 

(2)   It’s not all about terrestrial radio. Today there is a broadcast, cable, MVPD and a thriving OTT industry.  

 

(3)   Barriers to entry for new market competitors are quite low and new competitors are rapidly entering the PRO and distributor space.

 

(4)   Competition law has evolved and changed.

 

(5)   Direct licensing by music publishers has increased.

 

(6)   Licensees are large, complex, powerful mega-technology and media companies. Especially the FAANG companies -- Facebook, Amazon, Apple, Netflix & Google. They are smart, savvy, all lawyered up and wildly under regulated. I have yet to sit in a negotiation with one of these licensees and not feel as though songwriters’ hands were tied behind their backs due to these consent decrees. It’s crazy to think that Songwriters are more regulated in 2020 than Facebook.

 

(7)   The other factor that has changed is that consumers no longer buy music, they stream it. They no longer watch linear feeds. They binge on entire seasons of arguably some of the most compelling content in history on an on-demand basis.

 

The good news is that more music is being consumed today than ever before because of the present on demand consumption habits of consumers.

 

The bad news is that while there has been tremendous growth in musical performances, the growth of payments for music publishers, songwriters and composers has not followed suit.

 

Today, songwriters are being diluted from dollars to fractions of pennies on streaming services and composers are increasingly not given an opportunity to share in backend royalties when a show is successful.

 

ASCAP and BMI need to be able to freely compete with unregulated market actors in order to escalate innovation. If we can compete and innovate, then we can meet future market needs.

 

What is clear to ASCAP and BMI is that licensees are not our enemies. They are our partners and our customers.

 

We believe that competition is good. Competition drives innovation and efficiencies. Competition creates healthy economies.

 

Today, ASCAP and BMI are not allowed to compete on a level playing field with their unregulated counterparts like SESAC and GMR, and that has created market wide imbalances and confusion.

 

The consent decrees are wildly outdated and need to be harmonized and simplified. 

 

At a minimum, the ASCAP and BMI decrees should be modified to be the same. Today, ASCAP and BMI are not even on a level playing field with one another which distorts the marketplace.

 

To prepare for a new world order of global distribution, live data exchanges, demand and supply side pricing and experimental licensing initiatives, we have to be able to compete and innovate in a global market.

 

All we ask of the licensee community and the DOJ is that you help us modernize our outdated consent decrees. 

 

We do not seek an immediate termination of our consent decrees because we think everyone in this marketplace needs time to adjust and prepare. Instead of ripping off an 80 year-old band-aid, we suggest new and improved decrees that put all stakeholders on a pathway to an eventual free market.

 

My good friend Mike O’Neill, the CEO of BMI will cover some of the details of our proposal. Our measured approach is designed to minimize disruption in the marketplace for songwriters and publishers, but also to address the concerns of licensees.

 

You should know that we compete fiercely like Pepsi and Coke, so you may think it’s a little strange that two competitors have come together in full alignment of consent decree reform.

 

But we know that this problem requires industry-wide cooperation.

 

We both feel strongly that we must create reliable and transparent data for licensees in order to drive a sustainable ecosystem for creators and music publishers.

 

We believe that all licensees have the right to know what fractional share interests they are licensing from us.

 

To that end, ASCAP and BMI are continuing to work on an initiative called Songview to provide a reconciled set of fractional share ownership information for all of the works in our respective repertories.  Our goal is to launch by the end of 2020.

 

All we ask of the Department of Justice and the licensee community is please don’t leave songwriters and composers back in 1941. Please work with us to modernize these decrees.  

 

Thank you.