Go recuse yourself. Renata Hesse former Google lawyer and Principle Deputy Assistant Attorney General for Criminal and Civil Operations reportedly rammed through the 100% licensing change to BMI/ASCAP consent decrees.
Last week the Department of Justice Anti-Trust division announced a further tightening of the antiquated and likely unconstitutional consent decrees that govern songwriter organizations. Never mind that the 1941 consent decrees were put in place when most radio stations were owned by individuals and ASCAP was pretty much the only game in town. Now we have massive media consolidation in the broadcast industry, previously unimagined monopolies like Google/YouTube and at least 5 PROs. Yet the consent decrees are backwards now. They are still pointed at songwriters but benefit dominant firms like Google/YouTube, Clear Channel, Pandora and Spotify. It’s insane.
For this reason recent talk had been of loosening or even eliminating the 70+ year old consent decrees. That is why the entire songwriting community was shocked when the DOJ led by former Google lawyer Renata Hesse rammed through a tightening of the consent decrees that govern songwriters. In particular the DOJ has made a change to the consent decrees that would allow a single PRO to license an entire song on behalf of other co-writers even if they are represented by a different PRO which is not under the consent decree. While this is a seemingly small change the unintended consequences are huge. Among the many problems with this:
- May void thousands of private co-administration contracts that cover millions of songs.
- May void international agreements between US PROs and foreign government chartered PROs.
- May violate due process of thousands of songwriters not subject to the consent decrees.
- Creates an effective statutory license without action by legislative branch.
- Makes a sham of separate proceedings and rate courts for BMI and ASCAP.
- Makes music licensing process less efficient likely increasing costs to consumers, songwriters or both.
- Creates appearance of impropriety for DOJ as this favors Google.
- Reinforces Google/YouTube monopsony.
We will go further into each of these later this week, but for now we want to just concentrate on the very last one, the Google YouTube monopsony.
If you aren’t familiar with the term monopsony, a monopsony exists when a dominant market player like Wal-Mart or YouTube is able to reduce payments to suppliers below the price required to produce a good. Eventually this harms consumers because it creates a race to the bottom eliminating all but a few suppliers. Unfortunately it is often seen as a “neat trick” by monopolists because the way our antitrust laws have been interpreted for the last couple decades, anti-competitive behavior is okay if it results in lower prices to consumers. No need to “bust a trust” in this case.
I’m pretty sure this is not what Teddy Roosevelt had in mind.
Under this interpretation of antitrust law the Department of Justice absurdly favors music consumers over music producers. They invent a “consumer right” to cheap music and favor that over a songwriter’s right to participate in a free market and earn a fair return on songs they create. You see how that doesn’t really hold up? What happens to consumers when absurdly low royalties discourage songwriters from writing new songs? Doesnt fewer songwriters and fewer songs mean less competition?
In order to save the market the DOJ has decided to destroy it. Welcome to the dumbed-down American dystopia envisioned by Mike Judge in Idiocracy.
So specifically how does this 100% licensing change benefit a monopsony like Google? Let’s create a hypothetical example.
Say you are a big time artist manager. As a manager you grow tired of the lousy performance royalties that your artist/songwriters are receiving from YouTube and other digital services. When you find out that it’s not possible to withhold music from the lousy paying services because your songwriters’ PROs (ASCAP and BMI) are under antiquated 70 year old DOJ consent decrees, you decide to start a new PRO called Worldwide Music Rights (WMR).
Now WMR is not under the DOJ consent decrees, so you go ahead and start negotiating a new deal with service like YouTube. Obviously YouTube is not happy about paying a potentially higher price, so they invoke the DOJ 100% licensing deal, which forces ASCAP and BMI to issue licenses for all the songs that your writers have co-written with ASCAP and BMI writers. Since most big hits are co-written by songwriting teams, inevitably these teams include BMI and ASCAP writers. Bam! You’re back under the consent decrees. Further since the consent decrees set BMI and ASCAP royalties below market rates this effectively sets the WMR royalty rate. Even though WMR is not bound by the consent decree. You see how beneficial this would be to a company like YouTube. They really don’t have to negotiate with WMR. Mission accomplished anti-trust division! Market pricing eliminated!
Of course this is all hypothet-,,, Excuse me?… Sorry say that again?… What? This actually happened? Super manager Irving Azoff started a new PRO called GMR and tried to negotiate better rates for his songwriters with YouTube?! Wow! I did not know this! What a funny coincidence!
Gee I hope that Renata Hesse didn’t know this either! Or communicate with her former client. I mean cause you could get in a lot of trouble for doing something like that. I have to say it is pretty weird that she even went ahead with this 100% licensing proposal. I mean it’s not like anyone on either side of the song licensing market was clamoring for 100% licensing. The DOJ conducted a public consultation and even the US Copyright Office came out against this proposal. Members of the house of representatives weighed in against this proposal as well.
Well, I guess Renata Hesse is really smart and knows what is best for all of us. Smarter than anyone that works in the music business or the Copyright Office. After all she has a J.D. from U.C. Berkeley. People like me we are just dumb songwriters. What do we know? I’m sure this elite super educated lawyer will take real good care of us. We’ll just go back to shucking this corn.