Leading music publishers including Sony Music Publishing, Warner Chappell Music, Concord, and Reservoir have submitted responses to the US Copyright Office’s inquiry into Performance Rights Organizations (PROs).
All have argued strongly for reduced regulation in the sector.
The US Copyright Office (USCO) launched its investigation in February, examining “questions related to the increase in the number of PROs and the licensing revenue distribution practices of PROs”.
The deadline for submissions was Friday (April 11).
The USCO inquiry comes at a time of significant movement in the PRO landscape, including Global Music Rights’ recent majority acquisition by private equity firm Hellman & Friedman, valuing GMR at USD $3.3 billion.
Here are five key points from the pubcos’ submissions…
1. publishers call for less regulation of PROs, not more
Sony Music Publishing was direct in its assessment: “For decades the music publishing industry in the United States has been heavily regulated by the federal government.
“These regulations restrict the ability of songwriters and publishers to negotiate freely in the open market and have the effect of depressing the value of musical compositions which are the lifeblood of the music industry.”
“SMP believes that less and not more regulation is not only good for songwriters but also a sensible pro-competitive approach.”
Peter Brodsky, Sony Music Publishing
The publisher, via EVP/General Counsel Peter Brodsky, continued: “SMP believes that less and not more regulation is not only good for songwriters but also a sensible pro-competitive approach where the true value of musical compositions is determined in a free market.”
Warner Chappell’s submission – penned by WCM’s Guy Moot (CEO/co-Chair) and Carianne Marshall (COO/co-Chair) – similarly advocated that “Congress support free-market principles and market-based solutions that ensure songwriters and publishers are fully compensated for their creative efforts at market rates.”
Concord Music Publishing, represented by Duff Berschback, EVP of Legal and Business Affairs, warned: “Uniquely amongst creators and owners of (not just) intellectual property, music publishers and songwriters are already subject to significant regulation which distorts the market for and depresses the value of our property.”
And Reservoir Media, through founder and CEO Golnar Khosrowshahi, concluded: “We believe that there should be less regulation overall and that a market-based solution will ultimately lead to better compensation for all creators and rights holders.”
2. publishers argue consent decrees are outdated in the digital age
Warner Chappell’s Moot and Marshall pointed out: “The consent decrees, drafted decades before the Internet was invented, do not support the interests of songwriters and publishers in a modern digital environment.
“There is no market failure that justifies continued government intervention in what should be private commercial relationships.”
“the [consent decree] process distorts the normal pricing mechanisms that govern markets for other goods and services, resulting in lower payments to publishers and songwriters because our agent PROs lack the ability to say ‘no.’”
Duff Berschback, Concord
Sony similarly stressed that “the federal government sets rates for mechanical reproductions via Section 115 of the Copyright Act and, since the 1940s, the ASCAP and BMI consent decrees have governed licensing practices for most of the market for performance rights.
“These regulations have resulted in depressed rates for musical compositions as compared to analogous rights licensed in a free market.”
Concord was particularly blunt about the impact of consent decrees, stating: “The majority of public performance rights are subject to a compulsory process governed by the ASCAP and BMI consent decrees which require those PROs to offer licenses upon demand… Predictably, that process distorts the normal pricing mechanisms that govern markets for other goods and services, resulting in lower payments to publishers and songwriters because our agent PROs lack the ability to say ‘no.’”
3. Warner Chappell: Publishers want ‘selective withdrawal’ of digital rights from PROs
Warner Chappell specifically advocated for selective withdrawal of digital rights, which would allow publishers to directly license to streaming services while keeping other rights with PROs.
“Songwriters and publishers should be free to choose when to avail themselves of collective licensing (for example, for the thousands of radio broadcasters, live music venues, restaurants, bars, and retail establishments in the U.S.) and when it suits them to license directly (such as to digital services with whom they routinely contract for other rights), rather than being locked into an ‘all-in or all-out’ regime,” the Warner executives wrote.
“Songwriters and publishers should be free to choose when to avail themselves of collective licensing and when it suits them to license directly, rather than being locked into an ‘all-in or all-out’ regime.”
Guy Moot and Carianne Marshall, Warner Chappell Music
They added: “Moreover, blanket licenses granted under consent decrees undervalue musical compositions and permit use at below-market rates. They also introduce additional administrative delays and costs (typically in the 10-15% range or more). Negotiating direct deals with digital music services would lead to higher and faster payments for songwriters and publishers.”
Warner’s letter continued: “The U.S. is increasingly out of step with international practice in [terms of not allowing digital rights withdrawal]. Currently, PROs that operate in the E.U. are required to allow rightsholders to withdraw specific rights from collective management, including digital rights, if they choose to do so, while remaining affiliated with the PROs for their unwithdrawn rights.
“Similar practices apply with respect to PROs operating in the U.K. and Japan, which provide choice and flexibility to rightsholders.”
4. Publishers support competition and new PROs in the marketplace
Reservoir stated: “Specifically regarding the formation of new PROs, we are supportive of a competitive marketplace, and we do not believe that Congress and the Copyright Office should take any steps to limit the entrance of a new PRO into the ecosystem.”
This position was backed by Concord: “As the Office recognized in the NOI, multiple PROs affords songwriters and publishers choice and thus contributes to a functioning market.
“Songwriters and publishers affiliate with PROs for multiple reasons such as creative support, speed of payments, transparency, and advocacy, amongst others. Having multiple PROs encourages competitive services offerings amongst them.”
“we are supportive of a competitive marketplace, and we do not believe that Congress and the Copyright Office should take any steps to limit the entrance of a new PRO into the ecosystem.”
Golnar Khosrowshahi, Reservoir
Reservoir acknowledged some potential downsides but concluded that “while there may be increased financial and administrative costs due to entrance of additional PROs to the marketplace, the benefits of competition in a free marketplace outweighs any potential minor increase in the administrative costs of the licensee.”
5. Publishers reject additional regulation of PRO distribution practices
Concord strongly opposed any regulation of how PROs distribute royalties: “There is no reason for Congress or the Office to regulate the proper distribution of royalties between PROs and their affiliates, much less allow licensees to have a say on that topic.
“PRO affiliation agreements are private contracts, and both parties to such contracts are perfectly capable of addressing their respective concerns (if any) on this an any other related agreement topic between themselves, without further governmental interference.”
Reservoir similarly argued that “any issues with the practices and policies employed by PROs are best addressed between the rights holders and the PROs themselves.”
“A market free from regulations that unnecessarily reduce the value of musical compositions is the only way for songwriters to receive fair compensation for their valuable work.”
Sony Music Publishing
Sony Music Publishing emphasized the ultimate impact on creators: “A market free from regulations that unnecessarily reduce the value of musical compositions is the only way for songwriters to receive fair compensation for their valuable work,” adding that “the additional regulations being advocated for by certain [music] licensees is likely to further reduce the artificially low license fees they already pay.”
And Warner Chappell warned that “blanket licenses granted under consent decrees undervalue musical compositions and permit use at below-market rates” and argued that their own proposed changes would lead to “higher and faster payments for songwriters and publishers.”
You can read Warner Chappell’s full submission here and Sony Music Publishing’s full submission here.
You can read Concord’s submission here and Reservoir’shere.Music Business Worldwide
