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Will Donald Trump Make the Music Industry Great Again?

Will Donald Trump Make the Music Industry Great Again?

(AP/Evan Vucci)

By    |   Tuesday, 29 November 2016 07:46 AM

By almost all accounts, Hillary Clinton had this election in the bag, and the billionaire members of the music lobby couldn’t have been happier. Convinced by the polls, music publishers continued to dole her with millions in campaign contributions as a means of garnering special favors come inauguration time -- namely, strengthening costly music copyright laws.

In a surprising turn of events, however, America chose to elect a political outsider that is committed to “draining the swamp” of all special interests, including those within the music industry.

By midnight on November 8th, music publishers and lobbyists couldn’t have said “uh-oh” in unison fast enough. In truth, they must have looked like deer in headlights -- like the high-strung, sweat soaked, eyes bulging guy at the casino who just realized he blew through his entire life savings on a single game of blackjack.

According to the Federal Election Commission, Hillary Clinton received a whopping $6,835,455 from the entertainment industry compared to a mere $139,429 for Donald Trump. Music interests like Vivendi, Sony Music Entertainment, and Warner Music Group gave Clinton the hefty sum of $737,955 combined, leaving Trump with the pocket-change -- a measly $17,850. 

Plain and simple, the music industry bet heavily on a Hillary Clinton victory and the hope she would allow them to achieve their regulatory and legislative goals.

The music industry’s two major performance rights organizations (PROs), ASCAP and BMI, control the rights to approximately 90 percent of all songs and generate billion-dollar revenues each year. They are also government-recognized monopolies -- over 75 years ago, the federal government wisely imposed antitrust consent decrees on them, which allow ASCAP and BMI to maintain their monopolies while also protecting consumers from monopoly pricing. 

The consent decrees established a system to allow restaurants, bars, and other music licensees, including music streaming companies, to pay ASCAP and BMI for the right to play their music. ASCAP and BMI would then, in turn, disburse payments to each individual stakeholder in a song.

Songs often have multiple individual owners, and the consent decrees ensure that all owners get paid in a fair and efficient way, while preventing unnecessary lawsuits and keeping the cost of music reasonable for the customer. Yet, even though ASCAP and BMI have hit record revenues this year, they are still not satisfied and are pushing for these restraints to be loosened.

Unfortunately for consumers everywhere, these PROs have made great strides towards reversing these free market reforms. A few weeks ago, BMI succeeded in convincing a federal judge in New York tooverturn the long-standing consent decrees, replacing “whole-work” licensing with a fractional licensing regime. 

Fractional licensing would create havoc for local retail stores, restaurants, radio stations, and other businesses that currently pay ASCAP and BMI to license a catalog containing millions of songs. Under fractional licensing, these companies will be forced to negotiate prices individually with each partial owner of a song. In essence, a one percent owner would have as much clout as a 99 percent owner, ultimately tying up negotiations for years.

This process would become a bookkeeping nightmare for the small businesses that will be tasked with tracking down all of the copyright holders of each song to prevent lawsuits. No doubt, the potential for copyright infringement lawsuits would create a whole new cottage industry of music copyright trolls. 

The cost of licensing music would increase substantially, and businesses would have no option but to pass the expense onto the customers. Music streamers would increase subscription fees, and bars and restaurants would be forced to raise their prices -- or they might simply decide it's just not worth the hassle and stop purchasing song licenses altogether.

If music becomes more expensive and clearing the copyrights becomes more cumbersome to manage, businesses will simply shrink their playlists. Fewer artists will sell their songs, preventing them from receiving the public exposure they desperately need to truly succeed. They will not get paid for the songs, which will just sit with cobwebs of the PROs’ catalogs.

Imagine the already mundane task of grocery shopping without some peppy background music. By the time a business figured out who gets a portion of the licensing fees, it would just be too expensive, and we would end up with less and less music in all of our lives. 

If left to stand, this judge’s decision, however, will create a whole new revenue stream for copyright infringement lawyers and other trolls eager to sue tens of thousands of businesses across the country.

Since it will be nearly impossible to track down the many owners of each and every song, many businesses will be left vulnerable to litigation trolls looking to coerce higher fees. The larger businesses will most likely decide just to pay off the copyright trolls, but small mom-and-pop businesses like a local restaurant or coffee shop will be unable to fight the lawsuits and could be forced out of business altogether. 

For these reasons, the DoJ’s antitrust division rejected the PRO’s sales pitch this summer for fractional licensing. But like a spoiled, over-indulged child that doesn’t get his or her way, ASCAP and BMI refused to accept the DoJ’s decision and went running to a sympathetic federal judge in the Southern District of New York. The judge overturned the DoJ’s decision in a “preliminary conference,” where there was very little testimony considered. 

The PROs convinced the judge to rule in their favor by claiming fractional licensing was needed to provide “just compensation” to the various artists involved in making the music. But the music is controlled by the PROs, and it isn’t a case of lack of money to fairly compensate the artists. ASCAP and BMI have set record revenues for the last several years, so the question is really “where are these billions of dollars going?”

Luckily for consumers, the DoJ has appealed this judge’s decision. Industry insiders are optimistic about the likelihood of overturning the lower court’s decision. All legal precedents, including a Supreme Court decision argues against ASCAP and BMI licensing on a fractional basis.

Hopefully, the election of Donald Trump will set a new tone for the federal government that better protects the interests of small businesses and the American people with the return of common sense thinking. Special interest groups like ASCAP and BMI should no longer be able to manipulate judges like Louis Stanton into overturning common sense policies that are good for all music artists and the majority of Americans. The Department of Justice, under President Trump, needs to fight Stanton’s decision and make things in the music industry great again. 

Christopher (Chris) Versace is the editor of the newsletter The Growth & Dividend Report and is a featured columnist to The Street.com as well as a contributor to FoxBusiness.com and Forbes.com.

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The Department of Justice, under President Trump, needs to fight Stanton’s decision and make things in the music industry great again.
donald trump, music, industry, great
Tuesday, 29 November 2016 07:46 AM
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