Jeff Sessions, the current Attorney General of the United States, has promised to restore “law and order” to the Justice Department, so it’s no wonder why the Music Lobby has been sweating his nomination.
Over the past year, I have detailed how these bad actors have been trying to eliminate the free market protection laws that have been on this country’s book for the last 75 years.
Unfortunately, it appears their anti-consumer agenda just might come to a head -- that is, unless Sessions squashes their crony agenda by the middle of this week.
Here’s hoping he does because what the music industry wants will cause nothing but trouble for small businesses and music listeners across the nation.
Federal government copyright laws have essentially given rise to a government-created monopoly led ASCAP and BMI, the two largest music collectives. Combined, they control the rights to nearly 90 percent of the songs we hear on the radio. In an effort to bandage the problem caused by disruptive government regulations, Washington put these two collectives under consent decrees quite some time ago to mitigate the effects. These decrees mandate that ASCAP and BMI provide blanket song licenses to small businesses at a fixed rate. The two groups then disperse the funds to the appropriate stakeholders of each song.
A rational person would say that this system has been reasonably fair -- ASCAP and BMI break record revenue numbers every year, while music remains affordable for all Americans. But the executives in the music world want to move to an anarchic “fractional licensing” system, which will force small businesses to negotiate with every individual rights holder of a given song.
Why hasn’t fractional licensing come about previously? Because it would be a logistical nightmare as it would be close to impossible for local coffee shops, bars, and mom and pop stores to negotiate with every single rights holder for thousands of songs. Prices would skyrocket because of gridlock -- many songs have multiple owners, and the 99% stakeholder would have the same negotiating power as the 1% owner. The only folks that would benefit would be the attorneys that would be hammering out the plethora of agreements. Worse yet, because of rights disputes, many of the individual music stakeholders aren’t even established until after the song release date. Should fractional licensing become the law of the land, then every small business in the country would have to bear the ongoing cost of attorneys’ fees to ensure that they are kept up to speed on any new developments.
The bottom line is fractional licensing is simply not practical and very few small businesses would be able to afford such a process. At a time when the nation’s labor force participation rate has still not improved to pre-Great Recession numbers, and a time when a number of the country’s coffee shops, restaurants, and gas stations are going out of business because of modest credit card fees, it’s clear the incremental costs would weigh on profits. The end result would either be less music or higher prices on consumer goods to make up for the shortfall. How does that make sense?
American businesses and music listeners should not be prohibited from playing or listening to music just because our intellectual property laws need reform. That’s why the consent decrees have stood as-is for over 75 years -- they allow the system to work.
Although keeping the consent decrees intact should be common sense, BMI asked for a review and after a couple of years of investigating, Congress carefully determined that no changes should be made to the law.
But as the old saying goes, if the law is not fit to your liking, find a better lawyer. And that’s exactly what the Music Lobby has done. They have shopped this issue around and finally found a local district judge in New York that agreed with them, who reversed the DOJ’s decision on the matter.
The DOJ announced its intent to appeal the district judge’s decision, but the clock is ticking: the Department only has until May 18th to do so. If Sessions is serious about restoring “law and order,” then he will take a stand against special interest groups by defending the rule of law that has been in place for the better part of a century. The American people are counting on him to do so.
Christopher (Chris) Versace is the Chief Investment Officer at Tematica Research, editor of the newsletter Tematica Investing, co-host of the Cocktail Investing Podcast and is a featured columnist to The Street.com as well as a contributor to Business Insider and Forbes.com
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