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Entertainment Industry Giveaways Will Cost Businesses

Entertainment Industry Giveaways Will Cost Businesses
(Anthony-Furgison/Dreamstime)

By Sunday, 22 December 2019 05:21 PM Current | Bio | Archive

The way you watch movies may be about to change again. This time it won’t be because of Netflix, or innovation, or competition. This time it would be because of because of government intervention.

While official Washington was consumed with impeachment, President Donald Trump’s Justice Department quietly asked a federal court to lift consent decrees that have governed the movie theater business since the 1940s.

That may seem like ancient history. But it’s very relevant to today’s entertainment scene. The existing system has worked very well for consumers and theater owners. The major production studios were prevented from owning theaters, and the independent houses couldn’t be compelled to buy “blocks” of movies (most of which probably weren’t very entertaining).

“Thanks to those decrees, Hollywood is enjoying a golden era, with more studios producing more movies and television programs in ways that offer consumers more choice and convenience than at any time in history,” writes columnist Steven Pearlstein in the Washington Post.

Pearlstein’s no conservative. But that’s what’s odd here: the underlinks in the William Barr Justice Department didn’t necessarily take the conservative position. When something’s been working for seven decades, conserving it makes sense, unless there’s a good reason to make a change. Since the big movie studios still have immense power, this looks like a giveaway to Hollywood.

It brings up a warning about another area of the entertainment industry that’s eager to expand its power by getting rid of sensible consent decrees: The music industry.

Just two groups, known as BMI and ASCAP, own virtually all (90 percent) of the copyrights that allow public performance of music. That means when you hear a song in a store, in a restaurant or between innings at a ballgame, it’s almost certain one of those two companies is providing the rights.

Just as with the movie studios, these quasi-monopolies once used their power to squeeze small businesses that wanted to provide music. The providers set rates far above what the market would have allowed. So, as with the theaters, the federal government stepped in. Before World War II, the companies avoided the threat that they could be broken up by agreeing to “consent decrees” that made their entire catalogs available to any business that buys a blanket license.

There’s nothing inherently wrong with having high market share, but the decrees were never intended to fix ASCAP and BMI’s market power or collusive behavior. They simply put guardrails around the anticompetitive realities of this marketplace to ensure prices remain at close to market rates.

This is good for businesses: imagine if a bar had to negotiate with individual artists or record labels for every song it wanted to play during happy hour. Imagine if the doctor’s office had to obtain permission for each song it wanted to play in the waiting room. Nobody would even know where to begin seeking the rights to use music, and so music would virtually disappear from public life.

If a business did decide to play music without obtaining legal rights, it would be opening itself up to nuisance lawsuits. It’s easy to imagine teams of lawyers standing by to sue a restaurant that wants to host “80s Night” on “Throwback Thursday.” Did the owner really legally obtain the rights to “Take on Me”?

The crackdown, which will help keep music affordable, only happened because the federal government was taking the fundamentally conservative position by enforcing the consent decrees.

Music lovers beware: This could easily change, if the Barr DoJ decides to do for the music industry what it’s doing for the movie studio industry.

A dozen conservative groups, including the National Tax Limitation Committee and American for Limited Government, have made it clear that modifying the decrees would spell bad news for small businesses, consumers, and the free market itself. Hopefully the DoJ takes note and doesn’t repeat the same mistakes.

 Dr. Michael Busler, Ph.D., is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.

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DrMichaelBuslerPhD
The way you watch movies may be about to change again. This time it won’t be because of Netflix, or innovation, or competition. This time it would be because of because of government intervention.
entertainment, industry, giveaways, businesses
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2019-21-22
Sunday, 22 December 2019 05:21 PM
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