WASHINGTON, D.C. – NAB President and CEO Gordon Smith testified today at a Department of Justice workshop on competition in the licensing of public performance rights in the music industry.
Below are his remarks as prepared for delivery:
Good afternoon. Thank you to Assistant Attorney General Delrahim and the Department of Justice for inviting me to offer my thoughts, as president and CEO of the National Association of Broadcasters, on the future of the ASCAP and BMI consent decrees.
On behalf of America’s local radio and television broadcasters serving communities across the country, I welcome this opportunity to discuss why the ASCAP and BMI antitrust consent decrees continue to be essential, and our significant concerns with the so-called modified “skinny” decrees currently under consideration. Without the framework the current consent decrees provide, a fair competitive market for the licensing of musical works simply would not exist.
Despite the Department of Justice finding less than five years ago that the decrees were essential to preserving competition, we are yet again being asked to consider modifications to them. For broadcasters and many other licensees, this endeavor raises major concerns.
While NAB always welcomes conversation about ways to improve and modernize government “regulation,” most of the publicly proposed modifications would likely harm licensees and consumers, stifle innovation and frankly, entirely miss the point.
At the outset, it is critical to recognize that these decrees have been worked through line by line over the course of 80 years, with the parties and courts developing understandings and interpretations of nearly every word. While getting “skinny” often sounds like an appealing aspiration – especially at my age – in this instance it is quite misleading. Changing or eliminating sections or paragraphs or sentences…or even words in the decrees can have harmful and unintended consequences. These are not changes that can be consummated following a workshop or roundtable. If the decrees were to be modified, that could only come after the public fully vets any specific proposal to do so.
Moreover, there are three critical issues that DOJ must be address before we even get to any of the subjects on the agenda for these roundtables. The first of these is fractional licensing. The single biggest change to the PRO consent decree landscape in the last few decades is a federal court’s recent mistaken interpretation that the decrees do not require full work licensing. That means that, when a licensee contracts with BMI for a work that either one does not wholly own, the PROs insists that the licensee does not have any right to publicly perform that work unless it has each and every co-owner on board as well. Put differently, following the federal court’s ruling on the question of fractional licensing, licensees may very well pay ASCAP or BMI for the right to publicly perform works, but actually have no right to use them. Any discussion of modifying the decrees must start with requiring whole work licensing, through indemnification or another mechanism.
Second, also somewhat buried in the details of the roundtables is the PROs’ failure to be transparent about their repertoires. Shockingly, there is no real-time database among the PROs that indicates – with certainty – for what compositions licensees have contracted. What other business is asked to pay for something, yet they have no way of knowing what is included in the package? This issue is exacerbated by the federal court’s refusal to find that the existing decrees require whole work licensing.
Finally, the Justice Department should reassess the breadth of the parties to which these consent decrees apply. With the growth of SESAC and the emergence of powerhouse PRO Global Music Rights, broadcasters and other licensees are left without full protection under DOJ’s watchful eye. If we are going to get serious about reforming the decrees, all PROs must be brought within their purview. PROs do not compete with each other for licensees and licensees are effectively forced to license each PRO’s repertory. This, too, has been made worse by fractional licensing, as even a relatively smaller PRO could simply amass minority interests in key works and force licensees to pay above-market prices for the right to make use of their ASCAP and BMI licenses.
When it comes to the modifications publicly proposed by ASCAP, BMI and the National Music Publishers Association, the Justice Department must proceed with extreme caution.
For radio broadcasters, being able to play a wide array of music is essential, as that is what listeners expect and demand. Whether one owns one radio station or hundreds, it is essential to have immediate access to these catalogues and at a reasonable rate. Moreover, for radio stations that air syndicated programming, commercials and live events, they must have the public performance rights to the full catalog of musical works in order to operate lawfully.
Television stations often have even less control regarding the music that goes over their air.Each day, TV stations have music interspersed throughout their programming. Much of those musical performances occur in the background of stations’ movies, television shows, live sporting events, local news and commercials. Stations have no editorial control for much of their content, such as network and syndicated programming, live events and commercials. So, if a station lacked the right to publicly perform a single musical work because it was in a repertory it did not license, it would have no practical ability to mitigate the risk that an offending song might air. This would expose the station to the threat of significant penalties under federal copyright law.
Beyond the oft-discussed essential rate provisions of the decrees, NAB opposes any modification to the decrees that would allow for so-called “selective withdrawals.” As television and radio broadcasters continue to innovate in the digital space to better serve our audiences, any modification to the decrees that would enable rights holders to selectively withdraw from ASCAP and BMI to leverage their market power in direct negotiations with digital services would raise these same anticompetitive concerns.
Given the complexity involved with the modifying the decrees and the unique challenges of our nation’s music licensing regime, we believe that Congress is the best vehicle for modernization. Indeed, Congress just recently legislated with the decrees in mind, recognizing how much the industry has grown up with the decrees as an integral part of the business. Congress is well-equipped to balance all stakeholder interests to develop the most comprehensive solution for all parties. This would, of course, ensure that all PROs are subject to the rules and regulations governing music licensing and not just ASCAP and BMI.
The ASCAP and BMI consent decrees have effectively prevented significant harm to licensees, songwriters and consumers, and ensured that radio and television broadcasters are able to fairly, efficiently and transparently license musical works to the benefit of their audiences. For these reasons, the Department of Justice should not terminate, sunset or change the decrees at this time. Instead, the Department should work with the many legislators who weighed in during the Music Modernization Act process and over the course of this review – including Senate and House Judiciary Chairmen Graham and Nadler – and have since then to help develop an alternative framework prior to any action.
I look forward to the discussions over the next few days and a continuing dialogue with ASCAP and BMI and others in the industry to preserve broadcasters’ access to music and serve the interests of music creators, publishers and consumers. Thank you.