Home > Uncategorized > PRO Rate Courts are Swords, Not Shields: It’s Time to Bring the PRO Consent Decrees into the 21st Century

PRO Rate Courts are Swords, Not Shields: It’s Time to Bring the PRO Consent Decrees into the 21st Century

June 14, 2013

If Pandora’s recent shameless antics prove anything, it proves the decades-old antitrust consent decrees that dictate how ASCAP and BMI operate need to be updated to reflect the modern online music business or be abandoned altogether in favor of market place licensing.

The way the consent decrees work is that if a user of music and the songwriter collectives cannot reach a deal, they can avail themselves of what is essentially a government-mandated price setting hearing in front of a federal judge in New York. And with all respect, federal judges in New York have much more productive things to be doing with their time.

A rate court is a very expensive procedure that used to be rarely used, but now is the avenue of choice for well-heeled Internet companies wishing to use their financial muscle to harass songwriters into taking less money to make the pain stop–pain usually associated with the hemorrhaging of money to pay legal fees.  Unlike Pandora, ASCAP’s CEO is not making a million a month from stock sales.  Songwriters have to fund this massive rate court litigation with ever dwindling revenues that decline in large part as a result of the piracy that profits so many and for which the government has historically done little or nothing to stop (although that changed with Mr. Morton for which we are grateful).

And let’s be clear–ASCAP and BMI are songwriter collective bargaining groups, not that dissimilar to unions–unions that enjoy the labor antitrust exemption.  While the Pandoras of the world would like you to believe that they are suing “ASCAP”, when they sue ASCAP they are really suing songwriters.  There’s no ASCAP, BMI or any other PRO without the songwriter members of those organizations.  And it’s the songwriters who are hurt by these rate court tactics that are an end run around collective bargaining.

Rate courts are a process that is available to pretty much all users of music if they don’t make the deal they want with songwriters because companies like Pandora which clearly dominates the web radio space, the online video monopolist YouTube, Clear Channel, and the National Association of Broadcasters all need to be protected by the American people and its powerful government from…songwriters.

This would be the American government that has been unable and until recently unwilling to do much, if anything, to protect songwriters from brand sponsored piracy that is facilitated by companies like Google.  Google that is permitted to acquire pretty much anything they want and are never found to be American monopolists, can advertise drugs to unsuspecting consumers, get caught selling counterfeit Olympics tickets and keep the money, can have cars drive around taking pictures of your house to use with Google Maps (commissioned on a no-bid contract by a government spy agency)–but those songwriters, boy we have to watch out for them.

Aside from the sheer absurdity of the concept of rate courts as moral hazard, rate courts are also economically inefficient.  If you compare the last best positions of the PROs and the retailers before they went to the rate court, the rate they ended up with as set by the rate court, and the extraordinary cost of the rate court, it is hard to imagine that the rate court actually benefits anybody to any significant degree–if at all.

What is truly odd about the current rate proceeding with Pandora is that they seem to be complaining about songwriters “opting out” of the blanket licenses offered by PROs–which is a requirement of the consent decrees designed to foster competition.  PROs are required to allow their members to opt out, so when a songwriter opts out of the blanket license, she is exercising her right to do so.  Of course, when a songwriter opts out of the PRO blanket license for Pandora, the songwriter is also opting out of the rate court bully-boy mind game.

And that is enough to make Pandora stamp their little feet and go shopping.  And here’s the moral of their story:

Songwriters are dangerous people.  Pandora and Google must be protected against songwriters.

This is patently absurd.

  1. adamsmith2009
    June 14, 2013 at 15:54

    Songwriters ARE dangerous people, especially when others start screwing with a time-honored system that enables artists to invest the much-needed time to study and hone their craft to a fine edge, to something they can present that actually deserves the word “art” to describe it. In fact, Songwriters are SO dangerous, that Pandora and Google should be very careful how they handle themselves with all of this litigation, or they will find themselves with only amateurs producing mediocre works that don’t qualify as art. (Future google-employed songwriter, 13-y.o., “oh yeah, i wrote this one in ten minutes with my song-writing algorithmic rhyme-finder, random melody and chord generator software…just like the one from yesterday…oh, and the day before! In fact, it doesn’t make any sense to anyone, BUT…everything even rhymes!)

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