Why the Obama administration needs to get tough on the music lobby

Why the Obama administration needs to get tough on the music lobby
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The Obama administration has a fetish for rewarding bad behavior. It wants to lift the Cuban embargo despite the Castro regime’s gruesome and ongoing human rights abuses. It hopes to remove Iranian sanctions in spite of the fact the country jeopardizes the safety of millions of Americans. And now, it is considering easing regulations on greedy, billion-dollar music collectives, which have been waging an illegal financial war on small businesses.

ASCAP is a performing rights organization (PRO) that collects royalty fees for composers, songwriters, and music publishers. It is also a government recognized and regulated monopoly — combined with its main competitor, Broadcast Media, Inc. (BMI), it controls the rights to nearly 90% of the country’s music compositions.

The thought of the administration relaxing these monopolies’ antitrust restraints is troubling, especially given their long criminal history. In the late 1930s, ASCAP began leveraging its market share, holding back music licenses to raise costs. It doubled its licensing fees while increasing royalty rates charged to broadcasters by nearly 450%. Radio broadcasters, retail store owners, and other music copyright purchasers could not afford the cutthroat costs and rebelled. They refused to purchase licenses, causing over 1,250,000 songs to be wiped away from leading radio stations.

ASCAP eventually caved in and lowered its fees, but further problems ensued. The music publishers began colluding in order to extort more money, saddling radio stations, retail stores, and restaurants with large, unnecessary expenses. That’s when the Department of Justice intervened and issued antitrust consent decrees, which restrained the PROs’ ability to connive and distort the marketplace to inflate the cost of music.

Consent decrees are like probation for someone that has violated the law. They are a particular set of rules they are required to follow, combined with a set of prescribed consequences should they neglect them. They are issued to prevent lawbreakers from repeating the same illicit behavior that got him in trouble in the first place.

When enforced, these music consent decrees have worked wonderfully. By allowing businesses to shop around and purchase a bundle of songs on demand from the lowest bidder, they have successfully restored some semblance of market prices to the music industry.

Unfortunately, the PROs are not very compliant criminals. Just three years ago, ASCAP was once again caught trying to illegally raise music costs by encouraging Sony Music to pull its licenses from Pandora. ASCAP struck a side deal with Sony, in which it advised the company to violate the consent decree by withdrawing licensing rights to the streaming radio network. Worse, the music publisher refused to inform Pandora which songs were removed and waged a $150,000 penalty fee on each song it played.

In response to this malpractice, Pandora filed an antitrust lawsuit and won the case. In the opinion, Judge Denise Cote said that there was “troubling coordination” between ASCAP and Sony against Pandora that “implicate[d] a core antitrust concern.” She intervened to enforce the consent decree and ensure that fair market prices were brought back to the music industry.

But even this didn’t stop the PROs from trying to catch the Justice Department sleeping behind the wheel. Last month, ASCAP agreed to pay a $1.75 million settlement fee to the Department of Justice for again engaging in anticompetitive behavior. According to the DoJ, ASCAP violated its consent decree by signing 150 illegal exclusivity clauses with songwriters and publishers to extort more money from music copyright purchasers.

Despite turning a blind eye to their consent decrees, the PROs are lobbying to have them lifted. And, in response to this illicit behavior, the administration is deliberating, not to tighten the criminal’s ankle monitor, but rather to cut it off entirely.

Tell me: why would anyone consider rewarding an obstinate criminal’s bad behavior with more freedom? What type of sense does that make?

Would you reward your child for telling lies and stealing?

If Bernie Madoff were caught running another Ponzi scheme from prison, would the administration give into his lobbying campaign and set him free?

Should Obama’s Justice Department decide to weaken the PRO consent decrees, it might as well answer ‘yes’ to both of these questions for the sake of intellectual consistency.

Before criminal punishments are reduced, the perpetrator should first see the errors in its ways and have a genuine desire to implement behavioral changes. Unfortunately, however, it is clear that at this time, ASCAP has no inclination of altering its conduct.

And yet, upon further review by Obama’s Justice Department, these much-needed restrictions might be kissed away for good. Retail stores and restaurants will begin paying more for music, as will the hotels you stay in and the radio stations you listen to. The music will be the same, and yet the prices will rise.

In his speeches, President Obama frequently claims that we are a nation of laws. Unfortunately, however, he thinks we are only a nation of Obama’s laws. While the administration has personally created over 19,000 new pages of pointless liberal regulations, it has habitually refused to obey the existing ones that ensure order and stability in our country.

For the past eight years, the feckless administration hasn’t seemed to understand how to handle crime and punishment. This time around, however, radio stations and small businesses are hoping that the administration’s common sense will finally kick in. They are praying that there is still some change to believe in within the administration. For the sake of the music industry’s future, one can only hope so.

Edward Woodson

Edward Woodson

Edward Woodson is a lawyer, now host of the nationally syndicated Edward Woodson Show, which airs daily from 3 to 6 pm EST on gcnlive.com.


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