DOJ must stand up to the ‘music mafia’

DOJ must stand up to the ‘music mafia’

By Josh Baish

At the annual National Music Publishers Association conference, Makan Delrahim, head of the Department of Justice’s Antitrust Division, remarked that the DOJ is currently reviewing the consumer protection agreements decided upon by the Justice Department and ASCAP and BMI, the music industry’s two largest performing rights licensing organizations. What this means is that the Justice Department will soon choose between protecting the local music scene and lining the pockets of big money corporate music interests.

ASCAP and BMI are monopolies that control 90% of performing rights to songs. Virtually everyone that wants to publicly perform music, from restaurants to hotels to concert halls, must go through them.

Both ASCAP and BMI have a history of abusing their market share. Since their businesses hinge on managing intellectual property — an area where there is no true free market — there is little competition and hence no way of stopping their price gouging.

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That’s why the federal government put them under consent decrees in the 1940s: to ensure that the music collectives provide establishments with licenses to their entire collections at fair market rates, with a rate court handling all disagreements. These settlements have significantly helped in stopping their practice of charging rates that might make sense for their bottom lines but don’t make sense for anyone else, not even the songwriters they allege to protect.

Those who advocate for removing the decrees argue that doing so is necessary to increase the royalty rates of songwriters. However, I owned a live music venue for years and have firsthand knowledge that their payment problems are a result of not the consent decrees, but rather the strong-arm tactics of ASCAP and BMI themselves.

Without a doubt, everyone – including songwriters – should be paid fair market rates for their work. But as I mentioned in an interview with the Dallas Observerin 2013, ASCAP and BMI put their financial interests above everyone else’s, even those that their business hinges upon.

Those who want the ASCAP and BMI consent decrees removed should consider the financial hardship up-and-coming musicians and small businesses face even with them in place. For example, it doesn’t matter if a venue plays covers or exclusively original compositions from performers; ASCAP and BMI expect both to pay thousands of dollars for expensive blanket licenses each year. Because of their punitive rules and the fear of crippling lawsuits, many restaurants, bars, and other establishments are simply doing away with open mic nights and live music altogether. Small venues like mine have also been forced to close their doors, hence killing the local music scene.

Without a doubt, the music industry, from both a royalties and operational standpoint, is still to some degree on an uneven playing field that favors the biggest performers in the music industry at no fault of their own. Put another way, the current barriers to entry created by ASCAP and BMI’s greed muscle out some of the performers who would like to become the next big thing.

With that being said, consider how much worse the situation would be in the absence of the ASCAP and BMI consent decrees, which provide the little guy with important protections. Performers would lose even more chances to start their careers as an ever-increasing number of small venues, restaurants, and bars would be unable to weather the skyrocketing financial costs. The rich would get richer while the poor get poorer, all because of poor governance in Washington, D.C.

Without question, the music industry needs reform, but scrapping guardrails that protect unrestrained corporate welfare is not the answer.

At this week’s markup of the Music Modernization Act, Congress has the unique ability to hold the Justice Department’s feet to the fire, ensuring it does as it suggested by refraining from acting one way or the other on the music consent decrees until the legislative branch fully plays out its hand. Given how helpful Congress’s 2015 hearing on this very topic seemed to be in persuading the DOJ’s to retain the music consent decrees in 2016, it is critical that the body seizes on this opportunity to make its voice heard again.

With the help of members of Congress, especially Antitrust Subcommittee Chairman Mike Lee (R-Utah) and ranking member Amy Klobuchar (D-Minn.), Attorney General Jeff Sessions and Makan Delrahim at the Justice Department will have no problem ensuring the laws on the books to protect consumers get better, not worse.

We’re counting on the legislative and executive branches to work together in getting the job done. Here’s hoping they’re up for the task.

The author was owner of Rubber Gloves Rehearsal Studios, a live music venue based in Denton, Texas, from 1998 to 2017 that is re-opening this year.