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Lawmakers look for online music licensing alternatives

Grant Gross | March 11, 2015
Songwriters, music licensing services call for changes that would allow more negotiations.

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Large music licensing services should have more freedom to negotiate rates paid by streaming music services, radio stations and commercial establishments where music is played, industry executives told U.S. lawmakers.

The U.S. Department of Justice should loosen its hold on the two largest music licensing services, Broadcast Music Inc. (BMI) and the American Society of Composers, Authors and Publishers (ASCAP) after the two services have lived under antitrust consent decrees for 74 years, representatives of the two companies said Tuesday. The two services want the ability to use an arbitration process to negotiate licensing rates, among other changes.

Beyond giving ASCAP and BMI more room to negotiate licensing rates, Congress should change a licensing model that pays songwriters a fraction of what performers of music receive from streaming radio and other online services, Lee Thomas Miller, a BMI member and president of the Nashville Songwriters Association International, told members of the Senate Judiciary Committee's antitrust subcommittee.

A songwriter would be able to make a living if his song was played 1 million times on the radio, Miller said. The music business needs to get away from U.S. government regulations that make a songwriter's contribution worth "micropennies in the digital space," he said. "We're in a situation now where millions of spins in the digital space equals tens of dollars."

But streaming music online is a business model that reaches one listener at a time, countered Chris Harrison, vice president of business affairs at Pandora Media, the online music service. One million plays of a song on Pandora reaches 1 million listeners, while 1 million radio plays reaches hundreds of millions, he said, and there should be separate licensing rates.

Driving objections from some songwriters is a confusing U.S. music licensing system that operates on dual tracks. Outside of the Internet, BMI and ASCAP operate under DOJ consent decrees and are required to license their music to businesses wishing to use it, including traditional radio stations, TV networks, bars and restaurants.

Under the DOJ decrees, now under review at the agency, songwriters and publishers get a cut of the licensing revenue, with rates depending on a number of factors.

On the Internet, however, rates are not governed by the DOJ decrees, but instead are set by the U.S. Copyright Royalty Board, established by Congress. The online music licensing system pays performers significantly more, approximately $12 for every $1 paid to songwriters and publishers, with the difference partly driven by demands from record labels.

The royalties paid by music streaming services have prompted many musicians to complain in recent years. Late last year, in the most high-profile protest of streaming rates, country pop star Taylor Swift pulled her music from Spotify.

 

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