The Market Trumps the Music Lobby
After the astounding result of the 2016 presidential election, the music industry ought to be alarmed over President-elect Trump’s promise to “drain the swamp.” The industry’s army of lobbyists will now be forced to tackle a serious counter-offensive against its anti-competitive corporate cronyism.
According to OpenSecrets, music industry interests donated $7,581,975 to Hillary Clinton’s campaign, while only shelling out $193,441 to Donald Trump’s. That does not even speak to the $737,955 in direct donations Hillary Clinton received from music insiders at Vivendi, Sony Music Entertainment, and Warner Music Group; Trump received only $17,850.
Now that President-elect Trump is readying his team for the White House, it is no wonder that music lobbyists are regretting their bets.
Recently, the music licensing organizations, the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc. (BMI) attempted to reverse antitrust laws that prevent the two music collectives, which control over 90 percent of all music licensing, from price-gouging music copyrights.
These Performance Rights Organizations (PROs) attempted to strong arm the Department of Justice (DOJ) into changing the rules for how music is licensed to small businesses such as restaurants, retail shops, radio stations, and bars. Specifically, ASCAP and BMI wanted to require small businesses to license rights with each owner of a song — a process known as fractional licensing.
Because small businesses have to license millions of works to protect themselves from infringement suits, fractional licensing would create an inherently inefficient market and increase the number of lawsuits against businesses, resulting in less music for consumers.
What ASCAP, BMI, and their major publishers really wanted through fractional licensing was the ability to leverage infringement threats into higher fees paid by businesses up and down Main Street. Had they succeeded, the largest publishers would have been able to hold songs hostage, forcing broadcasters, bars, and restaurants to pay much higher prices for music across the board. Not only would this have been anti-competitive, prices would also have risen dramatically, potentially eliminating scores of music playlists in businesses across the country.
This is Big Business leveraging Big Government to increase its profits. And, as I’ve argued before, Big Business should not be mistaken for the free market. When a politically well-connected industry lobbies the government to influence the marketplace like this, it benefits corporations and the lobbying class, not everyday Americans.
This is precisely why the anticompetitive practices of ASCAP and BMI have been restricted since 1941, when consent decrees were put into place as the result of a Justice Department lawsuit against the two music giants. Some might argue that 75 years is a long time for the government to maintain a consent decree. However, ASCAP and BMI were not broken up, nor was competition introduced to the marketplace by these consent decrees. Instead, the decrees allow ASCAP and BMI to maintain their monopolies, but with safeguards put in place to prevent monopoly pricing.
This summer, after a thorough two-year plus review, the DOJ ended up ruling in favor of the consumer by keeping the consent decrees as they are, rightfully protecting all Americans from the oppressive, monopolistic practices of big music special interests. Had DOJ issued new rules, copyright trolls would have been given free range to manipulate the prices of licenses artificially.
As soon as the DOJ issued its ruling, ASCAP declared that it would lobby Congress on the issue. However, BMI challenged the decision in court, and, in a surprise twist, a federal judge overturned the DOJ ruling. The court’s finding — if left to stand — will upend the market governing royalty payments, enriching crony actors and trolls at the expense of consumers and artists. Fortunately, the DOJ confirmed that it will appeal the court ruling.
The consent decrees have been in place for more than a generation, effectively protecting against market manipulation by allowing collectives to control the licensing of music on behalf of artists and creators. Fractional licensing will create more problems than it will solve, allowing the music industry to take, rather than earn, more market power.
The final decisions on fractional licensing will work their way through the Congress and the courts. Fortunately, our new president-elect seems willing, even anxious, to take on political and corporate elites. As we’ve already witnessed with the Carrier deal, Trump is signaling to both Big Business and the American people that he plans to do things differently from past presidents. Let’s hope so.
Jerry Rogers is vice president at the Institute for Liberty and the founder of Capitol Allies, an independent, nonpartisan effort that promotes free enterprise. He’s the co-host of The LangerCast on the RELM Network. Twitter: @CapitolAllies