Rates for performance royalties paid to artists by streaming music platforms are set by the Copyright Royalty Board (CRB) within the Library of Congress. The CRB has artificially driven up rates for streaming music. The CRB set rates would have required streaming platforms pay upwards of 90% of their total revenue in royalties had Congress not intervened and set rates at an approximately paltry 60% of revenue.
As in the Pandora case, rates for publishers are set by the courts using a preset formula when negotiations break down. However artists’ performance rates aren’t part of the calculation. When artists were being granted performance rights in the 1990’s the same publisher organizations now agitating for change feared the new royalty would drive down their rates. They successfully petitioned Congress to expressly forbid the courts from considering performance rates as a data point in the formula for determining their own rates.
Now, in the wake of the Pandora decision and in the face of rapidly escalating performance royalties for artists, the music publishers are pushing legislation to un-rig and re-rig the law they previously demanded. The bill, known as the Songwriter Equity Act (SEA), would require the courts to consider performance royalty rates as “market rates” in setting publishers rates. So in short, the SEA would use one rate artificially inflated by government to artificially inflate another and call them both “fair market value.”
But with the SEA the industry is not seeking a “free market.” Rather they are seeking a one way price increase on licensees which will prove fatal to the growing streaming music industry. Their efforts at casting off the consent decree certainly wouldn’t produce a “fair playing field”. Rather it would provide publishers the unchecked power to extort any price they wish without recourse as Sony attempted to do with Pandora.
Proper copyright law is directed at finding a balance between those that own content and those that use it for the purpose of promoting “the progress of science and the useful arts.” The music industry’s lobbying for special carve outs to perpetually avoid evolving with consumer demand is in large part responsible for the irrational and overly complex system currently in place.
The House Judiciary Committee’s attempt at comprehensive review is a long overdue opportunity to bring balance back to the system. Hopefully they will be able to look past the industry’s rhetoric and star-studded messengers to move forward with responsible, balanced reform.
Daniel Horowitz is an independent consultant specializing in public policy strategy, coalition building and development. He previously has served as staff in the U.S. House and Senate and as the presidential appointee in charge of policy at the U.S. Small Business Administration.
Sen. Jeff Flake, R-Ariz., takes a selfie with his cut-out head during the Hoops for Youth 16th annual charity basketball game held at George Washington University's Smith Center, September 8, 2014. The members of Congress team beat the lobbyist team 46-40. Buy photo here.