On Aug. 6, a letter arrived at the U.S. Department of Justice from someone writing anonymously under the name John Doe. Mr. Doe was seeking to persuade the DOJ to protect his small business from an organization that was trying to bully him so aggressively into giving them money that he professed to prefer muggings. He wrote that he feared retaliation if he used his real name. Quoth the anonymous author:
I can confirm that it feels very much like a mafia-style shakedown…These threats sometimes rise to the level of a collection agent screaming over the phone. I have been mugged at gunpoint under circumstances that felt more polite.
Was this some branch of the mob? Perhaps the Crips or the Bloods? No. The organizations being referenced were none other than the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc (BMI). It is the job of these Performance Rights Organizations, or PROs, to negotiate financial arrangement with anyone who might potentially play music published by the companies they represent.
John Doe’s letter was not received as part of a criminal investigation, but rather during the DOJ’s comment period on whether or not to allow ASCAP and BMI to withdraw from established “consent decrees” that have set the rates that must be paid on all the songs in their catalogue. These decrees were instituted primarily because the amount of music that ASCAP and BMI control rises to such a high level as to be considered an antitrust concern. With an eye toward potential revenues from digital streaming service like Pandora, ASCAP and BMI are seeking to be released from those decrees so they can renegotiate for higher prices.
John Doe is not alone in smelling the whiff of cartel-like behavior. In fact, the reason that ASCAP and BMI are seeking to be released from the consent decrees is because they already tried to get out of them in court and failed miserably. Judge Denise Cote wrote in her decision that ASCAP and BMI had used “mafia-style tactics” and had even written language in their emails to businesses that effectively conveyed the message: “nice place you got here, would be a shame if anything happened to it.”
However, while ASCAP and BMI are just the most visible actors in this case, they are merely the enforcers in this metaphor. The dons are none other than the music publishers, such as Sony ATV and Universal Music Publishing. In fact, if ASCAP and BMI are being overly aggressive, that may be in part due to dissatisfaction on the part of music publishers that their enforcers aren’t shaking down their targets for enough money. Both Sony ATV and Universal Music Publishing representatives have, in fact, threatened to pull their music catalogues from ASCAP and BMI’s stewardship and negotiate for money directly.
Unlike ASCAP and BMI, Sony ATV and Universal Music Publishing would not be subject to the same heightened antitrust scrutiny. Nonetheless, Sony ATV is the largest music publisher in the world, controlling 32 percent of the market, with Universal Music Publishing close behind at 18 percent. In other words, between them, these two publishers control half of the music business.
If the DOJ were consistent, they’d find that level of concentration disconcerting. Bear in mind that the Society of European Stage Authors and Composers (SESAC), a PRO that represents just 10 percent of the market (according to the highest estimates), is now subject to two federal lawsuits for violating the Sherman Antitrust Act. If SESAC is in violation, then surely publishing groups that control either double or triple their market share should be treated similarly.
A further irony to the situation is that, not only do Sony ATV and Universal Music Publishing not speak for the entirety of their industry, but they may not even represent, on balance, the wishes of their respective companies. RIAA Vice President Mitch Glazier has publicly praised Pandora’s willingness to work with performers and seems more than willing to stand by the status quo. No less than seven entities bearing the Universal name are members of the RIAA, and the same goes for 30 entities bearing the Sony name. However, music publishers of the type represented by the National Music Publishers’ Association (NMPA) take a dimmer view and appear to regard any and all music licensees (especially Pandora) as a giant money pot.
In other words, what’s really going on here is an internecine struggle within the music industry, which might end up crushing entire business models.
Fortunately, there is a way to avoid this problem. If the DOJ is unwilling to consider antitrust action against Sony ATV or Universal Music Publishing, and it seems they are, there is another avenue to avoid seeing the big publishers crush music startups under their heel. Any DOJ compromise on consent decrees will have to be approved by Judge Cote, the woman who slammed ASCAP and BMI’s “mafia style tactics.” If the DOJ tries to gut Cote’s decision, she should deny approval and call the publishers’ bluff. If these people want to act like the mafia, let them show the world how willing they are to hamstring the entire music business for the sake of wringing a few more dollars and cents out of innovators.
Maybe then, the DOJ might remember that extortion is something it’s nominally supposed to fight against, even when the people doing it are friends of the administration.