NMPA's David Israelite Updates on Growth, DOJ Consent Decrees at Music Biz General Meeting


Music publishers attending the annual meeting of the National Assn. of Recording Merchandisers yesterday learned that the U.S. Dept. of Justice is once again reviewing the consent decrees that govern how the two large U.S. performance rights organizations, ASCAP and BMI, operate.

Meanwhile, during his address to the meeting, NMPA president and CEO David Israelite told digital services that after the decision by the U.S. Copyright Royalty Board that awarded music publishers and songwriters at least a 44% increase over the five-year term will be published and that they may have 30 days to decide to appeal that decision they shouldn’t view whether to appeal as a legal decision but rather as a relationship decision.

Music publishers and songwriters “are turning the corner in our relationship with digital services we need them to understand if any one of them decided to go to court, [and appeal the CRB rate determination] it will be very transparent if they are sincere in efforts to improve the relationship” with the music publishing industry,” Israelite said. Later after the meeting ended, Israelite elaborated that if any of the services—Spotify, Amazon, Apple, Pandora or Google—appeal the CRB decision, “it will irreparably breach the relationship between that company and the publishing community…we will be keeping score.”

Earlier Israelite noted that the NMPA estimates that the U.S. music publishing industry had grown to $2.652 billion from the prior year’s total of $2.517 billion; and that the industry had come a long way since growing from $2.206 billion in 2013.

“While that is an incredible turnaround story, music publishing is still lagging a little behind the record labels,” he said.

Israelite noted that 54% of music publishing revenue comes from performance licensing, 21% from synch licensing; 18% from mechanical licensing and 7% from other licenses.

Still that growth could even be better, he said, if so much of music publishing wasn’t facing government regulation either by the rate courts mandated by the consent decree or the Copyright Royalty Board. Almost three quarters of music publishing revenue—54% public performance revenue and 18% mechanical revenue—are regulated, Israelite noted.

He applauded the hard work done to get the Music Modernization Act passed in the House but noted that more work was needed to get it passed by the Senate. While some may have wished for the bill to include more changes that would benefit the music industry, he said that this bill enjoyed the broad support of all corners of the industry because it offered something for everybody without including controversial wish list items like the elimination of the compulsory license or consent decrees; or the creation of terrestrial radio performance rights for master recordings.

If things like that were included in the bill, it would die as legislative efforts in the past for those things have gotten nowhere.

“The very definition of insanity is to do the same things over and hoping for a different outcome,” Israelite said. “What the music publishing industry is looking for in this legislation can’t work over the objections the digital services and record labels. It may not be everything we want and hope for but this bill can pass and give meaningful improvement to how songwriters are treated.”

The most important element of the legislation to the music publishing industry is that it would create a central agency to issue blanket licenses to on-demand digital services and then create a database so that songwriters can be paid their appropriate royalties; all funded by the digital services. It also gives the agency the right to audit services; it rotates the PRO rate court judges; and it sets a willing buyer/willing seller standard for rate courts. “So even if it doesn’t end compulsory license or the consent decrees it provides enormous benefits,” Israelite said, thanking all sectors of the music industry and key players for getting the legislation this far in the process.

Finally, Israelite noted that through its effort to litigate against services that infringe songwriter copyrights, it has returned $656 million to songwriters and publishers, a 534% return on their NMPA membership fees.

Prior to Israelite’s presentation, the Dept. of Justice’s Assistant Attorney General for the Antitrust Division Makan Delrahim revealed that the DOJ was once again reviewing the consent decrees that regulate how BMI and ASCAP operate. The last time the DOJ began that process four years ago, it almost ended in disaster with the decrees not only not amended to reflect the modern industry, but more regulation imposed on the PROs through the then administration’s DOJ’s interpretation that the PROs must do full works licensing.

The election of President Trump and new appointments in the DOJ seem to suggest that the antitrust division would follow a different path that how the DOJ operated during President Obama’s administration. And so far, the DOJ has been looking at removing out-of-date consent decrees while in previous public comments, Dept. of Justice’s Assistant Attorney General for the Antitrust Division Makan Delrahim seems to be implying he was in favor of overhauling the PRO’s consent decrees.

But in his keynote address at the National Music Publishers’ Assn. Makan Delrahim appeared to be walking back previous comments made in the last month or two that some in the music industry interpreted that he might be predisposed toward scaling back, or even possibly eliminating the consent decrees that govern how ASCAP and BMI can operate. Nevertheless as soon as he was done talking, the MIC Coalition come out with a strongly worded statement right after his speech ended calling on the the Dept. of Justice’s Assistant Attorney General for the Antitrust Division to preserve them.

In a statement the MIC Coalition, which represents various trade associations of music users, said that the decrees are “essential to maintain a functional music marketplace. The termination or erosion of the decrees “would be nothing short of a nightmare scenario for the millions of businesses that rely on them to efficiently plan and pay for music performed publicly.”

While some argued that if you read between the lines of what Delrahim was saying, it seems that in his role as head of the DOJ’s antitrust division he will not only lead a review of the consent decree but will also possibly amend them; other industry leaders said he carefully addressed everybody’s concerns but “threaded the needle” without tipping his hand: and that he took a long time to walk that fine line during his address at the NMPA meeting.

Delrahim began his speech by noting that he “loves music” and that almost all of his public speeches start with a song title. “Music connects and defines us as an American people with a shared heritage,” he said. But, “every songs starts with a songwriter,” who are innovators in the truest sense of the word. They create valuable musical works and “deserve copyright protection;” and without the ability to chase remunerations for their works, there would be fewer songwriters pursuing their craft, which would be a loss for everyone, he added.

He also acknowledged music publishers' place in promoting songs and collecting money for songwriters, saying that songwriters and publishers have an “enduring partnership that gives us the great American songbook.” 

Delrahim then proceeded to “share some thoughts on how innovation, regulation and competition might strike a balance in the future.”

He noted that innovation was recognized as so valuable by America’s founding fathers that it was a part of the first article of the U.S. Constitution. Beyond the valuable intellectual property that is created by songwriters, he added that innovation also shapes the music industry, noting that the blanket license came about due to crucial innovative business practices. Otherwise, “it would be impossible for thousands of creators and thousands of music users to negotiate licenses for millions of songs,” he said. Also, he noted that “no one can ignore the impact that technological innovations have had on the music industry over the last two decades.”

He explained that each innovation changed the distribution of music and that “what each technological innovation has in common is that they delivered more music to more people in more places. In 1971 the Eagles hoped to get their music on the radio so people would hear it. Today, that music is available, anywhere, anytime.”

With all the changes that have occurred in the music industry, he applied a term that he credited to U.S. Deputy Attorney General Rod Rosenstein, it has “proven to be anti-fragile…which means that the more things change, the stronger the industry seems to grow.”

All of which led him to talking about the consent decrees, noting that while the DOJ had ruled that the industry was required to practice full-works licensing, BMI rate court Judge Louis Stanton and an appeal court ruled against the DOJ. In that latter ruling, the appeal Judges said that the DOJ have options if it wanted to take further action: it could initiate an anitrust lawsuit or it could amend the decrees to require full-works licensing. “To date, the [DOJ’s antitrust] division has done neither,” Mahrahim said.

He said the core mission of the antitrust division is to preserve and protect competition; and that antitrust laws are on the books in an effort to avoid government regulation of business.

Delrahim further noted that “competition in the distribution of music has exploded…An industry characterized by constant innovation but with a regulatory overlay could mean that the consent decrees are working; or it might be time to review them.”

While the new administration has come into office to look at longstanding decrees and plans to remove dozens of out-of-date-decrees still on the books, so far the DOJ has only decided to review the PRO’s consent decrees to see if they are achieving the right balance of regulation, innovation and competition.  He said that the passion that he has for the creators that the founding fathers sought to protect “will guide [the DOJ} in our review” of the consent decrees.

Earlier, Israelite noted that after the NMPA’s accomplishments during the year between the annual meetings of 2016 and the 2017—the latter representing the organization’s centennial anniversary—he was worried that the NMPA couldn’t top that year. But in the last 12 months leading up to the 2018 annual meeting held yesterday at the Edison Ballroom in Manhattan, he said music publishers, songwriters and the NMPA, which litigated a rate trial before the Copyright Royalty Board, managed to chalk up an historic win that will lead to a 44% or more increase in rates from on-demand digital services; then there was the BMI-led victory in favor of fractional licensing against the Dept. of Justice’s interpretation that the consent decrees required full-work licensing; and now the industry is on the brink of helping to turn once in a lifetime copyright reform legislation into law; while the industry is enjoying total victory against Wolfgang’s Vault for playing music without the proper license for audiovisual works; and a ground-breaking partnership deal with Facebook.

During the evening the NMPA recognized Carlin America president and CEO Caroline Bienstock with its Lifetime Service Award; Senator Sheldon Whitehouse with the Presidents Award for his work on reforming music copyright law, including his support for the Music Modernization Act; Nashville Songwriters Assn. International executive director Bart Herbison with the Legacy Award; and Alicia Keys with the Songwriter Icon Award.

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