In a recent editorial in The American Spectator, automotive columnist Eric Peters accused BMI and ASCAP of a litany of wrongdoings in an intended explainer of how Performance Rights Organizations allegedly operate. Under normal circumstances, an article this thinly researched wouldn’t merit a response, but given that BMI was singled out by name and widely misrepresented, we feel obligated to weigh in. Opinions are one thing, but facts are another.
Beyond a simplistic demonization of PROs as a monopolizing “music mafia,” the editorial inaccurately asserts that BMI pockets an inordinately large profit from licensing music.
Eric Peters: “If you own a restaurant or bar or other business (this includes streaming music services like Pandora) and want to play music for your customers, you must pay ASCAP and BMI a licensing fee for those playback rights. ASCAP and BMI then pay the artists (composers, musicians and singers, etc.) a percentage of that in royalties. It’s a very lucrative arrangement… for the mafia. And like the real mafia, a lot — profit in excess of $1 billion each year.”
THE FACTS: While our organization has indeed enjoyed another record-breaking year of revenue, BMI operates on a non-profit-making basis, returning approximately 88 percent of all revenue to the music creators and copyright-owners we represent. In fact, last year BMI distributed and administered a record breaking $931 million to its songwriters, composers and publishers, the largest royalty distributions by any music rights organization in the world.
Despite widespread and detailed media reports regarding BMI’s recent victory over the Department of Justice’s proposal to impose a 100 percent licensing model on our organization, the editorial then misrepresents the terms of our consent decree and is apparently unaware of the actual business practices of the music industry.
Eric Peters: “ASCAP and BMI were not happy about the deal they both signed on to — notwithstanding that it enabled them to legally maintain an effective monopoly and rake in billions in profits as a result of that monopoly power. They had hoped the new Justice Department would be agreeable to a fractional licensing system, which would require that before a restaurant or bar or streaming music provider could legally play a given song, a licensing deal would have to negotiated with each and every person holding an ownership stake in that song, no matter how small.”
THE FACTS: Throughout BMI’s 76-year history, we have always effectively licensed on a fractional basis. The DOJ only recently raised the suggestion of a 100 percent (i.e. “whole work”) licensing model in response to our petition to modernize our outdated (but faithfully upheld) consent decree. It was never an issue BMI brought to the table. The DOJ’s position, however, was rejected in federal rate court by Judge Louis Stanton in September 2016. Judge Stanton ruled that the language in that consent decree completely allows BMI to continue the longstanding industry practice of fractional licensing.
Eric Peters: “Superficially, [fractional licensing] may sound fair — but it would prove completely unworkable in the real world. If fractional licensing replaced the ‘whole work’ licensing structure agreed to under the terms of the consent decrees, a bar or restaurant owner would have to negotiate the same rights to millions of songs, time and time again. It would grind the market to a halt. Gridlock would be the result. And, litigation.”
THE FACTS: Contrary to this account, fractional licensing has been the music marketplace model for decades. Rights holders have always had the ability under copyright law to license portions of their work, and that extends far beyond the limits of the music industry. If anything, the litigious gridlock the editorial suggests would be a far likelier scenario if the DOJ’s decree interpretation was implemented. A mandated 100 percent licensing model would represent a stark departure from the status quo and could potentially remove thousands of musical works from the repertoires of ASCAP and BMI, rendering them “stranded.” For the bar and restaurant owner who has relied, historically, on the rich and deep BMI repertoire, this model would present a new and serious challenge. For our organization, the means certain works split between BMI and any other PRO would be un-licensable until BMI could confirm that those works were eligible to be licensed on a 100 percent basis and thus remain part of the BMI repertoire. This hold-up would derail the immediate access to our repertoire which radio and other music users have long been accustomed, and all parties in the ensuing business transactions would suffer.
Eric Peters: “The fear of the unknown and the legal exposure created by fractional licensing is what the PROs are counting on to raise prices on millions of businesses across the country.”
THE FACTS: There is absolutely nothing “unknown” about the practice of fractional licensing, and by safeguarding BMI’s ability to continue that practice, the federal consent decree court ruling has ensured that transactions remain both efficient and fair.
Eric Peters: “The Justice Department, following a multi-year review, has already rejected a move to fractional licensing. The issue is now being fought out in the courts.”
THE FACTS: The DOJ never “rejected a move” toward a practice that was already in place, nor does the DOJ have the power to unilaterally impose its interpretation of the consent decree on BMI. Rather, it issued an interpretation of our consent decree that, if unchallenged, would have mandated a move to a 100 percent licensing model. That interpretation was challenged by BMI and rejected by Judge Stanton. The DOJ has appealed that ruling, but BMI remains confident it will prevail in its position.
With regard to the inaccuracies in this editorial, we are disappointed that The American Spectator did not attempt to contact BMI to check the facts. Given our commitment to protecting the interests of songwriters, composers and music publishers, we at BMI believe it is imperative that there be a clear understanding of the issues surrounding 100 percent vs. fractional licensing, and we are grateful for the opportunity to provide that clarity.