• DOJ’s Cronyism Is Out Of Tune

    Commentary by Roberto Escoban

    Leave it to the Obama administration to change decades of laws and precedents to help one of their political supporters.  According to sources, the Department of Justice is on the verge of radically altering rules, laws and precedents as it applies to music licensing, an effort to pad the bottom line of rappers, rock stars and musicians who are always willing to cut big political checks.

    Billboard reports that the DOJ appears ready to change how Performance Rights Organizations (PROs) are required to treat the licenses of songs with multiple writers.  It may songs arcane and complicated but the impact would be felt on consumers immediately.  From streaming music companies to small restaurants and gyms that pipe music to their customers such a move could create jeopardy of civil fines and ultimately fuel an army of lawyers that would make “Better Call Saul” blush.

    For generations, songwriters have assigned their rights to three major publishers that control the vast majority of all musical compositions.  The three organizations American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI) and the Society of European Stage Authors and Composers (SESAC) do not reveal the songs to which they hold the rights but they do hold possession of the rights of 100% of each song, even when there are multiple authors.  Radio stations, restaurants and anyone seeking to play music must buy a license from all three organizations or risk millions of dollars in infringement fines. Total control of course includes the power to set prices and determine prices.

    If someone plays a song without paying royalties, the fines are draconian.  A Colorado club owner was forced to pay $40,000 when a cover band played 10 songs without paying a fee.   He was lucky, the law stipulates $30,000 fines per song, per play.   A club in Long Beach, California jazz club was forced to pay $198,000 in fines when eight songs were played without compensation.

    Now the Department of Justice is proposing to make the fee structure more complicated, confusing and difficult – a move that will create a cottage industry of “royalty trolls” that will lay siege to small businesses in a similar manner that “copyright trolls” have damaged the economy.

    DOJ is proposing the creation of “factional licensing.” Fractional licensing would upend this efficient 100% licensing structure that makes it easy for restaurants, small business or clubs to pay for each song they play. Under fractional licensing scheme, the restaurant would now have to go out and negotiate a license with any owners not covered by the PRO. In 2010 the average #1 song had between 3 and 4 co-owners.

    This system would not prove inefficient; it would prove impossible.  The United States Copyright Office has blasted the proposal saying it “believes that an interpretation of the consent decrees that would require these PROs to engage in 100-percent licensing presents a host of legal and policy concerns. Such an approach would seemingly vitiate important principles of copyright law, interfere with creative collaborations among songwriters, negate private contracts, and impermissibly expand the reach of the consent decrees.”

    Confusion and uncertainly creates a minefield for small business while giving lawyers the opportunity to take advantage of small businesses just for the cost of sending a threatening demand letter and a stamp.  With potential fines of tens of thousands of songs per incident, small businesses would be at the mercy of the lawyers ready to take advantage of the situation.

    The only people who benefit from a factional licensing scheme are the big music publisher organizations and the trail lawyers ready to suck more money from hard working families.  This scheme should be rejected.

    Roberto Escoban

    Roberto Escoban is the pen name of a conservative activist who spent 20 years working in Washington including a decade on Capitol Hill.

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