Will one judge allow price gouging of music copyrights?

Music is of great importance to American culture. Plato once said that it “gives soul to the universe, wings to the mind, flight to the imagination, and charm and gaiety to life and to everything.”  Despite music’s significance to our everyday life, one judge’s ruling may force the citizenry to kick its cherished tunes to the wayside.

At issue is whether the consent decrees that govern the monopolistic music collectives — namely, ASCAP and BMI, which control over 90 percent of the US market for music compositions — should be weakened to allow for the “fractional licensing” of songs.

{mosads}Currently, songs are licensed through a “whole-work” regime. This means that businesses like bars and restaurants pay a flat fee to ASCAP or BMI in order to license a basket of songs on demand. ASCAP and BMI then disburse the proceeds to each respective music publisher, composer, and copyright owner.

This process has created the happy medium of allowing the music industry to thrive with comfortable profit margins, all while curtailing unnecessary lawsuits and ensuring that consumers are not forced to pay monopoly prices.

Yet, despite breaking record annual revenues this year, the bigwigs in the music industry are still not happy. They want to upend the music licensing system and move to “fractional licensing”, which would force every small mom and pop store to negotiate with every copyright owners related to each of the millions of songs requiring a license. Even mom and pop stores have to license millions of works to avoid infringement liability.

And that’s not a good thing. It may lead to drastic price hikes, or worse —  many of our favorite songs completely disappearing from playlists on local radio or at your favorite pub.

Imagine striking deals with five copyright owners that possess 99 percent ownership of a given song only to have the sixth that owns a mere 1 percent strategically hold out for more money. And since a license would be required from every owner, there is no price competition.

Even worse, fractional licensing would open the door to the same troll-like behavior that has plagued the world of patents for years. The holdup power created under fractional licensing and the complete lack of transparency as to who owns which rights, will subject American businesses to higher rates extorted only under threat of infringement suit.

This isn’t mere overthinking — under the process of fractional licensing, these problems will occur.

One of the most recent examples of such a litigation nightmare involved the recent Bruno Mars hit “Uptown Funk.” It originally had 6 credited songwriters, but after becoming entangled in a rights dispute, it gained 4 more.

The whole work licensing process took care of this mess quickly and organically, but what would occur if we switched to a fractional licensing regime? Would restaurants and retail stores be required to keep up with every songwriting dispute in America? Would each small business be sued if, God forbid, they miss a new development in the copyright case? Would ever restaurant and bar be forced to re-negotiate each copyright deal after the completion of every song rights dispute?

If we move to fractional licensing, the answer to all of these questions will undoubtedly be ‘yes.’

The historical evidence is clear as day: we can’t afford to move to a fractional licensing regime. Thankfully, the Justice Department recognizes this point. This summer, after a two-year review of the case at hand, the DOJ ruled in favor of keeping the consent decrees their requirements of full work licensing as-is in order to protect small businesses and music consumers everywhere. 

Unfortunately, however, one New York judge’s opinion may change all this. Louis Stanton from the Southern District of Manhattan recently overturned the DOJ decision without entertaining nearly any debate.  Luckily, the DOJ was shocked and announced that it will soon appeal his decision.

One can only hope that President-elect Trump’s Justice Department will follow through with the current DOJ on rectifying this issue at hand — after all, the future of the music industry and businesses up and down Main Street depend on it.

Edward Woodson is a lawyer and host of the nationally syndicated Edward Woodson Show, which airs daily from 3 to 6 pm EST on gcnlive.com.

The views expressed by authors are their own and not the views of The Hill.