Two victories for new music artists in Washington DC

While the music industry is made up of hundreds of thousands of artists and songwriters spread across the country (one of whom is my brother, a professional drummer performing in a band based in the Midwest), the music licensing market is highly concentrated, with only three large companies, which dominates the global music economy. Every time you hear a song at a bar, on the radio, on the internet or even in the gym, it is more than likely that one of these three companies will get paid for that performance.

These music conglomerates – Sony, Universal and Warner – have such a massive share of the global music market, in part because they each house the dominant publishers and major record companies under one roof. To license music, a company gets one or more combinations of licenses from the publishers and the labels. These mega-companies are music equivalent to the electricity company, the gas company and the cable company.

Sony, Universal and Warner are well known names in the recorded music business. However, there has been less attention to the dominant position of large publishers, which are owned by the same business parents themselves. As outlined by Rolling stones:

Sony Corp. owns the world’s largest music publisher, Sony / ATV – which also includes EMI Music Publishing (EMP), fully acquired at the end of 2018 – in addition to a separate music publishing company in Japan. Universal Music Group owns the world’s second largest music publisher, Universal Music Publishing Group (UMPG), while Warner Music Group (WMG) owns the world’s third largest, Warner / Chappell.

While big is not necessarily bad – there are economies of scale in the music publishing industry – the interests of ordinary artists and consumers of their music can often diverge with the companies that control the industry. The reason is intuitive: Like most conglomerates, the music hemotas focus on their profits, and these do not always coincide with what is best for ordinary artists.

The actual dominance of these three companies over the music industry has led to considerable antitrust control in the United Kingdom and has led US policy makers and the courts to reject the major publishers’ efforts to further increase their economic influence.

For example, music publishers have been working for years to remove or weaken antitrust protection through the Department of Justice, called consent decrees that prevent them from increasing what they can charge bars, streaming services, restaurants and gyms for playing music. Both the Obama and Trump administrations rejected the major publishers’ efforts to ease these antitrust protections and with good reason: While it could help the major publishers, it would hurt competition and hurt future artists by reducing the market.

If the music publishers had not been rejected by the Obama and Trump administrations, artists covering other artists’ music (like my brother’s band) would have found themselves having to convince bars, pubs and other companies that support them to pay significantly more for the right to perform these songs. Given how many small businesses we already see across the country are stopping their support for live music, it’s clear that many would not be able to afford it. Having companies that support Peoria cover bands pay more money every time they cover a Peter Frampton song may be good for Sony, but it would do nothing to help America’s struggling artists.

Changing the consent decrees is not the only political initiative that music publishers are following; their recent efforts to raise the price of “mechanical” streaming fees by 44 percent were also rejected – in this case by DC Circuit. The Court wrote that “the negotiated prices continued to reflect ‘market value'” and made it clear that the major publishers “provided insufficient evidence and arguments … to establish that the agreed prices and terms [were] unfair.”

While the major music publishers have faced numerous disappointments from DC policy makers, the evolving marketplace has still worked quite well for the bottom lines of publishers and their corporate parents. In 2020, 15 million new consumers subscribed to on-demand streaming services – the largest year-on-year increase ever, and which also came on top of robust growth over the previous two years.

When people talk about “fixing” the music industry to help artists, they often refer to artists who are already established. For the forward-thinking artists struggling to make a living on their music, the democratization of the music market evoked by the Internet and music streaming have made their lives and careers easier.

When the digitalization of music first began in earnest, it was common for people to download music illegally, costing artists and composers royalties. Revenue from recorded music fell as a result. However, streaming music apps like Spotify, Apple, and Pandora came up with a product that was much better than ad hoc downloading of individual songs from questionable sites, and consumers proved more than willing to subscribe to such services. Most artists will not benefit from new policies that will discourage the availability of or restrict the use of streaming, but the major music publishers will no doubt keep trying to do so.

.

Leave a Comment

Advertise