It’s easy to yell, “You need glasses” to sports officials when they miss an obvious call, or to that driver who pulls out in front of us. Those are easy to spot, stupid mistakes that happen at the moment because someone didn’t see things clearly and made a bad decision. But what’s not as easy to recognize are obvious, mistakes that have bad consequences down the road, yet are still caused by someone not seeing things clearly. We could call those “myopic” mistakes, which is defined as “nearsightedness.” Music publishers (yes, I am one), have a history of mistakes that I’ll label, “music myopia.” Perhaps our future depends on us getting new glasses. Let me explain.
The recently released Copyright Office study, “Copyright and the Music Marketplace,” states in the introduction, “There is a profound conviction on the part of music publishers and songwriters that government regulation of the rates for the reproduction, distribution, and public performance of musical works has significantly depressed the rates that would otherwise be paid for those uses in an unrestricted marketplace.” I personally believe that is a true statement. But I also realize music publishers have been part of the problem, maybe a pretty significant part.
For instance, leading up to the 1976 Copyright Act, the Register of Copyrights at the time proposed the elimination of compulsory licenses, (which is one of the more significant government-regulated rates, for songs on records), yet the music publishers in that day opted for an increase in the rate instead (from 2 cents to 2 ¾ cents). They were concerned that the removal of the stat license would cause “unnecessary disruptions in the music industry.” That rate is now 9.1 cents. Yet, according to a statement by NMPA, that original 2 cent rate from 1909, adjusted for inflation, would be more than 50 cents today. How’d that work out for us? I think we were shortsighted. One instance of “music myopia.”
Another instance began around 2006 when a company called DMX, a music background service competing with the larger MUZAK service, began to acquire direct licenses from music publishers for use of songs through their services. About 800 publishers, mostly smaller companies, signed direct agreements with DMX, believing they would get better rates by cutting out the middleman, even though some who signed didn’t realize the terms they agreed to included performance rights. ASCAP had been negotiating an annual rate of just under $50.00 per location fee. The group of publishers signed a direct deal at closer to $25.00 per location fee. Ooops, too bad for those publishers. Oh, by the way, Sony/ATV was one of the ones who signed on. But to incentivize Sony to participate, DMX paid them a large advance, as well as a large “administrative” fee. With Sony on board, DMX was able to attract even more publishers to a direct deal.
That in and of itself was unfortunate. But things got worse. The courts got involved, and taking into account the much lower fees that DMX had negotiated with these hundreds of publishers they ruled the lower fees were fair since publishers in the open marketplace had agreed to them. Then, due to their consent decrees, ASCAP and BMI had to offer the same lower rate to similar services, including PlayNetwork, the much larger Muzak, and other background music services. According to ASCAP, that resulted in lost revenue to publishers of over 14 million dollars each year, and that doesn’t include BMI publishers. Ouch! Shortsightedness by publishers kind of cut the legs out from under ASCAP and BMI. Music myopia.
While I understand an upfront advance can be tempting for a publishing business, we have to look long term and try to discern how it may impact our future commerce, and the value of music. Other instances of music myopia, where publishers appear to have made decisions based on short-term gain but with long-term devaluation, are reports like Google having paid Warner Music an advance of over $400 million for its music to be played on YouTube, as well as major labels having reportedly taken an 18% equity stake in Spotify. And how many times have we publishers granted a reduced license because someone is willing to pay us an advance or guarantee on units, or we assign our rights to a foreign agent at higher percentage fees because they give us a catalog advance? Aren’t we being a bit shortsighted? Aren’t we participating in the devaluation of the very thing we are in charge of to maximize in value?
I realize I need glasses. I need to recognize my tendency toward music myopia. When I look across the future at the eye chart and try to read the letters, it’s not so much about the objects that appear larger than they really are (the short-term gain), it’s more about the smallest letters toward the bottom…. the ones I have to think harder about to recognize…. the future bottom line.
John Barker is President & CEO of ClearBox Rights, LLC, an independent rights managements company based in Nashville, TN. He is also Chairman of the Copyright Society of the South. John publishes a blog related to songwriting, publishing and copyright issues which can be found at http://clearboxrights.wordpress.com or www.clearboxrights.com.