Music industry seeks to stifle innovators

The more things change, the more things stay the same.

Since the days of the Old West and the mechanical “player piano” in the town’s saloon, the copyright system has been contorted and twisted beyond anything envisioned by the Founding Fathers. In the early 1900’s, the famous marching band leader John Phillips Sousa was so intimidated by competition from player pianos that he successfully convinced Congress to create a new royalty to protect composers from the evils of mechanical musicians.

And the war on invention by the music industry continues to this day with the recent introduction of the “Songwriter Equity Act” (S. 2321) by Sens. Bob Corker (R-Tenn.) and Lamar Alexander (R-Tenn.).

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With the addition of every new innovation the established music business has convinced Congress to stymie the new business — not by encouraging free competition, innovative services and better customer service — but with government regulation, miles of red tape and years of aggressive filings before sympathetic courts often stacked with cronies from the industry.

In the 1970’s, they set out to outlaw recording devices, the 80's the Walkman, the 90's the mp3 player. Today they have set their sights on the promise of online streaming companies like Spotify and Pandora. Their efforts, if successful, will bankrupt these companies and drive them out of business - which sadly will only further harm musicians and music lovers alike.

In the mid-1990s, the performance rights organizations (PROs) sought to elevate their composition royalties compared to the separate performance royalties believing that this would yield a better rate. To that end, they successfully petitioned Congress for legislation to prevent any performance royalty set by what is now the Copyright Royalty Board (CRB) from being used in determination of the composition royalty.

Now, unhappy with the unbiased determination by the courts and the U.S. Copyright Office, the performing rights organizations are asking members of Congress to game the system yet again. That’s what the recently introduced “Songwriters Equity Bill” is all about.

S. 2321 is designed to selectively change a law - which the music publishers themselves originally requested - to attempt to force judges to demand higher rates paid by distributors of their music. While copyright law should be about balance and equity, history shows that congressional intervention is usually intended to benefit one side over the free market negotiations with another. Traditionally, the long established power of the recording industry has ensured they managed to come out on the winning side.

Passage of this bill will inevitably affect tens of millions of Americans who love online music.The percentage of revenue which online music stores and streaming music services currently pay to artists has successfully been determined by Federal judges - and over the past decade and a half has even been reviewed and adjusted by the Courts and affirmed by the U.S. Copyright Office. To be clear - the rate has already been increased several times, which has resulted in an increase of the amount of money paid to artists and composers.

These current rates for digital transmission of songs are already threatening the sustainability of streaming music services. Corker's bill would only further threaten these services by requiring judges to base publishers’ royalties on those granted to performance royalties and pushing costs on distributors even higher. Not for any economic, legal or moral rationale or reasoning, but simply because the PROs want it.

It is unfortunate that just one part of the royalty recipient groups wants to derail an entire marketplace and push the online economy back toward piracy - not for all of the royalty holders, just for themselves.

Nothing could be worse for innovation in America. Nothing could be worse for the inventive products being created as you read this. Nothing could be worse for new small businesses being launched. Ultimately, nothing could be worse for the artists and performers who actually make the music we buy.

Horowitz is a former director of Federal Affairs for the Digital Media Association.