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26 Fordham Intell. Prop. Media & Ent. L.J. 493
Article by Brontë Lawson Turk*
hristina Aguilera’s hit song, “Beautiful,” topped the international music charts,1 won the 2003 Grammy Award for “Best Female Pop Vocal Performance,”2 and received international critical acclaim for its lyrics about self-acceptance and inner beauty.3 Aguilera earned a GLAAD Media Award,4 and Stonewall, a UK-based LGBT-rights organization, labeled it the number one most empowering song of the decade.5 As the track’s recording artist, Aguilera’s financial gains reflected the song’s success when her album sold more than 4.3 million copies.6 The same can’t be said, however, for Linda Perry—the woman who wrote and published the hit.7 In one fiscal quarter of 2012, Pandora played “Beautiful” approximately 12.7 million times and yet Perry made less than $350 dollars in streaming royalties.8 While record labels and recording artists receive up to ninety-seven percent of a song’s revenue through royalties when the song streams over “new media,”9 such as Internet radio services like Pandora or Spotify, songwriters are often paid as little as three percent.10 The inequality in compensation between recording artists and songwriters has never been as extreme as it is today.11
Songwriters are paid through Performing Rights Organizations (“PROs”).12 These organizations negotiate license agreements for the use of songs, collect any royalties the works generate, and then distribute the royalties back to the songwriters.13 In the 1940s, the Department of Justice (“DOJ”) investigated the two largest PROs in the United States for allegedly engaging in anti-competitive conduct.14 To avoid the threat of prosecution, both organizations signed governmental consent decrees establishing various licensing requirements and restrictions.15 The decrees have not been updated, however, in more than fifteen years.16 Neither decree has been revised to account for the introduction of digital technology, including the recent advent of Internet radio. Consequently, these antiquated decrees restrict the organizations’ ability to secure reasonable licensing rates for performance rights in new media. As the music licensing system stands, record companies and recording artists are making considerably more money than their counterparts in songwriting, composing, and publishing, with respect to new media services.17
In order to guarantee reasonable fees for songwriters, composers, and publishers, the consent decrees18 must undergo critical reform to account for how music is licensed in new media.19 Part I of this Note will provide background on the mechanics of music licensing, both traditional and through modern mediums, in order to explain why the two largest PROs initially entered into governmental consent decrees. Part II will discuss recent judicial determinations of “reasonable” licensing rates for public performances in new media and demonstrate the discrepancy in compensation between songwriters and their sound recording counterparts, namely record companies and recording artists. Finally, Part III will argue that the solution to this problem is through consent decree reform. The decrees should be modified to allow songwriters to withdraw their digital rights in order to separately license songs in new media. A new PRO should then emerge in the market place to account solely for public performance rights in new media, leaving traditional licensing to the existing PROs. Additionally, the current judicial process for setting rates, known as the “rate court” system, should be replaced with expedited, binding arbitration. Making these important changes to the music-licensing system will work towards bridging the gap in compensation inequality between songwriters and recording artists.
* Associate Editor, Fordham Intellectual Property, Media & Entertainment Law Journal, Volume XXVI; J.D. Candidate, Fordham University School of Law, May 2016; B.A., Broadcast & Digital Journalism, University of Southern California, 2013. Thank you to Theodore N. Kaplan for inspiring me to explore such a fascinating topic and to Professor Ron Lazebnik for his guidance in developing this Note.
See Christina Aguilera―Chart History, Billboard, http://www.billboard.com/artist/299251/christina-aguilera/chart?page=1&f=379 [http://perma.cc/F3TM-9MPV] (last visited Oct. 3, 2015) (“Beautiful” peaked at number two on the Billboard Hot 100 in the United States); see also Stripped―Christina Aguilera, AllMusic, http://www.allmusic.com/album/stripped-mw0000662221 [http://perma.cc/98YJ-9PSF] (last visited Oct. 3, 2015) (showing that “Beautiful” reached the top spot on the Canadian Singles Chart).↩
See, e.g., Mary Anne Donovan, Christina Aguilera: A Biography 58 (2010) (discussing the singer’s critical acclaim for “Beautiful” in comparison with her other songs).↩
See Margaret R. Mead, Christina Aguilera 10 (2012). GLAAD stands for Gay & Lesbian Allegiance Against Defamation. Id.↩
See Christina Aguilera’s ‘Beautiful’ Named Most Empowering Pop Song, Star Pulse (Apr. 8, 2011, 10:32 AM) http://www.starpulse.com/news/index.php/2011/04/08/christina_aguileras_beautiful_named_mo [http://perma.cc/K65E-N8NR].↩
See Gary Trust, Ask Billboard: Taylor Swift Out-‘Shake’s Mariah Carey, Billboard (Sept. 1, 2014, 10:05 AM), http://www.billboard.com/articles/columns/chart-beat/6236538/ask-billboard-taylor-swift-out-shakes-mariah-carey [http://perma.cc/X5KV-4QYF] (noting that the song “Beautiful” has been digitally purchased more than 1.5 million times.); see also Donovan, supra note 3, at 58 (noting that Aguilera was the number one Billboard Female Artist in 2003 for both the album and its singles with an overall total of twelve million copies sold worldwide).↩
Perry’s paycheck was for a mere $349.16; songwriters earn approximately eight cents for every thousand times Pandora plays one of their songs. See Burt Bacharach, What the Songwriting World Needs Now, Wall St. J. (Jan. 22, 2014, 7:12 PM), http://www.wsj.com/articles/SB10001424052702304603704579325053186123012 [http://perma.cc/FQD7-MK2E].↩
See Bailey Socha & Barbara Eber-Schmid, What is New Media?, New Media Inst., http://www.newmedia.org/what-is-new-media.html [http://perma.cc/4ZSW-SZSN] (last visited Oct. 2, 2015) (“New Media is a 21st Century catchall term used to define all that is related to the Internet and the interplay between technology, images, and sound.”).↩
The International Council of Music Authors published the “Study Concerning Fair Compensation for Music Creators in the Digital Age” in 2014 to address the issue of compensation inequality for music copyright holders with respect to digital streaming services. See Pierre-E. Lalonde, Study Concerning Fair Compensation for Music Creators in the Digital Age, Int’l Council of Music Authors (Oct. 22–23, 2014), http://www.ciamcreators.org/wp-content/uploads/2014/11/CIAM14-1172_Study_fair_compensation_2014-05-01_EN.pdf [http://perma.cc/G2S4-T3T6]. A main conclusion of the study was that while major record labels are paid up to ninety-seven percent of digital streaming revenues, songwriters, music publishers, and other rights holders and administrators share “as little as 3%.” Id. at 3. The study labeled the revenue split between recording artists and songwriters as “grossly inequitable.” Id.; see also Rick Carnes, Developing a Copyright System That Works for Songwriters, 38 Colum. J.L. & Arts 309, 313 (2015) (noting that songwriters are “suffering deeply unfair financial discrimination” due to the current revenue split for digital streaming services).↩
The introduction of digital streaming services has significantly widened the gap in compensation inequality. With respect to “mechanical royalties,” songwriters receive 9.1% of a song sale’s revenue. This covers “physical phonorecords” (i.e. physical copies of the sound recording, such as when a consumer purchases a compact disc) or “permanent downloads” (such as when a consumer downloads an MP3 of a sound recording). See Mechanical License Royalty Rates, Copyright Royalty Board, http://www.copyright.gov/licensing/m200a.pdf [http://perma.cc/5M55-AEP4] (last visited Feb. 4, 2016); see also infra Parts I, II. As previously mentioned, songwriters make as little as three percent with respect to digital streaming services. See Lalonde, supra note 10.↩
Three major performing rights organizations exist in the United States: the American Society of Composers, Authors and Publishers (“ASCAP”); Broadcast Music, Inc. (“BMI”); and SESAC, Inc.↩
Michael R. Cohen, 25B West’s Legal Forms, Intellectual Property § 23:22 (2014) (“Since it would be virtually impossible for publishers or songwriters to monitor and control the large numbers of users of their songs, the enforcement and control of such performance rights usually falls to one of three performing rights organizations . . . .”).↩
See, e.g., Noel L. Hillman, Intractable Consent: A Legislative Solution to the Problem of the Aging Consent Decrees in United States v. ASCAP and United States v. BMI, 8 Fordham Intell. Prop. Media & Ent. L.J. 733, 743 (1998) (detailing how and why the two largest domestic PROs—ASCAP and BMI—entered into governmental consent decrees).↩
The government often settles civil antitrust litigation outside of trial by having defendants enter into a consent decree to remedy the alleged anti-competitive conduct. See United States v. Am. Soc’y of Composers, Authors & Publishers, Civ. Action No. 41-1395 (WCC) (S.D.N.Y. Jun. 11, 2001) (Second Amended Final Judgment), [hereinafter ASCAP Consent Decree]; United States v. Broadcast Music, Inc., No. 64-Civ-3787 (S.D.N.Y. Nov. 18, 1994) (Amended Final Judgment), [hereinafter BMI Consent Decree]; see also Jeffrey L. Kessler & Spencer Weber Waller, International Trade and U.S. Antitrust Law § 4:8 (2d ed.).↩
The ASCAP Consent Decree was last updated in 2001, whereas BMI’s was last updated in 1994. See ASCAP Consent Decree, supra note 15; BMI Consent Decree, supra note 15.↩
Taylor Swift pulled her newest album, 1989, from Spotify out of fear that allowing free listening through the service would hurt sales. See Doug Gross, Songwriters: Spotify Doesn’t Pay Off . . . Unless You’re a Taylor Swift, CNN (Nov. 13, 2014, 11:58 AM), http://www.cnn.com/2014/11/12/tech/web/spotify-pay-musicians [http://perma.cc/Y9ER-BNR8]. She was on track, however, to make approximately six million dollars in 2014 from allowing her songs to play on the platform. Id. Comparatively, the songwriters of Jon Bon Jovi’s famed hit, “Livin’ on a Prayer” made only $110.00 for more than 6.5 million plays on the same platform. Id.↩
The ASCAP and BMI consent decrees are substantially similar. This Note will address making substantive changes to both decrees and will refer to them collectively as “the consent decrees.” The Antitrust Division of the DOJ solicited public comments on reforming the decrees in 2014 and is currently considering modification. See Antitrust Consent Decree Review, Dep’t of Justice, http://www.justice.gov/atr/cases/ascap-bmi-decree-review.html [http://perma.cc/M8AA-YW3L] (last visited Sept. 26, 2015).↩
For ease of reference, the types of artists represented by PROs (namely songwriters, lyricists, composers, and publishers) will be referred to in this Note collectively as “songwriters.”↩