Department of Justice Licensing Decisions Strike a Crushing Blow to Songwriters

A pair of June 30, 2016 decisions by the Department of Justice are serving as twin kicks to the pineal gland and the pocketbook for those who make their living as songwriters.

The first decision affirmed what had already become evident in practice – it is OK to rip off songwriters when songs are streamed instead of sold in physical form or for download.  The fact that streaming was not accounted for in the World War II era consent decrees on how Performance Rights Organizations (PROs) like BMI and ASCAP can collect licensing fees is the reason why a songwriter like Kevin Kadish reportedly made only $5,679 for 178 million streamed plays of “All About That Bass.”   Such a hit traditionally would have resulted in hundreds of thousands of dollars in royalties and residuals to the writer for that many listens, which seems fair, seeing that the creative work would have never existed without them.

Notable in this decision is that it deemed that songwriters do not hold the same ability as performers to withhold all or part of their catalog from a digital music service and negotiate their own royalty rates for their work. 

In practice this means a performer like Taylor Swift can withhold her work from iTunes until she thinks she has a deal that properly compensates her, but a writer like Desmond Child, with dozens of chart hits recorded by others, cannot.  Songwriting has a fixed market and, basically, everyone is going to be paid the minimum wage.

While BMI, ASCAP, scores of major artists and songwriters – Swift included - stood up against the current policy in hearing with the DOJ, the decision came as no surprise to those who have been watching how the money flows in the industry and in Washington DC.  Spotify and other streaming services were always going to win this one and they did.

It is the second decision, however, that may have even more far reaching effects on those who write songs and are compensated when they are produced and played.

A songwriter will typically assign responsibility to one of the PROs to collect royalties for them when a version of their song is recorded and subsequently played.  In the case of songs that are co-written, the writers might belong to different PROs and someone wishing to license the song traditionally would have to contract with both to ensure royalties are properly paid. This was called “fractional licensing.”

The State of Michigan ran into trouble last year when they did not obtain a license in advance from all parties with a theme song used in the Pure Michigan ad campaign and they had to pull the spot until the issue was resolved.

The DOJ decision now requires that the PROs offer “100% licensing.”  Basically, this means that they will be able and required to grant a full license to use the song, even if they only hold the licensing rights for a fraction of it.  It is up to the licensing organization to then properly distribute the royalties to all parties, even if they have no contract with them or, possibly, even no contact details.

Music has always been a hard business to make sure you get paid what you are due. This is why BMI and ASCAP were created to begin with.  The DOJ decision borders on ludicrous when you consider how impractical it will be in the real world.  Imagine if you worked at a company and they paid the whole department randomly, giving all of your wages to one person and it was up to you to figure out how much should be paid, who got the paychecks this week AND you would have to rely on them to still have the money and distribute it fairly when you approached them.  If that sounds like it would be a nightmare where you work, welcome to the new world of the collaborative songwriter.

Reaction in music towns like Nashville has been immediate and overwhelmingly negative.  It is already assumed this decision will put a damper on collaboration, as songwriters will almost be required to work for the same label or, at least, use the same PRO if they want to work in town or co-write with each other.

If that is how a 1945 law is supposed to work today, it is news to one of the most traditional workforces in the nation. 

In 2015, 77% of the royalties for recorded music went to 1% of the recording acts.  It is a ratio that is depressingly familiar in all areas of our economy. 

Like many decisions of late, this one really won’t be felt much by that group. This decision is more about the other 23% of the royalties, paid to 99% of the artists and songwriters.  This money doesn’t buy jets or come with the attention of the tabloids, it buys milk and bread and maybe a new tablet if you’ve had a good year.

Streaming companies win; songwriters lose.  Everyone knows money talks, but they’d better hope it learns how to sing.  It’s not like Roger Waters of Pink Floyd didn’t warn us.