[This transcript is excerpted from a special edition of Art of the Song entitled The State of the Music Biz. Click here to listen to the complete program as broadcast on Public Radio.]
John: We begin our special edition today with David Israelite, president of the National Music Publishers Association, headquartered in Washington, D.C. David explains the state of the business from the songwriters and publishers perspective.
David Israelite: The music industry, what most people don’t realize, is really two different industries. You have songwriter that writes the words and the notes to the songs and they have a copyright and they’re represented generally by a music publisher. When that song is then recorded, by an artist, that recording has a very different, separate copyright that’s usually represented by a record label. Even if the songwriter and the artist are the same person, you still have these two completely different and separate copyrights. When you’re talking about the music industry, let me focus on the half of it that I represent which are the songwriters and music publishers. We’re really in a crisis mode today. The music industry is changing, quickly, and there are a lot of wonderful things about what’s happening with the access to all these new internet music services that provide basically anything you want, anywhere, anytime and in any format that you want. It’s a wonderful time to be a music fan. The challenge has been that a lot of the new models don’t compensate songwriters very fairly. What you’re seeing is as consumers are enjoying a wonderful time to access music, the people that write the songs are often having a very hard time making a living, even when they’re successful. One of our big focuses is on a lot of these new digital services that are very popular. Quite honestly, they’re wonderful services, I enjoy them as a fan myself. But they don’t pay songwriters fairly. What really is at the root of this problem is that these services don’t even have to negotiate in a free market the value of the songs they are using because of some very antiquated government regulations and laws that regulate the songwriting industry in ways that people have never imagined. For example, there is a law, from 1909, prior to World War 1, that dictates that whenever you buy a copy of a song, like an iTunes download, the songwriter gets exactly 9.1 cents and that’s regulated by three judges in Washington, D.C. If you want to stream a song, like on internet radio stations, like a Pandora or a Spotify, the price for that is regulated under a 1941 consent decree that regulates a different part of our industry. In both cases, there’s no negotiation, where you’re in a free market. You can’t say no; and either a federal judge in New York or three copyright judges in Washington are setting the price. If you’re a songwriter today, 75% of your revenue is regulated with price setting, by the government, and you have no ability to say ‘no’ if you don’t like the terms. That situation has led to a circumstance where even successful songwriters are having a hard time making just a basic living. So there’s a real crisis in the songwriting community because of that.
John: How did these old laws come into being, given how unfair they seem to be at the present time?
David: Right, it’s interesting. In 1909, Congress thought that music publishers had a monopoly on player piano rolls. Those things that you would stick into a player piano and they would play the song. And so, in 1909, Congress passed a law that said that whenever you sell a copy of a song, that you must sell it and the price would be set by the government. That law exists today and applies to things like digital downloads. The 1941 consent decree came into being because two private companies, known as ASCAP and BMI, are in the business of representing songwriters and music publishers and they license a certain type of right, collect the money, and distribute the money. Well, in 1941, the Justice Department felt that these two companies had too much market share and therefore they had to be regulated under the antitrust laws. So, regardless of what was going on in 1909 or 1941, you fast-forward to today and songwriters are unable to escape either these laws or these consent decrees mostly because everybody who pays a songwriter has a vested interest in not letting us out. They benefit from these rules and regulations and so there are enormous lobbies here in Washington that will fight to the death to keep songwriters away from a free market and that really has been the problem is that we’ve been unable to escape because the lobbying equities are such that very powerful interests from the internet companies to the broadcasters, everyone who pays a songwriter, loves the current system because they get to pay the songwriters something much less than fair market value. And so the focus of NMPA and really a lot of people that care about songwriters has been how do we get out of this 1909 law, how do we get out of these 1941 regulations from the Justice Department because, in our view, if people actually had to negotiate the fair value of the songs, and pay a fair value, songwriters would be doing quite well. More people today access online music, more often than any time in history. Music is really important. And if it were just paid under a fair value system, then songwriters would be doing just fine. Unfortunately, that’s not the case yet.
John: Now you mentioned a difference in payment structure for streaming vs. downloads. Can you elaborate on that a little bit?
David: Sure, so consumer behavior is changing rapidly and that’s something that I’m not against. In fact, I embrace it because again, these new models are wonderful. But what you’re seeing is a movement from ‘ownership models’ where people used to buy copies and own them to what are know as ‘access models’ where you don’t own anything, you just are accessing it at the time and you’re either having to pay a fee or, more often, just listen to commercials. The old system of radio is such where people would listen to the radio to discover music that they liked and then they would go buy it. Radio was considered promotional and songwriters, while they would get paid something from radio, really the model was about driving people towards sales. Well, today, that just doesn’t happen anymore. People are satisfied with online radio models. Now they may be online radio models or have some choice involved with regard to interactive streaming, but the idea that you would go buy it is very foreign to a lot of people, especially Millennials and younger. As people move from these ownership models to the access models, the economics are different. For a songwriter, when people were buying, saying albums or CDs, it was very different economics than when they were buying single downloads. And that’s very different economics to when they’re listening to things like Pandora for free or going to YouTube for free and we’re just getting a very small percentage of the advertising pool that’s generated. As people migrate toward these access models, the economics simply aren’t working. While these companies are doing very well, and there’s a lot of money involved with these companies, the actual songwriters aren’t seeing any of it. So you actually had this incredible situation where one of the founders from Pandora cashed out more for himself in stock than the company paid every songwriter combined in a given year. When you have a situation like that, it’s pretty easy to see why these old rules are causing a situation where songwriters just can’t be paid fairly.