A Sustainable Music Industry for the 21st Century

Abstract

This essay argues that the current system of music licensing must be completely overhauled. At this time, songwriters are paid a mere pittance when their work is played through Internet streaming services. The paper traces the evolution of compulsory licensing from the early 20th century, when Congress put this system in place due to concerns over the monopolization of the player piano industry, to today. This essay shows how the separation between copyrights for compositions as opposed to public performances contributed to blanket licensing through royalty-collecting organizations like ASCAP and BMI, which — together with government intervention into pricing based on antitrust concerns via consent decrees — has led to an inflexible and tightly controlled market in this context. Last, the essay demonstrates how the focus on classifying streaming services like Pandora based simply on whether they are "interactive" or not relies on a misunderstanding of the substitution effects and hence decline in music sales that Pandora creates. Eliminating compulsory licenses would allow individual songwriters to set their own prices and negotiate with streaming services, including in ways that would allow for price differentiation grounded in factors such as song popularity. Giving songwriters the same control that copyright owners outside the music context already possess will ensure songwriters' ability to continue providing the public with the works it loves.

Keywords: copyright, music licensing, compulsory license, streaming, ASCAP, BMI, consent decrees, pandora, internet radio

JEL Classification: K21, O34