Competition in Licensing Music Public Performance Rights Transcript of Proceedings at the Public Workshop Held by the Antitrust Division of the United States Department of Justice July 28-29, 2020 Public Workshop on Competition in Licensing Music Public Performance Rights Table of Contents July 28, 2020 ................................................................................................................................................ 2 Opening Remarks ................................................................................................................................... 2 Songwriter Keynote (LeAnn Rimes) ..................................................................................................... 6 Session 1: Remarks from Stakeholders on the Consent Decrees ........................................................ 8 Elizabeth Matthews, CEO, American Society of Composers, Authors, and Publishers .............. 8 David Israelite, President and CEO, National Music Publishers’ Association ........................... 11 Michelle Lewis, Executive Director, Songwriters of North America ........................................... 15 The Honorable Gordon Smith, President and CEO, National Association of Broadcasters ..... 17 Michael O’Neill, President and CEO, Broadcast Music, Inc........................................................ 20 Session 2: Public Performance Licensing Alternatives ...................................................................... 25 Songwriter Keynote (Pharrell Williams) ............................................................................................ 42 Session 3: Competition Between PROs for Songwriters and Publishers ......................................... 45 July 29, 2020 .............................................................................................................................................. 65 Opening Remarks ................................................................................................................................. 65 Songwriter Keynote (Jon Bon Jovi) .................................................................................................... 68 Session 4: Licensing Music to Users .................................................................................................... 71 Session 5: Economists’ Views and Wrap-up ....................................................................................... 92 Closing Remarks ................................................................................................................................. 105 1 Public Workshop on Competition in Licensing Music Public Performance Rights July 28, 2020 Opening Remarks Makan Delrahim, Assistant Attorney General for Antitrust, U.S. Department of Justice KARINA LUBELL: Good afternoon everyone, or good morning to our friends on the West Coast. Hopefully everyone can hear me? Great, welcome to the Department of Justice Antitrust Division’s two-day, Public Workshop on Competition in Licensing Music Public Performance Rights. My name is Karina Lubell, I’m an Assistant Chief in the Division’s Competition Policy and Advocacy section and I’ll be your emcee for this week’s workshop. We have an impressive lineup of speakers and what is guaranteed to be some lively discussions. Before I introduce our first speaker, just a few housekeeping items. An agenda has been posted to the workshop website, a link to which was provided to you by your registration email. There’ll be short breaks between sessions, but please feel free to log in and out as needed. The Zoom link that you received for all of today’s sessions is the same. All members of the audience will be muted for the duration of the workshop. Should you wish to ask a question of one of the panelists, please submit it by email to [email protected]. That address was also provided in your registration confirmation email. If you have any trouble with your audio or a video or for any other technology issues, please contact AT&T Conferencing with Zoom Help Desk at 800-345- 0857. And now without further ado, I’d like to introduce the Assistant Attorney General for the Department of Justice, Antitrust Division, Makan Delrahim. MAKAN DELRAHIM: Thank you so much, Karina, for all your work and for helping us coordinate this workshop. For nearly three years now, I’ve had the unique privilege of serving as the Assistant Attorney General for Antitrust at the Department of Justice. And on behalf of the Department of Justice, I want to welcome you to our workshop today. I also want to thank our esteemed panelists for the presentations and perspectives they will share with us over the next two days. Given these challenging times, I’m welcoming you to a virtual workshop rather than to one in the Great Hall of the Department of Justice, where we’ve held several of our earlier workshops on these matters. You may ask what is our goal for this workshop? I have to say in one word, it’s competition. Competition for the benefit of the American consumer; competition for the benefit of innovation; and competition for the benefit of the songwriters, composers and the artists. I feel confident that this workshop will be informative and valuable to both the participants, the public and us at the Antitrust Division. After all, it’s not every day that great artists like LeAnn Rimes, Pharrell and Jon Bon Jovi share a stage with boring antitrust lawyers and economists, but artists, like all workers, creators and innovators benefit from competitive markets. So, it is only natural that we should come together to discuss competition in music licensing. 2 Public Workshop on Competition in Licensing Music Public Performance Rights This workshop is part of the Division’s ongoing effort to promote competition in the music licensing industry. Those efforts began with consent decrees first secured as resolutions to antitrust suits brought by the Antitrust Division nearly 80 years ago. For students of history that is almost four scores sheets ago. These decrees between the Department of Justice and two organizations, ASCAP and BMI, continue to govern music public performance licensing today. Like so many of you, I love music and it has played a special role in my life. When I came to the United States as a refugee from Iran as a child, I didn’t speak a word of English. The music on the radio nonetheless spoke to me. “The Jazz Singer” was the first movie I saw in the United States. When Neil Diamond sang about people coming to America without a home, but not without a star, he was singing to me, I felt. And I’m sure many Americans respond similarly to that song. That is the magic of music, it speaks a universal language. It can make us feel joy, can make us feel pain. Like nothing else, it can spark our imaginations and our memories. To this day, hearing Neil Diamond floods me with memories of my early days in America as a child. Not much else can do that. Each of us here has a song that transports us to a magic moment, evokes a feeling or simply inspires us to carry on. Music, perhaps most profoundly of all, has the extraordinary capacity to inspire hope and bring us together in times of division. Many consumers of music today, wouldn’t recognize eight-track tapes, cassettes or vinyl records, or even perhaps CDs. Technology continues to evolve how we enjoy our music. Digital streaming technology now gives us all access to almost any song anytime and anywhere. Some may recall the Spanish ship that sailed to discover America, the Santa Maria. It carried the flag of Queen Isabella that bore the words, “Nothing Further” because they believed Spain to be the furthest point west in the world. When they discovered the new world in America, the Queen ordered the flag repainted to read “More Beyond.” With new technology and new business models, we know there’s more beyond for music. Congress has responded to various innovations with new laws, such as the Digital Millennium Copyright Act in 2000 and the Music Modernization Act just recently in 2018. Some of the rules that governed the music industry today, however, are quite old. The Justice Department’s consent decrees with ASCAP and BMI, for example, first went into effect in 1941. The year that United States entered World War II, with the bombing of Pearl Harbor. In that year, a gallon of gas was 12 cents and the average cost of a new home was a little over $4,000. Americans listened to music on the radio or on phonograph players, which were becoming more affordable. And there was a robust market for sheet music sales. Much has happened in the way we listen to music since then. As Churchill famously said, “To improve is to change, so to be perfect is to have changed often.” While I assume that no one would accuse the Antitrust Division of being perfect, we have periodically revisited and changed our views on antitrust enforcement based on new market realities or new economic discovery. After the Division’s most recent review of the music consent decrees in 2016, the Department issued a closing statement signaling that we might revisit the decrees after resolution of, among other things, uncertainty surrounding fractional licensing. About a year later, the Court of Appeals for the Second Circuit concluded that the BMI consent decree allowed for fractional licensing. 3 Public Workshop on Competition in Licensing Music Public Performance Rights After the Second Circuit’s ruling, I began meeting with all interested parties about the decrees and