[Senate Hearing 114-830]
[From the U.S. Government Publishing Office]
S. Hrg. 114-830
HOW MUCH FOR A SONG?: THE ANTITRUST
DECREES THAT GOVERN THE MARKET FOR MUSIC
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HEARING
BEFORE THE
SUBCOMMITTEE ON ANTITRUST,
COMPETITION POLICY AND CONSUMER RIGHTS
OF THE
COMMITTEE ON THE JUDICIARY
UNITED STATES SENATE
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
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MARCH 10, 2015
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Serial No. J-114-6
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Printed for the use of the Committee on the Judiciary
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
42-757 PDF WASHINGTON : 2021
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COMMITTEE ON THE JUDICIARY
CHARLES E. GRASSLEY, Iowa, Chairman
ORRIN G. HATCH, Utah PATRICK J. LEAHY, Vermont,
JEFF SESSIONS, Alabama Ranking Member
LINDSEY O. GRAHAM, South Carolina DIANNE FEINSTEIN, California
JOHN CORNYN, Texas CHARLES E. SCHUMER, New York
MICHAEL S. LEE, Utah RICHARD J. DURBIN, Illinois
TED CRUZ, Texas SHELDON WHITEHOUSE, Rhode Island
JEFF FLAKE, Arizona AMY KLOBUCHAR, Minnesota
DAVID VITTER, Louisiana AL FRANKEN, Minnesota
DAVID PERDUE, Georgia CHRISTOPHER A. COONS, Delaware
THOM TILLIS, North Carolina RICHARD BLUMENTHAL, Connecticut
Kolan L. Davis, Chief Counsel and Staff Director
Kristine Lucius, Democratic Chief Counsel and Staff Director
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Subcommittee on Antitrust, Competition Policy and Consumer Rights
MICHAEL S. LEE, Utah, Chairman
DAVID PERDUE, Georgia AMY KLOBUCHAR, Minnesota,
THOM TILLIS, North Carolina Ranking Member
CHARLES E. GRASSLEY, Iowa CHRISTOPHER A. COONS, Delaware
ORRIN G. HATCH, Utah AL FRANKEN, Minnesota
RICHARD BLUMENTHAL, Connecticut
Matt Owen, Majority Staff Director
Kirstin Dunham, Minority Staff Director
C O N T E N T S
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MARCH 10, 2015, 10 A.M.
STATEMENTS OF COMMITTEE MEMBERS
Page
Klobuchar, Hon. Amy, a U.S. Senator from the State of Minnesota.. 4
Leahy, Hon. Patrick J. Leahy, a U.S. Senator from the State of
Vermont,
prepared statement........................................... 106
Lee, Hon. Michael S., a U.S. Senator from the State of Utah...... 1
WITNESSES
Witness List..................................................... 41
Dowdle, Mike, Vice President, Business Affairs and General
Counsel, Bonneville International, Salt Lake City, Utah........ 11
prepared statement........................................... 42
Griffin, Jodie, Senior Staff Attorney, Public Knowledge,
Washington, DC................................................. 15
prepared statement........................................... 51
Harrison, Chris, Vice President, Business Affairs, Pandora Media,
Inc., Oakland, California...................................... 8
prepared statement........................................... 62
Matthews, Beth, Chief Executive Officer, American Society of
Composers, Authors and Publishers (ASCAP), New York, New York.. 6
prepared statement........................................... 73
Miller, Lee Thomas, President, Nashville Songwriters Association
International, Nashville, Tennessee............................ 13
prepared statement........................................... 94
Pincus, Matt, Chief Executive Officer, SONGS Music Publishing,
New York, New York............................................. 10
prepared statement........................................... 97
QUESTIONS
Questions submitted to Mike Dowdle, Jodie Griffin, Chris
Harrison, Beth Matthews, Lee Thomas Miller, and Matt Pincus by
Senator Hatch.................................................. 108
Question submitted to Mike Dowdle, Jodie Griffin, Chris Harrison,
Beth Matthews, Lee Thomas Miller, and Matt Pincus by Senator
Leahy.......................................................... 109
Questions submitted to Mike Dowdle by Senator Lee................ 111
Additional question submitted to Jodie Griffin by Senator Hatch.. 108
Question submitted to Chris Harrison by Senator Lee.............. 110
Questions submitted to Beth Matthews by Senator Lee.............. 110
Question submitted to Matt Pincus by Senator Lee................. 110
ANSWERS
Responses of Mike Dowdle to questions submitted by:
Senator Hatch................................................ 114
Senator Leahy................................................ 115
Senator Lee.................................................. 112
Responses of Jodie Griffin to questions submitted by:
Senator Hatch................................................ 117
Senator Leahy................................................ 120
Responses of Chris Harrison to questions submitted by:
Senator Hatch................................................ 129
attachment................................................. 133
Senator Leahy................................................ 125
Senator Lee.................................................. 123
Responses of Beth Matthews to questions submitted by:
Senator Hatch................................................ 315
Senator Leahy................................................ 316
Senator Lee.................................................. 312
Responses of Lee Thomas Miller to questions submitted by:
Senator Hatch................................................ 318
Senator Leahy................................................ 320
Responses of Matt Pincus to questions submitted by:
Senator Hatch................................................ 324
Senator Leahy................................................ 325
Senator Lee.................................................. 321
MISCELLANEOUS SUBMISSIONS FOR THE RECORD
Consumer Electronics Association, Arlington, Virginia, et al.,
March 9, 2015, letter.......................................... 326
Internet Association, Washington, DC, March 10, 2015, letter..... 329
Mad Genius Radio (MGR), Denver, Colorado, statement.............. 332
Music Choice, Horsham, Pennsylvania, March 4, 2015, letter....... 337
SESAC Performing Rights (SESAC), New York, New York, statement... 341
Utah Broadcasters Association, Salt Lake City, Utah, letter...... 347
HOW MUCH FOR A SONG?:.
THE ANTITRUST DECREES THAT.
GOVERN THE MARKET FOR MUSIC
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TUESDAY, MARCH 10, 2015
United States Senate,
Subcommittee on Antitrust, Competition Policy
and Consumer Rights,
Committee on the Judiciary,
Washington, DC.
The Subcommittee met, pursuant to notice, at 10 a.m., in
Room SD-226, Dirksen Senate Office Building, Hon. Michael S.
Lee, Chairman of the Subcommittee, presiding.
Present: Senators Lee, Hatch, Perdue, Tillis, Klobuchar,
Franken and Coons.
OPENING STATEMENT OF HON. MICHAEL S. LEE,
A U.S. SENATOR FROM THE STATE OF UTAH
Chairman Lee. Welcome. This is the first hearing in this
Congress of the Subcommittee on Antitrust, Competition Policy
and Consumer Rights.
I would like to begin by thanking my friend and colleague,
Senator Klobuchar, for the tremendous job she did in chairing
this Committee before me. And I will note that she and I both
always had a very good working relationship and we share the
same basic goals for this Subcommittee, which involves
ensuring, first and foremost, that consumers are protected from
those who would abuse the marketplace and, second, that we
perform effective oversight of the Department of Justice's
Antitrust Division and of the competition side of the Federal
Trade Commission.
I look forward to continuing that bipartisan work in this
Congress and I would like to thank Senator Klobuchar and her
staff for their hard work in preparing for this hearing.
I would also like to thank the Chairman of the full
Committee, Senator Grassley, for supporting this hearing.
Senator Grassley was planning to be here today, but he is stuck
on the floor managing some human trafficking legislation that
is pending this week.
A few housekeeping matters before we begin that I would
like to address. After Senator Klobuchar give some opening
remarks about the hearing, we will hear from our panel of
witnesses, who I will introduce a little bit later on, and then
we will have 5-minute question rounds with our panelists.
Today's hearing deals with a serious issue and I trust that
members of the public who are here will act accordingly.
I want to note at the outset that the rules of the Senate
prohibit outbursts, clapping or demonstrations of any kind and
this would include blocking the view of people around you. So
please be mindful of the rules as we conduct this hearing. I do
not think this will be necessary, I certainly hope it will not,
but I will ask the Capitol Police----
Senator Klobuchar. Well, it depends on what you say,
because they could be allowed to clap.
Chairman Lee. Exactly, yes. I guess we have some rule on
that. But if it becomes necessary, I will ask the Capitol
Police to remove anyone who violates the rules.
If you will indulge me, I want to provide some background
on this complicated issue, an issue that perhaps could be
familiar to some in the room, but is not familiar to most
Americans.
This hearing is about the market for music. Specifically,
it is about the market for licenses to publicly perform
copyrighted musical compositions.
What does this mean? Well, every song has an author, the
person who wrote it, not necessarily the person who performed
it or the person who recorded it, and that author has a
copyright in that song, meaning that anyone who wants to
perform it in public has to get a license from the author in
order to do so, which turns out to be a lot of people.
Lots of businesses play music for customers, radio stations
and Internet streaming services like Pandora or iHeart Radio
are the obvious examples. But there are all sorts of other
examples. You have got bars and restaurants that play music to
set an ambience. You have got retail stores that do the same
thing.
Television networks and cable companies that air college
football games where there is a marching band in the background
and that marching band tends to play music and that music tends
to be copyrighted.
All those people need a license for every song they play or
else they have to pay enormous damages to the copyright-holder.
But the market could not function if every neighborhood
restaurant had to go look for every author of every song it
wanted to play and negotiate with each one of those authors for
license fees nor do individual copyright-holders have time to
contact every bar in America and ask them for license payments.
As a result, for more than 70 years, publishers and
songwriters have relied on performing rights organizations, or
PROs as they are known in the industry, to license music on
their behalf and then collect and distribute the royalties.
The two largest PROs are called ASCAP and BMI, and we are
pleased to have representatives of both of those organizations
here today as witnesses.
Well, ASCAP and BMI sell blanket licenses to all works in
their inventories and between the two of them, those licenses
will cover most every song, roughly speaking and the number is
debatable. ASCAP and BMI each control approximately 45 percent
of the market. The remaining roughly 10 percent belongs to two
other PROs, SESAC and Global Music Rights.
So what does this have to do with antitrust law? Well, it
turns out that virtually the entire market for the licenses we
are talking about is governed by a pair of antitrust consent
decrees from a long time ago.
In the 1940s, the Department of Justice separately sued
ASCAP and BMI over concerns that they had violated the Sherman
Act through aggregating control of the music license market.
DOJ settled these cases and entered into separate consent
decrees with ASCAP and BMI in 1941.
The consent decrees are somewhat unusual. They are
perpetual in duration and they essentially function as a kind
of regulatory system for the price of these music licenses.
The decrees contain requirements that look very much like a
compulsory license and royalty scheme. Specifically, they
require that the PROs offer a fair rate on a non-exclusive
basis to any user requesting a license and that they not
discriminate among similar licensees.
Any disputes about the rates are to be resolved by the
judge in the Southern District of New York who oversees the
degree, a process that has come to be know as rate court.
For almost 75 years, the consent decree-ruled ASCAP and BMI
blanket licenses have allowed consumers of music to have access
to virtually the entire catalog of written music by negotiating
with just a few entities. The system has allowed innovative
distribution methods to arise while enabling individual
songwriters to get royalties from thousands of bars,
restaurants and radio stations across the country.
Then came the Internet and things changed. In 1995, after
the advent of Web streaming, Congress decided to require
Internet companies who publicly perform music, but no one else,
to pay royalties to recording artists and record labels and all
the guys who play the songs rather than the people who write
them in exchange for requiring the record labels to license
their works.
In other words, Congress set up a scheme on the sound
recording side that looks very much like the scheme the consent
degrees set up on the musical composition side. The major
difference, however, is that the price of royalties for
composers is ultimately controlled by judges, judges applying
antitrust law, and the price of royalties for recording artists
is controlled by the Copyright Royalty Board, which is a panel
of administrative judges housed in the Library of Congress.
These two groups of people do not agree about the price of
a license to play music on the Internet. The Royalty Board sets
rates for sound recordings played on Internet radio that were
substantially higher than those the rate court had set for the
underlying compositions.
For example, in 2013, Pandora paid approximately 48 percent
of its revenue to recording artists and record labels and only
about 5 percent of its revenue to songwriters and to
publishers.
This disparity in rates led publishers to believe that they
would be able to achieve better rates outside the consent
decrees. So they made a request of ASCAP and BMI. They asked
ASCAP and BMI to change their membership rules to allow
something called partial withdrawal, meaning the right to
exclude digital services from the blanket licenses that they
normally sell.
That would require companies like Pandora to separately
negotiate with publishers for public performance licenses at
whatever price the market would bear.
All of that led to litigation that is still pending. It
also led to allegations that the music publishers who think
that their judge-set royalty rates are too low were colluding
to keep Pandora's prices high instead of competing with each
other to drive consumer prices down.
In a lengthy opinion, Judge Denise Cote of the Southern
District of New York ruled that publishers had no right to
partially withdraw their digital rights from the blanket
license under the ASCAP consent degree.
Judge Cote also rejected publishers' attempts to use the
prices they negotiated with Pandora while they tried partial
withdrawal as benchmarks for setting prices generally, noting
evidence that the publishers had cooperated instead of
competing in those negotiations.
That case is now pending on appeal and even as we speak, a
different judge in the U.S. District Court for the Southern
District of New York is now conducting a trial concerning
similar questions under the separate BMI consent decree.
Meanwhile, the Department of Justice's Antitrust Division
is currently considering an effort to modify the consent
decrees to allow partial withdrawals, among other things. That
would have a number of important consequences that today's
panel can discuss.
On the one hand, the publishers say that partial withdrawal
will allow them to negotiate prices with Internet companies in
a free market, and surely the most striking feature of the
current system is that there is no free market at work.
On the other hand, others believe that after partial
withdrawal, the market will not really be free because a few
music publishers control most of the licenses and they have
been accused in the past of colluding to drive up prices for
consumers.
In short, what to do about these consent decrees is a hard
problem and it is one ultimately that affects many millions of
Americans.
Today we will hear from a variety of parties affected by
the consent decrees, each with a slightly different place in
the market. Here we have an opportunity to discuss openly the
topics that DOJ is discussing privately.
As we listen today, we must remember that we have both a
responsibility to encourage creativity by recognizing the value
of copyrights and we also have a duty to ensure that prices for
music remain competitive for consumers.
Chairman Lee. Senator Klobuchar.
OPENING STATEMENT OF HON. AMY KLOBUCHAR,
A U.S. SENATOR FROM THE STATE OF MINNESOTA
Senator Klobuchar. Thank you very much, Mr. Chairman. I
congratulate you on taking over the Subcommittee. We do not
really have a formal passing of the gavel at the Subcommittee
level, but it is exciting and we have worked--yes, here you go.
There are you. Thank you.
[Laughter.]
Senator Klobuchar. And we have worked very well together,
as Senator Lee noted, and I know the majesty--the majesty--and
I know that is going to continue.
This hearing focuses on an important and timely topic, the
state of competition in the music industry and a pair of
antitrust consent decrees that govern licenses for the public
performance of musical works.
Now, we are not here to talk about the sound recording side
of musical licensing. That set of copyrights is governed by a
different structure and a different set of rules.
Today's hearing is about the underlying musical works, the
lyrics and the composition that songwriters create, music
publishers work to get out into the world, and that licensees
like broadcasters and digital music services help us all enjoy.
As Senator Lee noted, the consent decrees under which
ASCAP, which is the American Society of Composers, Authors and
Publishers, and BMI, which, outside of this room, refers to
body mass index, for anyone that has gone on a diet.
[Laughter.]
Senator Klobuchar. But inside of this room refers to the
Broadcast Music, Inc. Those consent decrees under which they
operate have been modified several times in their history. It
is appropriate from time to time for the Department of Justice
to review these consent decrees to ensure that they are meeting
their intended goal of preserving and promoting competition.
There are some who argue that the consent decrees have run
their course and should be sunsetted, while others maintain
that the consent decrees serve a role in protecting against
competition concerns and should be strengthened.
The DOJ's review of the consent decrees is also informed by
recent activity in the courts both in enforcing the consent
decrees and through private antitrust litigation.
As Chairman Lee mentioned, there is recent litigation in
the U.S. District Court for the Southern District of New York,
which includes some of the parties who are witnesses here
today.
It is against this complicated backdrop that DOJ is taking
a fresh look at the consent decrees. Our focus today is on
striking the right balance between the impacts on consumers,
main street businesses, and those broadcasting content through
radio, TV, satellite, and new digital services, and respecting
the rights and value owed to the creators of the music that we
all enjoy.
When the consent decrees first went into effect, noone
imagined the Discman or the boom box, much less the iPod and
digital streaming over the Internet.
In addition to innovations, restructuring, and new players
entering the market, Congress has also acted throughout this
time to recognize new rights in music. We have acted to
recognize new copyrights for sound recordings, production and
distribution, and, most recently in 1995, for public
performance of digital sound recording.
Although this area is at the intersection of antitrust and
copyright law, our hearing today is going to focus on the
antitrust side and any competition issues in the present day
market for licensing musical works.
I look forward to hearing from all of our witnesses today
about the ongoing DOJ review and your recommendations on the
best path forward.
Thank you.
Chairman Lee. Thank you, Senator Klobuchar.
Before we introduce and swear in our witnesses, I want to
note at the outset that we have received some letters from
members of the public concerned about this issue. Unless there
is objection, this will be entered into the record.
[The information appears as a submission for the record.]
Chairman Lee. Now I would like to introduce our witnesses
and then we will swear them in. We will move from this side of
the table over.
First, we have got Beth Matthews, who is the CEO of ASCAP,
the full title, of course, being the American Society of
Composers, Authors and Publishers.
To her immediate left is Chris Harrison, the vice president
of business affairs for Pandora Media, Inc.
Then we have Matt Pincus, who is the founder and CEO of
SONGS Music Publishing.
Next, we have Mr. Mike Dowdle, who is from my home State of
Utah. Mr. Dowdle is the vice president of business affairs and
also the general counsel for Bonneville International.
Lee Thomas Miller is with Broadcast Music, Inc., Songwriter
Affiliate, and also the president of the Nashville Songwriters
Association International.
Finally, we have Jodie Griffin, who is a senior staff
attorney with Public Knowledge.
Will each of our witnesses please stand and be sworn?
[Witnesses are sworn in.]
Chairman Lee. Thank you.
We will now hear from each of our witnesses, beginning with
Ms. Matthews and then continuing to her left until we get over
to Ms. Griffin. After that, we will proceed to questions.
Ms. Matthews.
STATEMENT OF BETH MATTHEWS, CHIEF EXECUTIVE OFFICER, AMERICAN
SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, NEW YORK, NEW
YORK
Ms. Matthews. Good morning, Chairman Lee, Ranking Member
Klobuchar, and Members of the Subcommittee.
My name is Elizabeth Matthews and I am the chief executive
officer of the American Society of Composers, Authors and
Publishers, which was formed 100 years ago by songwriters.
ASCAP is a membership association operating on a not-for-
profit-basis. We are comprised of more than 525,000
songwriters, composers, lyricists, and music publishers, and we
represent over 10 million musical compositions.
Songwriters are the unsung heroes behind American music.
Every song you hear comes from the hearts and minds of a
songwriter. Songwriters create the notes and the lyrics on the
page. This is the copyright in the musical composition that any
artist may record.
Unlike recording artists, however, songwriters do not earn
money from selling merchandise or touring. Many songwriters do
not have salaries, benefits, or other reliable sources of
income. They rely on public performance royalties to earn a
living, to feed their family, and pay the rent.
ASCAP's job is to ensure that songwriters can make a living
creating the music that we all love, because music matters.
Music is not just a business. It is an important and continual
contribution to our society and to our day-to-day lives.
ASCAP licenses the right to publicly perform our members'
music to over 700,000 licensees in the United States and we
work with over 100 public performance societies globally who,
in turn, license our members' works outside the United States.
In 2014 alone, we processed payment for over 500 billion
public performances, more than double the year before, and we
are only one of several market actors.
In 1941, ASCAP entered into a consent decree with the
Department of Justice because ASCAP did not have significant
competition. Fast-forward 74 years and today, competition with
ASCAP is alive and well. We compete directly with BMI and with
unregulated competitors, including SESAC, new licensing
companies, the foreign PROs, and even with our own music
publisher members whom are always free to directly license
their works.
The barriers to entry for new market competitors are quite
low, and yet we are still governed by a World War II era
consent decree which was last updated before the invention of
the iPod.
There have been seismic changes in the music landscape.
People no longer buy the music they love. The stream it.
Streaming services offer more choice and more consumer control.
As a result, they require access to a massive variety of songs
in order to provide users with an optimally tailored content
experience. This means that the use of music has increased
exponentially, but the payments have not followed. For a
songwriter, this is a terrifying trend.
New and innovative market players require experimentation
and novel approaches to music licensing, and yet the consent
decree restricts our ability to adapt because it is still stuck
in 1941.
Some digital music services are unwilling to pay
songwriters a fair market rate, making it impossible for
songwriters to earn a sustainable living. As a result, major
music publishers are threatening to resign from ASCAP and BMI
entirely, which would be a devastating blow to collective
licensing and to songwriters.
In response, we have proposed a number of changes to the
ASCAP consent decree, including the following. First, rate
disputes with businesses that use music should not be decided
in an expensive, time-consuming Federal rate court litigation.
We propose a faster, less expensive process.
Second, our membership have the flexibility to grant ASCAP
the right to license their music for some uses, while retaining
the right to license the other uses directly. ASCAP fully
supports transparency for licensees in this regard. That
approach is both pro competitive and consistent with the U.S.
copyright law.
Third, we need to simplify the music licensing by allowing
ASCAP to license more than just the right of public
performance. ASCAP may facilitate one-stop shopping, a single
destination where businesses may secure every right that they
need, if the consent decree is changed.
The Department of Justice is undertaking a review of our
consent decree and we look forward to working with them to make
these pro competitive changes. We have also engaged with
Congress in our efforts to modernize the current music
licensing system. In that regard, we applaud the leadership of
Senator Hatch and others who are introducing the Songwriter
Equity Act, which represents an important first step in reform.
If the consent decrees are not changed and major music
publishers resign from ASCAP and BMI, then the system of
collective licensing may collapse and everyone loses. Copyright
owners, licensees, music fans everywhere, and, most
importantly, the songwriters, who are the heart and the soul of
the music industry.
Thank you.
[The prepared statement of Ms. Matthews appears as a
submission for the record.]
Chairman Lee. Beautifully timed, by the way. You closed
that out just as the final second ticked off the clock.
Mr. Harrison.
STATEMENT OF CHRIS HARRISON, VICE PRESIDENT, BUSINESS AFFAIRS,
PANDORA MEDIA, INC., OAKLAND, CALIFORNIA
Mr. Harrison. Chairman Lee, Ranking Member Klobuchar, a
distinguished Members of this Subcommittee, thank you for
inviting me to testify.
My name is Christopher Harrison. I am the vice president of
business affairs at Pandora Media.
Launched less than 10 years ago, Pandora is now the most
popular Internet radio service in America, reaching more than
80 million participants--80 million listeners each month.
The mission of Pandora and our more than 1,400 employees is
to unleash the infinite power of music by being the effortless
source of personalized music enjoyment and discovery for
millions of listeners.
Where others may see a music industry in turmoil, Pandora
sees abundant opportunities for new leadership to create a
music industry that benefits the entire ecosystem.
The recent launch of Pandora's artist marketing platform,
which gives free access to artists to see how their music
performs on our platform is the first of many initiatives
intended to unlock the power of Pandora to enable music-makers
to grow their audience.
In addition, Pandora represents a significant new revenue
stream, with world the payments approaching $450 million last
year alone and more than $1.2 billion since we launched in
2005.
Ensuring a vibrant and growing music industry in the years
to come requires a marketplace that is open, transparent, and
vigorously competitive. Unfortunately, there are a number of
significant obstacles that threaten this future and require the
attention of this Subcommittee.
It has been nearly 3 years since this Subcommittee reviewed
competition in the music industry, with its hearing on Sony
ATV's acquisition of EMI, which reduced the number of major
music publishers from 4 to 3.
Among the most important obstacles is an alarming lack of
transparency. As I describe in my written testimony, this lack
of transparency was a key factor in Pandora's inability to
obtain competitive market agreements with the music publishers
who had allegedly withdrawn their digital performance rights
from ASCAP and BMI.
I commend Mr. Pincus for making the repertory of songs
available publicly and I hope that other publishers and PROs
follow his example. In order to foster competition, we
recommend the creation of a publicly available data base of
record to house all relevant music copyright ownership
information.
By enabling services to quickly ascertain who owns which
work, a single data base of record would enable services to
identify on a catalog-by-catalog basis the owners of the songs
they perform, which would encourage true competition among
copyright owners for distribution on digital platforms.
While the transparency provided by such a data base would
mitigate the anticompetitive behavior Pandora recently
experienced, transparency alone is insufficient to solve the
problems that Pandora faced over the past few years.
As this hearing takes place, the largest music publishers
and PROs are demanding changes to the very decrees designed to
forestall their now well documented into the competitive
conduct.
In the past year, four different Federal district court
judges found evidence of the same types of egregious
anticompetitive conduct that gave rise to the original consent
decrees 70 years ago. Pandora directly experienced some of that
anticompetitive behavior, which I detail in my written remarks.
While we are open to sensible modifications to the consent
decrees, any modification must ensure a competitive vitality
and independent pricing activity that does not exist at this
time.
To amend the decrees in the manner the PROs and publishers
seek would seriously harm competition by turning a blind eye to
harmful misconduct, permitting publishers and PROs to
artificially inflate prices and ultimately harm consumers'
access to the music they love.
While we remain optimistic about the future of music
streaming, the Government has a critical role playing to
guarantee a functionally competitive music licensing ecosystem.
As evidenced by the coordinated behavior I described
previously, there is a continued need for Government oversight
to ensure that certain participants in this highly consolidated
industry cannot leverage the market power run your game.
Thank you for your consideration of this important issues.
I look forward to answering any questions.
[The prepared statement of Mr. Harrison appears as a
submission for the record.]
Chairman Lee. Thank you, Mr. Harrison.
Mr. Pincus.
STATEMENT OF MATT PINCUS, CHIEF EXECUTIVE OFFICER, SONGS MUSIC
PUBLISHING, NEW YORK, NEW YORK
Mr. Pincus. Good morning, Chairman Lee, Senator Klobuchar,
and Members of the Subcommittee.
I am honored to provide my perspective as a music publisher
and a small business owner. The fundamental question of today's
hearing is simple. Why are the property rights of songwriters
and publishers subject to perpetual, heavy-handed Government
regulation?
I am the CEO of SONGS Music Publishing. I represent 350
contemporary songwriters. The current environment is very hard
on songwriters and perpetual Government regulation is making it
worse.
I am an avid user of many digital music services. Somewhere
in the many models out there is the answer to future growth for
my company.
I started SONGS in 2004 to transact with the digital market
freely and easily. However, as I detail in my written
testimony, the current consent decrees are artificially
depressing the performance royalties that digital services pay,
because I am unable to negotiate for my property rights in a
free and free market.
Three successful songwriters I represent wrote a song for
the recording artists, Jason Derulo. The song went number one.
It was streamed 124 million times on Pandora.
As a songwriter, it does not get any better than this, and
yet their 50 percent interest in this song generated only
$3,158.05 in royalties to be shared among the three of them.
If streaming music is the future, then it is clear that all
songwriters and publishers should be very concerned. This rate
of monetization is not fair for my songwriters.
Like any businessman, I am best suited to determine the
fair price for the property rights I represent and to say no
when I feel unfairly compensated for them. Instead, I am
compelled to allow anyone to use my songs, no matter what the
terms, because of perpetual Government regulation.
Those lobbying for continued regulation often cite the high
earnings of the top 1 percent of recording artists. While I
represent the creators of some of the most recognizable songs
in the world, the reality is that many of the creators I
represent are struggling to make the minimum wage from their
music.
Like the acclaimed indie rock songwriter, a husband and
father who has been plagued by illness and unable to afford
proper medical treatment, his sole income comes from creating
music. Despite achieving notoriety for a song streamed over 11
million times on Pandora, he was paid only $642.
I have a responsibility to secure fair compensation for the
talented songwriters I represent and I am unable to do so due
to perpetual regulation, because under the current consent
decrees, I have only two very bad choices in seeking fair rates
for my songwriters: Accept unfair Government regulation that
depresses property value or withdraw entirely from the
collective licensing system and incur tremendous costs and
terrible inefficiencies.
To the benefit of both rights-holders and businesses that
use our music, our songs are licensed collectively through
performing rights organizations such as ASCAP and BMI. However,
despite radical changes in how music is used and consumed,
today's songwriters and music publishers continue to be highly
regulated by consent decrees imposed during World War II.
In my written testimony, I identify modifications to the
decrees that I believe will allow for a more competitive, free
and fair market for all copyright owners and music users.
Critical changes to the consent decrees include amending
rate-setting procedures to allow for negotiations and payments
that more closely reflect the free market; allowing direct
licensing of performance rights; establishing a formal
mechanism for sunset or at least periodic review of the
decrees; and, providing music publishers and their agents the
flexibility to license digital services seeking multiple
rights.
I believe the Department of Justice has an important role
in enforcing antitrust laws against any real anticompetitive
actions of specific parties, but that role should not be used
to regulate small business owners and prevent a free market
development of an entire industry rose 75 years.
As a music publisher, my livelihood depends on widely
licensing my songs. That is the reality in a free market. If
given the freedom, like any other music publisher, I will
exercise it responsibly to the benefit of my songwriters.
Thank you again for the opportunity to share my views with
you today.
[The prepared statement of Mr. Pincus appears as a
submission for the record.]
Chairman Lee. Thank you, Mr. Pincus.
Mr. Dowdle.
STATEMENT OF MIKE DOWDLE, VICE PRESIDENT, BUSINESS AFFAIRS AND
GENERAL COUNSEL, BONNEVILLE INTERNATIONAL, SALT LAKE CITY, UTAH
Mr. Dowdle. Good morning, Chairman Lee, Ranking Member
Klobuchar, and Members of the Subcommittee.
My name is Mike Dowdle and I am vice president of business
affairs and general counsel for Bonneville International
Corporation, which owns television and radio stations in Salt
Lake City, Los Angeles, Seattle, and Phoenix.
I am pleased to testify today on behalf of the National
Association of Broadcasters and its thousands of free local
radio stations throughout the Nation.
My testimony will focus on the continued necessity of the
ASCAP and BMI consent decrees. Absent these consent decrees, no
fair competitive market would exist for the licensing of
musical works. This would harm not only broadcast audiences
whose access to our programming would be jeopardized, but
customers of the countless businesses that publicly perform
music every day, including restaurants, bars, retailers, and
sporting venues in your local communities.
To illustrate the issue, let me provide an example. KSL-TV,
Bonneville's NBC affiliate in Salt Lake City, has music
interwoven throughout its programming. These musical
performances take place in the background of its movies and
television shows and live sporting events and local news,
during transitions between programs and even within
commercials.
For its locally produced content, KSL-TV has editorial
discretion over which specific songs it airs. So in the event
that it could not obtain the rights to a certain song, KSL
could likely take steps to ensure that the song is not
performed.
But for a significant portion of its content, namely,
network and syndicated programming, live events, and
commercials, it has no editorial control. If KSL lacks the
right to publicly perform a song, it runs the risk of
significant penalties under Federal copyright law.
Our radio stations that air syndicated programming,
commercials, and live events run the same risks. They simply
must have the public performance rights to the full catalog of
musical works in order to operate lawfully.
Even the right to a single musical work gives the
copyright-owner significant market power. The risk of
anticompetitive abuse is compounded when these rights are
aggregated, which is exactly what the performing rights
organizations or PROs do.
ASCAP and BMI control more than 90 percent of the public
performance rights to musical works in the United States.
Aggregate those rights into blanket licenses, and then fix a
single price roll music within that license, irrespective of
which songs are actually used.
In any other industry, this would constitute per se
violation of the antitrust laws. But the consent decrees
entered into between the DOJ and both organizations more than
70 years ago serve as antitrust lifelines that allow ASCAP and
BMI to continue to operate in spite of their anticompetitive
nature.
Absent the protections and framework afforded by the
consent decrees, ASCAP and BMI would have unfettered ability to
extract above market prices and terms for the rights and those
works from broadcasters and other licensees.
Let me be clear. Broadcasters would cease operations
without the ability to clear these rights and the consent
decrees are critical to that end.
Before I conclude, I want to touch on two specific points
that are central to today's hearing. First, in an attempt to
circumvent the consent decrees, large music publishers have
sought to selectively withdraw from ASCAP and BMI to directly
negotiate with certain digital services.
Two Federal courts interpreted the consent decrees to
prohibit such partial withdrawals, and now the PROs are asking
both DOJ and Congress to amend them. Such a modification for
partial withdrawals should not be allowed. The fact is any
music publisher with sufficient size and scale to consider
direct negotiations for selected rights, such as digital
rights, would have essentially the same power in the market as
the PROs and raise the same antitrust concerns.
Relaxing the consent decrees in this way would enable music
publishers to engage in the same behavior that prompted the
consent decrees in the first place and that has been condemned
by the courts cents.
Second, this Subcommittee need look no further than the
recent antitrust actions brought against the third major PRO,
SESAC, to glimpse the anticompetitive licensing practices
undertaken by an unregulated collective. These practices, which
resulted in a $58 million settlement between SESAC and the
television industry just a month ago are detailed in my written
testimony and provide a real world example of the antitrust
abuses that would be unavoidable outside of this consent decree
framework.
In conclusion, this Subcommittee has long recognized the
important role that the antitrust laws play in ensuring free
and competitive markets for the benefit of consumers. The ASCAP
and BMI consent decrees remain vital to television and radio
broadcasters' ability to fairly, efficiently, and transparently
license musical works to the benefit of their audiences and
your constituents.
Thank you for inviting me to testify today. I look forward
to answering any questions.
[The prepared statement of Mr. Dowdle appears as a
submission for the record.]
Chairman Lee. Thank you, Mr. Dowdle.
Mr. Miller.
STATEMENT OF LEE THOMAS MILLER, PRESIDENT, NASHVILLE
SONGWRITERS ASSOCIATION INTERNATIONAL, NASHVILLE, TENNESSEE
Mr. Miller. Good morning. My name is Lee Thomas Miller. I
am an American songwriter.
I grew up on a small tobacco farm in Kentucky. When I was
11, and started playing piano, then guitar, then violin. Music
has a way of kind of taking you over.
I knew early on that it was not just a hobby. I went to
college and instead of studying something sensible like
business, as my mother wished, I studied classical music
composition, which basically just meant I was over qualified
for my job, singing and playing in the bars at night. But there
I was, classically trained and writing honky tonk songs on the
side.
Then I learned about Broadcast Music, Incorporated. I was
always looking for an excuse to visit Nashville. So I took a
trip to BMI. I met with a songwriter representative who
explained to me what BMI did.
When your song plays on the radio, we collect the money, he
said. And I said sign me up. Then I played him my self-made
recordings of the songs I had been writing, and he was very
blunt. You are not much of a singer and guitar players are a
dime a dozen. But I believe you can be a songwriter.
So I graduated college, said $1,000, and moved to Music
City. For years I wrote songs, hundreds of songs. I played in
bands and took temporary jobs to pay the bills. I studied the
songs I heard on the radio and began meeting and learning from
the songwriters who wrote them.
At the time, the music business was healthy and music
publishers could take chances. A prominent publisher took a
chance on me, and then the real work began.
My first cuts were not memorable. When BMI sent me my first
performance royalty check, it was for $4.69. Today it is framed
and hanging on my office wall. That check meant everything.
That check meant that I was a professional songwriter.
All in all, it took 11 years after I moved to Nashville to
have a hit on the radio. In 2003, I received my first BMI
award, an award given to the 50 most played songs of the year.
It was a song titled, ``The Impossible.''
Ironically, the song was about overcoming insurmountable
odds through faith and determination and believing anything is
actually possible. To me, earning that first BMI award was like
a ballplayer going from AAA to the major leagues.
In today's music industry environment, songwriters count on
their performing rights societies. The one thing keeping us
afloat is that performance royalty check. We do not tour. We do
not sell tee shirts. We write songs all day every day. And when
we succeed, we pay self-employment income tax. With what
remains, we buy gas and bread and white picket fences.
But since the year 2000, the National Songwriters
Association, where I serve as president, estimates that America
has lost between 80 and 90 percent of its professional
songwriters, whose primary income is from royalties.
I am talking about creators, and what we create is not some
obsolete, irrelevant cultural product of days gone by. It is
music.
What we create is there when you fall in love. It is there
when your heart breaks. It heals. It inspires. It time travels.
It crosses party lines.
So how does the BMI consent decree impact me? Well, I feel
that it puts BMI and songwriters at a disadvantage in several
important ways. For instance, if rate disputes could be
resolved by arbitration rather than expensive litigation, that
would feel like a win for everyone. New services could launch
and songwriters could get paid quickly without spending lots of
money on lawsuits.
Songwriters also worry that BMI is not allowed to license
rights other than the performance right. Most new services need
several rights. a one-stop license from BMI would be a quick
and efficient way to get those services off the ground.
These aspects of the BMI consent decree, in my view, have
devalued the musical composition to the point where the
songwriters are being crushed. It is bad enough that it is so
easy to steal the music today, but a legal framework that
allows songs to be streamed for nearly free will destroy the
livelihood of the American songwriter if it is allowed to
continue.
The U.S. Department of Justice is presently undertaking a
comprehensive review of the ASCAP and BMI consent decrees and
we hope that they will recommend substantial changes that will
allow us the flexibility we need to operate in the free market.
I am America's smallest small business. I sit down and make
stuff up. I can make you laugh, I can make you cry. I can make
you do both with one 3-minute story. That is the power of music
and it all begins with a song. But I am here to tell you there
are not many of us left.
Thank you, Chairman Lee, Ranking Member Klobuchar, and
Members of the Committee.
[The prepared statement of Mr. Miller appears as a
submission for the record.]
Chairman Lee. Thank you, Mr. Miller.
Ms. Griffin.
STATEMENT OF JODIE GRIFFIN, SENIOR STAFF ATTORNEY, PUBLIC
KNOWLEDGE, WASHINGTON, DC
Ms. Griffin. Chairman Lee, Ranking Member Klobuchar, and
Members of the Subcommittee, thank you for inviting me to
testify today. And I would like to thank you, Mr. Chairman, for
your remarks emphasizing that competition policy is, first and
foremost, about protecting consumers.
My name is Jodie Griffin and I am a senior staff attorney
at Public Knowledge, an organization that advocates for
policies that promote freedom of expression, affordable
communications tools, and the public's ability to create and
access creative works.
Before Public Knowledge, I was a musician and helped launch
and worked for the five-time Grammy-nominated independent
label, BMOP/sound.
The Department of Justice's review of its antitrust consent
decrees with ASCAP and BMI comes at a pivotal time for the
music business. Now more than ever, it is crucial that
policymakers promote competition and innovation in music
distribution to benefit listeners and artists alike.
New music services give consumers convenient ways to
legally access music at reasonable prices and they have the
potential to give artists greater control over their own
careers. However, this market is still new and it is still
growing and it is crucial that we encourage competition and
innovation or consumers and artists will only be left with
fewer options and less leverage in the marketplace.
Antitrust and copyright policies should promote a robust
and competitive music marketplace, where artists can get their
music out on the market and receive a fair price for it and
users have competitive choices among legal music services.
Yet all of the middlemen in the music business, from
publishers to labels to distributors, are facing robust
competition that forces them to be accountable to musicians and
their audiences. But if an intermediary can leverage a large
catalog of copyright acquisitions to dominate the market, it
has the power and the incentive to use that leverage to raise
prices for consumers, pass less revenue on to artists, and
prevent new services that would challenge its dominance.
For example, on the sound recording side of the music
business, when the major labels negotiate licenses directly,
they have been able to use their market power to obtain large
lump sum cash advances and equity in the new companies, the
benefits of which are not passed on to artists and independent
labels argue that the majors can demand royalties
disproportionate to their actual market share because they have
enough market power to veto new services.
The very act of creating large collective licensing
organizations concentrates market power and the market for
public performance rights and compositions is very
concentrated. This has been the case for decades, and so for
decades we have had antitrust settlements, ensuring that the
largest performing rights organizations offer reasonable
licenses despite their market power.
This does not mean it is inappropriate to periodically
review and update the consent decrees to encourage a more
competitive market, but at this moment we can already see
multiple warning signs that dismantling the protections in the
consent decrees would result in a less competitive and
innovative market with fewer choices for consumers.
In recent years, the music publishing industry has only
gotten more consolidated as the biggest publishers buy up
smaller firms. Ironically enough, some of those mergers were
even justified by the argument that post-merger publishers
could not possibly act anticompetitively because we can rely on
the market protections in the consent decrees and in statutory
licenses.
And even more recently, a Federal judge has found that when
the major publishers attempted to license their digital rights
directly to the Pandora, they chose collusion over competition.
They could have used that opportunity to compete with each
other and with ASCAP, but instead they chose to coordinate with
each other, despite the objections of some songwriters and
independent publishers within ASCAP.
A Federal judge later examined these negotiations and found
that the publishers' behavior magnified their already very
considerable market power, so much so that the resulting
licenses could not even be honestly considered free market
benchmarks.
Again, this does not mean that we must always have consent
decrees nor that they can never change, but the evidence shows
that at this moment in time, we need to protect competition
more than ever.
As the Department of Justice and Congress review
competition in the music licensing marketplace and the
antitrust consent decrees in particular, it is crucial that we
continue to support policies that encourage a competitive
market in which no company has the power to pick winners and
losers. A marketplace that allows new entrants to compete,
whether among copyright-holders or distribution services,
ultimately benefits consumers and artists alike.
Thank you and I look forward to your questions.
[The prepared statement of Ms. Griffin appears as a
submission for the record.]
Chairman Lee. Thanks to all of you for your opening
statements. Those were very helpful.
We will now begin our question-and-answer period with 5-
minute rounds. I will go first, and then Senator Klobuchar, and
then we will alternate on each side of the aisle.
Ms. Matthews, we will start with you. So your consent
decree has been around since the early 1940s. So I guess it is
the second oldest of the two consent decrees.
When we look at the music market today, we can see that it
has changed a lot over the last 75 years. We certainly see that
delivery methods, in particular, have changed a great deal
since the early 1940s.
What can you tell me about this, about how the market has
changed over the last 75 years, and how those changes, in your
opinion, bring about the need for some kind of modification of
the status quo?
Ms. Matthews. The competitive market has increased
dramatically since the 1940s. We compete both with regulated
competitors, such as BMI, and several unregulated new market
entrants have shown up on the scene in the last several years.
The most important change I think that has happened,
though, in the past decade has been consumer behavior. Because
people are no longer buying music, a major source of revenue
related to mechanical reproductions has steeply declined for
songwriters. So as a result, the reliance on public performance
is increasing.
Digital services are becoming increasingly more customized
and personalized with the proliferation of wireless device
adoption, broadband penetration rates with high-speed services
to the home, more music is being played than ever before.
So while the volume of music has increased in terms of
overall public performances, the revenue is simply not tracking
in terms of increase. And at the end, the songwriters are being
harmed.
As a result, major music publishers are threatening to
resign. If they resign, collective licensing will collapse.
Chairman Lee. Thank you.
Mr. Harrison, I am presumptively always supportive of free
market solutions to competition issues. Now, you have suggested
that these very old consent decrees are not outdated all.
What evidence in the market leads you to believe that the
consent decrees that we are talking about today, as they are
written, are necessary even in the digital age and even in the
digital sector?
Mr. Harrison. Well, I think there are two--two things I
would point--I would point you to. First is just the structure
of ASCAP and BMI. They are horizontal joint sales agents. The
take works from otherwise competing publishers, aggregate those
catalogs together, and then fix a single price across all of
their members' catalogs.
As Mr. Dowdle indicated earlier, that is normally viewed as
a per se antitrust violation and the consent decrees provide--
because of the protections they provide have immunized ASCAP
and BMI to prior private antitrust claims.
More contemporaneously, Pandora over the last 2 years has
experienced what happens when publishers attempt to partially
withdraw. You alluded to Judge Cotes' opinion in which she
found that when given the opportunity to compete against each
other, the publishers and ASCAP chose not to and instead chose
to coordinate their behavior, use their market power and drive
rates above the competitive market rate.
Chairman Lee. And speaking of that litigation and speaking
of Judge Cote, I want to turn back to you for a minute, Ms.
Matthews.
In the Pandora v. ASCAP litigation, the rate judge
discussed several examples of this behavior that she found to
be questionable. As this issue continues to arise, I would like
to give you a chance to respond to some of those.
Now, if the publishers are permitted to partially withdraw,
will ASCAP view them as competitors in the market for music
licenses; and, if so, do you think that will result in
competitive pricing?
Ms. Matthews. It is counterintuitive, I know, but ASCAP
views the major publishers and independent publishers as
competitors today. We only accept a non-exclusive grant of
right, meaning that they are always free to direct license with
any music service, including Pandora.
If they were allowed to, I will say, grant us a partial
grant of rights, which is supported by the U.S. copyright law,
because copyrights are divisible, they would simply remove
those rights from ASCAP in their entirety. So we would not be
competing for them with respect to that particular license, but
it would be pro-competitive in the sense that it would create
more choice for music licensing services.
Chairman Lee. I will probably want to follow up on that a
little bit later, but my time has expired and I will turn it
over to Senator Klobuchar.
Senator Klobuchar. I think I will start with where you left
off there, Senator Lee.
So a significant amount of the attention has been placed on
the partial withdrawal of certain rights from the performance
rights organization. As discussed, a recent letter of the DOJ
filed with the second circuit on Friday indicates that the
department believes the consent degrees, as currently written,
do not permit partial withdrawals.
Ms. Matthews you answered that in part. But, Mr. Pincus,
why do we not start with you? Why are the partial withdrawals
needed, in your view?
Mr. Pincus. Well, the current system works quite well with
respect to most aspects of collective licensing. I think there
is broad satisfaction with the radio licensing system, the
television licensing system, the bars, restaurants, stadiums'
licensing system.
But with respect to the additional rights, I believe that
the rates are artificially suppressed.
If you look at market comparative rates, they have been up
to three to four times higher in multiple situations. There are
many companies that are doing business in an unregulated way in
the digital market that are functioning just fine without
Government oversight, and that puts us in a position where we
feel like if we are earning--if our earnings are going down and
the listenership of radio is migrating to the lower-paying
rate, then our businesses are going to suffer over the long
term.
And what we would rather be able to do, like in any other
small business, is to be able to negotiate directly for those
rights.
Senator Klobuchar. Mr. Dowdle, do you want to respond to
that, this idea of the partial withdrawal?
Mr. Dowdle. Yes. Thank you, Senator Klobuchar. There is an
old adage--as a young lawyer, I was a litigator and there is an
old adage, time honored in that profession that says that facts
made bad law, hypothetical situations make worse law.
In this case, I would just urge the Members of this
Committee not to make a decision based on hypothetical threat.
That is first.
Second of all, the very fact that the music publishers we
are talking about are big enough to make a threat that scares
ASCAP and BMI should raise a lot of eyebrows on this Committee
and at the Department of Justice.
Those withdrawals are best put in--as has been mentioned
here, the possibility of those withdrawals are best put in the
light of what might happen if you take a look at what happened
when they threatened them.
They engaged immediately inclusive in anticompetitive
activity. If you want to see what will happen, that gives you a
pretty good idea of what should happen. That, I think, should
really raise some eyebrows and raise a question of whether or
not they ought to have their own consent decrees, frankly.
Senator Klobuchar. Do you want to respond at all, Mr.
Harrison?
Mr. Harrison. I agree with what Mr. Dowdle said. The
concern is not partial withdrawals, in theory. The concern is
partial withdrawals in practice. And what we experienced over
the last 2 years, when given an opportunity to compete, when
they actually believed they had partially withdrawn, the
publishers chose not to. And to the extent that the department
is looking into this issue, I think it is wise for this
Subcommittee to be mindful of actual behavior, not what folks
might say they want to do.
Senator Klobuchar. My last question. There are a number of
different ways that licensing rates are set throughout the
industry. Some have argued that rate should be set in the free
market rather than being subject to terms administered and
regulated by the Government.
Mr. Pincus, in your written testimony, you talk about the
right of public performance is, quote, ``inherently a free
market right.'' What do you mean by that? And if you could just
answer briefly so I can get some other comments on that.
Mr. Pincus, if it were not for the consent decrees
governing ASCAP and BMI, the negotiation would be between
publishers and licensees directly.
Senator Klobuchar. Do you think that is a good idea then?
Mr. Pincus. I do. I think that while I understand that
there are anticompetitive concerns, I, for one, have never been
accused of acting anticompetitively. My business is not scale
enough and yet I am regulated broadly by a system that is meant
to protect against anticompetitive behavior on a blanket basis.
Senator Klobuchar. Ms. Griffin, do you want to respond to
that?
Ms. Griffin. I think--so when I think of what a true free
market is, it is one that has competition, one that brings more
choices and lower prices to consumers.
When we look at the publishing market right now, it is hard
to know what a true free market rate is because we do not have
examples of negotiations where the licensee can say no and
still stay in business. And that is why we still need the
competition protections, like a statutory license or here the
consent decrees.
Senator Klobuchar. Does anyone else want to respond to
that, this idea? Ms. Matthews?
Ms. Matthews. I would just like to point out that under the
current consent decrees for both ASCAP and BMI, the license is
compulsory, meaning that there is no negotiation whatsoever in
order to have access to the assets.
It is the antithesis of a free market negotiation. A
licensee applies for a license. They immediately can exploit
those copyrights.
Senator Klobuchar. All right. Thank you very much. I will
turn it over to my colleagues.
Chairman Lee. Mr. Tillis.
Mr. Tillis. Mr. Dowdle, if the partial withdrawal is
allowed, how is this going to affect broadcasters that
simulcast through digital channel?
Mr. Dowdle. Well, we will be faced with having to
negotiate, if you can call it a negotiation, with people who we
do not know how much of their product may be used in our
programming. Therefore, we have to have those licenses.
Our hands are tied. We have to come to an agreement with
them. That gives them an uneven field on which we have to play
immediately. We do not have a choice. We have to sit down. We
cannot say no.
Second of all, we have already seen how they behave in a,
quote-unquote, ``free and open marketplace.'' They collude.
They will immediately go to the conduct, we believe, that they
have already proven they go to. That is, they will tend to
conduct themselves in an anticompetitive way.
That is what we will be faced with--a gun to hour head and
no market power.
Senator Tillis. Ms. Griffin, what is the consumer interest
here? How do consent decrees help consumers?
Ms. Griffin. Thank you, Senator. Consumers benefit when
they have choices for different services that give them
different types of offerings and different price points. And so
here, the role of the consent decrees in creating that market
is allowing prospective new licensees to enter the market, pay
artists, and then launch a service and give consumers a new
choice.
Senator Tillis. I have, I guess, a general question for
anyone that would like to speak on it. I am trying to get a
sense, in each of your view, what fair market value means, from
your perspective. And I am happy to have anyone, but I am
really just trying to understand how the consent decree stands
in the way of achieving it, as well.
But to anyone. We can start down here with Ms. Matthews.
Ms. Matthews. So a free market would encompass a willing
buyer and a willing seller negotiating openly. And in an
instance where they do not agree, either party can simply walk
away. When they do agree, presumably they would reach a free
market rate.
Conversely, under the consent decrees, that negotiation
does not happen because the right is compulsory. ASCAP and BMI
do not have the right to say no.
Senator Tillis. Mr. Harrison?
Mr. Harrison. I would agree with Ms. Matthews' first
characterization of fair market value. It is the value that
clears a market when you have a willing buyer and a willing
seller, without an information asymmetry and with the ability
to walk away.
I would also agree with Mr. Dowdle's characterization of
services and certainly the experience of Pandora that when
publishers will not tell you what they own and then threaten
willful copyright infringement, which comes along with $150,000
damage potential for each work infringed, services do not feel
they have the ability to walk away either.
Senator Tillis. Mr. Pincus?
Mr. Pincus. As a small businessperson, I think a free
market is a place where I can decide what is most appropriate
for my business and in this context, I do not feel like I can
do that.
Mr. Dowdle. Senator, with all due respect to our discussion
about a free market, we have actors that their very existence
would not exist in a true free market. We have collectives that
are sanctioned in their activity. Their very existence does not
allow a free market as such to really operate. And so you have
to come outside of this sort of theoretical free market
immediately when you give the right to collectives to bargain
in the way that they do.
There has to be a construct to govern that sort of
activity. I agree that if one seller and one buyer are talking,
that would work. When you are talking about a seller of the
size and magnitude of large music publishers or collective
societies, you do not have a free market.
Senator Tillis. Mr. Miller?
Mr. Miller. Well, free market is something that the
songwriters can only dream of. We have never had this. We have
been told what our copyright was worth since the beginning of
writing songs and it has got us to the place today where it is
quickly becoming unsustainable.
The thought of being able to sit down and have a
negotiation in 2015 of what our craft may be worth would be
life-changing to our profession. We are the ultimate player
that cannot say no. We are handcuffed to the bottom of the
ocean and we are just looking for some relief.
Senator Tillis. Ms. Griffin?
Ms. Griffin. I would agree with Ms. Matthews that a free
market is one where either side can walk away without going out
of business entirely. And I would note, I think Mr. Miller
mentioned how songwriters feel that they have to go through
these licenses and I think part of the reason that songwriters
feel that way is that the PROs dominate the business so much
that you do have to go through them, and that is what makes it
so dangerous from a competitive perspective.
Senator Tillis. Thank you. Thank you, Mr. Chair.
Chairman Lee. Senator Coons.
Senator Coons. Thank you, Chairman Lee.
Ms. Matthews, if I might, just to go back to your opening
statement that the competitive environment that ASCAP faces
today has become more and more challenging.
How does ASCAP compete with the other PROs? Just give me a
little more detail on how that competition today actually plays
out. And in answering my question, do not licensees really end
up needing a license from all the PROs?
Ms. Matthews. Well, the current business practice is most
licensees obtain a blanket license agreement from the three
largest PROs, SESAC, BMI and ASCAP. They are always free,
however, to license around, meaning they can program around
those assets purposely because they have complete creative
control over their programming, except in an instance where, as
Mr. Dowdle pointed out, that perhaps they are licensing
programming from other sources.
The barriers to enter the space, however, today are so low,
an individual could simply buy one catalog of copyrights and
compete with a PRO. Publishers are directly competing with
PROs. International foreign societies are competing with PROs.
And I would not be surprised if technology companies enter the
space and start competing with PROs.
Senator Coons. Mr. Dowdle, your view on that same comment,
on how the competitive marketplace looks to broadcasters and
others in your role?
Mr. Dowdle. Thank you, Senator. Yes. First of all, I am a
member of ASCAP and have been for over 20 years. I am a very
unimportant member of ASCAP, but I am a member of ASCAP and
still have publishing interests, as well, in musical works.
These are friends of mine. So I am not trying to say
anything personal about their personal behavior. But they do
not really compete as to a particular work because they do not
allow people to license with both societies.
As to the works in their catalog, they deal exclusively. I
do not think that is competition, frankly.
Senator Coons. Ms. Griffin, could I just ask you what risks
do we run if DOJ were to disband the consent decree wholesale
and then address any subsequent antitrust violations just as
they arise, if we really got to a free market and relied on
antitrust statutes? And how does partial withdrawal mitigate or
aggravate those risks?
Ms. Griffin. So if we were to disband the consent decrees
entirely, I think the three major publishers would have the
market power to demand whatever they want for licenses. They
may or may not be able to efficiently license the non-digital
pieces of the market, like restaurants and bars and cafes, and
that could be a big mess, as well.
But just looking at the digital side, I think the issue is
that--you know, I come from the recording side of the business
and we see that there in the major labels when they license
uses that are not governed by statutory licenses.
We have seen them demand equity stakes in new companies so
they can get vertically integrated. We have seen them get large
lump sum advances, which they will--it is reported that they
will often say that that is not attributable to their artist
contracts, so it does not go down to the artist at the end of
the day.
And then the independent labels say that the majors get
royalties that are more than their share of the market, so much
so that some of the independent labels are asking for more
statutory licenses, which is a pretty telling example of what
the state of competition is there.
So I think that the publishers would be able to begin to
act like that because they have similar levels of market
concentration.
And for partial withdrawals, I think the danger with
partial withdrawals over just disbanding the consent decrees
entirely is that we have seen how the PROs and ASCAP act when
they think that they can partially withdraw and it resulted in
a lot of competition problems. And my concern is that if the
DOJ was to then say having seen that, now you can partially
withdraw, it could be, even inadvertently, seen as giving the
imprimatur of the Government to that kind of behavior in the
market.
Senator Coons. Let me ask a last question, if I might.
Mr. Miller, I really appreciated your testimony. Just as a
reminder of the creative individuals who are, in many ways, at
the beginning of this conversation, although Ms. Griffin also
reminds us consumers are also a critical piece, there are a lot
of different folks involved in this at a lot of different
stages.
Mr. Miller, not all songwriters want to have some of their
performance rights pulled out of PROs. Why is that and do you
agree or disagree with that perspective?
Mr. Miller. Well, that does create a lot of hypotheticals
in a complicated music relicensing situation. My take on
partial withdrawal is if that is the only way that songwriters
can achieve higher rates, then, yes, it makes sense.
But we are accustomed to our share being paid directly to
us through our PROs, mine being BMI. That, for me, has worked
efficiently and stable. The copyright office has recommended
that the services pay the songwriters directly under partial
withdrawal.
So I think that from that standpoint, it makes sense.
Again, if the end game is we find a way to revalue the
copyright and get out from under the Government restrictions
that say it is worth micro pennies in the digital space, then I
think that it is a win for the songwriters, because we are in a
situation now where millions of spins in the digital space
equals tens of dollars, and that is what it comes down to at
the end of the day at my house for my family.
Senator Coons. Thank you. Thank you all for your testimony
today.
Chairman Lee. Thank you, Senator Coons.
It is now my honor to recognize my friend and distinguished
colleague, who happens to be an actual songwriter, Senator
Hatch.
Senator Hatch. Do not hold it against me.
We are happy to have all of you here and I am pleased that
our leaders are holding this hearing.
Let me just ask this to the panel. Last June, Senator
Whitehouse and I wrote to Attorney General Holder about the
consent decrees that govern ASCAP's and BMI's licensing
practices.
In the letter we encouraged the Department of Justice to
modify the consent decrees to allow for competitive benchmarks
and rate-setting, licensing flexibility, arbitration as an
alternative to litigation, and bundled rights.
Now, some of you have argued that modernizing the consent
decrees would be a bad thing and that the decrees need to be
preserved in their current form in order to prevent
anticompetitive conduct by PROs.
But tell me, why would allowing for arbitration in lieu of
expensive litigation trip the so-called antitrust wire? I would
really like to know that. Or why would allowing all performance
rights organizations to bundle rights disturb the free market?
These seem like common sense changes to me.
Maybe we can start with you over on that end.
Ms. Matthews. Thank you, Senator Hatch. We agree with you.
These are common sense changes.
To be clear, we are not asking to terminate the consent
decree. We are merely asking for the changes that Senator Hatch
just referenced.
Our request for alternative dispute resolution seems to be
a win-win for everyone. We should be able to reach consensus
without time-consuming, incredibly costly Federal litigation
that gets repeated again in a second rate court proceeding with
our competitor, BMI, with a different Federal judge, which
oftentimes leads to inconsistent decisions.
Bundling also seems to be a win-win for people. Services
often require more than one right, not just the right of public
performance. If we could offer to be a one-stop-shop for them,
that seems to have a pro-competitive and an efficiency benefit
for everyone.
Partial grant of rights, I am hearing concerns regarding
transparency and you should know that ASCAP fully supports
transparency. We believe licensees have the right to know what
they are licensing and from whom.
Senator Hatch. All right.
Mr. Harrison. Senator, I think the concern I would have
about arbitration, at least the way it has been characterized
so far, is that it would be mandatory and binding. There is
often significant sums at issue. When the Radio Music License
Committee settled its disputes with ASCAP and BMI in 2012, the
Radio Music License Committee estimated that that agreement was
going to save them $1 billion over the following 7 years.
While--as someone who has litigated rate cases against
ASCAP and is currently in a rate vetting with BMI, I understand
how expensive they are. But the protections of the Federal
Rules of Civil Procedure and the Federal Rules of Evidence is
what allowed Pandora to discover the behavior that Judge Cote
ultimately concluded was coordinated and that the benchmarks
that ASCAP had introduced as allegedly competitive benchmarks
were not.
Without those protections, my concern is that we choose the
cheap answer, not the right answer.
Mr. Pincus. Well, I am not a lawyer or a litigator, but as
a small businessperson, I know enough to know that when lawyers
and litigation enter the business process, things slow down and
get very costly.
So anything that moves us away from that environment makes
it easier for me to plan for my business for the long term.
Mr. Dowdle. Senator Hatch, thank you.
We--our experience has been, through the license committees
that we have, that arbitration, which we have had to resort to
with regard to SESAC from time to time prior to the antitrust
suits that have been filed, is really not any less expensive or
less time-consuming, frankly. And what you give up is the
expertise that the rate courts have on these issues.
There is deep and broad experience in these rate courts
with these issues and they understand the lay of the land.
It has also been brought up by Mr. Harrison, you have
protections within the Federal court system. These are proven
venues and have been relied upon for a long time by both
parties as they have resorted to them. ASCAP and BMI have gone
to these rate courts themselves many times over the years.
And I do not think that throwing the baby out with this
particular bath water would be a very good thing to do. It is
probably under the scenario of be careful what you wish for.
Mr. Miller. Sir, first, thank you for your championing of
our Songwriter Equity Act. Speaking as a songwriter and, like
Matt, not a lawyer, all I can say is these issues just show how
our back is against the wall. We have very little say. We had
no say in what got us to where we are today as far as the way
the rules are written and it seems like--certainly, when we get
into lawsuits and we need all the relief we can get as far as
that goes, because we get pounded pretty quick because we are
the smallest guy in the room.
So I think that, yes, these do seem like common sense asks.
It also seems like common sense that we are asking for
something to be done about 1941 regulations. I do not know what
other businesses in America are as constrained as we are by
something that happened during World War II.
Senator Hatch. Thank you.
Ms. Griffin?
Ms. Griffin. I think for--especially considering bundling
and arbitration, my concern is that both of those would
ultimately increase the power of the largest players at the
expense of the smaller ones, including the smaller rights-
holders.
For example, for bundling, if the PROs were allowed to
require mandatory bundling for licensees, that would make it
harder for smaller rights-holders to license those mechanical
rights separately. And for arbitration, there are a lot of
transparency concerns for me on that side.
In order to have a true free market, we have to know what
you are buying in order to figure out how much it should cost.
And, also, I would note that on the songwriter side,
Songwriters Guild, the Future Music Coalition, they have
brought up concerns about transparency because arbitration
might lead to issues where the artists themselves do not
necessarily know what the rate is or how it was decided.
Senator Hatch. I think my time is up, Mr. Chairman.
Chairman Lee. Thank you.
Senator Franken.
Senator Franken. Thank you, Mr. Chairman, for this hearing.
Mr. Harrison, you talked about this $150,000 fine that
could be imposed for infringing. Have you ever paid such a
fine?
Mr. Harrison. No, sir.
Senator Franken. How many times has that fine, in your
experience, to your knowledge, been imposed?
Mr. Harrison. Well, in the context of Pandora, I mean, it
was not----
Senator Franken. Just in the whole eco system of this.
Mr. Harrison. Oh, there are hundreds, if not thousands of
copyright infringement cases going on right now. Pharrell
Williams is involved in a lawsuit with Marvin Gaye's estate
over ``Blurred Lines,'' where statutory damages and willful
infringement are being sought by--by the plaintiffs.
Senator Franken. I go back to the question. How many times
has this $150,000 fine been imposed?
Mr. Harrison. The maximum $150,000, I cannot give you an
actual number.
Senator Franken. Because it was brought up as a--you
brought that up.
Mr. Harrison. Yes. We were--Pandora was threatened by--by
music publishers, by their outside counsel.
Senator Franken. I want to know how real a threat that is.
Ms. Matthews, in your testimony, you say, ``Section 114(i)
of the Copyright Act prohibits the rate court from setting fees
for the performance of musical works from looking at fees paid
by those same services to the recording industry for the
performance of sound recordings, leading to rate disparities in
favor of sound recordings on the order of 12-to-1.''
I think this is why Mr. Miller is saying that in the
digital area, there is just an imbalance. And I do not want to
get into this is about PROs today, but it seems very ironic
that in terrestrial, which is what we have been living with
since 1941, the performers get nothing and the copyright
holder--the songwriters and publishers, there is an imbalance
for them, obviously. And here we have just got the exact
reverse, where the performers do very well and the songwriters
get next to nothing.
I mean, this is why we are here is what is going on in the
digital space. That is why I think we are here, big reason why
we are here, because in digital space, it is nothing,
practically nothing. I mean, it adds up after billions of plays
to a little something, but this ain't no way to earn a living.
If you want to use that, Mr. Miller, this ain't no way to
earn a living.
[Laughter.]
Mr. Miller. It will be demo'd by the end of the week.
[Laughter.]
Mr. Franken. And I would get, what, half.
[Laughter.]
Mr. Miller. Would you like to know what that is going to
equate on a stream?
Mr. Franken. Yes. On a stream, I would like to know, three
plays.
Can I talk to the whole panel here about this issue? And I
know it gets into something we are not really discussing, which
is the right of the performer. But what would it entail to try
to address this where you would sort of equalize--and I know
that the performers would go, like, ``Oh, great, we have been
doing radio for 70 years and now you want to equalize this.''
But what would that entail besides looking at these consent
decrees? What would this all entail? If anyone wants to handle
that. How would you sort of--knowing that we are going more and
more and more into digital and this is going to kill the
songwriter, how would you equalize this more? Anybody?
Mr. Harrison. Mr. Franken, if I may. You should recall that
the largest record label in the world owns the second largest
publisher in the world and the second largest record label in
the world owns the world's largest publishing company.
At the end of the day, if rights-holders believed that
there was a different distribution of the royalties, the $450
million in 2014 that I referenced Pandora paying, if the
rights-holders themselves wanted to distribute that money
differently, they are controlled by the same corporate parent
and could make that--are, frankly, in the best position to
understand the relative value of the inputs for our--to our
service.
Senator Franken. Does that sound right to you guys?
Mr. Pincus. If I may.
Senator Franken. First, Mr. Pincus, and I am sorry, but----
Mr. Pincus. I am a music publisher who does not share a
corporate parent with a record company.
Senator Franken. Right.
Mr. Pincus. And what I would say is that in one very good
example of where there is a free market for these two rights,
the rights are 50/50. They are equal.
Ms. Matthews. Mr. Pincus is referring to the market for
audiovisual synchronization. And I would also like to point out
anecdotally that outside of the United States, oftentimes those
two copyrights, the copyright and the sound recording versus
the copyright and the musical composition, are equally valued.
So our proposal would be as part of copyright reform, we
have platform-neutral, technology-neutral laws, and we let the
free market decide what the allocation of value should be
between those two rights.
Senator Franken. Thank you, Mr. Chairman.
Chairman Lee. Thank you, Senator Franken.
Senator Hatch is the Chairman of the Finance Committee and
he has to get back to a meeting. So we are going to let him
take a few more minutes before he has to leave us.
Senator Hatch. Well, I appreciate that, Mr. Chairman. I am
in the middle of a big hearing on taxes, and all of you will be
very interested in that, I am sure.
Let me ask Ms. Matthews this. The notion that copyright law
prohibits the rate court judge from taking into account
evidence of what other rights-holders are paid for the same
piece of music, that does not make much sense to me.
That is why last week, together with Senators Whitehouse,
Alexander and Corker, I introduced the Songwriter Equity Act to
remove this evidentiary barrier. The Songwriter Equity Act
would authorize the rate court judge to consider rates paid to
other rights-holders, such as performers, as part of
determining a fair market rate.
Now, do you believe this reform makes sense and how will it
help the rate-setting process?
Ms. Matthews. I do believe that this reform makes sense. I
think it is a step in the right direction. We believe it would
be helpful and directionally incredibly important for a judge
to be able to have all of the information about how the money
flows.
Senator Hatch. Thank you.
Mr. Harrison, in your testimony, you express support for
the creation of a single data base for record of all music
copyright information to enable services to identify on a
catalog-by-catalog basis the owners of the songs they perform.
Now, this sounds like a good idea, but how much would that
cost and who would pay for it and who would manage the data
base?
Mr. Harrison. All excellent questions, Senator. I think the
best answer I could is Pandora and services like Pandora would
certainly be willing to bear their share of that burden in
creating such a data base, because it is vitally important for
the transparency that currently lacks in the system. And so we
would be more than happy to contribute to its creation.
Senator Hatch. Thank you.
Mr. Dowdle, the ASCAP and BMI consent decrees are over 70
years old and have been amended only twice. In light of the
significant technological advancements in the music industry
over the last 70 years, do you support making any modifications
to the decree?
Mr. Dowdle. Thank you, Senator Hatch. I think we have to be
a little bit more mindful of the fact that the nature of the
music services and the distribution models may change. There
may be modifications that could be undertaken to address those
types of issues.
But the actual anticompetitive nature of the PROs and the
market power that they wield in this space does not change and
the nature of the rights really that they are administering
does not change.
So even if you have to address new technology, the actual
underlying problems still remain. And so any changes that would
be proposed have to keep in mind that it has to be within a
construct that allows and enables the market to function.
If you take it outside of that construct, you are going to
have a difficult time having an efficient system.
Senator Hatch. Thank you.
Ms. Matthews, again, can you tell me what your experience
has been with the rate court process and how does that process
impact songwriters?
Ms. Matthews. Since 2001, ASCAP has spent approximately $86
million on rate court litigation. In the Pandora litigation
alone, we discovered more than 75,000 documents. We deposed
more than 35 individuals.
These rate court proceedings sometimes last years and
sometimes require an appeal process to the second circuit.
We think any other form of alternative dispute resolution
is better than the process that we have now. For every dollar
that we spend that goes to outside counsel, to lawyers, those
are dollars coming out of the pockets of the songwriters.
Senator Hatch. Let me go to Mr. Harrison again. Compared to
the 48 percent of revenue that you pay for performances of
musical works, is paying 1.7 percent to songwriters, the amount
you proposed to the rate court judge, is that really an
equitable rate for songwriters?
Mr. Harrison. So that 1.7 percent that Pandora proposed in
the ASCAP rate proceeding is actually the rate that terrestrial
radio pays for--to songwriters to publicly perform their works.
We compete most closely with terrestrial radio both for
listeners and for ad dollars. So if we are going to have a
distribution-neutral royalty structure, the 1.7 percent of
revenue was the--would be appropriate.
Senator Hatch. Thank you.
Mr. Chairman, could I ask just one more question? I
apologize to my fellow Senators, but I have got to get back to
the income tax matter.
Some songwriter groups have expressed concern over the lack
of transparency in direct licensing deals, the terms of which
are often subject to nondisclosure agreements.
Under these confidential arrangements, songwriters and
composers do not even know the details of the agreements under
which they are supposed to be paid.
Do any of you have any ideas about how to address that
particular problem, because it is a big problem, as far as I
can see? Does anybody want to take a crack at that?
Mr. Pincus. One of the roles that the PROs play for people
like me who would have a hard time replicating the scale of
what they do is providing transparency in the market in the
same way.
So I think having the PRO play a constructive role in
administering digital agreements would be a very good way to
handle withdrawn rights.
Mr. Harrison. Senator Hatch, one of the things that Pandora
did last year was launch its artist marketing platform. Now,
admittedly, it is geared toward recording artists, but it
allows any recording artist to sign onto the service and see
how their music is performed, the number of times it is
performed, who their audience is, where their audience is.
There is nothing that would prevent us, other than the lack
of transparency into music publishing ownership, for Pandora to
provide the same kind of visibility. It may not allow a
songwriter to track the dollars that come from the service into
their checking account, but it would certainly enable them to
see how their music is performed on the service and whether
they are actually getting the money they believe they deserve.
Mr. Dowdle. Senator Hatch, if I might. I think the one
thing, given that Ms. Matthews has already opined on this and I
appreciate her statement, the one thing I think all of us on
this panel could agree with is that if the consent decrees are
modified at all, they should be modified in a way to create
better transparency throughout the system, both for licensees,
for songwriters, for the PROs, for that matter.
We ought to know what it is that we are licensing, how much
is being paid, by whom and to whom so that this is all public.
It is all available to those who are a participant in the
system.
I think we can all agree that transparency is a really big
issue and anything comes out of this hearing, it should be
that.
Senator Hatch. Thank you, Mr. Chairman. I appreciate that
courtesy.
Chairman Lee. Thank you, Chairman Hatch, and we wish you
the best of luck as you reform our tax code.
Senator Hatch. It is going to take a lot of luck.
[Laughter.]
Chairman Lee. Senator Perdue.
Senator Perdue. Thank you, Mr. Chairman. I would like to
thank you and the Ranking Member for raising this meeting.
Thank you, panelists, for being here.
This is an important topic here today in our free
enterprise system. In recent years, Georgia has played an
increasingly important and prominent role in our Nation's music
industry.
As one that moved from Nashville to Atlanta, I can tell you
that there is a lot of music activity in Atlanta.
But I think every one of you agree that the music
marketplace has really changed and undergone radical changes in
the last few decades, since the BMI consent decree was in made
in 1994, a year in which, by the way, the Billboard Top 100
Singles had singles by Bryan Adams and Boyz II Men. Only my two
kids know who they are.
I would like to start with a threshold question today. It
is a policy question about both consent decrees.
In 1979, the Department of Justice revised the consent
decree policy and mandated that except in extraordinary
circumstances, all DOG consent decrees would contain a sunset
provision, as you are well aware.
These sunset provisions would terminate the decree within
10 years. This was in response to congressional action that
strengthened the penalties for Sherman Act violations.
So for more than 35 years, it has been DOG policy that
consent decrees should not be perpetual and should terminate in
under a decade, unless exceptional industry-specific
circumstances are present.
The policy was, of course prospective, but I think the
rationalize underlying it is worth considering in the context
of the consent decrees we are looking at today.
My question is this. I would like to get each of you to
respond to this. For those witnesses who support continuation
of the consent decrees in their present form, can I get a quick
description from each of you regarding the characteristics of
the music licensing market that trumped DOJ's presumption
favoring a 10-year sunset? And for witnesses who favor the
elimination of this sunset provision or amendment of the
consent decrees, do you believe the sunset presumption applies
here?
Would you like to start, Ms. Matthews?
Ms. Matthews. So today ASCAP is not requesting a
termination of the consent decree. While I do think it is
appropriate to have some reasonable pathway to consider regular
modifications to the consent decree, possibly eventual sunset,
today we are only asking for a few discreet changes to save
collective licensing.
The hypotheticals of publishers leaving ASCAP is not a
hypothetical. This will happen if we do not make these changes
and it is our greatest fear for the songwriter that we are
running out of time.
Mr. Harrison. Senator, I think the key issue, what makes
this exceptional and suggests that sunset is not appropriate is
most of the time, when a consent decree is entered, the
behavior that gave rise to the consent decree goes away and so
the consent decree is no longer needed.
At the end of the day, what ASCAP and BMI are are
horizontal sales agencies. They take otherwise competing
publishers, aggregate them together and then fix a single price
for what otherwise would be competing catalogs.
Unless that behavior changes, it does not seem appropriate
to do away with the protections that are provided licensees for
there to be abusive market power and super-competitive rates.
Mr. Pincus. In the market today, there are many, many
digital music services that operate without the kind of
regulation that music publishers operate under and the market
is thriving.
As to transparency, for example, my understanding is that
the majority of publishing data is currently available on a
voluntary basis by private actors.
So I think where the market is more free in this particular
area, it becomes more competitive.
Mr. Dowdle. Senator Perdue, thank you for the question. As
Mr. Harrison said, these are very unusual decrees. The
Department of Justice entered into these decrees not as it
usually does to prevent and deter anticompetitive conduct, they
actually entered into these decrees to enable anticompetitive
product within a construct that it could be regulated.
That makes them very unique and it makes them necessary. If
we are going to continue in the world and have ASCAP, BMI,
SESAC, Global Rights and all of these others, plus the large
publishers they represent, if they can operate as a collective
the way they do, there has to be a construct or they will
engage in anticompetitive activity.
Mr. Miller. Well, in a perfect world, I think that the
consent decrees could go away. What we do not want to see
happen is we do not want to destabilize our collective
agencies, mine being BMI, because it is just too important.
So we would hope that we could find ways to modify it to
give us some relief. It is just crucial to what we do now. And
the relationship with the PROs, by and large, and the writers
is good.
My wife of 23 years, as I was running some of these
technicalities by her looking for a little bit of wisdom, she
says, ``I don't know what any of that means, but I do know
this. The only days I circle on my calendar every year are the
4-days your BMI check is coming. Do whatever you have got to do
to keep that.''
Senator Perdue. Thank you.
Ms. Griffin. Senator, I agree that the consent decrees have
been in place for an unusually long time, because these are
unusual circumstances here. And I wold say I do not think
anybody at this table would be happier than I would be if we
found the silver bullet that created competition in the
marketplace and made the consent decrees unnecessary.
But that is not the world we are living in right now. So
especially given that we have seen increasing consolidation
among the publishers, some of which was justified because we
had the consent decrees as a backstop, and we have this Federal
court case where a judge found that the publishers had the
opportunity to compete and they coordinated with each other,
that sunsetting the consent decrees at this time would be
unnecessary.
But we should, of course, always be reevaluating as we go
forward.
Senator Perdue. Thank you all. Thank you, Mr. Chairman.
Chairman Lee. I think I would like to start with Mr. Dowdle
in this round.
Mr. Dowdle, I think, as has been mentioned today, a
distinguishing characteristic of any free market system is that
two parties negotiating have the ability to walk away from the
negotiation if they cannot achieve a mutually agreeable
outcome.
Yet it has been suggested that music services and
broadcasters in particular cannot--they literally cannot walk
away from license negotiations with the publisher or with a
PRO, because they do not have total control over what music
they publicly perform.
So let me just ask you that question. Can a broadcaster
remove a specific licensor's catalog from its service? Is that
possible?
Mr. Dowdle. Theoretically possible, not practically
possible, and here is why. We have various types of programming
that we put out over our airwaves. Some of that we produce. For
that that we produce, we identify the music. We are able to do
that exactly. But for a very large----
Chairman Lee. If you identify the music, you can then
figure out who holds the copyright and whether or not----
Mr. Dowdle. Exactly. And if we cannot come to an agreement
with them, we can cut that music out, the music--the program
that we produce, such as our local news, local magazine shows,
things like that. But for a large portion of our programming,
we do not have the ability to do that.
Now, part of that programming, which is network
programming, is cleared through to the viewer. So we do not
have to worry about that. The networks worry about that. But
all of our syndicated programming, all of our commercials, and
a lot of the stuff that comes in between, we do not have that
editorial control. We could not do it if we tried.
Therefore, we are at the mercy literally of these PROs.
Everybody that is going to come to us and say if you do not
license for me, I am coming after you, we have no way to avoid
it.
Chairman Lee. Would any of that change if the broadcaster
were provided with a continuously updated list of songs in the
catalog at issue? Would that change?
Mr. Dowdle. It would not change in the sense that the
producers of syndicated programming or the commercials, they do
not identify for us whose music they are using. I do not know
that that is within the realm of possibility to have every
single producer that is going to provide music to us in our
programming identify music.
If you could do that, it is theoretical possible. It is
just not practically going to happen.
Chairman Lee. Right. You would basically have to have the
ability to see the future.
Mr. Dowdle. Yes.
Chairman Lee. If you had that superpower, then a lot of
other things would be better, too.
Mr. Dowdle. If we were king, it would be a different place.
Chairman Lee. Ms. Griffin, I believe much of the pressure
on the Department of Justice to make changes to the consent
decrees may well stem from the threat of full withdrawal by the
publishers, which would seriously threaten the current blanket
license scheme that we have in place today.
If the blanket license framework is truly at risk of
falling apart, what, in your view, is the best alternative to
the consent decree system when it comes to ensuring robust
competition in the marketplace for performing rights licenses?
Ms. Griffin. In terms of alternative structures, other than
an antitrust consent decree, we do have statutory licenses for
certain uses in copyright law. If we can come up with a
statutory license that also protects competition and provides
transparency, helps artists get paid directly, we would support
that.
But at the time, we do not have that for these kinds of
uses. So I would be concerned about dismantling the protections
in these consent decrees until we have the new structure set
up.
Chairman Lee. Can you tell us whether you think it makes
sense to have this quasi-regulatory system--it is essentially a
regulatory system--administered by a handful of DOJ regulators
and a couple of judges or should Congress consider legislation
setting up some other type of regulatory structure and, if so,
what would that legislation look like?
Ms. Griffin. So we do have other structures. As I think was
mentioned earlier, we have the Copyright Royalty Board for
statutory licenses. But in terms of the consent decrees as they
are now, I would say that the Department of Justice has very
deep antitrust expertise and expertise evaluating how markets
are working, which is very important here.
And for the Federal judges, they are impartial, they
understand the law, and they, through the discovery process,
are able to obtain all the facts.
So I would say that I do not view that as a bad system, but
it is not that we cannot consider new ones.
Chairman Lee. Thank you. My time has expired.
Senator Klobuchar.
Senator Klobuchar. Thank you.
Ms. Griffin, one of the things that we know is that
regardless of the consent decree review, you were talking about
some other things with Senator Lee that are possibilities if we
did not have the consent decrees, and I think you said that
there would be a problem not to have it, from your perspective,
from a consumer standpoint.
But how about private enforcement of the antitrust law?
Even if DOJ is not pursuing competition issues, private parties
can still seek to address the issues in the courts. Do you see
downsides to relying on private enforcement?
Ms. Griffin. Yes, Senator. My concerns with private
enforcement would be that the parties bringing the cases could
likely be much smaller or at least it would make it relatively
easier for a very large company, like a Pandora or a large
broadcaster to bring a suit, although that itself wold be
burdensome, but the little guys, it would be near impossible
for them because of the expense.
And, also, I would say that transparency is an issue here
because part of the problem is that it is difficult to bring an
antitrust lawsuit against somebody if you do not know that they
are coordinating.
Senator Klobuchar. Very good. Mr. Dowdle, do you want to
weigh in on that at all? Mr. Dowdle. Frankly, I do not know if
there is a construct that we can come up with. Certainly, it is
problematic for a small broadcaster like us. We are not very
big, frankly. For us to be left with a private antitrust
enforcement against an entity such as ASCAP and BMI is not very
appealing.
Talk about expense, and that is not an expense spread over
an industry, that is our expense and I just do not think that
we could do it, not even talk the little broadcasters that are
much smaller than we are. It is not even a practical
possibility for them.
And so I just do not think that is a really workable
solution.
Senator Klobuchar. I just wondered. I want to get people's
views, because that has been thrown out.
Mr. Dowdle. Of course. Thank you, Senator.
Senator Klobuchar. And do you see any changes to the
consent decrees that you think would work with the concerns
that have been raised here?
Mr. Dowdle. I mentioned transparency. I think that is huge.
It has been mentioned by everyone and I think agreed upon by
everyone. Transparency in the process has been historically a
real problem. I know that because I used to license all of the
music used in the Intel commercials before I came to
Bonneville, among other things.
Finding the songwriter and finding the record label that
actually controls the rights was a real problem and without
better use--availability of data and use of that data across
all the system, I just do not think it is workable.
Senator Klobuchar. Thank you.
Mr. Pincus, do you want to weigh in on this?
Mr. Pincus. Well, a couple of things. First, to
transparency, I agree, like all of the other panelists, that
that is a very important issue. I think the market is solving
that issues. There is more data available on music publishing
copyrights now than there ever has been and it is getting
better on almost a daily basis, not only at the independent
level, but also at the major level.
And just quickly, to another point about the blanket
licensing system. Many of the arguments that are being put
forth here are a very good reason to preserve the blanket
licensing system. I agree with Mr. Dowdle that the television
licensing system should operate on a blanket basis. The problem
is that it is attached by the cords to the digital licensing
problem.
Digital licensing is much easier done on a direct basis
than, for example, television licensing. So that is a very good
argument for why partial withdrawal of digital rights ought to
be allowed to occur.
Senator Klobuchar. Mr. Miller?
Mr. Miller. Well, that is one of the million technical
questions that is probably beyond my pay grade. I will say, as
far as things such as transparency, that I think would be
relevant to maybe part of your question.
If I have a hit song, a million plays on terrestrial radio
is kind of a threshold. They send us a plaque at a million
plays. Okay. If I have one of those every now and then, you
now, I am raising a family and we are doing okay. And now we
get into a situation where we see these numbers on digital of
50 million and 100 million spins, and the songwriters are
shaking our heads going, ``What are you talking about?'' We
cannot even comprehend.
I understand it is a different medium and we can talk about
the Internet and we talk about technology, but a million plays,
we are smiling and taking the kids to movies; 100 million plays
is worth a few thousand dollars.
Now, we get transparency on that. We see those numbers
quite clear. So I think that is what we cannot emphasize
enough. How is that fair and where is the middle ground?
Under those numbers, if you move that ledger around just a
little bit, doing what I do is a very profitable business
potentially because apparently music is more popular than it
has ever been, and I think everyone will tell you that.
Mr. Harrison. Senator Klobuchar, I think it is important,
and as Mr. Miller talks about a million spins on terrestrial
radio versus the Internet and noted that it is a different
technology, Internet deliver is a one-to-one delivery
mechanism. It is not a one-to-many like broadcast.
So if you look at--if you wanted to do a real apples-to-
apples comparison, if you were to take a million spins on
Pandora to reach a million people on, for example, Z100, the
largest radio station in New York City, you would only have to
play that song 16 times.
If you wanted to reach that same million person audience in
Los Angeles, KISS-FM, the largest radio station in Los Angeles,
you would only need to play that song 21 times.
So it is important that we contextualize what a million
spins on Pandora means relative to spins on a terrestrial radio
broadcast.
Senator Klobuchar. Thank you.
Chairman Lee. Senator Blumenthal.
Senator Blumenthal. Thank you, Senator Lee.
I have a question for Mr. Dowdle. In your testimony, you
talked about, I think, both the value of the consent decrees
generally and about the harm that would be caused if composers
and publishers could withdraw from some of their rights without
withdrawing all of their rights.
You did not address, I do not believe, the two changes that
ASCAP and BMI have proposed to the content decree, bundling of
additional rights and arbitration.
Would you give us your view of those proposals?
Mr. Dowdle. Yes, Senator Blumenthal. Thank you.
I gave my--I think you were out of the room. I did address
arbitration. Arbitration is a poor, if even a second choice, a
very poor second choice to the system that we have now for
these reasons.
With an arbitrator, you do not know who you are going to
end up with, whether they even know anything about the
industry, and what you do know, with the rate courts that we
have, is that these courts have deep experience and a lot of
history with these consent decrees. They understand the
underlying dynamic that is going on. That is first.
Second, in the Federal courts, you have a lot of tools
available. Mr. Harrison talked about this--in discovering
information and getting that information in front of the
tribunal, having both sides able to engage in that process
freely and openly so that the full panoply of information is in
front of the tribunal.
With an arbitrator, you do not necessarily have that. And I
think substituting arbitration for what we have now is not
really a very good solution, in my opinion.
As to other licenses, from my standpoint, I mentioned
earlier I am a member of ASCAP and have been for over 20 years,
owned music companies, and I think there is maybe something to
look at there in allowing these PROs to administer additional
rights.
Their competitors are certainly doing that. SESAC is able
to, Global Rights is able to. If ASCAP and BMI are going to
compete going forward, we should take a look at that.
Senator Blumenthal. Let me ask, Ms. Matthews, if you had
your choice, would you abolish the consent decree or just make
reforms to it?
Ms. Matthews. I am sorry. If I had my choice, would I
abolish the consent decree or----
Senator Blumenthal. Would you eliminate the consent decree
or just reform it?
Ms. Blumenthal. So in a perfect world, I would eliminate
the consent decree. Sadly, we do not live in that perfect
world. So our immediate concern is keeping high value writers
and high value publishers in the system, because if the system
goes away, everybody loses. Licensees lose because they will
not have access to millions of copyrights to clear at once
through a blanket license agreement. Consumers lose because
once the money stops flowing or once the songs stop flowing,
the money will stop flowing.
But we are mostly concerned about songwriters, because they
are simply not going to be capable of licensing 700,000
establishments in the United States and millions of
establishments outside of the United States, which means they
will not get paid and their works will be infringed.
Senator Blumenthal. And why do you think--I think I know
the answer, but why would eliminating the consent decrees be
preferable in a perfect world?
Ms. Matthews. Because ASCAP believes the free market works.
Without regulation, we think you get to the right results. And
as copyright owners, we believe at the core of our law is this
principle that you should control your assets, whether it is a
real property asset or an intellectual property asset. You
should have control as that owner. The consent decrees take
that control away.
Senator Blumenthal. Thank you. Thanks, Mr. Chairman.
Chairman Lee. Thank you.
Senator Tillis.
Senator Tillis. Mr. Harrison, you made an interesting point
about the one-to-one relationship of streamers versus
broadcast. In your opinion today--and I think that Mr. Miller's
concern about being justly compensated--in your opinion today,
when you normalize in that way, do you feel like the streamers
are justly compensating?
Mr. Harrison. Pandora is the highest paying form of radio
there is. We pay more in total royalties than terrestrial radio
or satellite radio.
I think the best performing song by Mr. Miller on Pandora
is ``Country Girl,'' which I believe was recorded by Tim
McGraw. Last year, 2014, Pandora would have paid around $7,000
to Mr. Miller, his two co-writers, and the six publishers that
are listed on that song.
Candidly, Pandora would have paid close to $90,000 to Mr.
McGraw and his record label. I understand that the disparity is
a motivating factor for Mr. Miller, Mr. Pincus, and Ms.
Matthews to seek to modify the consent decrees, but at the end
of the day, if Pandora is paying 50 percent of its revenue to
the record labels and the solution is to pay 50 percent of the
revenue to the publishers, I cannot make that up on volume.
If there is going to be a--if the disparity is going to be
solved, it is going to have to be solved by the copyright
owners themselves, not on the back of services like Pandora.
Senator Tillis. I have a general question for anyone that
would like to speak up.
Mr. Harrison was talking about this data base to increase
transparency and Senator Hatch mentioned it. In your opinion,
is that a good idea or a bad idea? What are your concerns or
what are the merits? We can just start with Ms. Matthews and
run down the line.
Ms. Matthews. So as I stated earlier, ASCAP fully supports
transparency. We most recently made modifications to our own
proprietary system, which is available to the public.
Senator Tillis. Ms. Matthews, would you have a concern with
the concept of what Mr. Harrison has proposed or you feel like
you are already achieving it through existing--I am trying to
get a sense for this net new idea and whether you have a
specific concern with it and for what reasons, if you do.
Ms. Matthews. So my specific concern would be practically
how one would require cooperation through the entire sector,
especially with unregulated actors, our competitors. I know
that ASCAP and BMI are fully willing to cooperate, but I worry
that if others do not completely cooperate, licensees will
never have access to the full picture of data that is required.
Senator Tillis. Mr. Harrison, you mentioned it in your
opening comments. Do you have anything you would like to add in
terms of your rationale for it?
Mr. Harrison. I think it is the transparency and certainly
there--we know that the data bases exist. We know that the
publishers and the PROs assign unique identifiers to all the
works in their catalog. Mr. Pincus has made his catalog
publicly available. I have already downloaded it and sent it to
our engineers to have them ingest it into our system so that we
can understand what songs are controlled by songs.
But the transparency piece has to go far enough to allow us
to understand that not just the owner of the song, but also
what sound recordings have been made of that song.
Senator Tillis. Mr. Pincus?
Mr. Pincus. I think this is one of the issues on which Mr.
Harrison agree in terms of the open availability of data.
My position, however, is that the market is taking care of
that problem and where the market can take care of that
problem, it is better than regulation taking care of that
problem.
One area, if I may, where we disagree is that I understand
Mr. Harrison's comment about not being able to pay 50 percent
to each party, but I would also say that I am not sure that I
feel, as a small business owner, that it is my responsibility
to subsidize a public company.
Senator Tillis. Mr. Dowdle?
Mr. Dowdle. Thank you, Senator. Yes. I think it is
problematic. I believe that Ms. Matthews is correct. It is
problematic to get everybody involved. But with ASCAP and BMI
controlling 90 percent, let us start there. Let us start at 90
percent. That is a pretty good place to start. And if you can
get the other actors in piecemeal, well, that is okay, but let
us start with 90 percent and see where it goes.
Senator Tillis. Mr. Miller?
Mr. Miller. Mr. Pincus and Ms. Matthews can speak to that
much better than me on the technicalities.
I will clarify Mr. Harrison's comment. It's called
``Southern Girl,'' not ``Country Girl.'' That is important.
Words matter. By his own numbers, that would be $7,000 split
six ways. I got a sixth of $7,000--that is on a number one song
in the United States on Tim McGraw.
Senator Tillis. Ms. Griffin?
Ms. Griffin. On the issue of a data base, I agree that
moving forward, I am trying to figure out what that would look
like and how to get as much information as possible is
important. There are a lot of details that a lot of actors have
been talking about there, including the Copyright Office who
has looked into this issue.
I would say I do not think that the market is handling that
right now. Right now, if you look at the biggest licensors, you
may be able to, at most, download a list of all of the
songwriters or all the songs in the catalog, but there is not a
guarantee that that is what they currently control. It is more
of at some point this was our catalog, but we will not promise
you that that is what is in it on the day that you license,
which brings up huge liability concerns for somebody who is
trying to enter the market.
Senator Tillis. Mr. Pincus?
Mr. Pincus. Well, with respect to my business, that is
actually not the case. We are approximating open data on as
close to a real-time basis as practical. And my understanding
is that at least one of the majors has disclosed all the
information, including shares.
Senator Tillis. Thank you all for testifying. Thank you,
Mr. Chair.
Chairman Lee. Thank you, Senator Tillis.
Senator Blumenthal.
Senator Blumenthal. I do not have any additional questions.
Thank you.
Chairman Lee. Great.
Mr. Harrison, we have got two different types of royalties
that end up getting paid in some circumstances, one established
under the consent decrees and another established under the
CRB, under the Copyright Royalty Board.
Those established under the latter, a I understand them,
are substantially higher than those established under the
former. So you have got one set of royalties that go to those
who wrote the song, another set of royalties that go to those
who recorded the song.
Why should there be a substantial difference between these
two rates?
Mr. Harrison. Well, Senator, I think as I mentioned
earlier, I do not believe Pandora is in the best position to
value the relative contributions of the song versus the
recording. I think that is probably better left to publishers
and songwriters and artists and labels.
Having said that, if you go back to the early Royalty Board
proceedings, what you had was executives of companies that
owned both record labels and music publishers who argued that
the rates that should be paid to perform a sound recording
should be higher than the rate that was paid to a music
publisher, because according to these executives, the record
labels invest significantly more in bringing new music to
market.
As I said, I am not in a good position to make those
relative value judgments. At the end of the day, the copyright
owners themselves have made those arguments.
Chairman Lee. Now, if the Department of Justice decides to
allow partial withdrawal, it will likely impose other
requirements on the PROs, including increased transparency,
changes to board membership, some of these things that have
been mentioned earlier in the hearing.
In your opinion, will additional safeguards be sufficient
to ensure a competitive market if publishers can partially
withdraw?
Mr. Harrison. Well, without seeing the details of all of--
not just of what the suggestions are, but actually the language
that is intended to be used, it is hard to judge prospectively.
But I remain confident that the department is not going to do
things that result in less competition in the market.
Chairman Lee. I certainly hope they would not do that. But
do you think those things would be sufficient?
Mr. Harrison. As I said, without seeing a full list of what
the department would propose and then actually read what
language is used to implement them, it is tough to have an
informed opinion.
Chairman Lee. Mr. Dowdle, whenever we consider the
potential increase in prices in one market, it is important to
consider its potential effect on related markets. In this case,
related markets might include not only other music licenses,
but such as performance rights for sound recordings, but also
prices at restaurants and bars and at stores that play music.
What effect might increased rates have on prices for other
music licenses or for goods associated with music?
Mr. Dowdle. I think as we take a look at what is really
happening, in those fairly rare instances where actors in the
market are negotiating with each other, and there are a couple
of those that have been reported in the last couple of years.
You have at least on major label who has entered in to an
agreement that--where prices have been at play for many of
those things.
We do not know all of them because they are not
particularly transparent with all that information. But if the
reports that have been received are true, there has been an
equalizing in those deals of different prices for different
rights throughout that deal, and I think that is very
instructive.
The market itself, as Mr. Harrison has alluded to, the
market itself, when allowed to operate, in those rare
instances, is able to equalize those rates. There will be an
effect, but I just do not know--I cannot foresee in the future
what that effect will be. There clearly will be an effect.
If you unpeg one rate, there will be an effect on other
rates. It is ironic that the provision in the Copyright Act
that ASCAP has complained about at this point was actually
placed in that regime at their request. Now they want to unpeg
it because they do not like the way that it is operating
presently.
But I think if you do unpeg it, be careful what you wish
for.
Chairman Lee. I understand you are a songwriter. You had a
long career in music before your time in broadcasting. In that
respect, you come with a unique set of perspectives to this
panel.
Let me just ask you, do you think the consent decrees, as
written, are necessary to preserve the benefits of our system
or do you think they could be achieved outside of the decrees?
Mr. Dowdle. What I can say is I believe that the system has
worked. Now, all the parties have taken their turn in various
scenarios coming to the tribunals as they are set up now and
taking advantage of those forums and arguing whatever issues
they had on the consent decrees.
Those consent decrees have been proven, more or less, to
work over a period that now spans more than 70 years. Playing
with taking those systems down or fundamentally changing them
we ought to be looking at very carefully, very cautiously. It
is a system that has been working. I do not know what we would
be looking at. It is hard to say hypothetically whether
something that would be replacing them would be better or not.
All I can say is they are working and I hesitate to change
something that has historically been working.
Chairman Lee. It is not just unknown, it is unknowable
whether that could be achieved outside the decrees until we
know what the ``it'' is, what the other ``it'' is.
Mr. Dowdle. Exactly right, Senator.
Chairman Lee. Thank you. I am going to keep the record for
this hearing open for 1 week and that will include keeping it
open for written questions.
I want to thank all of our witnesses for coming today. This
has been a very helpful hearing and you testimony has brought a
lot of insight to the table on this important and pretty
complex issue.
I thank Senator Klobuchar, also, for her help in putting
this together.
This hearing stands adjourned. Thank you.
[Whereupon, at 12:07 p.m., the hearing was adjourned.]
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