[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

=======================================================================

                                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

                               ----------                              

                             MARCH 10, 2015

                               ----------                              

                           Serial No. J-114-6

                               ----------                              

         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
                                
                                ------                                

   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

                              ----------                              

                        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

                              ----------                              


                        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.]
    [Additional material submitted for the record follows.]

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