Transcripts For CSPAN3 Politics Public Policy Today 20140617

Respect to a Music Production industry after the turn of the century, its no longer necessary and unjust few blee aggregates copyright owners rights today. Fortunately, legislation has been introduced to begin to address this and i thank members of the subcommittee for supporting the songwriters equity act. Public performance royalties represent the large income for song writers. Its inherently a free market right. Its not regulated by law. But because the department of justice imposed consent degrees in 1941, incredibly, those decrees are still in effect today. They do not sunset. Under these world war ii era decrees song writers and publishers may not negotiate their value in a free market t a federal judge in the Southern District of new york dictates how much a songwriter is paid. Last week they have announced they are undertaking a review of these decrees and we hope song writers will receive fair market compensation. Using music in movies, television shows, music videos and youtube, this is a free market right. It is not regulated by law. It is not regulated by Consent Decrees. Because the market is a free market, its a useful barometer for assessing the fair market value of songs. Not surprisingly, given both copyrigh copyrights, a negotiator in a free market, the practice is to pay both copyright owners under the same terms. Theres an amazing amount of Digital Content available to consumers on the itunes store, Google Play Store t amazon store, movies, books, video games, magazines, television shows, recorded music are all available and all of those copyrights are negotiated and licensed in the free market. Only the content produced by song writers is uniquely singled out and subject to heavy regulation. On behalf of those song writers, i ask you to let them be paid fairly by letting them be free. Thank you. Thank you. Mr. Knife . Thank you. Members of the subcommittee, i thank you for inviting me to testify today. I currently serve as the executive director of the Digital Media association for dema for short. Were a nationally recognized trade association that represents many of the leading players in the Digital Music marketplace. Youre probably familiar with many of our larger members which include Companies Like amazon. Com, apple, itunes, google, youtube, microsoft and rhapsody. But there are several Additional Companies we represent that play an equally important part in the development of the Digital Music system. In little more than a decades worth of tile, the role our companies have grown to play within the Music Industry is simply amazing. With respect to consumers, our ingenuity has provided fans of online music with access to new services and offerings that satisfy almost every deceivable price point. From Online Music Stores to on demand streaming to Internet Radio and more recently, cloudbased offerings. With respect to copy wright owners, our efforts have meant the creation of new Revenue Streams that have rewarded content creators and their agents for their creative endeavors. Sound exchange, for example, recently reported a 312 increase in the total sum of royalties it paid to recording artists and labels in 2012 versus 2008. This is thanks to moneys paid by Services Operating under the section 114 compulsory license, many of which we represent. With respect to songwriter successes, as cap and bmi recently recorded record high revenues of 944 million each in 2013. Meanwhile, the smallest of the three, has witnessed its revenue grow from just 9 million in 1994 to 167 million. All of these accomplishments have come as dema members have been able to successfully convert would be pirates into legitimate users of paying Music Services. Its safe to say that if we were writing from a blank slate today, no one would develop the Current System were asked to operate under here. In the remaining minutes of my time, i want to offer just a few thoughts on what essential elements should be included in any future music licensing reform package followed by a quick evaluation of why i think two recently introduced proposals in particular constitutes a bad public policy. First, a 21est century regime thats properly suited to handle the needs of an industry and Consumer Base thats consistently demanding legal access to content when and where they want it has to include, one, efficiency, two, transparency, three, safeguards that adequately protect licensies from anticompetitive behavior, four, a level Playing Field among competitors, and five, it should shield licensies from risks when those licensies are acting diligently and in good faith. Greater efficiency has two parent benefits. For licensies it guarantees new products and services can be brought to the market sooner which helps us in our fight against online pirates. For creators, greater efficiency will mean less of the royalties we pay for the right to perform or district content will be used to cover administrative expenses. Last year alone, more than 200 million in royalties paid by music licensies was redirected to cover Pro Operating expenses. Greater efficiency would mean fewer middle men and more money in the pockets of song writers. The importance of transparency is robvious. The creator misses out on a royalty and the general public is deprived of the benefit of enjoying his or her creativity. Greater transparency provides full advise vilt into other services paid and the way theyre administered by the agencies and the affiliates that the artists rely on. This in turn will allow artists to make better informed decisions to maximize the net payments they ultimately receive. In the area of competition, the need to protect licensies from anticompetitive behavior may be greater now than at any time in history due to the recent consolidation in the recording and Music Publishing industries. Some, particularly in the context of licensing of musical works, have taken issue with this notion and even ask that certain requirements be modified. Before taking this considerable step, we would strongly urge policy makers to review the history of the Consent Decrees which is attached to my testimony and also recent federal court cases which have made note of continuing anticompetitive behavior carried out by various parties acting on behalf of the Music Publishing industry. Further on the subject of competition, a good Competitive Landscape requires a level Playing Field among competitors. For several years web casters have had one simple request. Namely, that the same rate setting standard thats currently used to determine performance royalties for cable and satellite radio be used for Internet Radio. Record labels have relied on this standard since the 70s while cable and satellite providers have relied on it while licensing sound recordings since the 90s. Your time is about expired. Excuse me . Your time is expired. Im sorry. Id like to close by saying we should consider the collective issues that i raised when we consider an omni bus approach to reform. Thank you, sir. Appreciate that. Mr. Oneil . Mr. Chairman, mr. Ranking member, subcommittee members, thank you for inviting me today. I am honored to be here. Id like to thank congressman collins for sponsorship of the songwriter equity act. Its being well received by my members. The im Michael Oneil and president and ceo of bmi. Ive been working with song writers, composers and publishers and businesses for 20 years. We were founded in 1939 as a not for profit company, and bmi today is one of the worlds leading performing Rights Organizations. Under copyright law, whenever music is played in the public, the creators of that music, people like lee thomas miller, are entitled to be compensated. We represent over 600,000 song writers and publishers and license their over 8. 5 million works to businesses across the country. We also work with rights societies all over the world, wherever american song writers music is used to make sure theyre paid for it. Today through the marriage of technology and artistic creativity, Digital Media has democratized the industry. It has knocked down barriers and created more opportunities for creators than ever before. While this is promising, as these new innovations come out, bmis is to ensure that our song writers and publishers are paid fairly. That mission, however, is being frustrated by an out of date Regulatory Framework. Bmi is governed under a Consent Decree which dates back to 1966 and beyond. Essentially were locked into a model that might have been appropriate when the beatles first came to america. That might have been appropriate when you had to get out of your chair or sofa to turn the channel on your television, bull but it isnt property in todays modern world. Here are three proposals to bring it into the 20th century. First, publishers do not currently have the flexibility to decide when they choose to utilize bmi and when they can license those works exclusively for themselves. Bmis rate court has held that publishers must choose between giving their works completely to bmi for all uses or not joining bmi at all. A publisher that wishes to license one Digital Service on its own without the involvement of bmi must pull out from any other use, thus recreating what bmi does across the 600,000 businesses we license. Publishers should be allowed to decide what businesses and what rights they wish to convey to bmi to license and what businesses and which rights they want to license themselves. This will require a change to our Consent Decree. Second, we need to be able to license more than just a performing right. Under copyright law, businesses often need multiple rights, especially online. Why make them seek out multiple people to get those licenses . Given the expertise and experience and the relationships with both the Business World and the creative world, i believe bmi is that one stop shop, a single destination where businesses can secure every right they need. Our decree should make that clear. The bmi and rate courts should be modernized. We propose replacing the Current Court with an arbitration model. The result were seeking would be faster, less expensive, and be more market responsive for all parties. Finally, the Consent Decree should sunset when the basis for those decrees no longer exist. As bmis relative strength in a marketplace is reduced by many new entrants, new participants competing with bmi, we should be allowed to operate on behalf of our writers on the same terms and conditions as our competitors do. In conclusion, bmis song writers and publishers face a Competitive Landscape. In order to meet those challenges, all participants need to provide greater flexibility and operate more officially. When song writers are unable to make a sustainable living, we are all impacted. The department of justice is undertaking a look at our decree and we are very excited and look forward to working with them to make those changes. On behalf of all bmi song writers across all 50 states, i thank you for your time. Thank you mr. Oneil. Good morning. My name is will hoit and i am the executive director of the music licensing committee. We represent 1200 legal commercial television stations concerning Music Performance rights and has on behalf of its members been involved in negotiations, arbitration and litigation for decades that represent composers and publishers. Based on tmlcs decades of experience, the Consent Decree restrictions must stay in place and consideration should be given to extending these types of restrictions to any entity that aggregates or bundles the power rightfully vested in individuals by congress. Local stations broadcast network, syndicated and locally produced programs. In most syndicated programs, stations do not selector control the music used in these programs. Theyre required to broadcast these programs precisely as produced and recorded by third Party Producers and then required to license the public performances embedded in the program. The stations license these performances through as cat, bmi or c sack. Each station must take a license from each pro. Historically, they have only issued licenses that permit the use of all of the aggregated copyrights in their respiratory without regard to the performance actually made by local stations. This is the socalled blanket license. Decades ago bmi entered into decrees with the department of justice to settle antitrust actions commenced by the department. These decrees have been instrumental in providing stations the right to reasonable license terms in light of the extraordinary market power that as cap and bmi enjoy by virtue of their Performance Rights and insist ans on licensing those copyrights on a selective or bundled basis. Independent federal judges have ruled that understand the Consent Decrees, some of the rights to perform music in the stations programming were licensed directly from the copyright owner. They have helped facilitate direct licensing within the industry and therefore more competition. These alternative Licensing Arrangements and fee structures were denounced by as cap and bmi, fought for and would not have been possible without the Consent Decree provisions. As explained in my written testimony, c sack is not subject to the restrictions and is the subject of a class action suit brought by local Television Broadcasters with support from the tmlc. The licensing practice of c sack demonstrated what any Performance Rights collected or any other organization will do without the types of restrictions contained in the Consent Decrees. The motion was denied in the class action antitrust case brought by television. The judge observed it is undispute that c sack possesses monopoly power and described the evidence of actions taken in recent years that are specifically banned by the as cap and bmi Consent Decrees. Attempts by tmlc to gain access to Music Performance information maintained by pros about the music contained have often been denied on the grounds that such music use information is supposedly proprietary. A general policy that requires collectives to publicly release information on which roadwayty distributions are based would help promote a more competitive market. We stand ready to cooperate with creators, collectives and other users to find Common Grounds on legislation that would promote competitive market values for the right to perform musical works. That is, legislation that will fulfill the constitutional provision to enhance the public interest. Thank you all very much for your time. Thank you. Mr. Griffin . Youre our cleanup hitter today, mr. Griffin. Excellent. I think im used to doing that. My name is is jim griffin. Im a media technologist which i think means im the panels geek. Thats appropriate. 20 years ago this coming saturday when i was the director of technology for geffen records, we released the first full length song online arrow smiths head first on june 14, 1994. Its been 20 years now. There are so many issues that are at the forefront of todays hearing. Im fascinated by all of them. But im going to focus on only one issue. Thats the growing need for registries, for databases, comprehensive databases of information related to creative works. Not just music, so my remarks, while they focus on music, really span the field of copyrights. Im going to make just a half a dozen fundamental points. The first point is that our goal should be to make it fast, easy and simple to pay for music, movies, books, art, other expressions of ideas such that the market can work with efficiency. If we make it fast, easy and simple to pay, more people will. Secondly, we need comprehensive public directories. It is unnecessarily difficult to pay or license from those difficult to identify or locate. We must work to record, e enumerate and update public databases that gets creators paid and works license. Two years ago i coauthored a paper for the law journal. The title tells the story, and thats all of the story you need to know without rights enumerated, theyre very difficult to respect. My third key point is that we should include all creators when we build these databases. [ inaudible ] mr. Griffin, you may want to pull that mic closer to you. Is this better . Okay. I guess i have two minutes to repeat a lot of what i said. So i will go very, very quickly here for you. Just to repeat that my name is is jim griffin. Im the panels geek, the media technologists here excuse me, sir, we heard it all. We heard it clearly. Got you then, thats fine by me. The fourth key point that im going to make is that we need geids and thats globally unique identifiers, no less than a bank check or a credit card. We have to have a number for each song, each book, each thing that we are trying to track. Simply using the title or the artist name is not enough. There are so many different ways to spell the creators name or the title that it makes matching extremely difficult, and yes, its true, we do rely upon semantics matching absent globally unique identifiers. Theyre easy to explain. Theyre like the vin number on a car. Without a vin number, we cannot accurately describe it. When we have these globally unique identifiers, we need to have them in a public database thats accessible to anyone to read. We do not now have appropriate databases for music, photos, graphics so cite a few examples where its not done at all. The key concern is that absent the use of these numbers, money disappears along its path to its intended receiver. Where does this money go . It goes to pools of unastribtd income divided through market share formulas at the organizations that collect the money and not the specific creator for which it is intended. I will say theres a Market Solution and it does not require the government to step in to fix it. The government, i think, should provide a wholesale core database that encourages retail activity at the edge of the market, no different than what happens with internet domain names. Theres a whole sale market at the center but it encourages a retail Market Solution at the edge. I will finish by saying that the problem is growing in front of us. In roughly the year 2000 we saw 50,000 sound recording albums released a year. By todays standards we go through that in four days on sound cloud on january 4th and some time on january 1st youtube sees that much content. Weve got a moving target. If we expect respect for rights, rights need recore days and im enumeration. This issue cuts across all concerns, regardless of how you license. You need to keep track of the stuff that you are licensing. Thank you. Thank you, mr. Griffin. As we examine you all, we try to stay within the fiveminute rule as well so if you work with us on that, i am told that the chairman has a meeting that we must attend, so we will let him kick it off. Mr. Chairman, thank you for your forbearance and to all of our witnesses, thank you. The clock is ticking, ive got four questions for all of you. Thats 28 answers. They need to be really short, most of them yes or no. Number one, well start with you mr. Portnow. Would a free market model be a better alternative than the licensing system we have today . Its a fair market that we need. In other words, what we have to pay mr. Miller . Yes, thats exactly what were here to ask you for today . Of course, yes. Mr. Knight . I think we need a fair packet as mr. Portnow was saying. Mr. Oneil. Polilease, yes. If you define it as a competitive market, yes. Mr. Griffin . As much as possible but copy wright is tough. Number two, former register of copyright, Mary Beth Peters once suggested the music rights so that music serves can more quickly get started, would you support a Music Rights Organization model rather than the Current System . Complicated question. It would depend on what that looks like. What i would say is that our community cannot subsidize the establishment of new businesses however off our backs. Mr. Miller . We support anything that reveals the copyright. That would happen in a free market. Mr. Knight . I think we wouldnt support the addition of other layers of administration but we do support anything that leads to the efficiency in the marketplace. Mr. Oneil . Yes. We dont see the necessity for a government regulated single unit and we believe that the competitive market will work in the long run. Mr. Griffin . I favor the consolidation that you described. Heres the tough one, you got to do some mental calculations quickly. Whats the appropriate split between a songwriter and a performer for their work and should congress determine the split or should someone else . If so, who . Nobody is getting rich from the new services. We have regulatory bodies at this point who are making that judgment. If its done on a fair market value, thats whats important, that each of the creators have what is fair in the marketplace. Mr. Miller . Essentially its two thinks, the underlying works is the words and the notes and then you have a sound recording. Mr. Israel would have to speak to the complications of that. A free market would answer that question, and the one place where theres a free market for copyrights which is the syncization right, its generally split 50 50. Were agnostic as to what that split would be but we are inclined to move towards a system where we would only have to pay one person and others would define what the split is among their rights. I have song writers who are artists and song writers that are just song writers and they argue that often. I think the free market would ultimately determine it. If you can create a truly competitive market, that competitive market will determine the rates. I dont think you should compel a particular solution or percentage. I think you should allow the parties to reach an agreement, but if they cannot, there needs to be an alternate arrangement such that thats payment. Congratulations. We are through 21 of the 28 questions and we still have a green light. Mr. Portnow, this is a little broader, what are the less visible issues that congress should be aware of as we review our nations music licensing laws . Weve got our hands full with the ones that are visible. Id be happy to talk about that privately. The current state of the Digital World is so debilitating to the song writing community that i assure you we cannot see beyond the obvious. Theres been quite a bit of focus on the market power of lee and his fellow song writers as opposed to the market power of the people we license to. I dont think that google and amazon and apple need protection in their negotiations with song writers. I think some of the issues that arent be addressed are issues the way money flows through the system. There are large of royalties getting paid but we still hear from song writers that theyre not getting paid. There are many issues below the surface that we just dont have time for. Well, perhaps my opening this up will cause you or others to comment as we move forward with more time. In the interest of public policy, i think you have to really look at the balance between the benefits of a obligation and price limitation. Its a very difficult question to answer definitive but we have to maintain monitoring to ensure balance. Mr. Chairman, thank you for your forbearance, 28 answers in five and a half minutes is pretty good. You almost went over the green light. Thank you. The distinguished gentleman from new york is recognized for five minutes. Thank you, mr. Chairman. Mr. Portnow. You endorse a comprehensive unified legislative approach to music licensing. We sometimes hear what are the advantages to a comprehensive approach . Are there harms to doing it piecemeal . Briefly, please. I have a lot of questions. I think we see the results of the bandaid approach. Over the years weve cobbled together these various different rights from different generations and when we arrive at where we are today, they just dont work. To do it piecemeal at this point when we have a great opportunity to make a difference, you hear everybody on this panel clearly saying that we have to make some changes. Ive heard most of you saying that some changes need to be made. We need to grab that opportunity. Its not certainly going to be easy. Its complicated. But thats really the way to go. Are there harms to doing it piecemeal . Why do we need a comprehensive approach . Comprehensive is the way to go in the long run because the piecemeal has not served us as well. Thank you. We also sometimes hear that a royalty for performing artists from radio would benefit the biggest of stars, not smaller artists. Whats your response and are there studies or other data showing this . The performance right, the way it would work is that it would go to the artist and the artist, whether it was a large artist or a small artist really is not relevant. The fact is that when somebodys work is played on the air and they are the performer, they ought to be paid. Theres no example in American History of business that profits from the works of others without paying them. Actually there is but its before the civil war. Thank you. Mr. Israelite, one goal is to maximize fair market value. How do you envision achieving that and can we do it in a comprehensive fashion so we dont leave anyone behind . About a quarter of our industry is regulated with a kpelsry license. We want to get rid of the compulsory license. We need to at least get a rate standard of willing seller, willing buyer. If that were the case, i can promise you that on 1. 29 download, a songwriter would make more than 9. 1 cents. In the absence of being given a free market opportunity, at least let the judges that set our rates try to approximate what would happen in a free market. What did you say that 1909 two cents was worth today . With inflation it would be 50 cents. But its only 9 cents . 9. 1. Under current law theres a different rate setting standard thats use today establish rates for cable and satellite than Internet Radio. How has this impacted your members . Clearly the biggest way its affected them is that they pay considerably higher rates. The willing buyer willing seller standards has led to higher rates. Currently some of your competitors have an advantage over you in creating parody would at least level that Playing Field . Absolutely, sir, yes. Why should we do the 801 b . A couple reasons. Probably the first and foremost is that the willing buyer willing seller is relatively new. In the short tenure it has result in disastrous results that this house has seen fit to intervene on. Where as the 801 b standard has been in existence for a far longer period of time and hasnt resulted in any difficult quickly ask if the others agree with that statement about the impact of the willing buyer, willing seller standard, quickly . The people that use songs may find it offensive to pay a fair market rate for them, but the fact that that would be a newer standard is no argument by a songwriter, doesnt deserve a fair market rate. Back to mr. Knife, given potentially thousands of rights that must be cleared for a single song to come to production, is a free and fair market system in a free and fair market system, how do we make this work . How do you deal with thousands of rights for a particular song . Those issues were addressed a little by mr. Hoyt and mr. Griffin. We have to balance the interests between an efficient marketplace which might include the collecting of rights licensing with fair royalty rates. So we have to kind of balance those issues and make sure that were controlling those monopolized interests. Mr. Griffin, my last question. You said that its unnecessarily difficult to pay or license, we must work to create a comprehensive registry system. My question is, do you mean Going Forward or backward . How much would such a system cost . How long would it take to set up . Who would pay for it . And why . Users should pay for it. It doesnt cost anything because its profitable. If you look at the internet domain name it wouldnt cost anything to set up this massive system . You already have a cost of the Copyright Office. If you make it a market based system, you invite the go daddies of the world to help you fill and populate that database and they make money doing so. So if you build a market based system of registration, i believe youll have the outreach how long would it take to set that up . I think it could be done within a year. Are you talking about Going Forward only or going back . It needs to go forward and backwards. That allows to register any claim. You think that you can register every song going back to the song of merriam and the bible . No problem with that. It should happen that we register our heritage. Let me ask, anybody else want to comment on the practicality of that . You could probably do it prospectively but doing it back years i think would be extremely difficult. I think you have to leave the Current System in place. Mr. Oneil . There was a global database that was contemplated to be built overseas that cost between 30 million and 100 million and it fell apart after three years of service. Thank you. My time is expired. Is the Collins Jeffries bill a comprehensive solution to your problem or do you see it more as a first step . Its a very important first step, so for the 50 of our industry that is regulated by outdated Consent Decrees from world war ii, it would at least allow the federal judge that sets the prices for song writers to consider evidence in the marketplace. Thats not a solution. Its an improvement. On the mechanical side, while it doesnt set us into a free market, it at least lets the three judges that set the price for song writers for reproductions try to approximate what would happen in a free market. How does it affect over the air and digital broadcasters . For digital broadcasters, the mechanical part of it wouldnt really affect them at all. For the other part of the bill that deals with performance, the truth of the matter is that all it would do is allow the parties to make arguments to the federal judge. So we think that its really not a very significant burden on any broadcaster to have to deal with the evidence of what rates would be in a free market when arguing to the judge that eventually is going to set the rates anyway. I was going to discuss the scope the split but i think you pretty well responded to that with the chairmans comment. Mr. Griffin, would you elaborate on the fair market value for all Music Performances. I think you all pretty much did that in response to the chairmans question. I was hard for me to hear the end. Elaborate on the importance of fair market value for all Music Performances, and do you feel that royalties are harm onnized or needs massages . I think music should receive its fair market value. Theres no question about that. I think its essential that in order to do so we track music and its owners such that we can identify them and those who participated in them so we can get them the money they deserve that the market provides. Today that money often disappears on its way to the creator. Thank you for that, sir. Mr. Miller, ive been asked to put these three questions to you. They may or may not be applicable to todays hearing. Do you know blue grass . Do you know tom t. Hall . Can you play the fiddle . Thats ironic, i do. I grew up in kentucky playing the fiddle. I came to nashville as a fiddle player. My first job in nashville was playing fiddle for tom t. Hall. I lasted three days and he fired me. I take it you do indeed know him . Very well, sir, thank you. I think the chairman pretty well touched the other question that i had thank you for your response, mr. Miller. Ill tell you, i will identify and divulge the identity of the person who asked those questions be presented to you. Thank you again. I yield to whos next in line . Thank you so much. As cochair of the congress at creative rights caucus i firmly believe that all artists should be compensated and thats why i am a coresponser of the respect act. Its not fair for song writers to be paid on average 8 cents for every 1,000 streams of their songs on Digital Radio. Its not fair for legacy artists who own pre1972 sound recordings to be paid nothing for continuing streaming of their songs when entire digital stations are dedicated to the music of the 40s, 50s and 60s and lets not forget that recording artists are paid nothing for countless plays of their songs an radio. I hosted a music roundtable where he heard from local sound writers and recording artists about the challenges they face trying to make a living in todays music market. One of the most legendary song writers there told me about the challenges that he has having to work at age 72 because hes paid very little for songs that hes written that play on Digital Radio despite the fact that hes written and produced over 54 motown hits. Todays hearing comes at a crucial time for music creators. These royalties are in need of a resolution so we can continue to have a vie brat environment that Fosters Creativity and growth. Id like to ask, because of a statutory mandate, song writers and publishers are forced to grant a license to anyone who wants to use their musical work for preproduction and distribution in exchange for paying a royalty set by the government and the rate was first set by congress in the early 1900s at two cents per song. Today it remains painfully low at 9. 1 cents per song. Lets not forget that this is split by the songwriter and publisher. Lets assume the status quo prevails. What does rt world look like in five years for Music Publishers and song writers, and how can songwriters who are not also artists make a living off the very low rates that accompany streaming services . In five years if im fortunate enough to still represent song writers, i fear i wouldnt have a lee miller sitting next to me because he wouldnt be able to make a living as a songwriter. Its inexcusable that you cant get a fair market rate for what the Property Value is in a song when someone purchases a song. So were very thankful for your sponsorship of the songwriter equity act. Its a very important step toward getting to a place where a songwriter can still make a living when successful. Mr. Imiller . Our Song Writers Association looks at the numbers that weve lost 80 to 90 of the song writers over the last 12 years. Five years is a long time. So i dont know. I fear what that would mean. Certainly if we do have status quo and we ease more into a streaming model, it seems as catastrophic as we would assume that it is. Whats interesting is my wife told me this morning that late last night my 11yearold noah asked what happens after today . Are all of daddys problems solved which caused my wife to call and say i should understand more than i do, but answer that question. What happens after today, does it get better . To her i have to say i dont know. Its a hard process, a complicated process. Im not the legal guy here. I look for words to rhyme with love every day. Until yesterday i had never used the word omni bus, okay . Thats the truth. But i will say this, i hope that you will take all of the facts into consideration and understand, an american profession is in a lot of trouble. Were hurting. Ill give you a shocking statistic about the low rates paid by one particular company, pandora. I believe one of the founders has been a witness before this body. Last year that founder cashed out more in his Stock Ownership than every songwriter in the United States combined was paid from pandora. That speaks to how low the rates are because we dont have the right to negotiate the value of them in a free market. Mr. Portnow, could you talk about the role of producers and engineers in creating music. Why is it important that we highlight their contributions as we review the licensing scheme. I know a little bit about producers and engineers because when i was a young man in a band and playing music, i had the experience of having a recording contract and having a producer in the studio. So the analogy then i became one. I was a record producer on staff for rca records for years. The producer is moranal gus to what we would call a director in the film and television business. So he or she is the person that puts it all together, everything from booking the studio to finding the songs, to creating the sound and the environment of those recordings. We wouldnt have recordings without them. Theyre not currently covered in the statute and thats important because they, too, need to be compensated fairly for the work that they do. We are in negotiations from the Recording Academy with our friends at sound exchange. We think we have some good beginning solutions for that and id be happy to talk about that beyond the hearing today. Thank you. I yield back. The ladys time has expired. The gentleman from texas. I stand corrected. The gentleman from pennsylvania. Thank you, chairman. I normally dont do this, but i have a brief statement that i want to make before i ask a couple of questions. Although there are a number of issues to work through in this copyright interview process, music licensing may be one of the most complex issues. I know first hand because ive been meeting with all the stake holders involved in this in d. C. , new york, los angeles and most importantly, in my district. One thing is for certain, no one is happy. Today the current laws in Consent Decrees that stake holders must operate under to negotiate their copyright licenses and royalties are simply not working. Ive also found this to be an incredibly divided group of stake holders who all seem to show some opposition to find commonalities to work towards a solution and its high time we need to work harder to finding a middle ground. Omni bus pieces of legislation and maybe you can use this as some words in your lyrics, mr. Miller. Omni bus pieces of legislation tend to omit all of us. See, i put that little rhyme in there. Many of you have heard me say this, but when it comes to creating a solution, those of you in the private sector need to get more involved in the discussions for a solution because if you cant come up with anything, you are really not going to like what we likef the music licensing issue come to the table to come up with something that works for all industries involved as well as for consumers so that we dont have to revisit this time and time again. And i look forward to working with you. Ill say this in the beginning, if any of you many of you have been coming to see me and talking about the issues and if you care to continue that my door is always open. Mr. Israelite i have a question for you, please. You stated in your testimony that your clients revenues are significantly below what they would be in a free market. Can you elaborate on how you came up with your figures and why you believe in getting rid of section 115 and moving to a free market would be the best solution . Thank you for the question and i completely appreciate your opening comment and i would point out that when a songwriter has been underpaid for over 100 years, any solution that involves fair market compensation is going to be opposed by anyone who pays for music. So its understandable why there are such deep divisions. The reason we believe a fair market standard would lead to a significant increase in songwriter compensation, if you look at 75s of our industry that is regulated for the 50 that is the Consent Decree with performance right, we know that the Consent Decrees lead to significantly lower rates than what would happen in a free market. We had a recent window of opportunity where there were free market negotiations for very similar Radio Services with apple that happened with pan dora and the result is staggering. On the mechanical side, the difference between a willing seller, willing buyer standard and 801b standard the copy copyright world people have spoken to that issue and indicate there is a significant gap between the two standards. So just by allowing us to have fair market rates in that 75 of our industry, we know it would lead to higher rates. If you look at the 25 of our industry that is unregulated the rate structures are significantly higher. I think there is no doubt that would happen and its understandable that anyone whos been benefitting from this government regulation by not paying songwriters fairly would fight hard against any change that would lead to fair market compensation for songwriters. Mr. Knife, although some stakeholders are urging we move to a free market system, i know others are very leery of this. Can you explain why in this particular industry the free market approach might be questionable . Um, again, i think it has to do with the idea that what some of the principles that i announced, were talking about a marketplace that needs transparency and efficiency. Free market system would necessarily not be very efficient. When mr. Israelite talks about the synchronization license hes not talking about licensing synchronization rights on a whole scale basis of 30 million songs at once. A song gets licensed into a movie or a Television Program and its a rather slow and laborious process. So we have to balance the ideas of making sure we have an efficient marketplace that might include the collectivization of rights licensing and making sure that collectivization isnt used as an undue market power. I yield back the remainder of my time. If i could quickly respond to that while many synchronizations are done on an individual basis, that premise is completely wrong. The largest music acquisition source on earth is youtube. Youtube needs a synchronization license. It is completely licensed, it happened in a free marketplace and the rates by the way are significantly higher than other forms of Competitive Services that are regulated by Consent Decrees and compulsory licenses. Gentlemans time has expired. Do you wand to respond briefly. I would say our experience in television is that when you do locally produced programming in a what we would consider a relatively free market, competitive market, those rates we think we have a lot of evidence that those rates are much lower than they are coming from asgap. Gentlemans time has expired. The gentleman from florida, mr. Dorsett is recognized. You said a free market said would not be efficient. The system we have now it seems to me is very efficient. It is efficiently it is efficient at putting an awful lot of songwriters out of work. Thats the system that we have now. So just before heading to my questions, i have a question for you, we talk a lot about percentages, 90 fewer songwriters, how many songwriters were there ten years ago, 20 years ago versus today . How Many Americans had to give up their profession because of a system as its evolved . We can only speak to music row in nashville. We have the luxury of kind of knowing everybody and to some degree. We certainly figure based on prior to consolidation of major publishers, you can kind of quickly look at the possibility of 3,000 or 4,000 writers making a living doing this down to 300 or 400. Which i think is a really important point for us to remember as we have this debate. The hearing is really important and the issues are cup plex and its hard for us to figure out how to go forward but without picking winners and losers. I was intrigued mr. Knife by what you said earlier. You said, we would all agree, no one would develop this system if we were starting from a blank slate. Thats right. You spoke about the need for a level Playing Field which again i think is whats really driving or should be driving this whole debate that this whole process were engaged in. So if we start with that, what is a level Playing Field, i just point out a couple things in the status quo i think are unfair and dont respect a level Playing Field. Maintaining difference Performance Rights standards for radio and digital and its digital competitors seems unfair both to the innovative Digital Services and the performance whose music is no less valuable when played over the air, that strikes me as not a level Playing Field. In the same vain Holding Music recorded before 1972 should be treated differently than recent music is disrespectful to the classic artists who have contributed so much to americas musical legacy. That makes no logical sense. Thats not a level Playing Field. And i would also agree with mr. Israelites point songwriters are given the song straw. Im proud to chair with the songwriters caucus and the songwriter equity act that would allow a rate court to consider other royalty rates as evidence for establishing the digital rate and adapting a fair rate standard, those are means again to leveling the Playing Field. We cant this isnt what we have now isnt what we have started with. If ultimately the goal is to level the Playing Field lets talk about how we do that. Mr. Portnow, you ran through some of the unfair arguments that have been used to defend the status quo in Performance Rights versus terrestrial radio. The question isnt do we make the change but can we defend the system without making that change . And again, i mr. Knife, i go to you, is it fair to your members who are mandated to pay for the music that they play in and broadcasters dont pay for music they play . I think its probably not fair, as a general principle, but i leave it to this body to determine who should be paying royalties and who shouldnt while were leveling the Playing Field. Yes, were asking for that kind of comprehensive review. It seems like were saying were telling you new technology you pay for both right because youre just starting out, but a service that does the same thing over terrestrial airwaves instead of the internet so we shouldnt change it that is my problem with so much of this debate, the sense that because things are the way they are that makes them so. That makes them sacro sancts, why broadcasters shouldnt have to pay a performance right, why we continue to rely on decisions from the 1940s and as amended in the 60s. Those are the issues we have. Mr. Portnow, actually mr. Miller, let me go back to you because i hate to i hate to think that you would spend a second after this hearing trying to arrive with anything with omni bus. Theres nobody who would buy that record, hissin listen to t record, lease of all members of congress. Youve talked about how this is what this has meant in nashville and i thought the story that you told about your exchange with your wife was really powerful as well. Can you just give a little more of the what this whole debate actually means to you and the thousands of americans who can no longer earn a living because of this system that we continue to have in place that needs to be changed . Well, the competition to write a hit song is tough enough. I mean its hard to write a song. It takes us a long time to learn how to do this. We understand were competing against the best in the world and thats fine because we go in there and we learn our craft and we slug it out. The problem that were up against now where even when we do have a hit song, it may not mean anything. But yet, millions of people are consuming that song and acquiring that song and listening to that song and singing that song at their weddings and their kids graduations. Im not really sure what were supposed to do with that. Im very perplexed at the idea that we need to help out the entrepreneur who wants to start a business by giving him the product. I suppose if we gave the general store owner, asked the farmer to give the corn and potatoes for free he would have more luck succeeding in his business but im not sure what that means to the farmer. And from the way we look at it, were running out of farmers. So that part is very frustrating. On the other hand, all of my colleagues are right now sitting in a room not thinking about any of this. Theyre concentrating on how to write the best song they possibly can to get on the album to get on the radio. First and foremost thats what we think about. We dont think about what as going to pay or whos going to cut it. All of our energy goes into writing the song because its still art. Thank you. If i could take just a moment to respond to the point about songwriters. Very briefly, mr. Knife, time has expired. Go ahead. Very briefly. Thank you very much, sir. I was just going to say, we keep hearing theres less and less songwriters based on the economics of this environment, et cetera, but i think in bmis own press releases they indicated their membership has increased by 100 between tw200 and 2013. I think ascap has similar growth figures. Im not sure where the idea that were losing songwriters is coming from. May i respond to that . Yes. We have grown in the number of songwriters. The advent of the internet has helped us sign songwriters online more than ever before. The question of how many songwriters are still getting paid, is that number growing and that is not growing. I thank the gentleman. Time has expired. Gentleman from texas, mr. Farenthold. I would like to take a minute just to say a word about the our previous questioner was asking just because things are the way they are. Businesses count on things being the way that they are, the local Radio Station is counting on the things continue to be the way they are when they decide whether or not to give the morning deejay a raise or go out and buy a new transmitter. So as we change these rules, weve got to be very leery of the fact that Different Companies throughout the country have invested and made Business Decisions based on these rules. So weve got to really make a clear and convincing case for that. Now im going to get off my soapbox, maybe not. Im going to ask mr. Portnow a question. Im a former broadcaster, so im Pretty Simple sympathetic to simple and sympathetic to the fact that it is a tough struggle for broadcasters now, the same forces that your industry is struggling with in new distribution mediums and figuring out how to get compensation, theres no way a Radio Station is going to get compensation from pandora. Theyre facing a tough challenge. You list a litany of reasons why theyre not different from some of these but i do point out that, you know, there is a historic radios highly regulated, limited resource, Radio Limited bandwidth, weve got basically unlimited room for expansion in new programs digitally. So i just wanted to point out there is a uniqueness and a synergy that Radio Stations have provided in allowing new music to be exposed. Its different now when you can customize almost down to the song what you listen to on the internet. It used to be the record labels and Music Publishers would pay folks to try to get Radio Stations to play songs. So weve got to keep that history in mind. Anyway, i want to go on now to bmi. If we allow publishers to choose what they license to bmi, how do i know what im buying from bmi, what license i have and what i dont have . In a recent pandora trial a number of individual publishers withdrew licensing right for Internet Services in an attempt to negotiate more favorable royalties outside the sun kent decrees. When pandora refused higher rates proposed they asked for a list of work owned by those publishers so they could pull them from their play lists. The publishers and ascap, your competitor, refused to provide a list of such works. This left pandora with the option to pay the price proposed by the publishers, not pay the price and face intrijment litigation or stop playing all muse altogether. I mean how do you answer that when youre asking for some change there that we deal with this issue . Thank you, congress man. Im a former broadcaster also and i understand where youre coming from. Maybe thats why im seated between mr. Hoyt and mr. Knife, now on both sides of the equation. I cant really comment on what was done by my competitor ascap. I can comment on what bmi has done. I got done with testimony in our pandora trial and the same question was raised to me and we provided the information where necessary and where our customers told us to provide the information. As far as providing the information or transparency as we like to call it, the department of justice, the review of our Consent Decree, this is a big subject that theyre looking at and were willing to explore that with them. Weve spent 75 years at bmi building that business. That expertise, that data. And we like transparency. Our writers demand transparency. Thats how we pay them. What i dont think is appropriate is to give that same data weve spent years and years gathering to give it to our competitors to build their business and i think wed fight against that. How do you feel about mr. Griffins guid proposal . It used to be you could go look on the label of a record an it would say ascap, bmi, have the artists name printed. A lot of times in digital stuff this isnt even available in the meta data . I think it has merit. Bmi and ascap have formed a venture called music mark were reconciling our two with marrying with our partners in canada the performing Rights Organization there to get authoritative data. I do think the industries are moving in that direction. Mr. Griffin, i really do like the idea, but you really think it could be done in a year . Sure. Heres the irony, weve already got the guids. Were not recording them, were not putting them in the data base, not making them available to the public and why. What kind of market could we possibly have without the information . It would be like a Stock Exchange without the listings. Thats where were at. My time has expired. I also want to say, youtube is completely licensed. And its not. Its licensed with regard to members but not licensed in with regard to small, independent medium sized players who youtube cant find to clear the concept and thats obvious because the content that has no ads wrapped around it is all unclear because they cant wrap ad s around tha which they havent cleared. An enormous amount is unlicensed because they cannot find the owners. Can i make a comment on mr. Oneills answer. The so that you understand, we have been trying to get transparency from the ascap, bmi for years. We cannot get that transparency. They refuse to give information to us. It is my view until that information is made public, all the details made public, you cannot attain a competitive market and it despite if you notice, mr. Oneills answer was ascap, socan and bmi. We dont get to participate in that. We offered to invest in a series of trying to get more cue sheet information which is what we have for television, they refused to allow us to participate in that project. To the extent theres a transparency issue it is as much the collectives as it is anybody else. The gentlemans time has expired. The distinguished lady from california, miss bass. Thank you, mr. Chairman and ranking member. I would like to address the Justice Departments announcement that it will review the Consent Decrees that govern the pros. I know some of you feel that these Consent Decrees are antiquated and some think we should get rid of them altogether. At the same time i also recognize as indicated by the judges decision in the recent Pandora Ascap case, theres some who feel these Consent Decrees are in place for good reason and should remain. Regardless i think we have to ensure that music marketplace is sustainable and works for creator, platforms and consumers so as the doj conducts its review, i wanted to know if the panel can tell me what it wants to see from the doj and what it thinks they can do to ensure songwriters are protectd, the legitimate marketplace is protected and the system works for all parties. Maybe we could briefly in my time go down the list. Would you like to begin, mr. Griffi griffin. Im going to defer. This isnt my issue. Okay. I think if you look at the most recent antitrust class suit against sesac brought by Television Broadcasters, you will see the absolute necessity of having Consent Decrees in place. What happens under current practices and law, the collectives are allowed to jag yag gre gait individual copyrights and refuse to sell them any other way than on a blanket basis. We have a significant problem in modifying Consent Decrees because we think in the run, well run into major antitrust problems. Thank you. I believe that there are many things that need to be addressed in our Consent Decrees. I actually believe that Consent Decrees should be sunset and done away with permanently. Mr. Hoyt earlier commented on a direct license and a marketplace that led to lower rates. It only led to lower rates because the publisher or the writer still didnt have the power to say no. They still werent able to get outside of bmis Regulatory Framework to see what a free market could have negotiated, would have negotiated because that buyer, if they didnt agree to the price, could have still went back to bmi. That was the ceiling, they could have never went below or above the ceiling. Thats the framework were trying to do. Were trying to give the marketplace, the songwriters and the publishers, the power to go out and make their own deals and to see what a true free market will hold. Thank you. Mr. Knife . Its still early. Were still evaluating what our position might be with regard to the dojs announcement, but i think its safe to say that when you have a marketplace that is entirely controlled by three players, two of them being rather significant, some type of control is necessary and so i think we would probably pursue the application of the Consent Decrees in some form. Mr. Israelite. These are the longest running Consent Decrees in existence. In 1979 the Justice Department adopted a policy of no longer having Consent Decrees that dont sunset. This decree never sunsets and hasnt since 1941. To the point of marked concentration one of the most important issues in this question is whether a rights holder can pull things out of the collective and go into a marketplace and were being told no. That is completely antitheatrical to the purpose of the Consent Decree. They want to complain about having three powerful organizations, but they want to deny the ability of a wrirights holder to leave them and further take the market into a more decentralized way. There are so many things that should be changed. No reason why ascap and bmi shouldnt be able to license different types of rights. A rights holder shouldnt be able to leave for a purpose if they choose so and the most egregious thing, there is no reason why a licensee should be able to use the music by simply asking okay. Without there being even an interim rate set which takes the incentive out of negotiating the rate. Thank you. Mr. Miller . Every argument and point ive made is due to unnecessary government restrictions on the songs that i create. I believe the doj is decades overdue in making some of this go away. Thank you. Mr. Portnow . Yeah. What i think is clear is that Consent Decrees as currently written dont result in fair outcomes for songwriters and should be modified and Recording Academy will be filing our comments directly with doj on this issue. And my time left, anyone else want to respond . Yes. Ill add because i deferred, i think that this is a situation much like that sports faced when john kennedy introduced the Sports Marketing act of 61, allowed, baseball, basketball, football, hockey to Work Together, owners, referees, players, in order to license. We face an extraordinary time here where people are sharing the kcontent in the main to get around licensing and where people are sharing its appropriate to allow the industry to Work Together to address that for licensing purposes. So i would lean towards more freedom with regard to those Consent Decrees. Thank you. Please dont forget, the licensees are the ones that benefit the most from the collective license and so while they may complain about having to negotiate its value, the truth is, is that licensees are the ones that benefit the most from having the ability to have the licenses collected. I think there are two different opinions on that. I will leave it at that. The congresswomans time has expired. Thank you congresswoman bass. The chair recognizes the gentleman from georgia, congressman mr. Excuse me, mr. Colins. Thank you. Doug. Thats what i was going to call you. I answer to any of them. Thank you so much. This as many in this room know this is something that is close to my heart and also the work that we are doing and i think i appreciate everyone on this panel. I have some questions and i want to go back because in the end, before i ask any questions, i want this my views on this come from one thing. When we talk of intellectual property, musical right, a dream, a hope, or emotion and those are all valuable property rights. And they need to be compensated. They need to be compensated fairly in a place in which we can do that. The numbers that mr. Israelites written testimony point to the fact that additional Music Services paid songwriters and publishers less than they paid for the sound recording. Mr. Knife, do you think that a sound recording is nine to 12 times more valuable than a musical composition . Again, i think my trade organization and most of my members are agnostic on the issue. We really dont have a view as to whether or not the songwriter or the song is any more valuable than the sound recording. What he we would like to see is an efficient marketplace that allows us to acquire both rights at a reasonable rate and let the parties who have interests behind that determine what appropriate split is. But you at this point from this testimony today opposed to moving to a willing buyer willing seller standard . Youre opposed to some of these things that actually would move us to there . Im opposed to a willing buyer willing seller standard that would continue to fragment the licensing landscape. Thats not ya yag mostic thats having a belief in one view. I thought your question was whether i had a view as to what the split would be between the composition and the recording. Was it more valuable or not . I just followed up on what you said. Mr. Israelite or mr. Oneill, would you like to respond to that. Shoe sure. Its not surprising that people that pay for music would find it inconvenient to pay for under a standard. We look at this in a two parts question. For a service that uses music what should they be paying for content. We are completely aligned on that question that music has value and that the total amount paid for the content is something that a free market should decide and should be significant. Then you get to the second question which is how you divide that revenue. And the Current System is so out of whack, that while in every other country in the world, radio money is generally divided 50 50 or better for the songwriter and publisher that in this country you have two things, one broadcast radio doesnt pay anything to artists and record labels, which is wrong, and secondly, for Digital Radio, youre seeing split divisions that have been as high as 57 to 4 which is just insane. And the only reason that can happen is because of the different rate structures and regulation thats put on the copyrights. Just to add, i agree with what mr. Israelite said. And also to hit the willing buyer willing seller free market concept, i believe everybody benefits from a free market. The songwriters, the composers and publishers and businesses because a free market breeds innovation. A lot of the topics we talked about today would have to come about because of the competitiveness of a free market. Mr. Israelite, i want to follow up on something. You talked about client rate being significantly below than in a free market. For the record, do you have evidence that supports that conclusion . I have another question so if you could quickly answer. I would offer two specific pieces of evidence i mentioned earlier. With regard to mechanical rates, the difference between an 801 b standard and not even in a free market but at least a willing seller willing buyer standard you could look to previous copyright royalty board decisions where they commented on the difference between the two rate standards. In one case suggested that a willing seller, willer buyer standard was worth more than twice as much, much as an 801 b standard. And with regard to performances, several of us have talked about that limited window where publishers try to withdraw the rights, were later told they couldnt, but in that window there was a free market negotiation with apple radio and that negotiation it was reported presented a result that was more than twice the value of the Consent Decree result. I think its absolutely undeniable that these two types of government regulations significantly hurt the value of our copyright. Mr. Portnow, do you think the committee should move forward on updating our music licensing laws independent of a copyright act rewrite . Or in conjunction with . We are suffering for the fact that we havent upgraded and brought ourselves into the current environment, so we believe that the music concept is wait to go. We can get there in various different ways. The bottom line is the free market raises all boats. I think the biggest thing here were dealing in something in which i want this committee and the leadership of the chairman and others are looking for. Were dealing in past many years, were looking at what it will elect 10 to 15 years. This committee has to take that up. Mr. Chairman, i yield back. Could i make a comment on there have been several suggestions that we operate in a free market and the free market is the way to go. Just so everyone understands on this panel that we do not believe that we are operating in a free, competitive market in television. One of the things that ascap said to the Copyright Office a sellerss ability to refuse to sell is a market requirement for a transaction. On the other side of that issue, a buyers ability to refuse to buy is a key requirement for a market transaction. We dont have that freedom, especially in syndicated programming. Gentlemans time has expired. The distinguished gentleman from new york, mr. Jeffries. Thank you, mr. Chairman. I thank the panelists for their presence here today and for their testimony. Mr. Knife, let me just begin with you. I believe in your testimony, certainly in your written submission, you indicate that the songwriter equity act and respect act take us in the wrong direction, correct . Yes. And you indicate that these two pieces of legislation seek to create a music licensing framework that cater to the unique interests of a limited group of stakeholders, correct . Correct. Now, the limited group of stakeholders that you refer to are songwriters, correct . Its songwriters and their collectives and record labels and performing artists and their collectives, yes. In the music ecosystem that exists youve got recording artists, correct . Yes. Publishers, true . Uhhuh. Broadcasters . Right. Youve got satellite radio, correct . Yes. Incident radio . Yep. Okay. And youve also got songwriters, correct . Uhhuh. Now, arent songwriters fundamental to that music ecosystem we just went over . Absolutely. Okay. So legislation designed to provide them with fair compensation, thats not a tangential legislative joyride, correct . That is an effort to deal with fair compensation for a group of vid individuals central to the music ecosystem, isnt that correct . I disagree. I think it continues down the road of what mr. Portnow has complained about here, which is the kind of piecemeal approach to updating copyright as opposed to a wholistic view of making sure that we have all of the concerns that are that have been expressed here today addressed comprehensively. I think we would all perhaps agree that a comprehensive approach and i believe testimony has been rendered to that effect by a wide variety of people with different opinions is the preferred way to go but we have some inequities in the system and im trying to get an understanding if you believe there are inequities in the system. Songwriters are essential to the music ecosystem . Yes. Are they currently compensated in a fair fashion . Obviously songwriters dont think they are but i think there are a lot of issues attended to that. As i testified to earlier, there are inefficiencies in the system where my Member Companies pay hundreds of millions of dollars in probably over a billion dollars a year in royalties for musical works yet we still hear complaints about songwriters at the end of that system not being compensated appropriately. Okay. That requires us to look at the entire system. And not just an individual approach. Okay. I think theres reasonable evidence on the record, congressman collins referred to some of it, to indicate that songwriters are not fairly compensated under the Current System. And perhaps the reason that occurs is because we are not operating in a free market context. True . Mr. Oneill . Yes. I agree with that. Okay. Now you indicated, mr. Knife, that there are inefficiencies if we move to a free market context, is that correct . No, i isnt say there were n inefficiencies. What i said is that there is a large potential for ine efficiencies and what we have to do here, what this body should be trying to do, is striking a very, very delicate balance between the efficiencies that are necessary for largescale music licensing, versus the potential for market abuse by creating collectives that allow the negotiation of for large bodies of work. Who could potentially abuse the system in the context of a free market . Im struggling with understanding your position in the context of the history of the republic which is that a free market has led to innovation, creativity, prosperity, 200 plus years of record evidence in the United States of america, that a free market system is not inefficient, its efficient when properly regulated. Who is going to abuse the system in the context of a free market designed to provide songwriters with reasonable compensation . Well, i think we see that with the Consent Decrees. Weve heard a lot of talk here today about how the Consent Decrees are decades old and they havent been updated et cetera yet we have a rate Court Decision that was rendered within this year earlier this year, that seems to indicate that a lot of the behavior that the Consent Decrees were intended to oversee and to regulate, still occurs. So i think there are opportunities for collectives to engage in anticompetitive behavior and thats one of the things we have to look out for. I think the perfect example of that is csack and its actions since 2008 in the television industry. If you take a close look at that, you will see that i do not disagree with you, by the way, if there is truly a free market. But that it will be e fishts. Let me ask note i know my time has run out in the context of anticompetitive behavior, right now weve got ascap, bmi, sesac, correct . And the Supreme Court or courts in this country are consistently stated if you have three entities engaged, three entities, you do not have conditions for anticompetitive behavior to exist. And that is what is exactly exists currently in the Music Industry if we were able to move to a free market standard and i yield back. Mr. Chairman, sesac is not here to defend itself but quickly, you have an organization that probably has significantly less than 10 of the market and yet you have accusations that they somehow have such concentration they need regulation. I think thats a ridiculous proposition. I have to respond to that the gentlemans time has expired. Mr. Hart, very briefly. I wanted to say that it doesnt take very much in terms of copyright aggregation to be in a monopoly position. If you read the decision by the judge on the summary judgment, motion that sesac made you will find that he very clearly believes there is at least a potential. We havent proved it yet. There is a potential for violation of the antitrust law. A single copyright by its definition is a monopoly. Gentlemans time has expired. The gentleman from california, recognized for five minutes. Thank you mr. Chairman. Im glad that the last words i heard were that the copyright is a monopoly. I am pretty sure that the restrained trade is not the intention of copyright. At the time of our founding i think its pretty clear that the goal was to get authors and songwriters, obviously, but authors compensation to induce the creation of these useful arts. Nowhere was restraint considered to be there so the idea that theres only one seller of an asset does not a monopoly make. Any of you, you know, antitrust attorneys here . I would love to have one. Lets just i dabble. Okay. Well mr. Israelite, im glad youre dabbling. Because i cant think of a song and ive got some songs i just dearly love i cant think of a song that i cant live without in favor of millions of others, hundreds of thousands at least. The fact is that songs are in competition and the author and the performer are simply people in competition to sell their wares who look at this as how they get their wares to market. Now dont strain your eyes, mr. Hoyt. This is that sort of complex of if ive got a musical work and im a publisher or songwriter or the label and artist, the how i get to what with whom and it blows up on additional pages, its a power point you dont ever want to spend that much time on. So ive been listening to everyone talking about free market and the chairman of the committee has absolutely said he wants to do comprehensive reform for a reason, which is, it needs it. Every one of you has a vested interest in some part of the status quo and every one of you is railing against some part of the status quo. Mr. Israelite, i think some time ago im chairing a committee next door, im double taxed or multitasking but when i was here before i pretty much i think i heard you complain about how much money pandoras founder got when he cashed out. I was not complaining about how much he made. I was complaining about that amount compared to the total amount paid to songwriters. I want him to make more money but i would like them to pay songwriters fairly. If you look at the revenue being received from sirius xm and revenue from pandora, its not insufficient if you compare it with all of am and fm, right . You must divide between the money paid to record labels and artists to money paid to songwriters and music pub lishsers. If you look at the totality of money paid from our performances its about half of our revenue. I believe it is significantly undervalued because of the way that the Consent Decrees work. Well, lets get back to that. Real marketplace doesnt it start off with the identity of the true owner before sublicensing . Isnt that the first question, is who owns the rights to the, if you will, the song and who owns the right to the performance and isnt that pretty owe make today . Mr. Griffin, you seem to be chomping at the bit. Even though youre a Technology Expert ill let you answer. Fair enough. We live in a time of tarzan economics. Were moving from one vine to the next. The old vine was music for the product. You had to clear the rights before you sold it in the store. In the new world, its almost like car accidents. The use of music has become [ inaudible ]. Mr. Hoyt points out sometimes his broadcasters arent even sure what theyre broadcasting because it comes from third parties. New Music Services allow people to upload songs for which they become responsive. But my question, famously i told eric holder here he wasnt a good witness because he didnt seem to ever answer the question asked. Youre getting there. Yeah, but the question that i asked michael roberts. Isnt there an opaqueness to who the original owners are . No question. That i so it wouldnt one of the things from a technology standpoint and from a reform standpoint be, that there should be transparency as to who owns the rights and, of course, thats a lot of people in some cases, and its only one person in some cases, and then transparency as to who has taken on that right . So the original owner, the access to the contract that gives a third party rights, shouldnt that be transparent and wouldnt that be the beginning of empowering both the willing buyer and the willing seller to have the opportunity for the reforms that some of you are talking about . That was my i see a lot of heads yes. My opening testimony was that we should build directories of these things and we should go further than the owner because the performers have a downstream remun rags right. I was talking of all all the beneficial owners. I can answer your question in one word absolutely. Mr. Oneill. Your silence is golden. I believe that, you know, the blanket license has served radio since the dawn of radio. Yep. Radio doesnt pay a cent to the performer. Theyve been served well. I have made a lot about the needs for transparency and also for efficiency and higher transparency necessarily leads to greater efficiency. If we had transparency about rights at the very primary level, that would necessarily lead to a lot more efficiency in the system. Anyone else . The best way to get transparency is to put fuss a free market put us in a free market because you will have an incentive if you want to license your copyright for it to be known. Theres an assumption in your question that somehow a copyright owner couldnt say no. They couldnt decide that ill create a copyright, and ill keep it to myself. And i dont want to license it. Thats the right that a Property Owner has. Okay. Mr. Oneill was cut off a little unfairly. If you could just let him answer whatever he had i would appreciate it. I have no further questions. Thank you, congressman. Personally i think we have a lot to lose at bmi with a free market. But we have a lot to gain also. Were allowing our publishers to go out to license directly or to license exclusively. And people said shouldnt you be scared of that, mr. Oneill, shouldnt you be worried about the . We would retain them. We would have to be innovative in a way thats different tomorrow. Mike deserves a lot of credit for that position. Its a forwardthinking position. Thank you. The distinguished lady from california, is recognized for five minutes. Thank you, mr. Chairman. And actually i think this is one of the better panels we ever had on this subject and anybody listening to this group al they we dont necessarily know the answer, we know what the questions are. Thats a big advance. I sometimes think if you just follow the money, it helps you understand whats going on and were looking at mr. Miller who has a legitimate desire to be paid for his work, mr. Portnow who represents many, many other people in that same situation. Just some statistics. Its my understanding that, for example, bmi reported really record high revenues last year of 5 increase over 2012 revenues, and if you take a look at revenues going to bmi just as an example, in 2003 it was 629 million, last year 944 million. Thats a 50 increase in revenue into bmi. You take a look at streaming Internet Services. And much has been said that maybe theyre not paying enough. None of them is making a profit. If you take a look at spotify, it just reached 10 million paid subscribers, it has never posted a profit. Pandora has 3. 3 million subscribers, last quarter it posted a 28. 9 million loss. And the Generator Research did an analysis and said this, no current music subscription service, including Marquee Brands like pandora, spotify and rhapsody, can ever be profitable, even if they execute perfectly because theyre paying 60 to 70 of revenue for licensing, which is unsustainable. I look at these statistics, im wondering, why mr. Miller isnt getting paid and how we fix this. As ive listened to you, mr. Griffin, it seems to me what youre proposing basically is a transparent system that takes the middle man completely out of this scenario potentially. Is that going to work in the interim if. I dont think it takes the middle man out at all. I think theres still extraordinarily valuable for aggregation, for promotion, any of the number of roles that the societies play and that the companies play. They only grow. It is absolutely critical that we record, enumerate, maintain, updates of those who were involved with these works, those who own these works, those who we need to pay when these works are used and we do not do that now. It is extraordinarily difficult to talk about a market when you cannot look up and find say all of the songwriters of the track. Let me tell you there are sometimes more than 30 songwriters for a single song and i suspect, although im not an attorney, if they all get divorced, theres 60 rights holder to contact to clear that track. Now thats an Important Role for a middleman to bring those people together but you have to split that money correctly downstream and find those who you would contact to directly license if you wish to do so under a supposedly free market. Well, it seems to me that as we take a look at, you know, nobody buys cds anymore, everything is going online, everything is downloaded and its important that we have that digital delivery of music compensated so artists like mr. Miller can be paid and so theres a delicate balance here where you need to actually make these services that are willing to pay profitable because if they go away all thats left online is pirates. And thats not a desirable outcome. Mr. Knife, do you have any suggestions on how to deal with this some. That would be a very, very long answer. I guess the short version is that we should move very, very carefully as one of the other congressman said earlier, businesses build their businesses based on assumptions of costs and how their business is going to run over the years lying out as they establish their business plans. I think as we look at all of these issues, the comprehensive licensing, compulsory licensing, blanket licensing, et cetera, we need to move carefully and we need to make sure that whatever system we come up with, adequately takes into account the fact that people are building their businesses based on expectations. Well, it seems to me, as we move forward and im sure we will, everybodys got to be at the table because although people are situated in different parts of the scene with different financial interests in the end, if we dont have a system that works, mr. Miller is not going to get paid, mr. Portnow is not going to get paid and we end up with a situation we had a it was two years ago that we dealt with sopa that was not going to work but all of us agreed that, you know, we ought to follow the money and make sure that we end up with a system that compensates rights holders. This is a key element of that. Again, mr. My time has expired but i think this has been an excellent panel. I think just one of the things you should remember or take into effect is the fact that businesses wont have as many problems with prospective change. Correct. So if you look at whats happening you should look more at the prospective rather than going backwards. And allow me to add as we move to International Trade more and more for our music, countries and others need to communicate with us in different languages and character sets and our lack of any kind of registry or unique number or respect for them makes it very difficult to get mr. Miller his money when we are saying dealing with trade with a chinese or Russian Organization or anyone with a different language. My time has expired. Thank you very much. You have a pretty good cheering section here today. This hasnt been near as hard as i thought it would be. Were not done yet, lee. The distinguished jenman from north carolina. Thank you, mr. Chairman. Earlier in my career, i worked in the other body and was a Legislative Council working on tax issues and although we always kept our eye on the larger picture and a desire for a major Tax Reform Tax overhaul, we were often confronted by issues where constituent or constituents business was being unfairly impacted by unintended consequence of a law, rule or regulation. We would work on our rifle shot fix for that unintended cups quence. I think that the respect that confronts an idiosyncrasy in the law thats resulted in some of our greatest talents because they recorded their music before 1972 arent getting compensated. Situations also led to lawsuits in states under a patchwork of state copyright law, this is costly, the it was complicated for everyone involved and this ecosystem as its been termed, and i think its a good reason for congress to act and provide some legal clarity, not only for the artists impacted, but by the growing additional music platforms. I want to point out that the additional means and services are playing an Important Role promoting artists of all generations an i want to commend them. These are new technologies, new ways to enjoy music, and new Revenue Streams. I wouldnt begrudge the founder of pandora for making a lot of money because hes created a new revenue stream for artists to get revenue. The so, you know, theres a discreet problem and we have a rifle shot solution and i think its appropriate and a Good Opportunity for congress to act. The fix, this anomaly in this system, and i also dont consider the respect tock a stalking horse for the larger issues that will ultimately be considered and hopefully resolved in an overall copyright review. But i dont think waiting for overall copyright review and fix, you know, is a reason to forgo fixing a discreet problem that is, indeed, an unintended cups quenkweng quence of law. Now mr. Knife, the i read your testimony, so i think i know what you were laboring to get out about two hours ago. Thank you. You know, you believe that it will create an ailnomaly that caters to a limited group, the pre1 pre1972 artists but i think, you know, the anomaly, rather than creating an anomaly is fixing an anomaly that, you know, copyright law has left open this loophole which companies can exploit and because its pre1972, theyre playing the recordings, this is pretty iconic music. You know, the artists that are still with us arent getting any younger. The and they get the services get to play this music for free. So your members, they use the statutory license, presumably because its a onestop shop for all the sound recording rights they need to operate a service, and its also become clear those services believe that statutory license doesnt apply to the rights that are protected only by state law and rights to sound recordings made before 1972, but rather, you get the rights in some other way, the services have simply decided not to pay anyone for the rights, to pay the play the recordings. So i recognize from reading your testimony that you may not believe theres Performance Rights implicated by the state law, and i think youre wrong, by the way, but i think its clear there are reproduction rights at stake because, you know, youve got to make a copy to your server before you can play it, you know, anyway, so thats one point. Its also clear in the private market, directly licensed services dont seem to draw a line between federally and state protected recordings in the private sector and the private licensing weve been talking about, and in addition, its incredibly complicated to identify whether a recording is protected by state law. For example, pre1972 sound recording has been sufficiently reengineered, protected by federal copyright law, foreign recordings that are pre 72 protected by federal law, it gets complicated so the agreement that you have, it seems that it would be simpler for you to pay for all the music than rather try to draw this distinction for pre 72 music just because theres a loophole there and you can. So laying all that out there, im confused as to why your members havent embraced this simple, elegant, rifle shot solution which i think would be beneficial to your member ebs. Mr. Chairman, if he has just a minute to answer that. Granted. Thank you. Yeah. Thank you very much for the for laying the issue so so clearly. The truth is amongst my membership some of my members do pay for pre 72 sound recordings. As you pointed out, based on direct deals and other arrangements. The point that i was trying to make about it establishing an anomaly was not that it doesnt attempt to that the respect act doesnt attempt to address an existing anomaly, but the problem that we have with it is that it seems to just build another anomaly on to that. In that it doesnt afford full federalization of these pre 72 sound recordings. It leaves certain people disenfranchised and continues as i complained about throughout todays hearing, the fragmentation of the marketplace. It doesnt allow libraries and archiving institutions to have their rights. It doesnt afford the Public Affair use right. It doesnt apply protections and probably most importantly, it doesnt afford those older legacy artists the opportunity to perhaps get their copyrights back or negotiate for a better deal once the term of copyright would expire. So thats our issue. Our issue is not that it in and of itself is not an rifle shot or attempt to rectify a situation. Our issue is that it seems to be, once again, a very, very narrowly tailored remedy that ends up creating more anomalies within the system. The gentlemans time has expired. The gentle lady from texas, recognized for five minutes. Mr. Chairman, and the ranking member, let me first of all take a little bit of my time to say this is an enormously important process. Ive gone through this for maybe almost a decade and just the idea of an omni bus approach and fixing it, finally or attempting to fix it finally, is a very crucial moment i think in our hichts f history for intellectual property and all of us who have enjoyed over the years this thing called music. Let me apologize on the record that we were in a meeting for the reauthorization of the Voting Rights act and so thats why i was away from the desk and i think all of you who represent such a diverse population understand how vital that is. So we had to divide our time. I dont know whether anyone has gone on record for the omni bus approach but i believe that is the right approach and what i would like to do is to get some of you who are here to indicate what would be the most important item to be in aspect of an omni bus approach. I assume we will be listening to broadcasters at some point and others who are involved in this process. Many of you have known that my work has included the valuing of the performance and the writer and the key element of putting together music, which i think many of the newer generation may not be familiar, that all that it takes to get a final product because they see it in the quickness or the twinkle of an eye, so mr. Portnow, who has been with this issue so, mr. Portnow who has been with this issue for a very long time and dealt with these issues of music being played, being heard, being written, what would be the most important element that congress should look at if we were to look at an amny bus approach . Thank you for the question. And i want to certainly take a moment to thank you for your support of the Performance Rights issue. Which is critical to us as i indicated in my opening remarks. I think its really about fair market value. If we can get our heads and arms around the fair market approach to all of the constituents here, thats going to rise all votes. And because we all have whether the songwriter, the artist, the producer, the engineer, those behind the scenes, that are the background of musicians, all of them have a stake here. And so we have to address this in a way that each one of them winds up with a fair market compensation for their work. Thank you. May i ask mr. Oneal, if you would. I heard your testimony on the work that youre doing. What would be the most important element in a bill that approached this from an omnibus perspective . I would also agree with the fair market concept. I think the songwriter equity act was a step in that direction, to allow the courts to view all rates, all rights when setting or when trying to approximate what a willing buyer and willing seller would do. And that word is still approximate because its not a willing buyer and a willing seller. So i believe that the fair market aspect of an omnibus bill would be beneficial to all parties. And as i pressed you a little further and indicated that theres this vast market of broadcast media that is not the internet, youtube, how would they play in to a omnibus approach, so that we wouldnt have to go back down a journey of no return, as weve done in times past . I think theyd be opposed to it. I think ultimately, youve heard it today, a little bit about the performance right, sound recording, would radio be for it or against it. I think youre tied to some Legacy Industries that dont want to change or dont want to recognize the value of copyright Going Forward. They all own copyright. They know the value of their own copyright. I think it comes down to what are the scales, the balance of payments for those copyrights. And you dont think a deliberative approach would draw in those different elements . Im going to call them different elements as opposed to labelings, or otherwise, to bring in to the table, because if you construct a bill that just develops a fight, you havent advanced yourself. Now do you think there is something that would draw more persons to the table . I do think that a bill yes, i do. I do think it would be beneficial to have it all in one. Again, i would, when we started this, i preferred to keep it simple. Something focusing on the songwriters. By making it broader, you bring in many more waconstituencies a it gets a little muddier, if you will. And so my nashl thought was lets protect what we had but we also have to look at the broader, the greater good. You might get money and come out on the other side in a better perspective. I would love that. Could i just yes. Contest from a broadcaster standpoint. I dont think there is any broadcaster in the world who doesnt want to operate in a competitive environment. Its how you get to that competitive environment that is so difficult. For instance, the one thing that i think local television stations would benefit from would be somehow getting the Copyright Holder to have to clear the perform and right at the time the production is made. Not tying it in to a, what we call, in the can product, and then say oh, you have to pay the Performance Rights, even though you didnt have a choice as to what music was used, nor can you control you cant get it out of the program. So, youre kind of stuck with a nocontrol, and you still have to pay for it. Thats, if you were looking just at pure television problem, im not suggesting that its a problem all over, but from a television perspective, you have to get the producer to clear the performance write. The gentle ladys time has expired. Let me, mr. Chairman, and the ranking member, thank you very much, and just put a comment on the record as my time has expired if youll yield my so that i can conclude. Im fascinated with mr. Griffins comment. I was not able to pursue questions about the registry, and how it would process into legislation. What would trigger it, and so hopefully well have an opportunity to dialogue unless the chairman will give me 30 seconds to hear mr. Griffins answer. Granted. Thank you. Ill just say it couldnt be more important, as your priority, because we call her the register of copyrights. Thats her prime function, maria, and shes great. So youve got to in this bill empower her, give her the resources she needs to revamp that office such that they can properly record and enumerate the rights, such that they can be properly licensed, properly paid, that there can be proper moral attribution of those who did these things, such that the history of our culture and our heritage, are properly recorded and enumerated. The rest can in some ways take care of itself if we do that. But we do not do that at all. I thank you. I yield back. I thank the gentle lady. The gentleman from pennsylvania had one final comment to make. Thank you, chairman. Were not going to take the time of each one of you answering but if you care to answer this question would you put it in writing and get it to me. Tell me what your interpretation is of a fair market compared to a free market. Gentlemen, this concludes todays hearing. I will thank the panelists, and i thank those in the audience. This standing room only audience indicates to me that this issue is not an insignificant issue, and it will be visited and revisited time and again, i can promise you. Without objection all members will have five legislative days to submit additional written questions for the witnesses, or additional materials for the record. This hearing stands adjourned. A live look at reporters gathered in the pentagon briefing room. Well be hearing from the Defense Department spokesman in just a few minutes. We expect to learn more about the situation in iraq, and todays news that the u. S. Captured a libyan militant. Suspected of killing americans in benghazi in 2012. The Associated Press in writing about that story says president Barack Obama Says the captured libyan militant, suspect of killing americans in benghazi, will face the full weight of the american justice system. Obama says he authorized an operation in libya to detain abu khatallah. Of the attack that killed ambassador stevens and three other americans. The statement from secretary of defense chuck hagel says i want to commend all the Service Members who were involved in the planning and execution of the operation to capture ahmed abu khatallah. There were tireless efforts may only be known to a few but are felt by all americans who are proud of what they do every day to defend this nation. That from defense secretary chuck hagel. Again, live coverage of todays pentagon briefing coming up shortly here on cspan3. Until it gets under way, more about the situation in iraq from todays washington journal. Former u. S. Ambassador to iraq and he joins us now as we continue our discussion on the militant uprising in that country, and ambassador negroponte, you started your service in iraq a decade ago, as insurgents then were trying to destabilize the country. How does the threat iraq faces today compare to what you saw firsthand back in 2004 and 2005 . I think things have really changed a lot. Probably the most important thing is that we withdrew our troops at the end of 2011 so theres really no u. S. Military presence, nor is there the kind of diplomatic presence that we had previously, so that were no longer, shall we say, an honest broker of the situation. And i think that was very important, both militarily, and politically. And the other thing, is that the situation in syria has gotten so bad since 2011. And i think part of what were seeing happening in iraq today is really the spillover of the situation that has been developing with isis in syria over the past several years. This is the islamic states of iraq and syria. Also known as the isil. On this map here from the wall street journal from over the weekend, the black section there is this approximate area that isis wants to make into one continuous threat. One continuous state. This was a threat that you werent dealing with back in 2000 we were dealing with it in a national form. It was inside of iraq in the form of al qaeda in iraq. And we certainly had difficulties with al qaeda in iraq. Particularly youll remember they took control of fallujah during that time and we had a big battle of fallujah back