Provide arms to youukraine. Later pakistan terrorist plans. The Senate Subcommittee looked at free online music streaming and what it means for copyright law. Well hear from executives from pandora and a company that owns radio station. Representatives of singers and songwriters testified as well. Utah senator maclee chairs the judiciary subcommittee on antitrust and competition. Welcome. This is the first hear on antitrust policy and consumer rights. I want to thank my friend and colleague senator klobuchar in chairing this committee before me. Weve always had a good work relationship and we share the same basic goals for this subcommittee which involves ensuring first and foremost that consumers are protected from those who would abuse the marketplace and second that we form effective oversight of the department of justices antitrust division and of the competition side of the federal trade commission. I look forward to continue that bipartisan work in this congress and i would like to thank senator klobuchar and her staff for their hard work in preparing for this hearing. I want to thank senator grassley for supporting this hearing. Senator grassley planned to be here but hes stuck on the floor managing some Human Trafficking legislation thats pending this week. After opening remarks we will hear from our Panel Witnesses who i will introduce later on and then five minute question rounds with our panelists. Todays hearing deals with a serious issue and i trust members of the public who are here will act accordingly. I want to note at the outset rules prohibit outbursts, clapping or demonstrations of any kind. This would include blocking the view of people around you. So please be mindful of the rule as we conduct this hearing. I dont think this will be necessary. I hope it wont. It depends on what you say. Exactly. If it becomes necessary ill Ask Capitol Police to remove anyone who violates the rules. If youll indulge me i want to provide some background on this complicated issue, an issue that perhaps could be familiar to some in the room but is not familiar to most americans. This hearing is about market for music. Specifically licenses to perform copyrighted musical composition. What does this mean . Every song has an author. The person who wrote it. Not necessarily the person who performed it or recorded it. That author has a copy write in that song meaning anyone who wants to perform it in public has to get a license from the author in order to do so. It turns out to be a lot of people. Radio station and Internet Streaming Services like pandora or iheart radio are the obvious examples but all sorts of other examples. We got bars and restaurants that play music to set an ambience. College Football Games where theres a marching band in the background and that marching band tends to play music and that music tends to be copyrighted. All those people need a license for every song they play. Or else they have to pay enormous damages to the copyright holder. But the market could not function if every neighborhood restaurant had to go look for every author of every song they wanted to play and negotiate with each of those authors for license fees. Nor do individual copyright holders have time to contact every bar in america and ask them for license payments. As a result for 70 these they relied on pros to license music on their behalf and then collect and distribute the royalties. The two largest are as kansas cap and bmi. Were pleased to have representatives of those organizations. They sell blanket licenses to all works in their inventories and between the two of them those license will cover most every song. Roughly speaking and the number is debatable as kansas cap and bmi control about 45 of the market. The remaining roughly 10 belongs to two other pros, csac and global music rights. What does this have to do with antitrust law . Well it turns out that virtually the entire market for the licenses were talking about is governed by a pair of antitrust Consent Decrees from a long time ago. In the 1940s the department of justice separately sued as kansas cap and bmi over concerns they had violated the sherman act through aggregating control of the music license market. Doj settled these cases and entered into separate Consent Decrees with ascap and bmi in 1941. The Consent Decrees are somewhat unusual. They are perpetual in duration and function as a regulatory system for the price of these music licenses. The decrease contain requirements that look very much like compulsory license and royalty scheme. Specifically they require that the pros offer a fair rate on a nonexclusive basis. Any disputes about the rates ought to be resolved by the judge in the Southern District of new york who oversees the decree, a process that has come to be known as rate court. For almost 75 years the Consent Decree ruled ascap and bmi ban keith license have allowed consumers of music to have access virtually to the entire catalog of written music by negotiating with a few entities. The system has allowed innovative distribution methods while enabling individual songwriters to get royalties from thousands of bars, restaurants and radio stations across the country. Then came the internet. Things changed. In 1995 after the advent of web streaming congress decided to require Internet Companies who perform, publicly perform music but no one else to pay royalties to recording artists and record labels and the guys who play the songs rather than the people who write them in exchange for requiring the record labels to license their works. In other Words Congress set up a scheme on the sound recording side that looks very much like the scheme the Consent Decree set up on the musical composition side. The major difference, however, is that the price of royalties for composers is ultimately controlled by judges, judges applying antitrust law and price of royalties for recording artists is controlled by the copyright royalty board which is a panel of administrative judges housed in the library of congress. And these two groups of people do not agree about the price of a license to play music on the internet. The royalty board sets rates for sound recordings played on Internet Radio that were substantially higher than those the rate court had set for the under lining compositions. For example in 2013, pandora paid approximately 48 of its revenue to recording artists and record labels and only about 5 of its revenue to songwriters and to publishers. This disparity in rates led publishers to believe they would be able to achieve better rates outside of the Consent Decrees so they made a request of ascap and bmi. They asked them to change their membership rules to allow partial withdrawal, allowing to exclude digital licenses. That would require Companies Like pandora to separately negotiate with publishers for Public Performance licenses and at whatever price the market would bear. All of that led to litigation that is still pending. It also led to allegations that the Music Publishers who think that their judge seat royalty rates are too low were colluding to keep pandoras prices high instead of competing with each other to drive Consumer Prices down. In a lengthy opinion, the judge of the Southern District of new york ruled that publishers have no right to partially withdraw their Digital Rights from the blanket license under the ascap Consent Decree. The judge also rejected publishers attempts to use the prices they negotiated with pandora while they tried partial withdrawal as benchmarks for setting prices generally noting evidence that the publishers had cooperated instead of competing in those negotiations. That case is pending on appeal and even as we speak a different judge in the u. S. District court for the Southern District of new york is now conducting a trial concerning similar questions under a separate bmi Consent Decree. Meanwhile the department of Justice Antitrust Division is currently considering an effort to modify the Consent Decrees to allow partial withdrawals among other things. That would have another a number of important consequences that todays panel can ask. On the one hand the publishers say that partial withdrawal will allow them to negotiate prices with Internet Companies in a free market. And surely the most striking feature of the Current System is that there is no free market. On the other hand others believe that have partial withdrawal the market will not really be free because a few Music Publishers control most of the licenses and they have been accused in the past to coldluding to drive up prices for consumers. In short what to do about these Consent Decrees is a hard problem. And its one ultimately that affects many millions of americans. Today well hear from a variety of parties affected by the Consent Decrees each with a slightly different place in the market. Here we have an opportunity to discuss openly the topics that doj is discussing privately. As we listen today we must remember that we have both a responsibility to encourage creativity by recognizing the value of copyrights, and we also have a duty to ensure that prices for music remain competitive for consumers. Senator klobuchar. Thank you very much, mr. Chairman. I congratulate you on taking over the subcommittee. We dont have a formal passing of the gavel. Here you go. Thank you. And we have worked very well together as senator lee noted and i know the majesty, and i know thats going to continue. This hearing focuses on an important and timely topic. The state of competition in the Music Industry and a pair of antitrust consent decrease that govern licenses for the Public Performance of musical works. Now were not here to talk about the sound recording side of musical licensing, that set of copyrights is governed by a different structure and set of rules. Today is about lyrics and composition that congress writers create Music Publishers network get out in the world and licenseees like broadcasters and Digital Music broadcasters make a better world. Ascap and bm impbi, those Consent Decrees under which they operate have been modified several times in their history. Its appropriate from time to time for the doj to review these Consent Decrees to ensure they are meeting their intended goal of preserving and promoting competition. There are some who argue the Consent Decrees have run their course and should be sunseted while others argue they serve a role. The dojs review of the Consent Decrees is also informed by recent activities in the courts both enforcing the consents decrees decrees. Theres recent litigation in the u. S. District court for the Southern District of new york including, which includes some of the parties who are witnesses here today. It is against this complicated backdrop that doj is taking a fresh look at the Consent Decrees. Our focus today is on striking the right balance between impacts on consumers main street businesses and those broadcasting content. And respecting the rights and value toed the creators of the music that we all enjoy. When the Consent Decrees first went into effect, no one imagined the boom box much less the ipod and digital streaming over the internet. In addition to innovation to restructuring and new players entering the market congress has acted throughout this time to recognize new reits in music. Weve acted to recognize new copy rights for sound recordings, production and distribution and most recently in 1995 for Public Performance of digital sound recordings. Although this area is at the intersection of antitrust and copyright law our hearing today will focus on the antitrust side. I look forward to hearing from all of our Witnesses Today about the ongoing doj review. Thank you, senator klobuchar. Before we swear in our witnesses weve received letters from members of the public concerned about this issue and unless theres objection those will be entered into the record. Now i would like to introduce our witnesses and then well swear them in. Well move from this side of the table over. First we got Beth Matthews who is the ceo of ascap, the full title being the American Society of composers authors and publishers. To her immediate left is chris harrison, Vice President of Business Affairs for pandora media, inc. Then matt pinkus for sounds Music Publishing. Next we have mr. Mike dowdle. He is the Vice President of Business Affairs and also the general counsel for boneville international. Lee Thomas Miller is with broadcast music, inc and also president of the Nashville Songwriters Association internationaler and finally we have jodi griffin who is a senior staff attorney with Public Knowledge. Okay. Will each of our witnesses please stand and be sworn. Do you affirm the testimony youre about to give before committee will be the truth, the whole truth and nothing but truth so help you god . Thank you. Okay. We will now hear from each of our witnesses beginning with miss matthews and all the way to miss griffin and then after that well proceed to questions. Miss matthews. Good morning chairman lee Ranking Member klobuchar and members of the subcommittee. My name is elizaBeth Matthews and im the chief executive officer of the American Society of composers, authors and publishers which was formed 100 years ago by songwriters. It operates on a not for profit basis were comprised of more than 525,000 songwriters, composers, lyricists and represent so 6r million composition. Songwriters are the Unsung Heroes behind american music. Every song you hear comes from the heart and mind of a songwriter. Songwriters created the notes and lyrics on a page. Unlike recording artist, however, songwriters do not earn money from selling merchandise or touring. Many songwriters do not have salaries, benefits or other reliable sources of income. They rely on Public Performance royalties to earn a living, feed their family and pay the rent. Ascaps job is to ensure songwriters can earn a living creating music we all love because music matters. Music is not just a business. It is an important and continual contribution to our society teen our daytoday lives. Ascap licenses the right to publicly perform our music to several hundred thousand license licenseees across the united states. We process payment for 500 billion Public Performances in 2013 more than trouble the year before and were only one of several market actors. In 1941 ascap entered into a Consent Decree with the department of justice because ascap did not have significant competition. Fast forward 70 years and today competition with ascap is alive and well. We compete directly with and unregulated competitors, new licensing companies, foreign pros and our own publishing members. The barriers for entry are quite low and yet we are still governed by a world war ii era Consent Decree. There have been seismic changes in the music landscape. People no longer buy the music they love, they stream it. It offers more choice and control. It requires access to a massive variety of song from provide users to a content experience. This means the use of music has increased but the payments have not followed. For a songwriter this is a terrifying trend. New and innovative Market Players reskbirmtation and novel approaches to music licensing yet the Consent Decree restricts our ability to adapt because its still stuck in 1941. Some Digital Music services are unwilling to pay songwriters a fair market rate making it impossible for them to earn a sustainable living. As a result major Music Publishers are athletening to resign from ascap bmi entirely which is a blow to collective licensing and songwriters. We have proposed number of changes to the ascap Consent Decree. First rate disputes with businesses that use music should not be decided in an expensive time consuming federal rate court litigation. We propose a faster less expensive process. Seour members should have the flexibility to grant ascap the right to license their music f