More scholarship out today on the role of performing rights organizations (PROs) in the digital marketplace, and it’s worth reading. “Creative Industries in Transition: New Directions for the Digital Era — The Songwriters’ Performing Rights Organization Imperative and Copyright Law for the Electronic Media Marketplace” debuted today at a symposium sponsored by the George Washington University Law School and GW’s Creative & Innovative Economy Center (CIEC) and BMI. It was written by former US Register of Copyrights and GWU CIEC Fellow Ralph Oman with GWU CIEC Director Michael P. Ryan and CIEC Research Associate Bhamati Viswanathan. (Will post a link when I have one.) First the praise, then the caution (the latter not being the PROs themselves but the way some cite them in music policy debates).

Like the previous paper and symposium based on the work of University of California Professor Robert Merges, this paper (a) focused on the role PROs play in promoting rights of songwriters and reducing transaction costs, (b) warned Congress against interfering in that working market, and (c) encouraged Congress, when considering digital rights and business models, to see PROs as a successful model.

I can’t disagree with any of that, and there are few if any in Washington who know more about the intersection of the market of copyrighted works and Congress than Ralph Oman. The paper made some very good points. In particular I was glad it emphasized the fact that there are multiple PROs competing for songwriters. They have incentives to increase the sophistication of their tracking of public performances of compositions, to provide songwriter support services, and to keep overhead costs down. ASCAP’s market dominance begat BMI, and those two aim-to-serve-all nonprofits begat the entrance of for-profit SESAC, which while smaller has a more targeted approach to client selection.

From an economic point of view these organizations do significantly reduce transaction costs of pairing copyright owner with user, and because there is no statutory license over public performance of compositions, copyright owners must feel the system works, because you really don’t see highly successful artists pursuing their own negotiations with every radio station and diner across the country to cut out that middle man.

There are other systems where transaction costs are reduced but government plays a larger role. The paper also mentions mechanical rights for composers. Those are governed under a statutory license. The government sets the rate (just renewed without an increase at 9.1 cents per copy for the next 5 years) and there is one collection agency, Harry Fox (owned by NMPA). Harry Fox does an admirable job, and competition isn’t really necessary here when prices are set, just as Sound Exchange is well suited to collect its royalties that are fixed by the government for digital services. Readers of my work know my sympathies toward the free market and thus know I’m more sympathetic to the songwriter public performance model, where the only limit to payment for the copyright owner is what the PRO can negotiate, but I find no fault with Harry Fox or Sound Exchange, who serve copyright owners as best they can in a fixed system.

So far, so good. But I’ve only been talking about the market portion of the paper. The paper also addresses Congress, although only in a vague and indirect way. I feel this is a very wise approach. I feel it’s a bit dangerous to be too specific to Congress about exactly how the digital landscape should look going forward, because I feel passionately that the market should determine this path. Will Congress have to step in occasionally and provide boundaries to ensure the success of what is already occurring in the marketplace? Given how much copyright law is already entangled in the business of copyright industries — most especially music — that will most likely have to occur. There are of course questions still unanswered in music copyright law, questions that are being debated in Congress and at the US Copyright Office.

The point of the authors is that to the extent Congress inserts itself in the music marketplace, it does so with a recognition that PROs provide a good model, and even seems to suggest that existing PROs could take on other responsibilities. I support this as far as it goes, because I’m an admirer of what the three PROs do, and am proud they (along with NMPA) are members of the Copyright Alliance. My hesitation has nothing to do with the PROs, but the way the PROs are sometimes cited in the music policy debate.

EFF frequently points to the PROs in promoting its model, built on and supported by academics such as Fisher and Lessig, wherein any sound recording anywhere on the Internet would be legal and free for any consumer to upload or download. How would this be possible? ISPs would voluntarily charge a fixed fee, say $5 per month, and that money would be pooled. a PRO-like organization — perhaps an existing PRO — would distribute the money to rightsholders, using some technological means to determine who should get what.

This has obvious flaws: (1) What ISP would voluntarily charge more than its competitors? Sponsors of this approach know Congress would have to step in and mandate it in order for the system to work, and they’re fine with that. (2) Does anyone believe this system could lead in any way to a fair distribution of royalties? The recipients sure wouldn’t. (3) This involves a price cap on the total digital music market. There are a fixed number of broadband households (remember, it would be households, not individuals) so there would be a fixed amount of money every month. If Artist A sees downloads increase for her music currently, her income goes up while others’ stays stable. If Artist A sees downloads increase in the new model, Artists B-Z see theirs go down because there is no way to grow a fixed pie.

In a way, we face the prospect of being victims of the PROs success. Over the last 90 or so years they have gotten very good at tracking down public performances of compositions, negotiating rates and transferring funds to copyright owners. (Government has played a role, with law guiding rates for different performance “venues” such as restaurants, for example.) Songwriters by and large seem to feel good about the PRO system, and even though they’re separated by a degree from the user, they feel passionately about copyright because they know if their works are being used in a way that hides from the PRO, they don’t get paid. (Just as authors I know feel passionately about copyright even though their publishers are usually the holders of their copyright during the publishing process.)

Let’s sing the praises of PROs. They deserve kudos. Let’s not let their success be an argument in creating a new system in the digital age that actually reduces the rights of creators.

Share It

Hide Sites

This entry was posted on Monday, October 27th, 2008 at 5:10 pm by Patrick Ross and is filed under capitol hill, copyright law, copyright opponents, creators, licensing, market forces. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.