Music publishers not subject to rate court could cause big trouble for webcasters, experts warn

The royalty rates at which webcasters pay recording copyright owners and performers can be (and usually are) settled by the government. The rates at which composers and publishers are paid -- if administered by ASCAP and BMI -- are settled in rate court (as per government decree). Thus, when the costs of performing copyright music are determined by a third party, webcasters such as Pandora can at least hope their interests are considered.  

But what happens when rights holders like Sony/ATV (which "directly controls an absolutely massive and critical catalog," writes Digital Music News) are no longer subject to government regulation (the group pulled out of ASCAP and BMI for digital uses) and can set any price they want?

We reported yesterday here, Pandora will see its pay-out to music publisher Sony/ATV increase 25% for the next year, according to the terms of a new settlement.

Digital Music News quotes "a source" in the publishing industry as saying, "This is the very tip of the iceberg. The 25% bump in going to get higher after the first year deal." What's more, Pandora's deal could also help rights holders that are subject to government regulation of their rates.

"ASCAP now has a real world, real market rate to point to, one that is substantially higher than what Pandora wants," writes Digital Music News.

The Pandora settlement with Sony/ATV "does establish a market rate," music industry attorney Steve Gordon told the news source. Pandora and ASCAP are in lititgation over rates. "ASCAP is now in the position of counterclaiming." 

Consider the thoughts of investment expert David Pakman (who testified before a House Judiciary subcommittee in support of the Internet Radio Fairness Act -- more here). He recently discussed the power tilt between the world's largest on-demand streaming service, Spotify, and the three major U.S. record labels (to which Spotify pays hefty licensing to peform recorded music). His thoughts have application here. He wrote:

There are now only three major labels. They control about seventy per cent of the world’s music catalogs... The world’s superstars are, for the most part, on major labels. And you just can’t operate a digital music retailer at scale without hit music content... they don’t have a service without the full catalogs from those three majors. If even one of them pulled their catalog, at least twenty per cent of all Spotify’s content would disappear. All the playlists on the service would break. And a third of the hits would be gone. Paying consumers would never stand for it and the service would crumble. The labels know this. They know they have fully concentrated power.

Again, Pakman's talking about labels and recorded music; Pandora and Sony/ATV is about publishing. But his point about unfettered, concentrated power applies.

Read Digital Music News here. More from David Pakman is here. (The photo is Sony/ATV CEO Martin Bandier, who doesn't seem to mind being visually portrayed as a cartoonish mogul.)