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 for uses. Ascap supports transparency in this regard. That approach is both pro competitive and consistent with the u. S. Copyright law. Third, we need to simplify the music licensing by allowing ascap to license more than just the right of Public Performance. They made a single destination where businesses can secure every right they need if the consents decree is changed. The department of justice is under taking a review of our Consent Decree and we look forward to work with them. Weve also engaged with congress. We applaud the leadership of senator hatch and others for introducing the songwriter act. If Consent Decrees are not changed and Music Publishers resign from ascap or bmi then licensing may collapse and everyone loses. Copyright owners, licenseee music fans every where and most importantly the songwriters who are the heart and the soul of the Music Industry. Thank you. Beautifully timed by the way. You closed that out just as the final second ticked off the clock. Mr. Harrison. Chairman lee, Ranking Member klobuchar and distinguished members of this subcommittee, thank you for invite meg to testify. My name is christopher harrison. Im the Vice PresidentBusiness Affairs at pandora media. Launched less than ten years ago pandora is now the most popular Internet Radio service one america reaching more than 80 million listeners each month. The mission of pandora and more of our 1400 employees is to untlaesh power of music by offering are personalized music enjoyment and discovery for millions of the listeners. Pandora sees abundant opportunities for new leadership to create a Music Industry that benefits the entire eco system. The recent launch of pandoras artist marketing platform which gives free access to artists to see how their music performs on our platform is the first of many initiatives intended to unlock the power of pandora to enable music makers to grow their audience. In addition pandora represents a significant new revenue stream with royalty payments approaching 450 million last year alone and more than 1. 2 billion since we launched in 2005. Ensuring a vibrant and growing Music Industry in the years to come requires a marketplace thats open, transparent and vigorously competitive. Unfortunately there are a number of significant obstacles that threaten this future and redwir attention of this subcommittee. Its been nearly three years since this subcommittee reviewed competition in the Music Industry with its hearing on sonys tv acquisition of ami which reduced the number of major Music Publishers of four three. Among the most important obstacles is an alarming lack of transparency. As i described in my written testimony this lack of transparency was a key factor in pandoras ability to obtain competitive market agreements with publishers that had withdrawn their Digital Performance rights from ascap and bmi. I commend mr. Pincus for making the repertoire of songs available and i hope other publishers and pros follow his example. We recommend the creation of a publicly available database of records to house all relevance music copyright ownership information. By enabling services to quickly ascertain who owns which work a single database of record could identify on a cat lone by catalog basis the owners of songs they perform which enables true competition. While the transparency provided by such a database would mitigate the anticompetitive behavior pan door j recently experienced transparency alone is insufficient to solve the problems that pandora faced over the past few years. As this hearing takes place, the largest Music Publishers and pro are der manding changes to the very decrees to forestall their well documented anticompetitive conduct. In the past year four different Federal District court judges have found evidence of the same types of egregious anticompetitive conduct that gave rise to the original consents decrees 70 years ago. Pandora experienced some of that which i detail in my written remarks. While were open to sensible modifications to the consents decrees any modification must ensure a competitive vitality and independent pricing activity that does not exist at this time. To amend the decrees in the manner that the pros seek would hind engineer competition. Permitting publishers and pros to artificially inflate price and ultimately harm consumers access to the music they love. While we remain optimistic about the future of music streaming the government has a Critical Role to play to guarantee a musical licensing eco system. As heed by the behavior i described previously theres a continued need for government oversight to ensure that certain participants in this highly consolidated industry cannot leverage their market power for untaxpayer gain. Thank you for your consideration. I look forward to answering any questions. Thank you, mr. Harrison. Mr. Pincus. Good morning chairman lee, senator klobuchar and members of the subcommittee. Im honored to provide my perspective as a music publisher and Small Business owner. The fundamental question of this todays hearing is simple why are the Property Rights of songwriters and publishers subject to perpetual heavy handed government regulation . I am the ceo of songs Music Publishing. I represent 350 contemporary song write perps the currents environment is very hard on songwriters and perpetual government regulation is making it worse. Im an avid user of many Digital Music services somewhere in the many models out there is the answer to future growth for my company. I started songs in 2004 to transact with the digital market freely and easily. However as i detail in my written testimony the current Consent Decrees artificially depressing the performance royalties that digit services pay because im unable to negotiate for my Property Rights in a free market. Three successful songwriters i represent wrote a song for the recording artist jason. The song went number one. Streamed 124 million times on pandora. As the songwriter it doesnt get any better than this. And yet their 50 interest in this song generated only 3,155. 80 to be shared among the three of them. If stream cigarette the future all songwriters and publishers should be concerned. This rate of modernization is not fair for my songwriters. Like any businessman im best suited to determine the fair price for Property Rights i represent teen feel no when i feel unfairly compensated for them. Instead im compelled to allow anyone to use my songs no matter what the terms because of perpetual government regulation. Those lobbying for continued regulation cite the high earnings of top 1 of recording artists. The reality is that many of the creators i represent are struggling to meet the minimum wage. Like the acclaimed writer husband and father who has been plagued by illness and unable to afford proper medical treatment his sole income comes from creating music despite achieving notoriety for a song streamed over 11 million times on pan torah he was paid only 642. I have a responsibility to secure fair compensation for the talented songwriters i represent and im unable to do so due to perpetual government regulation. Under the current Consent Decrees i have only two bad choices in seeking fair rates. Accept unfair government regulation that depresses Property Value or withdraw entirely from the elective licensing system and incure tremendous costs and terrible inefficiencies. To the benefit of both reits holders and businesses that use our music our songs are licensed collectively through performing rights organizations. However, despite radical change in how music is used and consumed, todays songwriters and Music Publishers are highly regulated by Consent Decrees imposed during world war ii. In my written testimony i identify modifications to the decrees i believe will allow for a more competitive free and fair market for all copyright owners and music users. Critical changes to the Consent Decrees included amending arrest setting procedures that more closely reflect a free market. Allowing directly sensing of performance rights. Establishing a foamal mechanism for sunset or at least periodic review of the decrease and providing Music Publishers and their agents the flexibility to license Digital Services seeking multiple rights. I believe the department of justice has an Important Role in enforcing antitrust laws against any real anticompetitive actions but that role should not be used to regulate Small Business owners and prevent the free Market Development of an entire try for almost 75 years. As a music publisher my livelihood depends only sensing my songs. Thats the reality. If given the freedom like any other music publisher ill exercise it responsibly to the benefit of my songwriters. Thank you, again, for the opportunity to share my views with you today. Thank you, mr. Pincus. Mr. Dowdle. Good morning. I am Vice President of Business Affairs and general counsel for boneville International Corporation which owns television and radio stations in Salt Lake CityLos Angeles Seattle and phoenix. My testimony will focus on the continued necessity of the ascap and bmi Consent Decrees. Absent these Consent Decrees no fair competitive market who exist for the licensing of musical works. This would harm not only broadcast audiences whose access to our programming would be jeopardized, but customers of the countless businesses that publicly perform music every day including restaurant, bars retailers and sporting venues in your local communities. To illustrate tissue let me provide an example. Klstv boneville affiliate in Salt Lake City has music interwove convenient throughout its programming. These music performances take place in the background of music and Television Show live sport sporting events and local news. For its locally produced content theres editorialal discretion over which specific songs it airs. So in the event it could not obtain the rights to a certain song, ksl could take the steps to ensure the song is not performed. But for a significant portion of its content namely network and syndicated programming live events and commercials it has no editorial control. If ksl lacks the right to publicly perform a song it runs the risk of significant penalties under federal copyright law. Our radio stations that air syndicated programming, commercials and live events run the same risks. They must have the Public Performance rights to the full catalog of musical works in order to operate lawfully. Even the right to a single musical work gives the copyright owner market power. The risk of abuse is compounded when these rights are aggregated which is exactly what the performing rights organizations or pros do. Ascap and bmi control 90 of the rights. In any other industry this would constitute per se violation of the antitrust laws. But the Consent Decrees entered into between the doj and both organizations more than 70 years ago served as antitrust life lines that allow ascap and bmi to continue to operate in spite of their anticompetitive nature. Absent the protection and framework afforded by the Consent Decrees ascap and bmi would have unfettered ability to extract above market prices and returns for the rights of those works from broadcasters and other licenseees. Let me be clear. Broadcasters would crease operations without ability to clear these reits and Consent Decrees critical to that end. Before i conclude i want to touch on two specific points that are central to todays hearing. First in an attempt to circumvent the Consent Decree large Music Publishers sought to withdraw from ascap and bmi to directly negotiate with digital service. Two federal courts interpreted it to prohibit such partial withdrawals and now the pros are asking doj and congress to amend them. Such a modification shouldnt be allowed. The fact is any music publisher with such ensize and scale to consider direct negotiations for selected rights such as Digital Rights would have essentially the same power in the market as the pros and raise the same antitrust concerns. Relaxing the Consent Decrees would enable Music Publishers to engaging the same behavior that prompted the Consent Decrees in the first place. Second, this subcommittee need look no further than the recent antitrust actions brought against third major pro, csac to glimpse practices. These practices resulted in a 58 million settlement are detailed in my written testimony and provide a real world example of the antitrust abuses that would be unavoidable outside of this Consent Decree framework. In conclusion this subcommittee has long recognized the Important Role that the antitrust laws play in ensuring free and competitive markets. Ascap and bmi Consent Decrees remain viable for broadcasters to fairly and transparentally license music works to the benefit of their audiences. Thank you for inviting me to testify today. I look forward to answering any questions. Thank you. Mr. Miller . Good morning. My name is lee Thomas Miller. I am an american songwriter. I grew up on a small tobacco farm in kentucky and when i was 11 i started to play piano then guitar then violin. Music has a way of kind of taking you over. I knew early on it wasnt just a hobby. I went to college and instead of studying something sensible like business as my mother wished i studied Classical Music competition which meant i was overqualified for my job singing and playing in the bars at night. But there i was classically trained and writing honky tonk songs on the side. I was looking for an excuse to visit nashville so i took a trip to bmi. I met with the songwriter representative who explained what bmi did. When your song plays on the radio i collect the money. I said sign me up. I made recordings of the song i had been writing and he was very blunt. Youre not much of a singer and guitar players are a dime a dozen but i believe you can be a songwriter. So i graduated college, saved 1,000 and moved to music city. For years i wrote songs. Hundreds of songs. I played in bands and took temporary jobs to pay the bills. I studied the songs i heard on the radio and met the songwriters who wrote them. At the time the music business was healthy. A prominent publisher took a chance on me and then real work began. My first cuts were not memorable. When bmi sent me my first check it was for 4. 69. Today it is framed and hanging on my office wall. That check meant everything. That check meant that i was a professional songwriter. All in all it took 11 years after i moved to nashville to have a hit on the radio. In 2003 i received my first bmi award an award given the 50 most played songs of the year. It was a song entitled the impossible. It was about overcoming insurmountable odds and believing anything is possible. To me earning that first award was like a ball player going from aaa to major leagues. Today songwriters count on their performing rights societies. One thing keeping us afloat is that perform royalty check. We do not tour. We do not sell tshirts. We write songs. All day every day. And when we succeed we pay self employment income tax with what remains we buy gas and bread and white pickett fences. But since the year 2000 the national Songwriters Association where i serve as president estimates that america has lost between 80 and 90 of its professional songwriters whose primary income is from royalties. Im talking about creators. And what we create is not some obsolete irrelevant product of days gone by its music. What we create its there when you fall in love, when your heart breaks, it heal it inspires, it time travels, it crosses party lines. So how does the bmi consents decree impact me. It puts bmi and songwriters at a disadvantage. If rate dispute kos be resolved by arbitration rather than expensive litigation that would feel like a win for everyone. New services could launch. And songwriters could get paid quickly without spending lots of money on lawsuits. Songwriters also worry bmi is not allowed to license rights other than the performance right. Most new services need several rights. A one stop license from bmi would be a quick and efficient way to get those services off the ground. These aspects of the bmi Consent Decree, in my view have devalued the Music Composition to the point where the songwriters are being crushed. It is bad enough it is so easy to steal the music today but illegal framework that allows songs to be streamed for nearly free will destroy the livelihood of the american songwriter the if it is allowed to continue. Tu department of justice is presently under taking a comprehensive review of the ascap and bmi Consent Decrees and hope they will recommend substantial changes that will allow us the flexibility we need to operate in the free market. I am americas smallest Small Business. I sit down and make stuff up. I can make you laugh. I can make you cry. I can make you do both with one three minute story. Thats the power of music. And it all begins with a song. But im here to tell you there are not many of us left. Thank you chairman lee. Ranking member klobuchar and members of the committee. Thank you, mr. Miller. Miss griffin. Chairman lee Ranking Member klobuchar and members of the subcommittee thank you for invite meg to testify today. I would like to thank you, mr. Chairman, for your remarks emphasizing that competition policy is first and foremost about protecting consumers. My name is jodi griffin and im a senior staff attorney at Public Knowledge an organization that advocates for policies that promote freedom of expression affordable communication tools and publics ability to create and access creative works. Before Public Knowledge i was a musician. And helped launch and worked for the five time Grammy Nominated independent label beamont sound. The Consent Decrees comes at a pivotal time for the music business. Now more than ever its crucial policymakers promote competition and innovation to benefit listeners and artists alike. New Music Services give consumers convenient waz to legally access music at reasonable prices and they have the potential to give artists greater control over their own careers. However, this market is still new and its still growing and it is crucial that we encourage competition and innovation where consumers and artists will only be left with fewer options and less leverage in the marketplace. Antitrust and copyright policies should promote a robust and competitive music place where artists can get their music out on the market and get a fair price for it. If all of the middlemen in the music business from publish towers labels to distributors are facing robust competition that forces them to be accountable to musicians and their audiences. If an intermediary can leverage a large catalog to come to nature the market it has the power and incentive to use that leverage to raise prices to consumers and prevent new services that would challenge its dominance. For example on the sound recording side of the music business one of the major labels negotiate licenses directly that they have been able to use their market power to obtain large lump sum cash advances and equity in the new companies the benefits of which are not passed on to artists and independent labels argue that the majors can demand royalties disproportionate to their actual market share because they have enough market foreveto new services. The very act of creating large collective licensing organizations concentrates market power and the market for Public Performance rights and compositions is very concentrated. This has between case for decades so for decades we had antitrust settlements ensuring the largest perform rights organizations offer reasonable licenses despite their market power. This doesnt mean it is an appropriate to periodically review and update the Consent Decrees to encourage a more competitive market but at this moment we can already see multiple warning signs that dismantling the protection in the Consent Decree would give fewer choices for consumers. In recent years the Music Publishing industry has only gotten more consolidated as the bigger publishers buy out small firms. Some of those mergers were justified by the argument that postmerger publishers could not act anticompetitively because we can rely on the market protection and Consent Decrees. A federal judge found that they chose collusion over competition. Despite the objections of some songwriters and independent publishers within ascap. A federal judge later examined these negotiations and found that the publishers behavior magnified their very considerable market power so much so that the resulting licenses could not even be honestly considered free market benchmarks. Again, this does not mean we must always have Consent Decrees nor that they can never change but the evidence shows at this moment in time we need to protect competition more than ever. As the department of justice and Congress Review competition in the music licensing place it is crucial we dont support policies that encourage a competitive market in which no company as the power to pick winners and lowers. A marketplace that allow users to compete benefits consumers and artists alike. Thank you and i look forward to your questions. Thanks to all of you for your opening statements. Those were very helpful. Well now begin our question and answer period with five minute rounds. Ill go first and then senator klobuchar and then well alternate on each side of the aisle. Miss matthews well start with you. So your Consent Decree has been around since the early 1940s, second oldest of the two consents decrees. When we look at the music market today we can see that it has changed a lot over the last 75 years. We certainly see delivery methods in particular have changed a great deal since the early 1940s. What can you tell me about this, about how the market has changed over the last 75 years and how those changes in your opinion, bring about the need for some kind of modification of the status quo . Push the button. Thanks. Excuse me. The competitive market has increased dramatically since the 40s. We compete biowith regulated competitors such as bmi and several unregulated new market entrants have shown up on the scene in the last several years. The most important change i think that has happened in the past decade has been consumer behavior. Because people are no longer buying music, a major source of revenue related to mechanical reproductions has steeply decline for songwriters. So as a result the reliance on Public Performance is increasing. Digital service are becoming increasingly more customized and personalized with the proli proliferation of highspeed service to the home. More music success played than ever before. So while home, more music is being paid than ever before. So while the volume has increased in terms of overall Public Performances the revenue is simply not tracking in terms of increase. And, at the end, the song writers are being harmered. People are threatening to resign. If they resign, collective licensing will collapse. Thank you. Mr. Harrison, im presumptively always supportive to free markets competition issues. Youve suggested that these very old Consent Decrees are not out dated at all. What evidence in the market leads you to believe that the Consent Decrees that were talking about today, as theyre written, are necessary, even in the digital age. And even in the digital sector. Well, i think theres two things i would point you to. First is just the structure as b. M. I. They are horizontal joint sales agents. They take works from otherwise competing publishers aggregate those catalogs together and then fix a single price across all of their members catalogs. As it was indicated earlier that is normally viewed as an antitrust violation. Because of the protections they provide, more contemporariously pandora has experienced what happens when publishers attempt to partially withdrawal. You alluded to the judges opinion which the publishers and ascap chose not to, use their market power and drive rates above the competitive markt rate. Speaking of that litigation speaking of the judge, i want to turn back to you for a minute, ms. Matthews. In the pandora feed the rate judge discussed several examples of this behavior that she found to be questionable. As this issue continues to arise, id like to give you a chance to respond. If the publishers are committed to partially withdrawal, with ascap view them as competitors in the marktet for music licenses . And, if so, will that result in competitive pricing . Its counter intuitive, i know. Independent publishers, as competitors today, we only accept a nonexclusive grant of right meaning that they are always free to direct service with any music service, including pandora. If they were allowed to grant us a partial grant of rights which is supported by the u. S. Copyright law because copy rights are divisible, they would simply remove those rights in their entirety. So we would not be competing for them with respect to that particular license. But it would be procompetitive in the sense that it would create more choice for music licensing services. Well probably want to follow up on that a little bit later. My time is expired and ill turn it over to the senator. Okay. I think ill start where he left off there. A cig nichesignificant amount of attention has been discussed in a recent letter the d. O. J. Discussed in the Second Circuit friday currently written do not permit partial withdrawals. Ms. Matthews, you answered that in part. But, mr. Pinkus why are the partial withdrawals needed in your view . Well the Current System works quite well with respect to most aspects of collective licensing. I think theres broad satisfaction with the licensing system the Television Licensing system, the bars, restaurants, stadiums licensing system. But, with respect to the additional rights i believe that the rates are artificially suppressed. If you look at market comparative rates, they have been up to three to four times higher in multiple situations. There are Many Companies that are doing business in an unregulated way in the digital market that are functioning just find without digital oversight. That puts us in a position where if our earnings are going down and the listeningship of radio is going down, then our businesses are going to suffer over the long time. What wed rather be able to do, like any other Small Business, is to be able to negotiate directly for those rights. Okay. Do you want to respond to that . This idea of the partial withdrawal . Yes, thank you, senator kobashar. Theres an old