The unlikely cause uniting Netflix and the Big Cable lobby

Reed Hastings is not a big cable fan.
Reed Hastings is not a big cable fan.
Image: AP Photo/PR Newswire
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Netflix and the cable industry, bitter foes on most issues involving the internet, have been united by an unlikely cause: music licensing.

Both sides want to preserve a pivotal piece of the ridiculously convoluted system of music licensing in the US: the “consent decrees” that force music publishers to grant blanket licenses to anyone requesting them, at prices set independently by the courts.

The US Department of Justice is currently reviewing the use of the consent decrees, which have been in place since 1941. The collective licensing system made it possible for the broadcast radio business to flourish, and for streaming radio companies like Pandora to emerge. Instead of having to negotiate with hundreds of copyright owners, they only need to secure agreements with two organizations—ASCAP and BMI—to get access to a vast array of music. ASCAP and BMI  collect royalties from people who play music publicly—broadcast radio stations, internet radio companies,and even bars and restaurants—and then distribute the money to rights holders.

The big publishing companies argue the current system leads to below-market rates, costing them billions in lost royalties.  They want the consent decrees reformed (for example, to exclude digital rights) or abolished altogether and for royalty rates to be set via arbitration, not the courts. But companies that play music publicly are concerned that changing the system would give the publishers too much power (a dispute between Pandora and ASCAP earlier this year provides a glimpse of what that can look like).

In comments submitted to the DoJ, the National Cable & Telecommunications Association, which represents the big cable companies (they air TV shows featuring music ) and has taken swipes at Netflix on issues like fast lanes and net neutrality, has voiced its resounding support of the status quo.

[T]he consent decrees continue to serve very important purposes, acting as safeguards to constrain ASCAPs and BMIs substantial market leverage… Our members continue to support and see the necessity for the Consent Decrees. Without the protections contained in the Consent Decrees, ASCAP and BMI would be in a position to extract excessive rates from licensees through the threat of copyright infringement litigation

Which actually sounds similar to  Netflix’s submission:

The Consent Decrees are just as critical today to constrain the market power of ASCAP and BMI as they were when they were enacted, if not more so… Without these protections, the PROs and their major publisher members—two of whom (SonyATV and Universal Music Publishing Group (UMPG)) now control some 50% of the US publishing market—would be able to combine their enormous market power with the threat of crippling copyright infringement liability to extract supra-competitive rates from licensees.

The music publishing industry has managed to achieve  a rare feat: uniting the internets fiercest rivals against it.