In today’s Washington, it is highly uncommon for the House of Representatives to pass a complex bill by a 415-0 vote and for the companion measure in the Senate to have 23 diverse and bipartisan cosponsors. Factor in that the two bill sponsors are highly respected retiring members of Congress, and this legislation should be a sure thing to make it to the president’s desk.
Unfortunately, that is the scenario that our small company, Music Choice, confronts as we try to eliminate one small but very harmful and unwarranted provision in this legislation, the Music Modernization Act, before it is enacted.
If you have Comcast, Verizon, DIRECTV or a similar service, you may recognize the 50 or so curated channels (such as rock, country, and R&B hits) Music Choice provides as part of your basic residential package. We were the first digital music service and have survived when nearly every other company that attempted to provide music offerings via cable systems failed.
We are a small company, but 70 million Americans listen to our music channels over 20 hours per week. The vast majority come from middle-income homes, with 25 million of our listeners having household incomes of less than $50,000 per year. Twenty million of our listeners are older than 55, and our diverse audience includes 12 million African-Americans and 12 million Latino Americans.
At a time when American families are pressed into paying for so many things they can’t easily afford, at least their basic cable packages come with a free music option to enjoy in their homes.
The provision we hope to change has nothing to do with the portions of the MMA that would increase royalties for our nation’s talented songwriters. The provision would substantially harm cable radio services, 70 million listeners, and recording artists alike and was inserted at the behest of the record labels — companies that trumpet their robust profits annually and have never seen a revenue stream they didn’t want to increase.
We agree that parts of the music licensing system are broken and should be fixed. However, the provision in the MMA that eliminates the existing royalty rate standard applicable to Music Choice, known as the Section 801(b) standard, will do significant harm, and no good.
The Section 801(b) standard has worked successfully for many companies for over four decades, which operated under this standard previously. That standard provides flexibility to adapt royalty rates to the unique market characteristics of different segments of the digital music ecosystem and can result in massive royalty rate increases for the record labels when warranted.
For example, two recent rate decisions using the Section 801(b) standard increased Sirius XM’s rate by 40 percent and increased streaming services’ rates by at least 44 percent. But now the record companies want to eliminate it and impose a one-size-fits-all standard for their own pure profit motives.
Eliminating the existing royalty rate standard would put Music Choice out of business, and no other company would be able to take its place. This would harm consumers in almost 70 million homes across the country, and ironically, it would harm recording artists and the record companies themselves. Research shows that if Music Choice becomes unavailable, listeners will shift to radio, which pays the record companies and artists nothing.
Our founders established a legislative branch with two houses so that only the best policies would become the law of the land. It is up to the Senate to fix the MMA legislation by ensuring Section 801(b) remains intact, preserving the flexible royalty rate standard so that 70 million Americans who love their music will continue to benefit.
David J. Del Beccaro, is president and CEO of Music Choice.
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