months. i heard that at the outset, and i hear that less and less and that is the good news. and so what are we trying to do? with our proposed rule? we're trying to -- and we're trying to solve the problems that have afflicted so many people. i think about the family elaine and merlin, they saved $650,000 throughout their career. and they had that nest egg. they did everything right. and they tried to figure out how to save it, invest it, because they were in the new paradigm, and they go to their local bank and they get put into a veriable annuity. very complex instrument. the fees were something like $26,000 a year. my wife and i just bought a car

and we paid 21,000 for it and i thought myself, they're buying a new car every year a nicer car than we have. by the way it's a ford. a very nice carment they could have had that. anyway, that is a lot of money, and when i reflect on this, think about some of the concerns that have been raised. well what about the small investors? to me, the small investors are the people who are in the greatest need of getting advice that is in their best interests, because they don't have margin for error. and so when i hear that argument, i am -- i agree with the notion that small investors deserve advice, and we need to get more advice for small investors, but we need to get advice that is in their best interests.

folks who are wealthy and get conflicting at vice, that's unfortunate and we'd like to prevent that but the consequences for them are less catastrophic than the family that saved $50,000 and is trying to figure out how to spend it. by the way, that small investor who has 50,000 or 100,000, the vast majority of them need an index fund or something really simple. and that's why business models have already emerged. that can help them. and we want to make sure that we provide education, because i think education is -- i think an educate ode consumer is the best customer, and what we're going to do in this rule is clarify the line between education and advice. because that is important. we heard from the industry you can't ban commissions. that would put us -- that would

up duly upset our business model and we'll not be banning commissions in the proposed rule. and now they did that in the u.k. and i'll note something that is very interesting. i went to the u.k. because i told you you build a big table, you listen to folks and you learn from them. i traveled over there because i wanted to learn with my own eyes and ears about the u.k. experience. and what is really interesting is what has happened in the aftermath of their rule, which is very different from what we will be proposing. but what has happened is that it spawned inknow vacation and there are lot of web-based products providing advice to folks, many of whom are people who don't have that million dollar nest egg but have a nest egg that is far smaller and so you know, they're pretty smart people over there. they had a new regulatory environment, and they have been figuring it out.

and innovation has emerged. i think folks around here are pretty smart, too. we're no less smart than the brits, and i think we can figure it out too. and so, you know, the miracle of compound interest is a wonderful miracle. however, the minimumside of that, which is not a -- the flipside of that, which is not a wonderful miracle is the tragedy of compound fees and costs can linger like a chronic illness for a retiree. and when you're talking about $26,000 a year, for this family, do the math, and do the comparison between that and an index fund or an instrument that was simple. i think we can do this. this one of the most remarkably important things that we can undertake in the remaining 650

days. i got 650 days until the weekend. and that's what i'm going to be working on. things that make sure that we sustain the pillars of the middle class and make sure that all the things that we have worked on to help people, to save. many people lost so much of their savings in the great recession. they're getting it back now. and this is one of the most important things we can do to help them. and i know one thing. we can't help them without a movement. because it brings me back to sell half. anything that is important around here you need a posse to get it done and i have been so heartened by the folks in industry who have stepped up and said we can do this. and it's right for our customers and it's right for our business model. i was in duke law school recently speaking about what i

call the stakeholder model of how we build a soil -- cycle in america. hairs too many false choices. i only take care of my -- i can't take care of my customer. that's wrong. i see business that understand that the high road is the smart road, including people in this space. who understand you can take care of your shareholders you can take care of your whoers and take care of your customers and create that virtual cycle. so that's what we're going to do with this rule. but i know there are some who still want the status quo and we look forward to those conversations. we have done remarkable amounts of outreach to date and then when the rule comes out, we're going to begin another formal process of comments, and i look forward to that comment, and i look forward to continuing to have a big table with inclusive

participation, because that is how you provide and that's how you produce the best possible rule. but i need your help. because i need ordinary people to do extraordinary things. and this is a rule that is at the heart of protecting consumers, making sure that retirement with dignity can be achieved and doing so while recognizing that, you know what? folks who are in this space can make a very decent return, and make a very decent living. i am all for that. i think we can have both. i think we can adopt the stakeholder model i discussed, and we can put it here. so, we got a lot of work to do. we've done a lot of work. and i hope that when you go back to your communities, you will talk to your stakeholders and

among other things ask them have you ever looked and asked the question of your financial planner, like what standard does he or she adhere to? because a lot of folks -- this is like -- this is a first cousin of what i saw in the mortgage space. folks did not know they were victims because they went to someone they thought they trusted. turned out that the trust may have been misplaced. and so i need your help in raising consciousness because we don't know what we don't know. and i saw this in the mortgage space. we had to go out there and say hey, show me your mortgage instrument, and then we'd talk to people and say, did you know that the eight months your interest rate is going to go up four percent? hell no. and that is what we have to do here. there's a lot of consciousness raising that needs to go on. there's a lot of education that needs to go on. and you all are in the front

lines and the reason i was excited to be here is because i know that we can get this done. i know this guess for america. i know this guess for the financial services industry as well. we can thread this needle. we will thread this needle. the president himself has talked about this. because he understands that at the heart this rule is about middle class economics. retirement security is a pillar of middle class economics. so, i want to thank you for listening. but much more importantly want to thank you all for being serial activists in your communities across the country, for giving voice to issues that are all too frequently not discussed. from empowering communities that all too frequently feel vulnerable. and disempowered, and for being those heroic figures who are thinking boldly about an america

that works for everyone, an america in which really shared prosperity is what we are about, and shared prosperity throughout the golden years is an article of faith. and so thank you so much. [applause] >> so, secretary perez said he would be willing to stay for a couple of questions. we have microphones here. [inaudible] >> when we rolled it out the other day -- >> of course. so this year is the 25th 25th anniversary of the americans for disabilities act and despite this groundbreaking law that is supposed to protect workers, the unemployment rate for people with disability has remained flat for the full 25 years. i'm wondering if you can tell us what your department is doing to

help encourage people to get -- and also because older workers often have disabilities as part of their discrimination problems. would you please discuss that. >> sure. the unemployment rate of people with disabilities is something like 19% but more importantly the labor force participation rate of people with disabilities is woefully low. it's in the low 20s, if my memory serves me. and i've spent a lot of time in local and state government on this, and we're doing a lot of work at the department of labor. i think the unfinished -- the major piece of unfinished business of the ada is employment. and we -- one of the thing wes did, and it's actually a good parallel to this discussion that i was just having about the conflict of interest rule, is a rule we nut place under section 503 of the rehab act, which is a rule designed to ensure that employers are taking best

efforts to hire people with disabilities. we put this in place a year and a half ago. when we first proposed it there was an outcry from some in the employer community who said this is impossible to do. we were asked questions like do i have to hire a blind person to drive the truck? and i'm not kidding when i say that. we were sued. we won. and the remarkable thing about it is this one person who shall go unnamed who led the assault against us is now one of hour biggest proponents because he looked at his business, which is a fortune 500 -- probably fortune 100 company -- and he looked at his numbers and said, our numbers are lousy, and once all the litigation was over and he focused on implementation we put him in touch with our biggest allies who are other employers, who are doing it.

and say it can be done. all of these issues, if you have the will to do it you find the way. and regretably, if you lack the will to do it, you find the road blocks. and there are so many employers like walgreens and lowes and others who have made significant commitments to hiring people with disabilities and we're doing our level best to lift those up and through the 503 enforcement we'll continue those efforts, and we're making progress but it just isn't fast enough. as he highlight the 25th 25th anniversary i'm certainly going to be talking a lot about employment. i think that's the biggest piece of unfinished business. i do the last three and then have to call it if that's okay. >> sure. >> i'm brian, and i applaud your work on bringing the spotlight into the financial conflict, in the financial services industry.

my question concerns what do you do about companies who claim presently that they serve the best interests, that their advisers avoid conflict of interests, things like that. but yet they have never enforced that. are you aware that many sort of institutions have those rules that they do not enforce? and what do you think about the idea of sort of second opinions on financial advice because i see many people who think they've worked with somebody they could trust, but that if they'd gone and gotten the second opinion they'd get very different advice. so i applaud the fiduciary goal

i'm not sure it gets us all the way trip. welcome your thoughts. >> we have heard from a number of stakeholders who have said that we already -- we put our customers first, and we will continue to do so, and my response is, well, then compliance with this is going to be pretty easy and -- >> but the never -- injury they've never had a legal obligation, enforceable, to do so and so that will be a different paradigm. but i have a lot of conversations with folks and the most productive conversations are often one-on-one. who say we can do this. we can figure this out. and when you have such a substantial subset of the industry who already does this what i hear from certified financial planners, we need a level playing field because consumers don't know whether the person they're talking to is under a suitability standard.

they all think they're looking out for their best interests. they don't know massachusetts -- they don't know that some are and some aren't. i don't want my doctor i go to today to be looking out for my best interests my doctor next week to tell me the treatment is suitable. that's level playing field issue is a big part of what we're doing in terms of second opinions, one thing i hope are already in place -- i've done a lot of work in the mortgage space on this -- is having internal controls. we do a lot of work to put in place things like mystery shoppers. often to term of consent decrees and that is you say you're not discriminating in the mortgage space. well, test it. see what is happening. and when you do that you can preevent things that you see emerging from becoming big, and

so a big part of this conversation needs to clue those internal controls. >> i'm alexis and very excited you're here today, secretary perez, and i'm excited about your energy you're bringing to this conflict of interest rule, and you mentioned the president is behind it. that sets up expectations this will be a strong rule. you allude to third idea you have seen less pushback from the final industry bit have reports from moneyed institutions lee the financial services roundtable, saying things like they're offended by the tone that the white house has taken with its memo, and so my question is, that memo, if recall correctly, said that retirement savers are losing believe 17 billion a year due to hidden fees and i'm curious if you stand but the numbers in that report if you stand by the tone in that report and if we can expect a strong rule in spite of this industry pushback by very well moneyed interest.

>> want to clarify something about what i said. i have spoken to a number of industry stakeholders who have said that this is something we could do. and in some cases this is something we are doing. i don't think i said that there's been less pushback by some in the industry. i don't want to give you a misimpression that suddenly light bulbs have gone off everywhere. i'm not confused by that. i appreciate those who have said, i haven't seen the rule yet and i want to withhold judgment until then, and if i were in those shoes i'd do the same thing. so i'm not confused about the road ahead. there are some -- again, i had meetings with folks who said i don't understand the problem. and so you got to understand that there are some who stated

that and perhaps that bespeaks an effort to move forward with pushback but again, i am -- when you have the facts on your side and when you have movements on your side and when you have folks in the industry, this notion i would go out of business if i have to do this, and i'll stop serving people -- when i was in montgomery county maryland, we put in place a rule in the mortgage space to help consumers, and i heard from the bankers saying i'm going to stop lending in montgomery county if you put this rule in place. i'm thinking to myself hmm, the wealthiest county in america, o'tom potomac, being the da and they can't get a loan. --be bethesda and i can't get a loan. but guess what. they're still lending in the county, we were able to thread the needle, and i think we can

do this here and because i see -- there's so many good players in this industry, and they're smart and they're innovative, and i think this rule that we're going to put out for comment will enable us to thread the needle. yes, sir can last question. >> i'm bob abner, commissioner at the consumer product safety administration and during the transition i was your boss. >> yes. i worked -- you do god reside work there. >> this is a personal note and i first want to note that there was a great article in the "new york times" a couple weeks ago making the very points you did about the differential that you pay when you have an indexed fund versus a brokerage account, which was a personal point for me because for years i was asking my brokerage account, how much am i paying in fees? it wasn't until i hired an independent consultant that he actually read my incredibly obscure financial disclosure form they sent and told me how much i was paying which shocked

me, which is why i'm no longer with them. one of the points the article made was over the course of 30 years, two investors with roughly the same amount of money, the one with an actively managed account would pay -- would reap on average hundreds and thousands are hundreds of thousands of dollars less than going to an indexed fund. the other point i want to make as a form academic is that most of the studies i'm aware of say over the long run, actively managed accounts cannot beat the market in times they're lucky to stay even with the market. so i wonder if you can tell us what your assessment or if there are any studieds you're aware of about the advantages of an actively managed account versus the advantages of an indexed fund. >> well, you have taken the words out of my mouth and certainly in our research we have seen the statement -- the same studies. the concern i hear the most frequently is this is going to

hurt small savers. i would respectfully assert that small savers are the people who need to make sure that their adviser is working in their best interests, because small savers don't have any margin for error and small savers by and large are going to do the best in an index fund or some other no-load, low-fee kind of fund. and so whenever i hear that argument -- biffle -- by the way, jack vogel's company is doing okay i think, and he is not the only one in this space. and then again, you look at the aftermath of the u.k. and you see that there are now new web-based products springing up and i think -- and i don't want to overstate those. i'm intrigued by the fact that

innovation has really taken off there. and i think we're a pretty darn innovative world here in the united states, and so i think again it gets back to what i said. if you have the will to do something, you can do it. i look at the woman who asked the question about 503. no we are not requiring employers to hire blind drivers, okay? i can say that with certainty. and i repeat this because i'm not making this up. these were some of the comments. but now i go to walgreens and as a result of the leadership of their corporate heads, you go to their distribution center in connecticut, and i've been there, 40% of their employees are people with disabilities. working side-by-side, making 15 bucks an hour or more. with people who don't have

disabilities and that's one of their most effective and productive places -- bless you -- bless all of you -- and you know what -- so they figured it out. and other companies are starting to figure it out. and so i feel like there's a little groundhog day feel to this. i heard this in me mortgage space, when we tried to regulate. blacks and latinos will no longer have access to the american dream. that was the argument. in the mortgage space. and that was wrong. we need to move forward, and we can move forward, and the studies are legion. you cited a couple. but the studies are legion about how the products that folks are going to get into, that are low-cost high-reward products are exactly what they need. that's why my guy said stay in the thrift savings plan. i can take your corporationus

and make a little money rolling it over but that wouldn't be in your best interests. everybody deserves to get theded a advice that my legal aid lawyer wife that works with people, and we don't have -- we're not the rockefellers. okay? so, our margin for error is pretty slight and that's why we shopped around and i need you all to help in communities to do this to set up through your networks folks who can provide second opinions for folks, because what is going to happen is that as people become more and more aware, they're going to start asking more and more questions. that's great. that what should happen. and you know what? the companies that can answer the questions in a way that shows, i'm looking out for you those are the companies that have nothing worry about. and the companies that have been getting 24,000 or $26,000 a

year from a variable annuity for someone, don't know that. it's like olympic diving. you decent in the twist. the cannonball with do for just about everyone. okay? and so this is do-able. and your data is compelling. so, thank you. [applause] >> thank you everyone. please join me in thanking secretary perez. >> c-span2 road to the white house coverage will bring you two event thursday is weekend with potential 2016 presidential candidates. first, wisconsin governor scott walker speaking at a republican party grassroots work shop in concord, new hampshire, live tomorrow at 11:45 a.m. eastern

on c-span, and on sunday an event with texas senator ted cruz, who is a featured speaker at this year's lincoln-reagan dinner new hampshire. you can watch that sunday night at 9:35 eastern on c-span2. >> this sunday on q & a decider adrian berman, director over the georgetown university medical center watchdog project on how pharmaceutical companies lobby congress and influence dew doctors what medication to prescribe. >> promotion of drug starts seven to ten years before the drug comes on the market and while it's illegal for a company to market a drug before it's been approved by the fda it's not illegal to market a disease. so drug companies have sometimes invented diseases or exaggerated the importance of certain conditions or exaggerated the importance of a particular mechanism of a drug, for

example, and then blanket medical journals journals and medical meetings and other venues with these messages that are meant to prepare the minds of clinicians to accept a particular drug and also to prepare the minds of consumers to accept a particular condition. ...

>> roughly speaking, and the number is debatable. they control approximately 45% of the market. the remaining roughly 10% belongs to two other pros, csac and global music rights. so, what does this have to do

with antitrust law? well it turns out that virtually the entire market for the licenses we're talking about is governed by pair of antitrust consent decrees from a long time ago. the 1940s the department of justice separately sued ascap and bmi over concerns they violated the sherman act through aggregating control of the music license market. doj settled the cases and entered into separate cop sent decrees with ascap and bmi. the con seen the keeping decrees are someone unusual. they essentially function as a kind of regulatory system for the price of these music licenses. the decrees contain requirements that look very much like compulsory license and royalty schemes. specifically they require that the pros offer a fair rate on

a nonexclusive basis any user requesting a license. ... and things change. in 1995 after the advent of the web streaming congress

decided to require internet companies who publicly perform music but no one else to pay royalties to recording artists and record labels and other people who heard the songs rather than those who require there record labels to license their works. it looks very much like this scheme that dissent agree set up on the musical competition side. the major difference is that the press a royalty for proposes ultimately controlled by judges. judges supplying antitrust law and the price of lawyer's -- loyalties for the recording office is controlled by a panel of administrative judges, house and the library of congress. these two groups of people do not agree about the price of a license to play music

on the internet. a royalty board sets rates for recordings played on internet radio that were substantially higher than those the rate court had set for the underlying compositions. for example, in 2013 pandora paid approximately 48 percent of its revenue to recording artists and record labels and only about 5 percent of its revenue to sound writers and publishers this disparity led publishers to believe that they would be able to achieve better rates outside the consent decrees, so they made the request asking for a change in membership rules to allow something called partial job meaning the right to exclude digital services from the blanket licenses that they normally sell. that would require companies like pandora to separately negotiate with publishers for public performance

licenses at whatever price the market would bear. all of that lead to litigation that is still pending. it also led it also led to allegations that the music publishers who think that the judge set royalty rates are too low were colluding to keep pandora's pandora's prices high instead of competing with each other to drive consumer prices down. in a lengthy opinion a judge of the southern district of new york ruled that publishers have no right to partially withdraw their digital withdrawal there digital rights from the blanket license under the 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 the initiations. that case is now pending on appeal even as we speak a different judge a different judge in the us district court for the southern district of new york is now conducting a trial concerning similar questions under the separate bmi consent decree. meanwhile the department of justice antitrust division is currently considering -- currently considering an effort to modify the consent decrees to allow partial withdrawals, among other things. that would that would have a number of important consequences that today's panel can discuss. on the one hand, the publishers say that partial withdrawal we will allow them to negotiate prices with internet companies in a free market. surely the most striking feature of the current system is that there is no free market at work. others believe that after partial draw the market will

not really be free they have been accused in the past in short what to do about these consent decrees is a hard problem and one ultimately that affects many millions of americans. today we will 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 the department of justice 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 the duty to ensure that prices for music remain competitive for consumers.

>> thank you very much mr. chairman. i congratulate you for taking over the subcommittee. we don't have a formal passing of the gavel at the subcommittee level, but it is exciting. here you go. >> thank you. [laughter] >> and we have worked very well together. i no that it will continue. this hearing focuses on an important and timely topic on the state of competition in the music industry and a pair of antitrust consent degrees that govern license for the public performance of musical works. we are not here to talk about the sound recording which is governed by a different structure and set of rules but the underlying musical works, lyrics, composition that songwriters create, music publishers get out into the world and licensees like

broadcasters and digital music services help us all enjoy. the consent decrees under which the american society of composers authors and publishers and bmi but inside of this room it refers to broadcast music link. those consent decrees under which they operate have been modified several times in history. it is appropriate from time to time for the department of justice to review these deceptive or consent decrees to ensure they are meeting their intended goal of preserving and promoting competition. there are some who argue that they have run their course and should be sunset it while others maintain the server role in protecting against competition, concerns command should be strengthened. recent activities in the court enforcing the consent decrees and to private

antitrust litigation. there is a recent litigation in the us district court for the southern district of new york which includes include some of the parties were witnesses here today. his against this company backdrop that the department of justice is taking a fresh look at the consent degrees. our focus is on striking the right balance between impact by consumers, main street and those broadcasting content. respecting the rights and value 02 out to the creator of the music that we all enjoy. when the dissent -- consent decree 1st went into effect no one imagined the just man, the boombox to not much less ipod and digital streaming. in addition to innovations cannot restructuring command new players entering the market congress has acted throughout to enact knew rights for music, copyrights for sound recordings distribution, distribution and most recently for public

performance of digital sound recordings. our hearing today is going to focus on the antitrust side and any competition issues in the present-day market for licensing musical works. i like forward to hearing from oliver witnesses. >> thank you, senator before we introduce, and our witnesses, we receive letters from members of the public can sit during this issue. unless there are objections they will be entered into the record. i we will introduce our witnesses and they will be sworn in. move from the side of the table over. beth matthews, ceo the full title, of course, the american society of composers, authors and publishers. to her immediate left is

chris harris, the vice president of business affairs for pandora media incorporated and then. and then we have met pinkas the founder and ceo of songs, music, publishing. next we have a man from my home state of utah, the vice president of business affairs and office of general counsel for bonneville international. the thomas miller is with broadcast music inc. a songwriter affiliate and the president of the nashville songwriters association international. finally we have jodi griffin, senior staff attorney with public knowledge. okay. well they please stand and be sworn? do you are from the testimony you are about to give before the community will be the truth the whole truth, and nothing but the truth of hope you got?

thank you. okay. we will now hear from each of our witnesses beginning with this matthews and then continuing to her left until we get over to ms. griffin. after that we we will proceed to questions. >> good morning, chairman ranking member, members of the subcommittee. my name is elizabeth matthews, chief executive officer of the american society of composers, authors composers, authors publishers, which was formed 100 years ago by songwriters a membership association operating on a not-for-profit basis comprised of more than 525,000 songwriters, composers, lyricists, and music publishers and represent over 10 million musical compositions. songwriters are the unsung heroes behind american

music. from the heart and mind of a songwriter. they create notes and lyrics on page. this is a copyright in the musical composition that any artist may record. unlike recording artists songwriters do not earn money from selling merchandise were touring. many songwriters do not have salaries, benefits, or other reliable sources of income. they rely on public performance royalties to make a living, a living, feed there family, and make the rent. songwriters can make a living creating the music we all love. music matters. not just a business, an important and continual contribution to society and our day-to-day life. licensing the right to publicly perform music to over 700,000 licensees and work with over 100 public performance 100 public performance societies globally who internalizes members works outside of the united states.

2014 alone we processed payment for over 500 billion public performances, more than double the year before and we are only one of several market actors. we entered into a consent decree with the department of justice because they did not have significant competition. fast-forward and today competition is alive and well. we compete directly with bmi and unregulated competitors. the barriers to entry for new market competitors are quite low and, yes we are still governed by a world war ii era consent decree last updated before the invention of the ipod. seismic changes in the music landscape. people know longer people no longer buy the music they love. they stream it. more choice and consumer control which as a result

requires access to a massive variety of signs in order to provide users with an optimally tailored content experience which means the use of music has increased exponentially, but payment has not followed. for a songwriter, this is a terrifying trend. new and innovative market players require experimental approaches to music licensing and yet that it consent decree restricts our ability to adapt because it is stuck in 1941. some digital music services are unwilling to pay a fair market rate making it impossible for songwriters turn a sustainable living. a sustainable living. as a result major music publishers are threatening to resign entirely which would be a devastating blow to collective licensing and songwriters. we have proposed a number of changes to the consent decree

including the following: rate disputes of businesses that use music should not be decided in an expensive, time-consuming litigation. litigation. we propose a faster, less expensive process. second, membership have the ability to license directly. fully supporting transparency for licensees in this regard. that approach that approach is both procompetitive and consistent with the us copyright law. third we must support five and music licensing by allowing more than just the right of public performance to be licensed. they may facilitate one-stop shopping where businesses may secure every right that they need if the consent decree is changed. the department of justice is undertaking a review command we look forward to work with them to make procompetitive changes. we have engaged with congress in our effort to modernize the current music licensing system. we upon the leadership of

senators for introducing the songwriter equity act which represents an important 1st step in a form. if consent decrees are not changed and made -- major music publishers resign then the system of collective licensing may collapse and everyone loses. copyright owners, licensees music fans everywhere, and most everywhere, and most importantly songwriters who are the heart and soul of the music industry. thank you. >> beautifully timed, by the way. you close that out. mr. harrison. >> chairman, ranking member, distinguished members of this subcommittee thank you for inviting me to testify. my my name is christopher harrison, the vice president of business affairs at pandora media launched less than ten years ago and now the most popular internet radio service in america reaching more than 80 million listeners each month.

the mission of pandora and our more than 1400 employees is to unleash the infinite power of music by being the effortless source of personalized music enjoyment and discovery for millions of listeners. listeners. where others may see a music industry in turmoil pandora's is abundant sees abundant opportunities for new leadership to create a music industry that @pandora's is abundant sees abundant opportunities for new leadership to create a music industry that better is the entire music system. the marketing platform which gives free access to artists to see how their music performs on our platform is the 1st of many initiatives intended to unlock the power of pandora to enable music makers to grow there 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 the launch of 2,005.

ensuring a vibrant and growing music industry in the years to come requires a marketplace that is open transparent, and fiercely competitive. unfortunately there are number of obstacles that have the future. it has been nearly three years since the subcommittee reviewed competition in the music industry. it reduces the number of major music publishers from 43 among the most important obstacles and alarming lack of transparency. as. as i described my written testimony dislike of transparency was a key factor in the inability to obtain competitive market agreements with the music publishers who had withdrawn the digital performance rights. i commend mr. pincus for making the repertoire of songs available publicly and hope that others follow the example. we will recommend the creation of a publicly

available database to house all relevant music copyright ownership information. a single service would allow us to identify the owners of the songs in the form encouraging to competition among copyright owners for distribution on digital platforms. by the -- while the transparency would mitigate the anti-competitive behavior pandora recently experienced transparency alone is insufficient to solve the problems pandora faced. the largest publishers and bureaus and amending changes are now being forestalled. four different federal court judges have found evidence of the same types of egregious anticompetitive conduct that gave rise to the original dissent decrees. they directly

experienced some of that and take up and behavior which detailed written remarks. anything must ensure a pricing mentality that does not exist at this time. turning a a blind eye to harmful misconduct permitting publishers and bureaus to artificially and pray -- inflate prices and harm consumers access to music that they love. a functionally competitive music licensing ecosystem. as evidenced previously there is a continued need for government oversight to ensure certain participants in this highly consolidated and 55 55 industry cannot leverage the market power for unfair gain.

thank you for your consideration of these important issues and going forward to answering in these questions. >> i am honored to provide my perspective. why are the property rights of songwriters and publishers subject to heavy-handed government regulation. perpetual government regulation is making it worse. i am an avid user of mini digital music services. somewhere in the many models out there is the answer for future growth for my company. as i detail in my written testimony the current consent decrees are artificially depressing the performance world sees the digital services pay because

i am unable to negotiate for property rights. three successful songwriters wrote a song for the recording artist. the song went number one. it was streamed 144 million times on pandora. as a songwriter it does not get any better than this. yet the 50% interest generated only $3,158.5 in royalties to be shared among the three of them. if streaming music is the future it is clear all songwriters and publishers should be concerned. it is not fair for songwriters. i am compelled to allow anyone to use my songs no matter what the terms because of perpetual government regulation.

those lobbying for continued regulation often cite the hirings of the top 1 percent of recording artists. only represent the creators of some of the most recognizable signs in the world what many of the creators i represent i represent are struggling to make the minimum wage from their music. like the acclaimed indie rock songwriter husband and father who has been plagued by illness and unable to afford proper medical treatment, his sole income comes from creating music. over 11 million times on pandora, paid only $642. i have a responsibility to secure fair compensation for the talented songwriters i represent in them unable to do so due to perpetual government regulation. under the current consent decrees i have only two very bad choices in seeking fair rates, except unfair government regulation or withdraw entirely from the collective licensing system and incur tremendous cost and terrible inefficiencies

to the benefit of both rights holders and businesses the user music from our site are licensed collectively. however despite radical changes in our music is used and consumed using consumed today songwriters and music publishers continue to be highly regulated by consent decrees imposed during world war ii. in my written testimony i identify modifications to the decrees that i believe will allow for a more a more competitive, free, fair market for all copyright owners and music users. critical changes include amending ratesetting procedures to allow for negotiations and payments that more closely reflect a free market allowing direct licensing of performance rights establishing a formal mechanism for sunset or at least periodic review and providing music publishers and agents the flex ability to licenses and services seeking multiple rights. i believe the department of justice has an important role in enforcing antitrust

was against any real anti-competitive actions of specific parties, but it should not be used to regulate small business owners and prevent the free market development of an entire iustry from a 75 years. that is the ifiven the freedom like any other music publisher i we will exercise it responsibly to the benefit of my songwriters.ing member, members of the subcommittee. i am vice president of business affairs and general couner which owns television and radio stations in salt lake. i am pleased to testify on behalf of the national association of broadcasters and its thousands of free local and radio stations throughout the nation.

my testimony we will focus on the continued necessity. absent these consent decrees no fair, competitive market would exist for the licensing of musical works which would harm not only broadcast audiences whose access to programming would be jeopardized but customers of the countless businesses that publicly perform music every day, everyday, including restaurants, bars, retailers, and sporting venues in your local communities. to illustrate the issue, let me provide an example. ks ltv has music interwoven throughout the programming. these musical performances take place in the background of movies and television shows and live sporting events and local news during transitions between programs and even within commercials. for his locally produced concent there is editorial discretion over which specific songs it airs. in in the event it could not obtain the rights to a certain song they would

likely take steps to ensure that song is not performed. for a significant portion of its content, namely network and syndicated programming programming, live events command commercials, it has no editorial control. if if they like the right to publicly perform a song it runs the risk of significant penalty to the penalties under federal copyright law. our radio stations, air syndicated programming commercials, and live events run the same risk. risk. they must have the public performance rights of the full catalog of music works in order to operate lawfully. even the right to a single work gives the copyright owners significant market power. the risk of anti-competitive abuse is compounded when these rights are aggregated, which is exactly what the puerto rico owes do. they control more than 90% 90 percent of the public performance rights to musical works in the united states. aggregate those rights into licenses and fix a single price.

the consent decrees entered into between the department of justice and both organizations more than 70 years ago served as antitrust lifelines that allow them to continue to operate in spite of their anti- competitive nature. absent the protections and framework afforded by the consent decrees they have unfettered ability to extract above market prices and terms for the rights from broadcasters and other licensees. let me be clear. broadcasters would cease operations without the ability to clear these rights. the consent decrees are critical to that end. before i conclude i conclude i want to touch on to specific points central to today's hearing. first in an attempt to circumvent the at decrees

large publishers have sought to selectively withdrawal directly negotiate. 2 quarts interpreted the consent decrees to prohibit such partial withdrawals and they are asking both doj and the congress to amend them. such a modification should not be allowed. the fact is, any music publisher with sufficient size and scale to consider% the fact is, any music publisher with sufficient size and scale to consider direct negotiations for selective rights would have essentially the same power in the market as the puerto rico owes and raise the same antitrust concerns. relaxing the consent decrees in this way would enable music publishers to engage in the same behavior that prompted the consent decrees in the 1st place command has been condemned by the court sense. second, this subcommittee need look no further than the recent antitrust actions brought against the 3rd major puerto rico 02

commence the anti- competitive licensing practices undertaken by an unregulated collective. these. these practices, which resulted in a $50 million settlement just a month ago are detailed in written testimony. 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 the antitrust laws play in ensuring free and competitive markets. they remain vital to television and radio broadcasters. thank you for inviting me to testify today. i look forward to answering any questions. >> thank you. >> good morning. my name is lee thomas miller. i grew up on a small tobacco farm in

kentucky. i started playing piano guitar, violin. music has a way of taking you over. i knew early on it was not a hobby. studying something both -- sensible like business. classical music competition which basically just meant i was overqualified for my job singing and playing in barks at night. there i was classically trained and writing honky-tonk songs on the side. i learned about broadcast music incorporated, looking for an excuse to visit nashville. i met with a songwriter representative who explains to me what bmi did. when your song plays on the radio we collect the money, he said. i said, sign me up. i i played him myself made recordings of the sites i have been writing kind he was very blunt : you're not

much of a singer and a guitar players are a dime a dozen, but i believe you can be a songwriter. so i graduated and moved to music city four years writing songs, songs, playing in man centered temporary jobs to pay the bills, studied songs i heard on the radio and b and meeting and learning from the writers who wrote them. at the time the business was healthy and publishers could take chances. a prominent publisher took a chance on me and the work began. my 1st cuts were not memorable. my 1st performance royalty check my 1st performance royalty check was for $4.69. today it is framed and hanging on my office wall. that check meant everything. that check check meant that i was a professional songwriter. all in all, it took 11 years after after i moved to nashville to have a hit on the radio. in 2,003 i received my 1st bmi award. it was a song titled the

impossible. ironically about overcoming insurmountable odds through faith and determination and believing anything is actually possible. to me during that 1st award was like a ball player going from aaa to the majors. in today's music industry environment songwriter's count on there performing rights societies. the one thing keeping us afloat is that performance royalty check. check. we don't tour, sell t-shirts, we write songs all day everyday. when we succeed, we pay self-employment income tax. with what remains we buy gas and bread and white picket fences. since the year 2000 the national songwriters association where i serve as president estimates america has lost between 80 and 90% 80 and 90 percent of its professional songwriters whose primary income is from royalties. i am talking about creators. what we create is not some obsolete, irrelevant cultural product of days gone by.

it is music. what we create is there when you fall in love, we are heartbreaks and heels, heels, it inspires, it time travels, it crosses party lines. how does the bmi consent decree affect me? i feel it puts bmi and songwriters at a disadvantage. if it could be resolved by arbitration rather than expensive litigation it would feel like a win for everyone. new services services could launch, and songwriters can be paid quickly without spending lots of money on lawsuits. songwriters worry that bmi is not allowed to license rights other than performance rights. most services need several rights. a one-stop license from bmi would be a a quick and efficient way to get those services off the ground. these aspects of the bmi consent degree in my view have a valued the musical

competition to the.where songwriters are being crushed. it crushed. it is bad enough that it is so easy to steal music today that a legal framework allowing songs to be streamed for nearly free will destroy the livelihood of the american songwriter if it is allowed to continue the us department the us department of justice is presently undertaking a comprehensive review and we hope they we will recommend substantial changes that will allow us the flexibility we need to operate in the free market. i am america's small -- 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 13 minute story. that is the power of music, and it all begins with a song. i am here to tell you, there are not many of us left. >> thank you, mr. miller.

>> chairman, ranking member members of the subcommittee thank you for inviting me to testify today, and i would like to thank you, mr. chairman, for your remarks emphasizing that competition policy is 1st and foremost about protecting consumers. i am a senior staff attorney at public knowledge an organization that advocates for policies that promote freedom of expression, affordable communications rules and the public's ability to create and access before public knowledge i was a musician and helped launch and work for the five-time grammy nominated independent label piedmont sound. the department of justice's justice's reviewer the antitrust consent degrees comes at a pivotal time for the music business. more than ever it is crucial policymakers promote competition and innovation in music distribution to benefit listeners and artists alike. new music services give

consumers convenient ways to legally access music at reasonable prices and have the potential to give artists greater control over their own careers. however, this market is new and growing and it is crucial we encourage competition and innovation. antitrust and copyright policy should promote a robust and competitive music marketplace where artists can get music out on the market and receive a fair price. users should have competitive choices among legal music sources. if all sources. if all of the middlemen from publishers to labels to distributors are facing robust competition that forces them to be accountable to musicians and audiences but if an intermediary can leverage a large catalog of copyright acquisitions to dominate the market, it has the power and incentive to use that leverage to raise prices for consumers tactless revenue targets and prevent new services that would challenge his dominance. on the sound recording side

one of the major labels negotiate directly and have been able to use their market power to achieve 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 market share. a very active to have the very act of creating licensing organizations concentrates market power command a market for performance rights and composition is concentrated. we have had antitrust settlements ensuring the largest performing rights organization offers reasonable licenses despite market power. this does not mean it is inappropriate to periodically review and update consent decrees to encourage more competitive market but at this moment

we can already see mom -- we can already see multiple warning signs that they would result in a less competitive and innovative market with fewer choices for consumers. in recent years the music publishing industry has only gotten more consolidated as bigger publishers buy out smaller firms. some were justified by the argument that postmerger publishers cannot possibly act anti- competitively because we can rely upon market protection and consent decrees. even more recently a federal judge has found that when the major publishers attempted to license digital rights directly to pandora they chose collusion over competition. of the competition. they could have used that opportunity to compete with each other but instead chose to coordinate with each other. a federal judge later examined these negotiations

finding the publisher's behavior magnified their very considerable market power so much so that the resulting licenses could not be honestly considered free market benchmarks. again, this does not mean we must always have consent decrees or that they can never change but at this moment in time we need to protect competition more than ever. as the department of justice reviews competition and the antitrust consent decrees in particular it is crucial we continue to support policies that encourage a competitive market in which no company has the power to pick winners and losers. a marketplace allowing new entrants to compete whether among copyright holders or distribution services ultimately benefits consumers and artists alike. thank you, and i look forward to your questions. >> thank you to your for your opening statements. we will now begin our question-and-answer with five-minute rounds. i we will go 1st. ms. matthews, we will start

with you. your consent decree has been around since the early 1940s, the 2nd oldest of the two consent decrees. we look at music market today and can see that it has changed a lot over the last 75 years. delivery methods in particular have changed a great deal since the early 1940s. what can you tell me about this, this how the market is 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. >> the competitive market has increased dramatically since the 40s. we can beat both with regulated competitors such

as bmi and several unregulated new market entrants have shown up on the scene over the last several years. the most important change 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 reproduction has deeply declined for songwriters. as a result reliance on public performance is increasing, digital services are becoming increasingly more customized and personalized with the proliferation of wireless device adoption, broadband penetration rates and high-speed services. more music is being played than ever before. while the volume has increased, the revenue is simply not tracking in terms of increased command at the end songwriters are harmed. as a result major

publishers are threatening to resign. if they do, collective licensing will collapse. >> thank you. i am presumptively always supportive of free market solutions to competition issues. now, you have suggested these old consent decrees are not outdated at all. what evidence leads you to believe the consent decrees we are talking about today as written are necessary, even in a digital age age, and even in a digital sector >> i think that there are two things that i would.you to. the 1st is just the structure of the two. they are horizontally joint sales agents that take works from otherwise competing publishers, aggregate those, and then fix a a single

price across all of their members catalogs. as mr. devil indicated that is normally viewed as a per se antitrust violation. they have immunized to prior private antitrust claims. more contemporaneously pandora has experienced what happens when publishers attempt to partially withdraw. you alluded to the opinion in which he found that when given the opportunity to compete against each other the publishers chose not to and to coordinate their behavior, use behavior, use market power and drive rates above the competitive market rate. >> speaking of that litigation judge coats in the pandora the litigation

the rate judge discussed several examples of this behavior as she found to be questionable. as this issue continues to rise i would like to give you a chance to respond. if the publishers are permitted to partially withdraw will they be viewed as competitors? if so, do you so, do you think that that will result in competitive pricing? >> it is counterintuitive, i know, counterintuitive, i know, but if you major publishers and independent publishers as competitors today. we only accept a nonexclusive rate meaning they are always free to direct license with any music service, including pandora. if they were allowed to grant partial rates supported by the us copyright law because they are divisible they would

simply remove them in their entirety so that we would not be competing for them with respect to that particular license. it would be pro-competitive in the sense that it would create more choice for music licensing services. >> we probably will want to follow-up follow up on that a little later but my time has expired. >> i we will start where when he left off. a significant amount of the attention has been placed on the partial withdrawal of certain rights from the performance rights organization. as discussed a recent letter was filed with the doj indicating that department believes they do not permit partial withdrawal. you answered that. why don't we start with you? why are they needed in your view? >> well the current system

works quite well with respect to most aspects of collective licensing. there is broad satisfaction with the rating of licensing system, the television licensing system bars restaurants, stadiums but with respect to the 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 a digital market that are functioning just fine without government oversight that puts us in the position where we feel like if our earnings are going down and the listenership of radio is migrating to a lower paying rate, our businesses will suffer over the long term.

but we would like to do is to be able to negotiate directly for rights. >> okay. do you want to respond? >> this idea of the partial withdrawal. >> yes. thank you, senator. as a young lawyer i was a litigator. there is no adage time honored in that profession that says that fact makes that law. hypothetical situation -- hypothetical situations make worse law. i would discourage the members of the community not to make a decision based upon a hypothetical threat. that is first. second of all, the very fact that the music publishers we are talking about a big enough to make a threat should raise a lot of eyebrows on this committee and the department of justice. those withdrawals are best as has been mentioned here, best put into light of what

might happen if you take a a look at what happened when they threatened the. they engaged immediately in conclusive anti- competitive activity. if you want to know what will happen, that should give you a pretty good idea and raise eyebrows and the question of whether or not they ought to have their own consent decrees, frankly. >> do you want to respond at all? >> i agree with what was said. the concern is not partial withdrawals interior. it is partial withdrawals in practice. what we experience over the last two years when given an opportunity to compete when they actually believed they had partially withdraw, the publishers chose not to. to the extent that the department is looking into this issue i think i think it is wise for the subcommittee to be mindful of actual behavior not what

folks might say that they want to do. >> my last question, the number of different rays of licensing rates set throughout the industry, some arguing they should be set in the free market rather than subject to terms administered and regulated by the government. you talk you talk about the right of public performances inherently a free market rate. what do you mean? if you could answer briefly so i can do to other comments. >> well, if it were not for the consent decrees the negotiation would be between publishers and licenses directly. >> okay. do you think that is a good idea? >> i do. i think i understand that there are anti- competitive concerns. i have never been accused of acting and i competitively. yet i am regulated by a system meant to protect

against anticompetitive behavior on a blanket basis probably. >> thank you. >> so when i think of what a true free market is, it has is, it has competition brings more choices and lower prices to consumers. when we look at the publishing market now it is hard to know what a true free market rate is because we do not have examples of negotiations where the licensee can say no and stay in business. that is why we need competition protections like a statutory license. >> anyone else want to respond? okay. >> i would like to.out under the current consent decrees the license is compulsory meaning that there is no association in order to have access. it is the antithesis. they can immediately exploit copyrights.

>> thank you very much. >> the partial withdrawals how we will this affect broadcasters digital channel. >> we will be faced with having to negotiate, if you can call it a negotiation with people who we don't know how much of the product may be used and therefore have to have those licenses. licenses. our hands are tied. we have to come to an agreement which gives them an uneven field on which we have to play immediately. we do not have a choice. we have to sit down. we cannot we cannot say no. second of all, we have seen how they behaved in a free and open marketplace. they collude. they will immediately go to the conduct that we believe they have already proven they go to.

they will not tend to conduct themselves in an anti-competitive way which anti- competitive way which is what we will be faced with. again to our head and no market power. >> ms. miss griffin, what is the consumer interest are? how do consent decrees help consumers? >> thank you, senator. consumers benefit when they have choices for different services that give them different types of offerings and different price points. the role of the consent decree in creating that market is allowing prospective new licensees to enter the market pay artists, and then launched service and give consumers a new choice. >> and i have a general question for anyone who would like to speak on it. i am trying to get a sense what a fair market value means from your perspective. ..

>> >>, would also agree with

the characterization of services and surveyed the experience of pandora and publishers will not tell you what they own them will full copyright infringement with $150,000 infringement services don't feel they have the ability to walk away there. >> as a small business person a free market i can decide is more appropriate for my business and i don't think i can do that in this context. >> senator with all due respect to our discussion about the free market we have actors whose existence would not exist in a coat -- a market they have collectives that their existence does not allow the free market.

city have to come outside this free market immediately with the right to collectives to bargain the way that they do. there has to be a construct to govern that activity. i agree if one buyer and seller are talking that would work but we're talking about the size and magnitude of collective society is there is not a free market. >> pre-market this something the songwriters' dead tree love we have never had the speed of 12 and are copyright laws were this is the beginning of trading songs quickly it is becoming unsustainable. the thought to sit down to have a negotiation in 2015 what our craft might be worth maybe life changing to

our profession. we are the alternate player. we're handcuffed to the bottom of the ocean. >> i would agree with ms. matthews of free market is where either side can walk away without going of business entirely inadequate note mr. miller mentioned how the song writers and feel they have to get the license and they feel that way because the pro dominates the you have to go through them and it makes it dangerous from that competitive perspective. >> ms. matthews just to direct your opening statement of the competitive environment that becomes more and more challenging, how does they compete with the other pro how that competition plays

out and the answer my question don't they need a license from all the pro's? >> with that current business practices they obtain a blanket license agreements from the biggest ones. there are always free to license around your program around the assets because they have complete creative control. perhaps the licensing program is rather sources an individual could simply by one catalog of copyrights to compete with the pro's but publishers are directly competing with pro's. international foreign societies are competing with pro's and i wouldn't be surprised if technology

companies start to enter the space and compete with the pro's. >> your view? >> first of all, i am a member and have been over 20 years and still have publishing interest in musical works. these are friends of mine and not trying to say anything personal about their behavior but they don't really compete because they don't allow people with these societies with the deal exclusively i don't think that is competition frankly. >> what risks do we run if the doj would address any antitrust violations if we got to a free-market to rely

on the antitrust statutes and how does that mitigate or aggravate the risk? train wreck if we were to disband entirely the three major publishers would have the market power to demand wherever they wanted for licenses and eight or may not be able to licensee of fishable water as the official part like a restaurateur the bars but looking at the digital side i come from the recording side when they're not statutory licenses to demand equity stakes to get vertically integrated and live longer -- large lump-sum offenses to say that is not to the artist's

contract so that it doesn't go down to the artists at the end of the day but then they get royalties that is more than they're fair share of the market the independent labels are asking for more statutory licenses so that is showing the competition. i think the publishers would begin to act like that. with similar levels of concentration. the danger with partial withdrawal over just disbanding entirely to see how the act and they can partially withdraw so it could be in ever in the scene to give that type of behavior in the market.

>> are really appreciated your testimony but as a reminder the creative individuals although consumers have different folks involved but not all songwriters wanted pulled out of the pro. do you agree or disagree? >> so my take on a partial withdrawal of that is the only way but it so that has worked for the copyright office saying that they paid the songwriters' directly

into make sense of the end game if we find a way to revalue the copyright with those restrictions that say it is micro pennies then it is a win for the songwriters' because those indebted to space is tens of millions of dollars. >> thank you for your testimony selected is my honor to recognize my friend and colleague u.n. is an actual song writer. >> we are happy to have all of you here writing to

attorney-general holder with the licensing practices to say that it is that the letter at this point. with a licensing flexibility arbitration as an alternative. some of you have argued of modernizing would be a bad thing and this needs to be preserved in its current form to have anticompetitive combat by the pro's but with that expensive litigation i would like to know that. so why would they disturb the free market?

it seems common-sense changes to me. >> there are common sense changes to is merely asking for the changes that the senator preference for. on the quest for alternative dispute resolutions is a win-win for every one we should be able to reach consensus without time consuming federal litigation with the different federal judge with the deal might at least inconsistent decisions. bundling seems to be though win-win for people. not just public performance but if we could offer to read a one-stop shop that seems to have a pro competitive in the

efficiency and benefit for everyone. partial grant of rights by your concerns with transparency we believe the licensees have the right to know what they are licensing from them. >> senator a concern ever have about arbitration there is often a significant sums at issue when the committee settled its disputes and estimated that agreement would save $1 billion over the following seven years. as someone who has litigated those rate cases i understand -- and understand how extensive they are but

the federal rules of evidence is allows them to discover the behavior the judge concluded was coordinated and the benchmarks that ascap introduced as competitive benchmarks and without those protections my concern is beach use the cheap answer not the right answer. >> when the enter the business process is closed down. still makes it easier to plan the business for the long term. to the license committees that we have prior to the

antitrust suits there really isn't any less expensive for time-consuming. the expertise there is deep and broad experience to understand the late of the land. you have projections o dash protection son had been relied upon for a long time is a resort to them. they have gone to the courts themselves many times over the years. i don't think during the baby out with bathwater would be a good thing to do so this scenario is be careful what you wish for. >> speaking as a songwriter not as a lawyer is these

issues show how we have very little say what got us where we are today and this seems like certainly getting into lawsuits we need all the relief we can get because we're the smallest guy in the room. it seems like common sense asking for someone to be done 1941 regulations. to be as constrained as we heard during world war ii. >> i think especially considering bundling and arbitration the debt would

increase the power of the largest players including the smaller rights holders for carol that would make it harder for smaller haulers to license that can operate separately. said to have a true free market we have to know what you buy to figure out how much it should cost and also on the song writer side their product concerns about transparency so that they don't know how it was decided. >> my time is up. >> thank you for this hearing. mr. harrison you talk about

the $150,000 fine imposed on infringing. how many times has that then impose? with pandora. >> but without a whole ecosystem. >> there are hundreds of not thousands of copyright infringement case is going right now williams is a bold with the estate of marvin gaye with statutory damages and infringement is a lot by the plaintiffs. >>, a times is $150,000 been implied -- imposed? to reckon not give you the

actual number. >> pandora was threatened by music publishers but outside killed salt. >> how big a real threat is that? mismatch use you say section 114 of the copyright act prohibits the record from setting fees for musical works and looking at the same services for the recording industry leading to great disparities on the order 12 / one and this is why mr. miller is saying with a digital area there is the imbalance. and don't want to get into this is about the perak

today but it seems very ironic and terrestrial since 1941 and the copyright holders in the songwriters and publishers there is an imbalance for them obviously. so with the performers do very well and the song writers get next to nothing. to go on the digital space than the digital space is nothing. it adds adductor billions of plays.

if you want to use that as a new way to earn a living. [laughter] i would get half of that? [laughter] >> with that equate? rick and would like to know if it is replayed. i want to talk to the whole panel about this issue. which is the right of the performer but what would entail where it would equalize? but to do radio for 70 years but now you want to equalize? what would that entail

besides looking at these degrees? anybody want to handle that? knowing we go more and more into digital and this will kill a songwriter haulage you equalize this more? >> you should recall the largest record labor -- label in though world also owns the biggest publisher and at the end of the day if they believe there is said different distribution that i referenced if they wanted to distribute that many differently their control by the same corporate parent and would be in the best position to understand the relative value to our service. >> does that sound right to

you? >> if i may i am of public -- a music publisher who does not share corporate account with the record company but one good example of the markets for these two rights they are 50/50. they're equal to making is referring to the market for audio visual synchronization i like 2.0 that outside of united states often times the copyright in the sound recording versus the copyright in musical composition are equally value to our proposal is with copyright reform we have platform neutral laws and let the free market decide with the allocation is a value between those two rights.

>> thank you. ha we will let him take a few more minutes to 40 has to leave us. >> i am in the middle of doing my taxes that you are very interested i'm sure. [laughter] but what other rights holders have paid for that same piece of music does not make sense that is why with the senators i introduce a songwriter equity act that would authorize the judge to consider rates paid to others such as performers as part of determining a fair market rate. and you believe this reform makes sense in the rate

setting process? >> a think it is a step in the right direction we believe it would be helpful and directionally important for a judge to have all of the information about how the money flows to make it your testimony talked about the database to enable services were to identify this sounds like a good idea but how much does that cost? >> all excellent questions but the best answer i could give is pandora in services like pandora would be willing to bear their fair share of the burden to create a database because it

is vitally important for the transparency that currently lacks in the system. we would be more than happy to contribute to its creation. >> with ascap being 70 years old and light of the technological investments over the last 70 years to support making any modifications? to read thank you senator hatch. we have to be a little more mindful of the fact the nature of the music services and the distribution models need change. there could be modifications to address those types of issues but the nature of the

pro's the market power they yield does not change. in but did the minister does not change. you have to address new technology so any changes proposed keep in mind it has to be within the constructs that enables the market to function. but you'll have a difficult time with that system. >> host. >> what is your experience with that process and how does that affect the songwriters? >> since 2001 ascap has spent $86 million on litigation. with pandora alone we discovered more than 75,000 documents in the post more

than and 35 individuals. the proceedings sometimes last year's is and has required an appeal process for the second circuit. we think any other form of alternative dispute resolution is better for every dollar we spend that goes to lawyers are dollars coming of the pockets of the songwriters. >> compared to the 48% paying for performances for what use it to the record judge. >> so with any ascap rate proceedings to the songwriters to publicly perform their works.

we compete most closely for listeners and add dollars if we have the distribution of 1.7% of revenue for recovery. >> just one more question? i apologize to my fellow senators. but i have to get back to the income tax matter. some songwriter groups have expressed concern of the lack of transparency with direct licensing deals. the terms are often subject to nondisclosure agreements. so songwriter's don't even know the details under which they are to be paid. du have any ideas how to address that problem? it is a big problem that i can see.

>> one of roles they played to have a hard time to replicate the scale is providing transparency in the market. so having the pro's play a constructive role is of a good way to handle those rights. >> one of the things pandora did last year admittedly it is geared towards a recording artist and allows them to sign on to the service to see how it is performed nothing prevents us other than lack of transparency with ownership with the same kind of visibility. it doesn't track the dollars into the checking account but it enables them to of howard is performed by the

service if they get the money they believe they deserve and miss matthews is already opined on this but if they are modified at all it should be to have better transparency throughout the system for licensees licensees, writers and pro's and we ought to know what is real licensing how much is being paid by whom and to whom it is all public and available. we can all agree it is an issue if anything comes up of the hearing it should be that to occur appreciate the courtesy chairman.