The Music Business is Completely Corrupt

Think Facebook or Google should be prosecuted for "Anti-Trust?" Think that would help "the little guy?" You'd be wrong. Perhaps you should learn about the history of ASCAP & BMI, even if you don't care about the music business.

Today I filed an Opposition to ASCAP & BMI's Motion to Dismiss. The point of my lawsuit is to establish that ASCAP & BMI owe a fiduciary duty to Songwriters, and that they are engaging in financial impropriety. This paper explains how ASCAP & BMI are "talking out of both sides of their mouth", i.e. lying about their business model to avoid liability.

The article below is an answer I published on Quora, in response to the the question:

"What is the saddest truth about musicians?"

The saddest truth about musicians is that their industry is completely corrupt and ruled by organized crime. While many other musicians have answered this question complaining about the low money, I'd like to dig a little deeper on where the money goes.

I can speak as a musician who starved in bar bands during my early 20s, then graduated to playing concerts on world tours in my late 20s - early 30s, then successfully earned an upper-class lifestyle writing and producing music for film and television from my mid 30s - mid 50s, then had my entire career and life’s work stolen from me by the media-mafia.

In the late 1980s, I was musical director for the Supremes, and I got to know the late Mary Wilson pretty well. She and her managers explained to me that in the 1960s, nobody sold more records than the Supremes, except for the Beatles. And yet, the Supremes were never awarded a gold or platinum record. Why? Because Motown head Berry Gordy would never allow the required audit.

That is just one example of *thousands* in which somebody made a lot of money on music while ripping off the music creator. Although my name is likely not one that you know, because most of my writing was essentially anonymous under “work-for-hire” contracts, the media-mafia made millions of dollars licensing my songs to film and tv, paying my contract money and royalties for over 20 years. But in the end, my entire life’s work was stolen, my company stolen from me, my royalties were shut down and I was completely black-listed. This, because I happened to discover a stack of music contracts with forgeries of my signature, purporting to agree to terms that I never actually agreed to.

There is and always has been a strong organized crime element in the music business. It goes back to the prohibition era. “ASCAP” - the American Society of Composers, Authors and Publishers - was founded in 1915, and their job is to collect royalties for the public performances of copyrighted songs, and then pass those royalties along to the writer and publisher of those songs. That’s not actually what they do, more on that below. Later on, another so-called performing rights organization came along, Broadcast Music, Inc. (“BMI”).

In those days, before radio and tv, music was performed by singers in nightclubs, where they serve alcohol. This is good, because as I used to say on the mic in my bar band days, “the more you drink, the better we sound!” Working on behalf of the music publishers and writers, ASCAP (and later BMI) would send agents around to all the music venues and survey which songs had been performed, and would then take money from the nightclub owner for the use of music. This is where performance royalties come from.

In 1920, alcohol became illegal in the U.S. Almost overnight, all of the nightclubs were being run by mobsters. Can you imagine having the job of knocking on the mobster’s door with your hand out, demanding money just because they happen to have a singer there singing the beautiful songs? And, if you had that gig, can you imagine not knowing they were serving alcohol there?

What happened is pretty obvious - ASCAP and the mob reached a deal under which the mob would continue paying "performance fees" while ASCAP would say nothing about the alcohol.

Prohibition ended in 1933, but of course the now-entrenched nightclub owners didn't disappear. They simply were allowed to operate above board. By then, two new fledgling music industries had emerged - records and radio. The record business was born as a new medium through which music publishers could offer their wares, while radio was an amazing new way to advertise.

However, the record business is extremely risky in that only a low number - perhaps 10% - of music artist projects end up being profitable. The rest fail to ever recoup the up-front investment that a record company must make. From the beginning, recording artists were offered ridiculously one-sided contracts, where the profits from the relatively rare project that was successful were used to subsidize all of the losers.

This financial reality made record companies an ideal vehicle for money laundering. With the relationship between organized crime and the performing rights organizations already well-established, mob money earned through extortion, loan sharking, drugs, prostitution and murder-for-hire was invested into the record companies, where the majority of projects were expected to lose money. It was "decided" early on that music artists had no right to audit the record companies' financial books. I wonder why?

During World War II, while people were distracted by death and full-on war socialism, the U.S. Department of Justice quietly prosecuted both ASCAP & BMI for anti-trust. Before you think the story has a happy ending, think again. As with all anti-trust litigation, the true purpose is to enshrine rather than eliminate anti-competitive activity. Before you say prosecuting Facebook for anti-trust would be good, you should learn about ASCAP & BMI.

The result of the DOJ prosecutions of ASCAP & BMI were "Consent Decrees" which define how they are permitted to operate. ASCAP & BMI are tax-exempt “nonprofits” which are required to accept as a member any songwriter with at least 1 published song. ASCAP & BMI’s finances are top-secret, and have never once been audited. They collect "blanket fees" based on a percentage of gross revenue - like an income tax - charged to music users such as radio broadcasters, entitling the licensee to play any and all music from ASCAP & BMI's vast repertoire of millions and millions of songs. The fees they charge are unrelated to any particular song or song usage. This is key.

Currently collecting over $2 billion annually in fees, ASCAP & BMI co-mingle all that money into giant pools, then allegedly tabulate which songs actually were performed, then allegedly apply a top-secret "royalty distribution formula", then pay out performance royalties to writers and publishers on a quarterly basis. Since Songwriters have no choice but to trust ASCAP & BMI with all that money, it would appear to be the very essence of a fiduciary duty, entitling them to audit the books.

In a currently pending lawsuit in the United States District Court, however, ASCAP & BMI are denying the reality of their business model. They are falsely contending that they collect royalties on behalf of songwriters and simply pass that money along. They perpetrate this falsehood in order to disclaim owing a fiduciary duty, so that they can never be audited.

Recent decades have seen the advent of online streaming. Infamously, the royalties for streamed music are abysmally low, this by agreement between the streaming platforms and the publishers. Since publishers receive performance royalties along with songwriters, you might think they would have stood strong against the streaming platforms. Think again.

What happened was that the major publishers took equity positions in the streaming platforms. They are on both sides of the deal! Here’s another example. The company I used to work for - FirstCom Music, was licensing a ton of music to Universal for their tv shows. Back in 2006, Universal decided to just buy FirstCom, so that they could license the music from themselves! That way, they can bypass the performance royalties that are supposed to go to the lowly songwriter - you now, the guy who actually creates the music in the first place.

This is exactly the type of corrupt influence that anti-trust was supposed to address, but in reality condones and encourages. It’s all run by the mob, and the mob is actually the government.

The music business is, and always has been, completely corrupt. And that's the saddest truth about musicians.