Fable in Another Key: Path Dependence and the Licensing of Music Performance Rights

Abstract

The histories of the processes of obtaining music performance rights for theatrical motion pictures and for pre-recorded television are discussed as examples of path dependent historical processes. The histories of these markets might be identified as strong historical processes, and both processes may have resulted in inefficient equilibria. Early motion pictures were silent. Music was added at the theater by a pianist or organist. The performance rights for this musical accompaniment were obtained by the local theaters which paid a *seat tax* to the music rights collective--ASCAP. When talkies arrived, music performance rights could have been obtained when the movie was produced--as were all other rights. For a number of reasons including imperfect foresight, the lengthy transition period between silent films and talkies, and sunk investments in the ASCAP blanket licensing arrangement, producers initially did not obtain these rights for early talkies, and the theaters continued to pay the ASCAP seat tax. The growing stock of talkies supplied without music performance rights was one reason that subsequent attempts by theater owners to escape the seat tax were unsuccessful until the Alden Rochelle decision in 1948. The post-Alden Rochelle industry provides a rare and valuable opportunity to examine an industry under alternative institutional regimes, rather than using the usual counterfactual suppositions. A similar pattern occurred in television as it made the transition from a live to a pre-recorded medium. When TV was predominantly a live medium, broadcasters needed to obtain the performance rights for their unpredictable music use from the music licensing collectives. For the pre-recorded shows that began to dominate television during the 1950s, however, the blanket licenses were no longer necessary, and music performance rights could have been obtained--along with all other rights--by producers at the time shows were made. The reasons for the use of the ASCAP (BMI) blanket license for pre-recorded television shows include the same general factors that affected the movie industry--imperfect foresight, a lengthy transition period between a technology for which the blanket license was useful and one for which it was not, and the sunk costs aspects of the use of the blanket license. The initial decision not to clear music performance rights for the early pre-recorded shows became irreversible in part because broadcasters could not afford to ignore the growing stock of potential re-runs which were available only without music performance rights. Extensive legal efforts by television broadcasters to overturn the blanket license by legal means have been unsuccessful, but provide valuable information.