1 00:00:17,560 --> 00:00:21,479 Speaker 1: Pushkin too quick. No, it's perfect push kit stuff. You 2 00:00:21,600 --> 00:00:34,320 Speaker 1: got it. 3 00:00:36,360 --> 00:00:39,960 Speaker 2: Just because you own something, even with a patent or copyright, 4 00:00:40,200 --> 00:00:43,440 Speaker 2: it doesn't mean that you can necessarily make money off 5 00:00:43,480 --> 00:00:46,400 Speaker 2: of it profit off of it, because what you need 6 00:00:46,720 --> 00:00:50,440 Speaker 2: is the power to protect your ownership, protect the thing 7 00:00:50,479 --> 00:00:52,400 Speaker 2: you own from the people who want to take it. 8 00:00:53,360 --> 00:00:56,240 Speaker 2: This is a lesson that the songwriters of the United 9 00:00:56,280 --> 00:00:59,160 Speaker 2: States of America learned about one hundred years ago. In 10 00:00:59,200 --> 00:01:02,920 Speaker 2: the early nineteen hundreds, you could get famous writing a 11 00:01:03,000 --> 00:01:05,840 Speaker 2: hit song, you could own that song, and you would 12 00:01:05,880 --> 00:01:10,479 Speaker 2: still be poor. Songwriters were mostly employees or contractors, handing 13 00:01:10,520 --> 00:01:13,280 Speaker 2: over their work for just a few bus But that 14 00:01:13,400 --> 00:01:17,399 Speaker 2: all changed when the meek and talented songwriters of this country, 15 00:01:17,600 --> 00:01:20,880 Speaker 2: guys who tinkled pianos all day long, they banned it 16 00:01:20,920 --> 00:01:27,080 Speaker 2: together and decided to play hardball. The songwriters adopted mafia 17 00:01:27,240 --> 00:01:32,559 Speaker 2: like tactics, and they held music in America hostage until 18 00:01:32,560 --> 00:01:36,480 Speaker 2: everyone agreed to pay them what they were owed and more. 19 00:01:37,080 --> 00:01:40,760 Speaker 3: I'm Robert Smith and I'm Jacob Goldstein. This is Business History, 20 00:01:41,200 --> 00:01:42,840 Speaker 3: a show about the history of business. 21 00:01:42,959 --> 00:01:46,160 Speaker 2: The funny thing is that music is designed to be copied. 22 00:01:46,560 --> 00:01:48,600 Speaker 2: The whole point is you want to play it again 23 00:01:48,640 --> 00:01:51,360 Speaker 2: and again by different people. You know, you hear the song, 24 00:01:51,440 --> 00:01:54,200 Speaker 2: you join in singing, you listen once you can hummet back. 25 00:01:55,120 --> 00:01:56,760 Speaker 2: But the problem, of course, is if something can be 26 00:01:56,760 --> 00:01:59,360 Speaker 2: easily copied, it's hard to make sure that the owner 27 00:01:59,400 --> 00:01:59,960 Speaker 2: gets paid. 28 00:02:00,120 --> 00:02:02,800 Speaker 3: This problem that the songwriters were trying to solve is 29 00:02:02,840 --> 00:02:05,680 Speaker 3: a big it's a big idea problem. It's a problem 30 00:02:05,720 --> 00:02:10,120 Speaker 3: for anyone who owns intellectual property, whether that's software or 31 00:02:10,200 --> 00:02:14,080 Speaker 3: a podcast. You make a thing, you technically own it, 32 00:02:14,240 --> 00:02:15,560 Speaker 3: but it's easy to copy. 33 00:02:15,680 --> 00:02:16,800 Speaker 2: How do you get paid? 34 00:02:16,880 --> 00:02:21,239 Speaker 3: How do you control, really control your intellectual property. 35 00:02:21,480 --> 00:02:24,519 Speaker 2: There is copyright protection, and there was so in the 36 00:02:24,560 --> 00:02:28,960 Speaker 2: early nineteen hundreds, but songwriters realized that that protection wasn't enough. 37 00:02:29,240 --> 00:02:33,160 Speaker 2: They needed power. They needed to band together. They created 38 00:02:33,200 --> 00:02:37,320 Speaker 2: an industry group so powerful that it persists to this day, 39 00:02:37,840 --> 00:02:42,639 Speaker 2: and the system they built ended up making songwriting so valuable. 40 00:02:42,840 --> 00:02:48,519 Speaker 2: It created billionaire musicians and brought Wall Street calling Duomo. 41 00:02:49,240 --> 00:02:54,519 Speaker 2: The songwriter's revolution starts Jacob. In nineteen thirteen, a composer 42 00:02:54,639 --> 00:02:57,760 Speaker 2: named Victor Herbert He's feeling the Peckish, walks into a 43 00:02:57,800 --> 00:03:03,040 Speaker 2: restaurant in Times Square called Shanley's. Now Times Square. Shanley's 44 00:03:03,160 --> 00:03:05,720 Speaker 2: was one of those places to see and be seen, 45 00:03:05,919 --> 00:03:10,440 Speaker 2: very famous clientele, known for their lobsters. In nineteen thirteen, 46 00:03:11,000 --> 00:03:13,560 Speaker 2: and there's a and playing in the corner. You know, 47 00:03:13,600 --> 00:03:16,720 Speaker 2: it's just a racous, fun atmosphere. And Herbert at this 48 00:03:16,760 --> 00:03:19,400 Speaker 2: time is a pretty big deal. He gets a good table. 49 00:03:19,639 --> 00:03:23,160 Speaker 2: He's helped take American theater from sort of vaudeville shows 50 00:03:23,160 --> 00:03:27,360 Speaker 2: to the story based musicals that we hear today. He 51 00:03:27,400 --> 00:03:30,680 Speaker 2: wrote the musical Babes in Toyland in nineteen oh three. 52 00:03:30,919 --> 00:03:35,760 Speaker 2: And so Herbert's eating lobster whatever, right, and then he 53 00:03:35,760 --> 00:03:39,240 Speaker 2: hears it the band starts playing a song from a 54 00:03:39,280 --> 00:03:43,240 Speaker 2: new Broadway show called Sweethearts. 55 00:03:44,320 --> 00:03:47,520 Speaker 3: We've actually brought in our own piano player today, pushed 56 00:03:47,560 --> 00:03:48,760 Speaker 3: his own Benfefer. 57 00:03:53,160 --> 00:03:55,680 Speaker 2: Victor. Herbert is sitting at his table, and he knows 58 00:03:55,800 --> 00:03:59,440 Speaker 2: this song because he wrote it. It's his and last 59 00:03:59,440 --> 00:04:02,320 Speaker 2: time he checked, he was not getting a cut of 60 00:04:02,360 --> 00:04:10,600 Speaker 2: any of that sweet Shanley's lobster money, thanks Ben. So 61 00:04:10,880 --> 00:04:13,680 Speaker 2: after his meal, Herbert calls up Shanley, the owner, and 62 00:04:13,720 --> 00:04:17,440 Speaker 2: he informs him that, you know, copyrights do exist even 63 00:04:17,480 --> 00:04:20,279 Speaker 2: in nineteen thirteen, and I own the copyright on the song. 64 00:04:20,600 --> 00:04:23,239 Speaker 2: So I need to be paid, Herbert says, for the 65 00:04:23,279 --> 00:04:28,599 Speaker 2: performance of my music, and Shenley disagrees. I don't know, 66 00:04:28,600 --> 00:04:29,920 Speaker 2: maybe he's in a bad mood. He could have just 67 00:04:29,960 --> 00:04:31,680 Speaker 2: given a few bucks, but he says, you know what, 68 00:04:32,360 --> 00:04:36,040 Speaker 2: we haven't charged admission to the restaurant. It's not a 69 00:04:36,120 --> 00:04:39,120 Speaker 2: performance in a concert hall. It's just playing in the 70 00:04:39,160 --> 00:04:41,719 Speaker 2: background while people eat. We can play whatever we want 71 00:04:41,760 --> 00:04:43,160 Speaker 2: in the background. It's immaterial. 72 00:04:43,320 --> 00:04:45,640 Speaker 3: But think about it from Herbert's point of view, this 73 00:04:45,680 --> 00:04:48,479 Speaker 3: is this moment in the early twentieth century when the 74 00:04:48,520 --> 00:04:52,120 Speaker 3: country is urbanizing. People are moving to cities and it's 75 00:04:52,160 --> 00:04:55,400 Speaker 3: getting richer. People have more leisure time, they're going out more. 76 00:04:55,720 --> 00:04:58,200 Speaker 3: So there are more and more of these places where 77 00:04:58,720 --> 00:05:01,960 Speaker 3: people are paying to whatever eat dinner, and in the 78 00:05:02,000 --> 00:05:05,240 Speaker 3: background somebody is playing copyrighted music. 79 00:05:05,640 --> 00:05:08,520 Speaker 2: And it is expected at this point that you would 80 00:05:08,560 --> 00:05:10,760 Speaker 2: have what are now known as hit songs that weren't 81 00:05:10,800 --> 00:05:13,080 Speaker 2: really hit songs before this. This is before the radio 82 00:05:13,200 --> 00:05:16,200 Speaker 2: and really when photographs are starting. So the hit songs 83 00:05:16,200 --> 00:05:18,400 Speaker 2: were the songs you saw on Broadway or that you 84 00:05:18,440 --> 00:05:19,760 Speaker 2: saw when you went to Shanley's. 85 00:05:20,000 --> 00:05:23,200 Speaker 3: If you're Herbert like it seems good that there's a 86 00:05:23,279 --> 00:05:25,480 Speaker 3: hit song and it's your hit song and everybody's playing it, 87 00:05:26,080 --> 00:05:29,720 Speaker 3: but now you want to get paid, and it's never 88 00:05:29,800 --> 00:05:32,440 Speaker 3: gonna be worth your time to try and figure out 89 00:05:32,760 --> 00:05:34,919 Speaker 3: if a piano player is playing your song in some 90 00:05:35,080 --> 00:05:38,200 Speaker 3: random restaurant or bar. Impossible to know, impossible to know. 91 00:05:38,360 --> 00:05:41,720 Speaker 3: And there's this useful idea here, which is the collective 92 00:05:41,880 --> 00:05:45,440 Speaker 3: action problem, right, Like, think of all the composers, all 93 00:05:45,520 --> 00:05:48,320 Speaker 3: of the Herbert's writing songs. Like if there were some 94 00:05:48,440 --> 00:05:53,279 Speaker 3: way they could all get together and act, they could 95 00:05:53,400 --> 00:05:56,039 Speaker 3: maybe figure out a way to make it worth getting 96 00:05:56,080 --> 00:05:59,320 Speaker 3: paid for each little performance. But how do you do that. 97 00:05:59,800 --> 00:06:01,760 Speaker 2: I'll tell you how you do that. You start out 98 00:06:02,000 --> 00:06:08,279 Speaker 2: with a lawsuit. So Victor Herbert sues Shanley and Shanley. 99 00:06:08,760 --> 00:06:11,279 Speaker 2: He has his own collective action problem because he doesn't 100 00:06:11,320 --> 00:06:13,800 Speaker 2: want to, like have to figure out whose songs he's 101 00:06:13,839 --> 00:06:15,760 Speaker 2: playing and pay them all. So he goes to the 102 00:06:15,839 --> 00:06:19,440 Speaker 2: National Association of Hotel and Restaurant Owners. They all get 103 00:06:19,480 --> 00:06:22,960 Speaker 2: together to back his legal defense. They want a court 104 00:06:23,040 --> 00:06:25,960 Speaker 2: to say that music in the background doesn't matter, you 105 00:06:26,040 --> 00:06:28,640 Speaker 2: do not have to pay the composers. And Herbert's is fine. 106 00:06:28,720 --> 00:06:32,080 Speaker 2: I've got friends too, and he assembles eight heavy hitters 107 00:06:32,120 --> 00:06:35,200 Speaker 2: from the music publishing industry at a German restaurant downtown 108 00:06:35,200 --> 00:06:37,360 Speaker 2: called Lucho's. They were not going to go to Shanley's 109 00:06:37,360 --> 00:06:40,680 Speaker 2: for this, so the songwriters decide to form a cartel. 110 00:06:41,120 --> 00:06:45,600 Speaker 2: They decide to found in nineteen fourteen the American Society 111 00:06:45,720 --> 00:06:51,200 Speaker 2: of Composers, Authors and Publishers ASCAP. It is known as ASCAP, 112 00:06:51,240 --> 00:06:52,680 Speaker 2: and I'm not going to say the whole thing, will 113 00:06:53,000 --> 00:06:55,680 Speaker 2: just refer to it as as CAP going forward, and 114 00:06:55,720 --> 00:06:59,680 Speaker 2: they start recruiting all of the songwriters in town. There is, 115 00:06:59,720 --> 00:07:02,960 Speaker 2: in fact a district of New York City where the 116 00:07:03,000 --> 00:07:06,800 Speaker 2: songwriters all work. It's called tinpan Alley, apparently because the 117 00:07:06,839 --> 00:07:09,760 Speaker 2: sound of out of tune pianos sounds like tinpans being 118 00:07:09,800 --> 00:07:12,960 Speaker 2: banged together, you know, evocative. It's old New York and 119 00:07:13,160 --> 00:07:17,840 Speaker 2: Tinpanaley is where all the publishers of music exist, right. 120 00:07:17,920 --> 00:07:21,760 Speaker 2: And the members of Tinpanaley are heavy hitters like Prepare Yourself, 121 00:07:22,120 --> 00:07:27,200 Speaker 2: Irving Berlin truly, yeah, John Phillips SUSA, the Marches, Yeah, 122 00:07:27,240 --> 00:07:30,320 Speaker 2: you need them all. And a budding songwriter named Gene 123 00:07:30,520 --> 00:07:32,840 Speaker 2: Buck you don't know him back, He's going to come 124 00:07:32,880 --> 00:07:35,840 Speaker 2: back into this story later. So the lawsuit goes on 125 00:07:36,640 --> 00:07:40,360 Speaker 2: Herbert versus Shanley Company winds its way to the Supreme 126 00:07:40,360 --> 00:07:41,840 Speaker 2: Court in nineteen seventeen. 127 00:07:42,080 --> 00:07:43,280 Speaker 3: Love a Supreme Court case. 128 00:07:43,720 --> 00:07:46,960 Speaker 2: You're going to love this one because Justice Oliver Wendell 129 00:07:47,120 --> 00:07:53,280 Speaker 2: Holmes writes the decision Junior, and he rejects the argument 130 00:07:53,720 --> 00:07:56,640 Speaker 2: that this music was just incidental to the restaurant that 131 00:07:56,640 --> 00:07:59,640 Speaker 2: it's playing in the background. His decision said, if the 132 00:07:59,720 --> 00:08:02,720 Speaker 2: music did not pay, it would be given up. If 133 00:08:02,760 --> 00:08:06,080 Speaker 2: it pays, it pays out of the public pocketbook. Whether 134 00:08:06,120 --> 00:08:08,960 Speaker 2: it pays or not, the purpose of employing it is 135 00:08:09,040 --> 00:08:12,440 Speaker 2: profit and that is enough. So it basically means, just 136 00:08:12,440 --> 00:08:15,480 Speaker 2: to be clear, like, you could play and sing it at. 137 00:08:15,280 --> 00:08:18,040 Speaker 3: Your house if you have your friends over, Yeah, But 138 00:08:18,160 --> 00:08:20,240 Speaker 3: if you charge your friends ten bucks to come in 139 00:08:20,640 --> 00:08:23,120 Speaker 3: and you play the music, then you got to give 140 00:08:23,160 --> 00:08:23,840 Speaker 3: ass CAAP a cut. 141 00:08:23,920 --> 00:08:24,080 Speaker 4: Yeah. 142 00:08:24,120 --> 00:08:27,120 Speaker 2: It means even if you're just harmlessly using music in 143 00:08:27,200 --> 00:08:31,560 Speaker 2: a podcast and the podcast has advertising and you're making 144 00:08:31,600 --> 00:08:33,439 Speaker 2: money off of it, then you have to pay the 145 00:08:33,480 --> 00:08:34,480 Speaker 2: people who wrote the music. 146 00:08:34,960 --> 00:08:35,840 Speaker 3: Excellent example. 147 00:08:35,960 --> 00:08:40,959 Speaker 2: The ruling established the power of as cap and they 148 00:08:41,000 --> 00:08:43,520 Speaker 2: had a sort of two part plan. The first part 149 00:08:43,839 --> 00:08:50,120 Speaker 2: was they are going to start enforcing the rules about copyright. 150 00:08:50,400 --> 00:08:54,679 Speaker 2: So essentially, as CAP sends out music cops people who 151 00:08:54,720 --> 00:08:59,000 Speaker 2: go to the big establishments like Shandley's and listen and 152 00:08:59,040 --> 00:09:02,160 Speaker 2: write down all the music that's played, and then they 153 00:09:02,240 --> 00:09:06,880 Speaker 2: sue the restaurant owner or the burlesque hall. And of 154 00:09:06,920 --> 00:09:10,320 Speaker 2: course they weren't getting everyone, but it's a huge, huge 155 00:09:10,360 --> 00:09:12,760 Speaker 2: scary thing to be slapped with a loss, and everyone 156 00:09:12,760 --> 00:09:16,280 Speaker 2: knows they're going to lose the lawsuit, so now they 157 00:09:16,320 --> 00:09:21,280 Speaker 2: have the restaurant's attention. And this is when ASCAP offers 158 00:09:21,320 --> 00:09:23,840 Speaker 2: an easy way out, like, yeah, you could try to 159 00:09:23,880 --> 00:09:27,880 Speaker 2: avoid us and we'll just sue you all eventually, or 160 00:09:28,559 --> 00:09:31,200 Speaker 2: you could pay us a tiny percentage of the money 161 00:09:31,240 --> 00:09:33,640 Speaker 2: you make in your restaurant and then you can play 162 00:09:33,640 --> 00:09:37,880 Speaker 2: anything you want from our collective of musicians. Hu as 163 00:09:37,960 --> 00:09:41,320 Speaker 2: CAP and TERN distributed the royalties they got from these 164 00:09:41,400 --> 00:09:44,880 Speaker 2: establishments to its members, they had a very complicated system, 165 00:09:45,200 --> 00:09:49,200 Speaker 2: but basically, if you were a big popular songwriter and 166 00:09:49,200 --> 00:09:51,800 Speaker 2: people knew your name, you would get more money from 167 00:09:51,800 --> 00:09:54,520 Speaker 2: the royalties. If you had more hits, if you produced 168 00:09:54,559 --> 00:09:57,280 Speaker 2: more songs, you'd get more money. And the money was 169 00:09:57,320 --> 00:10:00,720 Speaker 2: technically shared between the songwriters and the publishing houses who 170 00:10:00,720 --> 00:10:01,920 Speaker 2: were marketing the music. 171 00:10:02,559 --> 00:10:05,440 Speaker 3: I mean, I will say, this seems like a nice system, 172 00:10:05,559 --> 00:10:09,400 Speaker 3: right because on the one hand, you want everybody to 173 00:10:09,400 --> 00:10:11,439 Speaker 3: get paid who should get paid, But on the other 174 00:10:12,320 --> 00:10:15,640 Speaker 3: there would be all this friction otherwise, like counting every 175 00:10:15,800 --> 00:10:18,760 Speaker 3: song you play if you're a restaurant is such a 176 00:10:18,880 --> 00:10:20,800 Speaker 3: ridiculous thing to have to do. Like you're not in 177 00:10:20,840 --> 00:10:23,319 Speaker 3: the counting songs business. You're in the restaurant business. And 178 00:10:23,440 --> 00:10:24,600 Speaker 3: this does seem to solve that. 179 00:10:24,840 --> 00:10:27,600 Speaker 2: It does, and you know, it works out to whatever 180 00:10:27,679 --> 00:10:30,720 Speaker 2: pennies per song. But it's great for the musicians, and 181 00:10:30,800 --> 00:10:33,240 Speaker 2: it probably ends up being great for the restaurants and 182 00:10:33,280 --> 00:10:36,160 Speaker 2: such that they don't have to think about this whole thing. Now. 183 00:10:36,200 --> 00:10:39,920 Speaker 2: It is worth mentioning that as CAP did not let 184 00:10:40,000 --> 00:10:42,840 Speaker 2: just anyone in. They had rules. You had to know 185 00:10:42,840 --> 00:10:45,679 Speaker 2: how to read music, you had to have the right pedigree, 186 00:10:46,120 --> 00:10:49,360 Speaker 2: meaning that for the most part, jazz and blues musicians, 187 00:10:49,480 --> 00:10:51,800 Speaker 2: hillbilly musicians as they were called at the time. We 188 00:10:51,960 --> 00:10:54,199 Speaker 2: now know that as country music they were left out 189 00:10:54,200 --> 00:10:56,080 Speaker 2: of this whole thing. It was you know, the Broadway, 190 00:10:56,120 --> 00:10:57,200 Speaker 2: the composers, it. 191 00:10:57,120 --> 00:11:00,239 Speaker 3: Was New York thinking it was better than everybody else exactly. 192 00:11:00,720 --> 00:11:04,480 Speaker 2: By nineteen twenty one, this whole thing is actually paying 193 00:11:04,520 --> 00:11:08,080 Speaker 2: off for as Cap. Whatever they were spending in enforcing 194 00:11:08,200 --> 00:11:12,560 Speaker 2: their copyrights, they're getting more money back. Everything's working out 195 00:11:12,920 --> 00:11:18,080 Speaker 2: for its members until a brand new technology emerges. 196 00:11:18,559 --> 00:11:20,600 Speaker 3: Your favorite technology. 197 00:11:20,120 --> 00:11:25,000 Speaker 2: A miracle in the ether. It's radio. November two, nineteen 198 00:11:25,280 --> 00:11:28,640 Speaker 2: twenty first radio broadcast out of Pittsburgh. 199 00:11:29,040 --> 00:11:34,080 Speaker 4: This is kd KA of the Westinghouse Electric and Manufacturing 200 00:11:34,120 --> 00:11:36,800 Speaker 4: Company in East Pittsburgh, Pennsylvania. 201 00:11:36,880 --> 00:11:40,080 Speaker 3: The Westinghouse Corporation like Westinghouse in our Edison, Tesla and 202 00:11:40,120 --> 00:11:40,920 Speaker 3: Westinghouse show. 203 00:11:41,120 --> 00:11:44,559 Speaker 2: Yeah, they wanted to sell radios electronics, so they had 204 00:11:44,559 --> 00:11:47,280 Speaker 2: to put something on the air. But Jacob, I wanted 205 00:11:47,280 --> 00:11:51,199 Speaker 2: you to hear this part very first broadcast ever. Listen 206 00:11:51,240 --> 00:11:52,240 Speaker 2: to what the announcer says. 207 00:11:52,679 --> 00:11:56,160 Speaker 4: We'd appreciate it if anyone hearing this broadcast would communicate 208 00:11:56,240 --> 00:11:58,720 Speaker 4: with us, as we are very anxious to know how 209 00:11:58,760 --> 00:12:02,240 Speaker 4: far the broadcast is reaching and how it is being received. 210 00:12:02,320 --> 00:12:04,960 Speaker 3: Email us at business History at Pushkin dot of him. 211 00:12:05,240 --> 00:12:07,960 Speaker 2: I love the very first hour of the very first broadcast. 212 00:12:07,960 --> 00:12:11,120 Speaker 2: They're like, do we have any listeners? Write us or 213 00:12:11,480 --> 00:12:15,200 Speaker 2: leave a coment below. Guys, that was a news broadcast. 214 00:12:15,200 --> 00:12:17,640 Speaker 2: That's how it started out. But very quickly radio stations 215 00:12:17,679 --> 00:12:21,959 Speaker 2: started to play sporting events, radio dramas, and music. And importantly, 216 00:12:22,040 --> 00:12:25,520 Speaker 2: at this time, music on the radio was played live. 217 00:12:25,559 --> 00:12:28,920 Speaker 2: They would bring in orchestras to play the music, just 218 00:12:28,960 --> 00:12:33,160 Speaker 2: like in the restaurants and for as cap they're like, okay, like, 219 00:12:33,679 --> 00:12:37,559 Speaker 2: what is radio except a dance hall of the air. 220 00:12:37,920 --> 00:12:40,840 Speaker 2: Of course you have to pay the piper, or pay 221 00:12:40,840 --> 00:12:42,720 Speaker 2: the person who wrote the music for the piper. But 222 00:12:42,760 --> 00:12:44,680 Speaker 2: you know how it goes. There's a series of court 223 00:12:44,720 --> 00:12:48,079 Speaker 2: cases and radio stations they make all these arguments. These 224 00:12:48,080 --> 00:12:51,560 Speaker 2: are gonna sound familiar. The first one is the radio says, 225 00:12:52,040 --> 00:12:54,920 Speaker 2: since there is no audience in the studio, we are 226 00:12:54,960 --> 00:12:57,000 Speaker 2: not giving a public performance. 227 00:12:58,480 --> 00:12:59,760 Speaker 3: It's just it's just private. 228 00:12:59,960 --> 00:13:02,240 Speaker 2: It's just private, just in the studio. If you're listening in, 229 00:13:02,320 --> 00:13:04,160 Speaker 2: that's not our concern. 230 00:13:04,160 --> 00:13:05,360 Speaker 3: It's literally their concern. 231 00:13:05,480 --> 00:13:09,320 Speaker 2: Go on. The second argument they made, and you'll hear 232 00:13:09,360 --> 00:13:13,120 Speaker 2: this one today, we make the songwriters f so why 233 00:13:13,120 --> 00:13:14,080 Speaker 2: should we pay them? 234 00:13:14,240 --> 00:13:17,200 Speaker 3: They should pay us. That was in fact the payola 235 00:13:17,240 --> 00:13:19,480 Speaker 3: scandal of a few decades later, which was illegal. 236 00:13:19,559 --> 00:13:23,880 Speaker 2: But the third one was radio does not broadcast music. 237 00:13:24,000 --> 00:13:27,560 Speaker 2: Jacob it emanates electrical energy. 238 00:13:28,480 --> 00:13:30,920 Speaker 3: Hamburger's not chopped ham, it's chopped steak. 239 00:13:33,120 --> 00:13:37,720 Speaker 2: Obviously, these were stupid arguments. In nineteen twenty four, the 240 00:13:37,800 --> 00:13:41,800 Speaker 2: FCC Federal Communications Commission rules that radio is, of course 241 00:13:41,800 --> 00:13:45,959 Speaker 2: a public performance and copyright is in effect you have 242 00:13:46,000 --> 00:13:49,720 Speaker 2: to pay the musicians. As CAP has won, not only 243 00:13:49,720 --> 00:13:52,920 Speaker 2: are they getting a small amount of money from restaurants 244 00:13:52,960 --> 00:13:55,200 Speaker 2: and dance halls and that sort of thing, they now 245 00:13:55,480 --> 00:13:58,960 Speaker 2: get a share of the money from the biggest technology 246 00:13:59,000 --> 00:14:00,760 Speaker 2: of the time, the thing that is going to take 247 00:14:00,800 --> 00:14:05,560 Speaker 2: over music in America radio. So far in this podcast, 248 00:14:05,800 --> 00:14:08,080 Speaker 2: I have been sort of pulling for the little guy, 249 00:14:08,559 --> 00:14:13,080 Speaker 2: the songwriters, but they are about to go way too 250 00:14:13,640 --> 00:14:15,600 Speaker 2: far in their quest to control music. 251 00:14:15,720 --> 00:14:18,600 Speaker 3: That's what cartels do. This is a cartel story. They 252 00:14:18,600 --> 00:14:21,000 Speaker 3: get together, there's a collective action problem there the little guys, 253 00:14:21,520 --> 00:14:25,360 Speaker 3: but then they go crazy with their cartel power. 254 00:14:25,280 --> 00:14:29,560 Speaker 2: They become the big guys. It starts with the election 255 00:14:29,680 --> 00:14:31,960 Speaker 2: of a new president of the organization. His name is 256 00:14:32,080 --> 00:14:34,600 Speaker 2: Jean Buck. I mentioned him before. He's one of the composers. 257 00:14:34,920 --> 00:14:38,960 Speaker 2: He is the composer of get Ready. Ben Daddy has 258 00:14:39,000 --> 00:14:58,200 Speaker 2: a sweetheart and mother is her name. Don't let that 259 00:14:58,280 --> 00:15:02,680 Speaker 2: sweet tune fool you. Jean Buck is a total shark. 260 00:15:04,280 --> 00:15:07,119 Speaker 2: Gene Buck is about to run as Cap like the Godfather. 261 00:15:07,400 --> 00:15:09,280 Speaker 3: What is some radio guy gonna wake up with a 262 00:15:09,440 --> 00:15:11,080 Speaker 3: bloody microphone in his bed? 263 00:15:11,200 --> 00:15:15,040 Speaker 2: Ah when our program continues. 264 00:15:36,920 --> 00:15:40,960 Speaker 3: Okay, we're back. We got Jean Buck. Gene but is 265 00:15:41,000 --> 00:15:45,320 Speaker 3: apparently not a sweetheart running as Cap. What happens next? 266 00:15:45,520 --> 00:15:48,880 Speaker 2: He's about to do the thing that cartels always do, 267 00:15:49,240 --> 00:15:52,640 Speaker 2: which is to squeeze their customers just a bit too 268 00:15:52,680 --> 00:15:56,800 Speaker 2: hard until they squeal. Bucks started out actually as a 269 00:15:56,840 --> 00:15:59,760 Speaker 2: cover illustrator in Tin pan Alley. You know, the way 270 00:15:59,800 --> 00:16:02,520 Speaker 2: you sold sheet music was you had to have a 271 00:16:02,560 --> 00:16:05,560 Speaker 2: picture on the cover like, oh this looks great. I'm 272 00:16:05,560 --> 00:16:07,000 Speaker 2: gonna buy this for my kid to learn how to 273 00:16:07,000 --> 00:16:09,800 Speaker 2: play the piano. And then his eyesight started to fail 274 00:16:09,880 --> 00:16:13,880 Speaker 2: him and he became someone who wrote lyrics. Okay, that's fine, 275 00:16:13,960 --> 00:16:16,240 Speaker 2: and he became very successful at it. He was known 276 00:16:16,240 --> 00:16:19,560 Speaker 2: as mister Broadway, so successful that he had a mansion 277 00:16:19,800 --> 00:16:23,040 Speaker 2: out on Long Island next to f Scott. 278 00:16:22,640 --> 00:16:25,120 Speaker 3: Fitzgerald Gatsby Gatsbys. 279 00:16:25,240 --> 00:16:28,120 Speaker 2: It is a rumored that his parties might have inspired 280 00:16:28,160 --> 00:16:30,480 Speaker 2: the great Gatsby, although now that they think of it, 281 00:16:30,600 --> 00:16:34,000 Speaker 2: Everyone on Long Island probably says that about themselves, right, So. 282 00:16:34,040 --> 00:16:36,240 Speaker 3: I mean if they were rich and full of despair 283 00:16:36,280 --> 00:16:37,560 Speaker 3: and had great parties. Sure. 284 00:16:38,480 --> 00:16:42,080 Speaker 2: So he has an orchard out there. Vineyard apparently doesn't drink. 285 00:16:42,440 --> 00:16:46,240 Speaker 2: Time Magazine calls him the general Lissimo of the clangorous 286 00:16:46,360 --> 00:16:47,920 Speaker 2: army of tinpan alleymen. 287 00:16:48,040 --> 00:16:50,720 Speaker 3: That is the timiest sentence that ever timed. 288 00:16:51,160 --> 00:16:53,840 Speaker 2: Why do you give us the new Yorkist sentence ever 289 00:16:53,920 --> 00:16:57,400 Speaker 2: new Yorker? So the New Yorker said of him, they said, 290 00:16:57,840 --> 00:17:01,880 Speaker 2: the sentimental, soft spoken lyric writer is the most powerful 291 00:17:01,920 --> 00:17:06,119 Speaker 2: private citizen on earth. He can stop the broadcasting of 292 00:17:06,159 --> 00:17:10,560 Speaker 2: popular music if he says stop jazz must vanish from 293 00:17:10,560 --> 00:17:13,840 Speaker 2: the air. It's interesting they would mentioned jazz because gen 294 00:17:13,960 --> 00:17:16,680 Speaker 2: Buck did not seem like a big fan of black 295 00:17:16,760 --> 00:17:20,639 Speaker 2: music or black performers. He didn't let black musicians mostly 296 00:17:20,720 --> 00:17:22,960 Speaker 2: or not many of them into as CAP. He's a 297 00:17:23,080 --> 00:17:27,400 Speaker 2: driving force behind ASCAP's exclusion of blues and R and B, 298 00:17:27,720 --> 00:17:30,639 Speaker 2: as well as hillbilly musicians. So at this point it 299 00:17:30,880 --> 00:17:35,320 Speaker 2: is all about the radio, whatever else. As CAP was 300 00:17:35,320 --> 00:17:40,159 Speaker 2: doing sheet music sales, photographs, player pianos, like the radio 301 00:17:40,320 --> 00:17:42,920 Speaker 2: is making the most money, and so Gene Buck says, 302 00:17:43,040 --> 00:17:46,320 Speaker 2: we go where the money is. We are going to 303 00:17:46,440 --> 00:17:49,680 Speaker 2: squeeze them. In nineteen thirty five, they make a deal 304 00:17:49,720 --> 00:17:52,640 Speaker 2: with radio stations. Radio has to pay a fixed fee 305 00:17:52,640 --> 00:17:57,640 Speaker 2: to as CAP of five percent of their advertising revenue 306 00:17:58,160 --> 00:17:59,400 Speaker 2: five percent a year. 307 00:17:59,520 --> 00:18:01,119 Speaker 3: It's a good time to be writing songs. 308 00:18:01,160 --> 00:18:03,560 Speaker 2: I guess it creat time to be writing songs. It 309 00:18:03,600 --> 00:18:06,600 Speaker 2: works out to millions of dollars for as CAP. And 310 00:18:07,080 --> 00:18:09,840 Speaker 2: at this point in nineteen thirty nine, as CAP does 311 00:18:09,960 --> 00:18:15,040 Speaker 2: control about ninety percent of music copyrights. They're in bed 312 00:18:15,080 --> 00:18:17,800 Speaker 2: with Hollywood. Their members are writing songs for Broadway, they 313 00:18:17,800 --> 00:18:24,040 Speaker 2: are running popular culture. Now, radio stations obviously are a 314 00:18:24,080 --> 00:18:26,719 Speaker 2: little upset with this situation, you know, having to give 315 00:18:26,760 --> 00:18:29,399 Speaker 2: away five percent of their advertising revenues. They go to 316 00:18:29,440 --> 00:18:32,160 Speaker 2: the federal government. The federal government, it's a complicated story, 317 00:18:32,200 --> 00:18:34,399 Speaker 2: but they decide that for the time being, they are 318 00:18:34,400 --> 00:18:38,080 Speaker 2: not going to challenge this cartel. So instead the radio 319 00:18:38,119 --> 00:18:43,159 Speaker 2: stations go to the state legislatures, state by state. In 320 00:18:43,200 --> 00:18:46,240 Speaker 2: the mid to late nineteen thirties, they go and try 321 00:18:46,280 --> 00:18:50,560 Speaker 2: to convince them to pass laws against this mafia like behavior, 322 00:18:50,600 --> 00:18:54,600 Speaker 2: and they succeed in a few states, Nebraska, Louisiana, Tennessee, 323 00:18:55,200 --> 00:18:59,439 Speaker 2: and importantly for the story, Montana. They all pass laws 324 00:18:59,760 --> 00:19:04,240 Speaker 2: that forbid the collection of performance fees by joint action. 325 00:19:04,600 --> 00:19:07,919 Speaker 3: Collection of So it's like it's like a racket, Like 326 00:19:07,960 --> 00:19:10,480 Speaker 3: I'd hate to see what would happen to your radio 327 00:19:10,520 --> 00:19:11,840 Speaker 3: station if you did not pay me. 328 00:19:13,040 --> 00:19:17,640 Speaker 2: They say it is extortion because it's not a free 329 00:19:17,720 --> 00:19:21,120 Speaker 2: market negotiation with the rights are Montana should be able. 330 00:19:21,200 --> 00:19:23,639 Speaker 2: Montana Radio Station should be able to make their own deals, 331 00:19:23,680 --> 00:19:25,320 Speaker 2: which they cannot under this system. 332 00:19:25,359 --> 00:19:27,280 Speaker 3: They're trying to undo the cartel, trying to sort of 333 00:19:27,359 --> 00:19:29,800 Speaker 3: unsolve the collective action problem. 334 00:19:29,560 --> 00:19:34,560 Speaker 2: And it's gonna get hot this fight. Montana Radio Station 335 00:19:34,960 --> 00:19:38,400 Speaker 2: gets a Justice of the Peace to issue a warrant 336 00:19:38,440 --> 00:19:42,960 Speaker 2: for jen Buck, the president of ASCAP, on extortion charges. 337 00:19:43,200 --> 00:19:46,080 Speaker 2: This man cannot go to Montana because there is a 338 00:19:46,119 --> 00:19:49,439 Speaker 2: warrant out for his arrest, and in fact, that warrant 339 00:19:49,480 --> 00:19:54,840 Speaker 2: starts to be circulated to other states. Jeenbuck is visiting Phoenix, Arizona, 340 00:19:54,920 --> 00:20:00,320 Speaker 2: nowhere near Montana, and he gets arrested on extortion. The 341 00:20:00,320 --> 00:20:03,080 Speaker 2: sheriff sets the bail at ten thousand dollars. 342 00:20:03,200 --> 00:20:05,239 Speaker 3: Not Treville, no A. 343 00:20:05,320 --> 00:20:08,760 Speaker 2: Buck is in Phoenix, it's a it's a holiday weekend, 344 00:20:08,840 --> 00:20:10,280 Speaker 2: doesn't know where he's gonna get the money. He calls 345 00:20:10,320 --> 00:20:14,000 Speaker 2: up a friend and the friend is okay, I will 346 00:20:14,040 --> 00:20:18,400 Speaker 2: send a certified check from Chase National Bank to the sheriff, 347 00:20:18,920 --> 00:20:22,960 Speaker 2: and the sheriff apparently replied, I'm one of those old 348 00:20:23,119 --> 00:20:26,840 Speaker 2: fashioned fellas, and I don't know what a certified check is. 349 00:20:27,280 --> 00:20:30,639 Speaker 2: And I have never heard of this Chase National Bank. 350 00:20:30,800 --> 00:20:33,640 Speaker 3: I don't believe that sheriff will admit. I bet he's 351 00:20:33,720 --> 00:20:36,520 Speaker 3: running for offense. I bet he's got three hundred thousand 352 00:20:36,600 --> 00:20:39,040 Speaker 3: dollars in an account in the Chase National Bank. 353 00:20:38,840 --> 00:20:42,960 Speaker 2: And arresting in New York. Songwriter is good forgetting votes, 354 00:20:43,000 --> 00:20:47,120 Speaker 2: good forgetting votes. Eventually Buck gets out, the charges are dropped. 355 00:20:47,880 --> 00:20:52,159 Speaker 2: Montana's like, this is ridiculous, but this shows you how 356 00:20:52,359 --> 00:20:56,480 Speaker 2: serious this fight was getting. So the government's sniffing around. 357 00:20:56,520 --> 00:21:00,119 Speaker 2: Broadcasters are pushing back. These should be a sort of 358 00:21:00,240 --> 00:21:03,880 Speaker 2: warning to ASCAP to be like, hey, be a little 359 00:21:03,920 --> 00:21:06,159 Speaker 2: bit of a benevolent monopoly here, you know, give you 360 00:21:06,480 --> 00:21:08,960 Speaker 2: give your customers a break. Yeah, take the money, just 361 00:21:09,000 --> 00:21:12,760 Speaker 2: get rich enough, don't push it too far. Gene Buck 362 00:21:13,040 --> 00:21:15,560 Speaker 2: announces that they're going to raise rates. They are going 363 00:21:15,560 --> 00:21:17,880 Speaker 2: to double them, in fact, from five percent to ten 364 00:21:17,960 --> 00:21:22,479 Speaker 2: percent of the broadcasters advertising revenue. And this is going 365 00:21:22,560 --> 00:21:24,919 Speaker 2: to go into effect when the contract expires at the 366 00:21:25,080 --> 00:21:29,720 Speaker 2: end of nineteen forty December thirty first, nineteen forty. If 367 00:21:29,760 --> 00:21:32,719 Speaker 2: you don't pay us, you will have no music on 368 00:21:32,760 --> 00:21:36,919 Speaker 2: your air in nineteen forty one. So what happens The 369 00:21:36,960 --> 00:21:42,000 Speaker 2: broadcasters freak. They're just like, Oh, we got to negotiate, 370 00:21:42,000 --> 00:21:44,399 Speaker 2: We got to negotiate. They set up this big meeting 371 00:21:44,440 --> 00:21:47,000 Speaker 2: between the heads of all the big radio networks and 372 00:21:47,119 --> 00:21:49,480 Speaker 2: Gene Buck. They have a room at the Ritz Tower. 373 00:21:49,520 --> 00:21:54,000 Speaker 2: They're gonna hash this out. The radio executives arrive. Buck 374 00:21:54,119 --> 00:21:57,520 Speaker 2: is late and it's an hour two hours. He doesn't show. 375 00:21:57,560 --> 00:22:00,280 Speaker 2: They call askap there, They're like, where's Gene Buck, Like 376 00:22:00,280 --> 00:22:03,040 Speaker 2: we're supposed to negotiate. They're like, oh, Gene Bucks on 377 00:22:03,080 --> 00:22:05,840 Speaker 2: the West coast. In fact, he's on a train en 378 00:22:05,960 --> 00:22:08,040 Speaker 2: route to the Bohemian Grove. 379 00:22:08,920 --> 00:22:12,000 Speaker 3: I know that the Bohemian Grove is like where famous 380 00:22:12,280 --> 00:22:16,600 Speaker 3: rich people go camping with each other or something, right whatever, 381 00:22:16,760 --> 00:22:20,240 Speaker 3: Henry Kissinger and Bill Clinton. It's where powerful and rich 382 00:22:20,280 --> 00:22:22,240 Speaker 3: people go to meet in secret. 383 00:22:22,320 --> 00:22:23,520 Speaker 2: And if you think of the. 384 00:22:23,600 --> 00:22:27,399 Speaker 3: Arc so far. You know, we started with a composer 385 00:22:27,720 --> 00:22:31,680 Speaker 3: walking into a restaurant having no power over the fact 386 00:22:31,680 --> 00:22:33,880 Speaker 3: that his music was being played and he wasn't being paid. 387 00:22:33,920 --> 00:22:37,160 Speaker 3: And now you have this guy going to hobnob with 388 00:22:37,200 --> 00:22:40,120 Speaker 3: the most powerful elites instead of meeting with the people 389 00:22:40,160 --> 00:22:42,760 Speaker 3: who want to negotiate with him, presumably in good faith. 390 00:22:43,040 --> 00:22:46,320 Speaker 2: The broadcasters call a war meeting, yes, love a war meeting, 391 00:22:46,480 --> 00:22:50,240 Speaker 2: and they say, how do you fight a cartel? And 392 00:22:50,320 --> 00:22:57,320 Speaker 2: the answer is we form a rival cartel. They decide 393 00:22:57,480 --> 00:23:02,359 Speaker 2: they are going to build Broadcast Music Incorporated b m I. 394 00:23:02,920 --> 00:23:06,959 Speaker 2: There's a standing ovation and the idea behind BMI is 395 00:23:07,040 --> 00:23:11,320 Speaker 2: there's a lot of music that ASCAP has not captured, country, blues, 396 00:23:11,480 --> 00:23:15,040 Speaker 2: R and B, gospel, Latin artists, and so what if 397 00:23:15,040 --> 00:23:19,800 Speaker 2: we sign those artists and we go to radio stations 398 00:23:20,200 --> 00:23:22,960 Speaker 2: and say you don't have to deal with ASCAP, you 399 00:23:23,000 --> 00:23:26,920 Speaker 2: can deal with us BMI. It's amazing when you say that, right, 400 00:23:26,960 --> 00:23:29,320 Speaker 2: this is what nineteen thirty nine. So they don't know 401 00:23:29,359 --> 00:23:32,600 Speaker 2: what's coming. But when you say country music. 402 00:23:32,400 --> 00:23:36,719 Speaker 3: And R and B and blues, they're making the rock 403 00:23:36,800 --> 00:23:40,080 Speaker 3: and roll cardtel Yeah, and Latin artists I'm just gonna say, 404 00:23:40,080 --> 00:23:42,919 Speaker 3: Irving Berlin did not play the Super Bowl. Yes. 405 00:23:43,200 --> 00:23:47,040 Speaker 2: BMI starts its operations in February of nineteen forty. They 406 00:23:47,040 --> 00:23:51,600 Speaker 2: have ten months. Ten months to sign up radio stat right, 407 00:23:51,600 --> 00:23:54,200 Speaker 2: because at the end of the year, that's when the 408 00:23:54,640 --> 00:23:56,440 Speaker 2: ascap ultimatum hits. 409 00:23:56,480 --> 00:23:58,760 Speaker 3: So if they don't do it in time, the radio 410 00:23:58,760 --> 00:24:00,880 Speaker 3: stations won't have music after New. 411 00:24:00,920 --> 00:24:05,160 Speaker 2: Year's BMI recruits a guy named Carl Haviln as their 412 00:24:05,200 --> 00:24:08,320 Speaker 2: station relations manager. It's going to be his job to 413 00:24:08,520 --> 00:24:12,359 Speaker 2: sell stations on this plan. There's this really charming story 414 00:24:12,359 --> 00:24:16,399 Speaker 2: about him that illustrates what it is he does. In 415 00:24:16,480 --> 00:24:19,480 Speaker 2: nineteen thirty five, he was working for a radio station. 416 00:24:19,640 --> 00:24:23,800 Speaker 2: He'd been in touch with Amelia Earhart, the famous flyer. 417 00:24:24,520 --> 00:24:26,439 Speaker 2: She was about to attempt to be the first person 418 00:24:26,480 --> 00:24:31,440 Speaker 2: to fly solo from Hawaii to the US mainland eighteen hours, 419 00:24:31,920 --> 00:24:34,200 Speaker 2: and she was worried about falling asleep in the cockpit. 420 00:24:34,320 --> 00:24:38,000 Speaker 2: So Haverlin and the others at the radio station have 421 00:24:38,040 --> 00:24:41,080 Speaker 2: this sort of publicity stunt they've decided to do. They 422 00:24:41,119 --> 00:24:44,560 Speaker 2: are going to beam music to her plane, specifically for 423 00:24:44,640 --> 00:24:47,719 Speaker 2: her her playlist, and she's going to like call in 424 00:24:47,760 --> 00:24:51,399 Speaker 2: on the radio to say if she's okay, great, great idea. 425 00:24:52,280 --> 00:24:54,560 Speaker 2: But at three oh five am, they don't hear from 426 00:24:54,560 --> 00:24:57,680 Speaker 2: Amelia Airheart. Again at three thirty five they don't hear 427 00:24:57,680 --> 00:25:00,119 Speaker 2: from her their words, she's gone down. And at four 428 00:25:00,160 --> 00:25:03,440 Speaker 2: o'clock in the morning, a Millia Earhart comes through, sounding 429 00:25:03,480 --> 00:25:06,480 Speaker 2: a little bleary. So Havilin asks her on the radio, 430 00:25:07,200 --> 00:25:12,480 Speaker 2: what is your favorite song? And she says the River 431 00:25:12,560 --> 00:25:19,080 Speaker 2: Valley country music, and Havelin says, to the band hit it. 432 00:25:19,560 --> 00:25:37,480 Speaker 5: Dolan said, by myself, and. 433 00:25:37,400 --> 00:25:41,080 Speaker 2: Then the song keeps a millionaire heart awake. She continues 434 00:25:41,119 --> 00:25:43,800 Speaker 2: to fly and she lands in Oakland. It was a 435 00:25:43,840 --> 00:25:48,720 Speaker 2: hoedown of the air. Thanks Ben, and this is a 436 00:25:48,760 --> 00:25:52,280 Speaker 2: good glimpse of something that Havelin seemed to understand that 437 00:25:52,359 --> 00:25:57,600 Speaker 2: gene Buck did not. A lot of Americans didn't actually 438 00:25:58,480 --> 00:26:02,280 Speaker 2: like the high falutint Broadway music. Maybe they pretended they did. 439 00:26:02,320 --> 00:26:04,760 Speaker 2: It was certainly on the radio, but a lot of 440 00:26:04,800 --> 00:26:09,119 Speaker 2: people wanted to hear a lot of other things, local songwriters, 441 00:26:09,200 --> 00:26:11,760 Speaker 2: jazz and blues like this is what people we were 442 00:26:11,800 --> 00:26:14,679 Speaker 2: listening to in their bars and honkey talks outside of 443 00:26:14,720 --> 00:26:16,679 Speaker 2: New York, and they wanted to hear it on the radio. 444 00:26:17,000 --> 00:26:19,320 Speaker 2: And I should say here that this story and most 445 00:26:19,320 --> 00:26:22,280 Speaker 2: of our information about Carl Havelin and BMI comes from 446 00:26:22,320 --> 00:26:25,840 Speaker 2: a few oral histories courtesy of the Country Music Hall 447 00:26:25,880 --> 00:26:27,000 Speaker 2: of Fame and Museum. 448 00:26:27,400 --> 00:26:30,520 Speaker 3: I will say our producer, Gabriel Hunter Chang, who did 449 00:26:30,560 --> 00:26:32,720 Speaker 3: most of the research for this show, was sitting next 450 00:26:32,760 --> 00:26:34,840 Speaker 3: to him in the office and there was this moment 451 00:26:34,880 --> 00:26:36,960 Speaker 3: a few weeks ago when he was like yes, and 452 00:26:37,000 --> 00:26:38,680 Speaker 3: I was like what, and he was like, we get 453 00:26:38,680 --> 00:26:42,160 Speaker 3: the oral histories. It's like that is a great producer. 454 00:26:42,800 --> 00:26:45,800 Speaker 2: So the charming Carl Havelin is the man who really 455 00:26:45,840 --> 00:26:48,760 Speaker 2: gets BMI off the ground. He's traveling around the country 456 00:26:48,760 --> 00:26:52,880 Speaker 2: talking to station managers getting them to sign licenses with BMI, 457 00:26:53,080 --> 00:26:55,720 Speaker 2: very similar to the ASCAP licenses where you can play 458 00:26:55,800 --> 00:26:58,080 Speaker 2: all of our roster of artists if you give us 459 00:26:58,119 --> 00:27:00,720 Speaker 2: a small amount of your revenues. His goal is to 460 00:27:00,760 --> 00:27:04,600 Speaker 2: get seven hundred and fifty stations, and BMI is starting 461 00:27:04,600 --> 00:27:07,520 Speaker 2: to get some hits. They work out a hit arrangement 462 00:27:07,560 --> 00:27:10,640 Speaker 2: of Genie with the light brown hair. They start bringing 463 00:27:10,640 --> 00:27:13,840 Speaker 2: in the country music musician the Carter family, very famous 464 00:27:14,000 --> 00:27:14,760 Speaker 2: Jimmy Rodgers. 465 00:27:14,920 --> 00:27:16,520 Speaker 3: What are the fathers of country music? 466 00:27:16,560 --> 00:27:19,760 Speaker 2: I believe a yodeler. A yodeler, that's what people wanted 467 00:27:19,760 --> 00:27:23,280 Speaker 2: to hear, not yodelin' on Broadway. The end of the 468 00:27:23,359 --> 00:27:27,800 Speaker 2: contract with ASCAP is looming December thirty one, nineteen forty, 469 00:27:27,880 --> 00:27:32,119 Speaker 2: Jean Buch planning to pull American music off the air, 470 00:27:32,760 --> 00:27:36,040 Speaker 2: and as the clock hit midnight, people around the nation 471 00:27:36,200 --> 00:27:39,239 Speaker 2: were wondering, what is going to happen. They tuned in 472 00:27:39,320 --> 00:27:44,120 Speaker 2: and they heard, Wait. 473 00:27:43,960 --> 00:27:45,640 Speaker 3: Isn't hold An signed in the public domain? 474 00:27:46,359 --> 00:27:48,919 Speaker 2: Yes, anyone could play it as long as it's not 475 00:27:48,960 --> 00:27:51,920 Speaker 2: an ASCAP arrangement. But everyone's waiting to see what happens 476 00:27:52,040 --> 00:27:55,040 Speaker 2: After Ben finishes playing this song, will there be any 477 00:27:55,119 --> 00:27:57,960 Speaker 2: music at all on the radio? Will they just turn 478 00:27:58,000 --> 00:27:59,000 Speaker 2: the whole system off? 479 00:27:59,440 --> 00:28:00,040 Speaker 3: Thanks? Ben? 480 00:28:03,400 --> 00:28:06,840 Speaker 2: After the song finishes, the music continues into the night. 481 00:28:07,440 --> 00:28:10,200 Speaker 2: Listeners thought that maybe as CAP had finally made a deal, 482 00:28:10,560 --> 00:28:14,439 Speaker 2: maybe the radio stations gave in. But no, it was 483 00:28:14,600 --> 00:28:19,399 Speaker 2: BMI music. They had slotted in BMI music, and nobody 484 00:28:19,720 --> 00:28:24,720 Speaker 2: really noticed or even really cared. Music is music. They 485 00:28:24,760 --> 00:28:29,040 Speaker 2: partied into the night, except for maybe one man, Gene Buck. 486 00:28:29,320 --> 00:28:32,120 Speaker 3: Yeah, if you form a cartel, you better make sure 487 00:28:32,119 --> 00:28:34,240 Speaker 3: that there's not a substitute for what you're selling. 488 00:28:34,640 --> 00:28:36,480 Speaker 2: He thought there would be people in the streets being like, 489 00:28:36,520 --> 00:28:39,160 Speaker 2: where's my Gushwin, where's my having Berlin? 490 00:28:39,840 --> 00:28:41,800 Speaker 3: And they were just yodeling all night long. 491 00:28:41,920 --> 00:28:45,840 Speaker 2: They were yodling all night long. Ten months later, as 492 00:28:45,960 --> 00:28:50,120 Speaker 2: CAP caves, they agree to much more modest terms than 493 00:28:50,120 --> 00:28:52,520 Speaker 2: the ten percent they were asking for. In fact, they 494 00:28:52,520 --> 00:28:55,720 Speaker 2: didn't even get the five percent of advertising revenues which 495 00:28:55,760 --> 00:29:00,160 Speaker 2: they had before they negotiated. Now two point seventy five 496 00:29:00,240 --> 00:29:03,360 Speaker 2: percent of radio station revenues had to be paid. 497 00:29:03,480 --> 00:29:07,000 Speaker 3: Shout out competition. I know right of competition. 498 00:29:07,320 --> 00:29:10,680 Speaker 2: I know half of what they've been paying before. Buck 499 00:29:10,840 --> 00:29:14,640 Speaker 2: is eventually removed as president of as CAP, Carl Havelin 500 00:29:15,360 --> 00:29:16,920 Speaker 2: becomes the president of BMI. 501 00:29:18,080 --> 00:29:21,480 Speaker 3: I guess the songwriters don't necessarily love competition, although the 502 00:29:21,560 --> 00:29:25,440 Speaker 3: formerly excluded songwriters love competition right. The only people who 503 00:29:25,480 --> 00:29:28,120 Speaker 3: don't love it are the klubby tin panale New York 504 00:29:28,160 --> 00:29:29,560 Speaker 3: songwriters who pushed it too far. 505 00:29:29,720 --> 00:29:33,040 Speaker 2: I feel like I'm saying the Jacob Goldstein line. But 506 00:29:33,080 --> 00:29:37,840 Speaker 2: the pie can get bigger, more music, more songwriters, more revenues, 507 00:29:37,920 --> 00:29:40,040 Speaker 2: more advertising, more money for everyone. 508 00:29:40,200 --> 00:29:42,640 Speaker 3: Yes, two point seventy five If you can grow the 509 00:29:42,720 --> 00:29:46,000 Speaker 3: pie ten x is more than ten percent at the 510 00:29:46,000 --> 00:29:46,840 Speaker 3: old smaller pie. 511 00:29:46,920 --> 00:29:49,840 Speaker 2: Love that I've learned something from you. The broadcasters in 512 00:29:49,880 --> 00:29:52,880 Speaker 2: the American public end up with music from both as 513 00:29:52,880 --> 00:29:55,400 Speaker 2: CAP and BMI. There is a truce in the war, 514 00:29:55,800 --> 00:29:59,120 Speaker 2: and they're still a little competitive, which is great. BMI 515 00:29:59,240 --> 00:30:03,320 Speaker 2: signs Elvis Presley, as CAP scoffs the rock and roll. 516 00:30:03,440 --> 00:30:05,960 Speaker 2: That's not going to happen. The Gershwines are coming back. 517 00:30:06,400 --> 00:30:11,200 Speaker 2: Then as CAP signs Bob Dylan, Hey, acoustic Bob Dylan, 518 00:30:11,280 --> 00:30:14,040 Speaker 2: because that's more, it's more classy, that's more as CAP. 519 00:30:14,440 --> 00:30:17,720 Speaker 2: And then when Dylan goes electric, as CAP has to 520 00:30:17,840 --> 00:30:20,640 Speaker 2: kind of go electric too, and it opens the door 521 00:30:20,680 --> 00:30:23,720 Speaker 2: for them to represent rock and roll. You see this progress, 522 00:30:23,800 --> 00:30:26,040 Speaker 2: this progress, But the big picture is that the two 523 00:30:26,120 --> 00:30:30,800 Speaker 2: organizations have created a calm and very profitable market for songwriting, 524 00:30:31,480 --> 00:30:35,520 Speaker 2: a common profitable market. And who loves a calm and 525 00:30:35,560 --> 00:30:39,680 Speaker 2: profitable market? Wall Street. Wall Street takes a look at 526 00:30:39,720 --> 00:30:44,400 Speaker 2: this and says, we want some of this action. After 527 00:30:44,440 --> 00:31:08,280 Speaker 2: the break this next act, we're going to talk about 528 00:31:08,280 --> 00:31:11,720 Speaker 2: a sort of unintended consequence of the as CAP and 529 00:31:11,760 --> 00:31:15,640 Speaker 2: bm MY fight. At this point, because of as cap'ain 530 00:31:15,680 --> 00:31:19,960 Speaker 2: BMI songs are not just ditties that you sing along to. 531 00:31:20,800 --> 00:31:25,640 Speaker 2: They are revenue generating machines. They have a life of 532 00:31:25,720 --> 00:31:26,560 Speaker 2: their own. 533 00:31:27,280 --> 00:31:28,400 Speaker 3: And a thing we know. 534 00:31:28,520 --> 00:31:28,640 Speaker 4: Right. 535 00:31:28,680 --> 00:31:31,560 Speaker 3: So we're getting into the like sixties seventies, this is 536 00:31:31,560 --> 00:31:36,360 Speaker 3: a time when intellectual property more generally is growing as 537 00:31:36,400 --> 00:31:39,720 Speaker 3: a thing. The owners of intellectual property, not just songwriters, 538 00:31:39,720 --> 00:31:43,600 Speaker 3: but people like say the Walt Disney Company, are pushing 539 00:31:43,680 --> 00:31:47,240 Speaker 3: for stricter intellectual property protection and longer. 540 00:31:47,360 --> 00:31:47,520 Speaker 2: Right. 541 00:31:47,600 --> 00:31:49,640 Speaker 3: One of the really striking things you see in the 542 00:31:49,760 --> 00:31:53,840 Speaker 3: twentieth century is copyright keeps getting longer and longer and longer. 543 00:31:54,280 --> 00:31:58,120 Speaker 2: Yeah. And as capain, BMI helped push for copyright protection 544 00:31:58,200 --> 00:32:03,080 Speaker 2: to be extended to the songwriter's lifetime plus fifty years. 545 00:32:03,960 --> 00:32:08,840 Speaker 2: Eventually it'll be seventy years, so years plus plus their lifetime. Yeah, 546 00:32:08,840 --> 00:32:12,000 Speaker 2: So a song can live for more than a high 547 00:32:12,040 --> 00:32:15,120 Speaker 2: hundred years. And at this point the song can live forever. 548 00:32:15,280 --> 00:32:18,560 Speaker 2: The revenues can live for more than one hundred years. Right. 549 00:32:19,000 --> 00:32:22,600 Speaker 2: And at this time the number of places that you 550 00:32:22,640 --> 00:32:25,600 Speaker 2: could get a little slice of revenue from was growing 551 00:32:25,640 --> 00:32:29,000 Speaker 2: because you not only had radio, you had TV and movies. 552 00:32:29,160 --> 00:32:32,400 Speaker 2: You had records and then eight tracks and cassettes and 553 00:32:32,520 --> 00:32:36,200 Speaker 2: eventually CDs, and then you had the rise of old 554 00:32:36,240 --> 00:32:38,960 Speaker 2: these radio stations, the hits of the seventies, eighties, nineties, 555 00:32:39,000 --> 00:32:43,240 Speaker 2: and today, where a song like Hotel California is played 556 00:32:43,720 --> 00:32:46,600 Speaker 2: every single day until the end of time. 557 00:32:47,600 --> 00:32:48,560 Speaker 3: It's a lot of pennies. 558 00:32:49,120 --> 00:32:52,240 Speaker 2: It's a lot of pennies. To put in financial terms, 559 00:32:52,640 --> 00:32:57,400 Speaker 2: a song became an asset. It's protected and monetized by 560 00:32:57,400 --> 00:33:00,760 Speaker 2: as captain BMI, along with the music labels and the publishers, 561 00:33:01,200 --> 00:33:04,800 Speaker 2: and it generates a predictable cash flow, as we said, 562 00:33:04,880 --> 00:33:08,320 Speaker 2: maybe for more than one hundred years. A great song 563 00:33:08,760 --> 00:33:11,800 Speaker 2: is essentially like a long term bond. 564 00:33:12,120 --> 00:33:15,120 Speaker 3: Yeah, like especially a hit. Right when you think about 565 00:33:15,160 --> 00:33:19,080 Speaker 3: the one hundred year cash flow that is your Hotel 566 00:33:19,160 --> 00:33:21,760 Speaker 3: California or whatever, it's what you know. People are going 567 00:33:21,800 --> 00:33:24,320 Speaker 3: to play every day until the end of time. You 568 00:33:24,360 --> 00:33:27,160 Speaker 3: can check out any time you like, but the royalties 569 00:33:27,200 --> 00:33:27,920 Speaker 3: will never leave. 570 00:33:28,160 --> 00:33:32,280 Speaker 2: People start to figure out that these assets, we're going 571 00:33:32,360 --> 00:33:35,400 Speaker 2: to call them assets now, not songs. You can buy 572 00:33:35,440 --> 00:33:38,760 Speaker 2: and sell other people's rights. You can assemble them into 573 00:33:38,800 --> 00:33:41,840 Speaker 2: a giant portfolio. And one of the first to do 574 00:33:41,880 --> 00:33:44,840 Speaker 2: this in a notable way was a well known financial genius, 575 00:33:45,840 --> 00:33:50,360 Speaker 2: the King of Pop, Michael Jackson. Here's how the story goes. 576 00:33:50,840 --> 00:33:55,360 Speaker 2: One night in nineteen eighty one, Michael Jackson and Paul McCartney, 577 00:33:55,520 --> 00:33:58,200 Speaker 2: who he's a member of the Beatles or was hanging 578 00:33:58,240 --> 00:34:01,240 Speaker 2: out at McCartney's estate outside of London. They're getting to 579 00:34:01,280 --> 00:34:04,880 Speaker 2: know each other. Michael's interested in writing some songs with 580 00:34:04,920 --> 00:34:07,960 Speaker 2: Paul McCartney, and in fact they are going to collaborate 581 00:34:08,000 --> 00:34:11,200 Speaker 2: on a few songs including say say say what. 582 00:34:11,319 --> 00:34:13,959 Speaker 3: You want, Don't lead Me in no direction. 583 00:34:13,720 --> 00:34:17,840 Speaker 2: Direction, something like that. And McCartney is talking to Michael 584 00:34:17,920 --> 00:34:22,680 Speaker 2: Jackson about the music business, and McCartney is saying, you know, 585 00:34:22,719 --> 00:34:26,200 Speaker 2: it's so important that you own the rights to your songs, 586 00:34:26,239 --> 00:34:29,960 Speaker 2: because in fact, he and John Lennon had lost some 587 00:34:30,000 --> 00:34:32,560 Speaker 2: of the rights to their songs back in the early days. 588 00:34:33,000 --> 00:34:35,800 Speaker 2: They were now owned by someone else. And McCartney says, 589 00:34:35,840 --> 00:34:37,560 Speaker 2: you know, you know, someday I would love to like 590 00:34:37,920 --> 00:34:40,719 Speaker 2: reown my music, So don't make the mistake I made. 591 00:34:41,040 --> 00:34:43,480 Speaker 2: And McCartney's actually showing off a little bit. He's is 592 00:34:43,520 --> 00:34:47,040 Speaker 2: showing Michael Jackson that that he's bought some other songs. 593 00:34:47,080 --> 00:34:50,360 Speaker 2: So McCartney had bought the Buddy Holly catalog and some 594 00:34:50,480 --> 00:34:57,000 Speaker 2: Broadway tunes, and Michael Jackson jokes, well, you know, someday 595 00:34:57,080 --> 00:35:01,120 Speaker 2: I should buy all of your music, Paul. Well, at 596 00:35:01,200 --> 00:35:06,640 Speaker 2: least McCartney thinks it's a joke, but it's no joke. 597 00:35:07,160 --> 00:35:11,920 Speaker 2: Michael Jackson happens to be sitting on nine million dollars. 598 00:35:12,480 --> 00:35:14,000 Speaker 2: Used to be a lot, used to be a lot, 599 00:35:14,040 --> 00:35:17,000 Speaker 2: and you'd earn that in nineteen eighty and he's thinking 600 00:35:17,000 --> 00:35:20,120 Speaker 2: about where to park it, and McCartney has this suggestion. 601 00:35:20,320 --> 00:35:24,040 Speaker 2: So Michael Jackson starts buying songs, music rights for songs 602 00:35:24,480 --> 00:35:27,239 Speaker 2: like run Around, Sue and The Wanderer, classic songs from 603 00:35:27,239 --> 00:35:29,840 Speaker 2: the nineteen fifties. He buys the whole Sly and the 604 00:35:29,880 --> 00:35:34,359 Speaker 2: family Stone catalog for half a million dollars. I know 605 00:35:34,680 --> 00:35:36,920 Speaker 2: I would buy the music for half a million dollars, 606 00:35:37,480 --> 00:35:39,759 Speaker 2: and it's a good deal because Michael Jackson ends up 607 00:35:39,760 --> 00:35:42,200 Speaker 2: making that money back when someone covers a Sly in 608 00:35:42,280 --> 00:35:45,960 Speaker 2: Family Stone hit. This is all working, and then Michael 609 00:35:46,000 --> 00:35:49,919 Speaker 2: Jackson goes for the big score, the thing he'd joked about. 610 00:35:50,040 --> 00:35:54,600 Speaker 2: An Australian media tycoon named Holmes A Court puts the 611 00:35:54,640 --> 00:35:58,160 Speaker 2: Beatles catalog up for sale in nineteen eighty four. So 612 00:35:58,320 --> 00:36:00,960 Speaker 2: Jackson makes his move. He makes an offer for the 613 00:36:01,000 --> 00:36:05,359 Speaker 2: Beatles catalog of forty million dollars. Remember signing the family 614 00:36:05,400 --> 00:36:08,360 Speaker 2: stone was half a million. Forty million dollars is huge. 615 00:36:08,440 --> 00:36:11,840 Speaker 2: It's a very high valuation. I mean, it is the Beatles, 616 00:36:12,400 --> 00:36:15,879 Speaker 2: but we didn't know how much songs were worth back 617 00:36:15,880 --> 00:36:18,360 Speaker 2: in this day. People in the industry think he's losing 618 00:36:18,400 --> 00:36:23,040 Speaker 2: his mind, but there is in fact a bidding war. 619 00:36:23,160 --> 00:36:26,920 Speaker 2: Richard Branson of Virgin Records throws his hat in the 620 00:36:27,000 --> 00:36:30,280 Speaker 2: ring and in August of nineteen eighty five, Jackson wins 621 00:36:30,440 --> 00:36:36,759 Speaker 2: at forty seven point five million dollars, plus he has 622 00:36:36,840 --> 00:36:40,480 Speaker 2: to appear at a telethon fundraiser in. 623 00:36:40,360 --> 00:36:41,880 Speaker 3: Perth, Australia. Incredible. 624 00:36:41,960 --> 00:36:45,279 Speaker 2: I love that that got thrown in there. And at 625 00:36:45,320 --> 00:36:48,759 Speaker 2: this point this is the most expensive publishing purchase ever 626 00:36:48,800 --> 00:36:53,320 Speaker 2: by an individual and Michael Jackson, this is really interesting. 627 00:36:54,120 --> 00:36:58,160 Speaker 2: He agreed to exclude one song, one Beatles song, from 628 00:36:58,160 --> 00:37:00,600 Speaker 2: the purchase. The man who was selling it wanted to 629 00:37:00,680 --> 00:37:04,880 Speaker 2: gift his daughter one Beatles song, which is pretty adorable. 630 00:37:05,600 --> 00:37:09,640 Speaker 2: He's kind of hoping that she'll pick Yesterday, which probably 631 00:37:09,680 --> 00:37:14,080 Speaker 2: is worth the most money. His daughter chooses Penny Lane 632 00:37:14,200 --> 00:37:15,799 Speaker 2: and owns the rights to this day. 633 00:37:15,880 --> 00:37:17,080 Speaker 3: I'm sure she's doing fine. 634 00:37:18,600 --> 00:37:23,480 Speaker 2: Jackson also doing fine, thrilled to have the Beatles collection. 635 00:37:24,760 --> 00:37:31,640 Speaker 2: Paul McCartney not so happy. He felt like he had 636 00:37:31,640 --> 00:37:36,080 Speaker 2: made it clear that he wanted the Beatles catalog, and 637 00:37:36,160 --> 00:37:38,000 Speaker 2: Jackson has not only bought it, but if you think 638 00:37:38,040 --> 00:37:42,319 Speaker 2: about it, has greatly increased what it would cost for 639 00:37:42,440 --> 00:37:47,640 Speaker 2: McCartney to buy those songs back. And pretty quickly Michael 640 00:37:47,719 --> 00:37:50,400 Speaker 2: Jackson starts, you know, trying to make money off of 641 00:37:50,440 --> 00:37:53,200 Speaker 2: his investment of the Beatles songs, doing something that Paul 642 00:37:53,239 --> 00:37:56,400 Speaker 2: McCartney says he would never do, like sell Beatles songs 643 00:37:56,440 --> 00:37:57,320 Speaker 2: to advertisers. 644 00:37:57,520 --> 00:38:01,560 Speaker 3: I remember, actually, is this the eighties? I remember in 645 00:38:01,600 --> 00:38:04,440 Speaker 3: the eighties there was this famous Nike ad where they 646 00:38:04,480 --> 00:38:07,920 Speaker 3: played Revolution, the Beatles song Revolution, and I, being the 647 00:38:07,960 --> 00:38:09,719 Speaker 3: target for that ad, loved it. 648 00:38:10,239 --> 00:38:13,319 Speaker 2: Yeah, a lot of hippies didn't love it, and Paul 649 00:38:13,360 --> 00:38:16,080 Speaker 2: McCartney didn't love it, like this was not something they 650 00:38:16,120 --> 00:38:19,839 Speaker 2: wanted to do with their music. And apparently Jackson said, oh, Paul, 651 00:38:19,960 --> 00:38:22,880 Speaker 2: it's just business. It ended up being a great business 652 00:38:22,880 --> 00:38:26,520 Speaker 2: for Michael Jackson. He doubled his money when he sold 653 00:38:26,520 --> 00:38:30,319 Speaker 2: the rights later to Sony, And the lesson of all 654 00:38:30,360 --> 00:38:34,080 Speaker 2: of this for the world was, these songs are way 655 00:38:34,120 --> 00:38:37,760 Speaker 2: more valuable than we thought as assets. Now, Michael Jackson 656 00:38:37,840 --> 00:38:41,000 Speaker 2: was a simple by hold and sell investor. He saw 657 00:38:41,000 --> 00:38:43,880 Speaker 2: an underpriced asset, bought it, sold it for double. But 658 00:38:44,040 --> 00:38:47,400 Speaker 2: once songs are assets, you can do all sorts of 659 00:38:47,440 --> 00:38:51,320 Speaker 2: financial engineering to them. The next step in our story 660 00:38:52,719 --> 00:39:05,120 Speaker 2: comes from David Bowie round control to Majo. 661 00:39:13,600 --> 00:39:14,760 Speaker 3: All right, it's Bowie again. 662 00:39:17,200 --> 00:39:21,000 Speaker 2: In the nineteen nineties, David Bowie owned fifty percent of 663 00:39:21,040 --> 00:39:22,960 Speaker 2: the rights to his catalog, which you know, for a 664 00:39:23,040 --> 00:39:25,400 Speaker 2: rock and roll star who was perhaps using drugs, like, 665 00:39:25,440 --> 00:39:29,040 Speaker 2: that's a high percentage. Like he had kept fifty percent. 666 00:39:29,640 --> 00:39:32,640 Speaker 2: The problem was the other fifty percent was owned by 667 00:39:32,640 --> 00:39:37,799 Speaker 2: his manager, whom he despised, hated his manager. And you 668 00:39:37,840 --> 00:39:41,919 Speaker 2: can imagine if you're David Bowie driving along in California 669 00:39:42,239 --> 00:39:44,360 Speaker 2: and a song comes on the radio and it's your song, 670 00:39:44,800 --> 00:39:48,040 Speaker 2: you should feel great. But in fact, he felt miserable 671 00:39:48,080 --> 00:39:50,680 Speaker 2: that half of the royalties from that song was going 672 00:39:50,920 --> 00:39:54,040 Speaker 2: to a man that he hated. So he wants to 673 00:39:54,120 --> 00:39:59,320 Speaker 2: buy back all of his rights, and his financial advisors 674 00:39:59,360 --> 00:40:01,319 Speaker 2: come up with a scheme that will allow him to 675 00:40:01,360 --> 00:40:05,080 Speaker 2: do it by inventing a new financial instrument, or at 676 00:40:05,120 --> 00:40:07,800 Speaker 2: least a new way to use an older financial instrument. 677 00:40:08,200 --> 00:40:11,600 Speaker 2: In nineteen ninety seven, Bowie packages two hundred and eighty 678 00:40:11,640 --> 00:40:15,000 Speaker 2: seven of his songs and copyrights from Life on Mars 679 00:40:15,040 --> 00:40:18,879 Speaker 2: to Ashes to Ashes, and he puts them into a 680 00:40:19,000 --> 00:40:23,520 Speaker 2: special purpose vehicle, a securitization pool. 681 00:40:23,880 --> 00:40:28,000 Speaker 3: A securitization pool, you're ringing the two thousand and eight 682 00:40:28,040 --> 00:40:32,680 Speaker 3: financial crisis bell, right, Like anybody who has read about 683 00:40:32,680 --> 00:40:35,160 Speaker 3: the financial crisis or listen to a plent of money 684 00:40:35,160 --> 00:40:38,960 Speaker 3: talking about the financial crisis might remember. The securitization pool 685 00:40:39,000 --> 00:40:42,719 Speaker 3: is when you take some set of assets, typically that 686 00:40:43,360 --> 00:40:46,560 Speaker 3: have some stream of income attached to them, like a mortgage. Yeah. 687 00:40:46,560 --> 00:40:48,480 Speaker 3: So if you take one hundred mortgages, you put them 688 00:40:48,480 --> 00:40:51,920 Speaker 3: into one special purpose vehicle. You put them into one bundle, 689 00:40:52,360 --> 00:40:55,799 Speaker 3: and then you sell off slices of that bundle. Those 690 00:40:55,800 --> 00:40:56,799 Speaker 3: are the securities. 691 00:40:56,920 --> 00:40:59,919 Speaker 2: Yeah, sell off slices of the revenue that comes from 692 00:40:59,920 --> 00:41:00,400 Speaker 2: the bundle. 693 00:41:00,560 --> 00:41:05,120 Speaker 3: Yes, So you buy a slice of a mortgage backed security, 694 00:41:05,160 --> 00:41:08,040 Speaker 3: and every month you get some money as people pay 695 00:41:08,080 --> 00:41:10,120 Speaker 3: their mortgage or I guess in the case of Bowie, 696 00:41:10,520 --> 00:41:13,640 Speaker 3: every month or every quarter, whatever, you get a slice 697 00:41:13,680 --> 00:41:14,920 Speaker 3: of his royalties. 698 00:41:15,440 --> 00:41:18,120 Speaker 2: Yes, so this is the genius of the plan. In 699 00:41:18,160 --> 00:41:20,400 Speaker 2: the old days, David Bowie, if you needed money, would 700 00:41:20,400 --> 00:41:22,759 Speaker 2: just sell the rights to his songs and then he 701 00:41:22,800 --> 00:41:26,040 Speaker 2: wouldn't own them anymore. But by putting them in this pool, 702 00:41:26,640 --> 00:41:29,920 Speaker 2: he still owned his songs. He was just promising the 703 00:41:29,960 --> 00:41:35,040 Speaker 2: revenue to whoever would invest in this vehicle. So we 704 00:41:35,160 --> 00:41:40,279 Speaker 2: offer something that is cold colloquially a Bowie bond. It 705 00:41:40,320 --> 00:41:44,160 Speaker 2: pays seven point nine percent interest, and it gets bought 706 00:41:44,320 --> 00:41:47,720 Speaker 2: mostly by an insurance company. You know, the show's company 707 00:41:47,760 --> 00:41:50,640 Speaker 2: is thinking, well, we need to invest our money somewhere. 708 00:41:50,880 --> 00:41:54,759 Speaker 3: Well, and insurance companies have long term liabilities. They know 709 00:41:54,800 --> 00:41:57,040 Speaker 3: they're going to have to pay out for decades, and 710 00:41:57,080 --> 00:42:00,520 Speaker 3: as you were saying before, songs are now long term 711 00:42:00,560 --> 00:42:03,600 Speaker 3: assets and they want to match their assets and their liabilities. 712 00:42:03,680 --> 00:42:06,399 Speaker 2: So boy ends up getting fifty five million dollars from 713 00:42:06,400 --> 00:42:09,120 Speaker 2: this deal, and he uses the money to buy the 714 00:42:09,200 --> 00:42:12,040 Speaker 2: other half of his music rights from the guy he 715 00:42:12,440 --> 00:42:13,080 Speaker 2: I hate. 716 00:42:12,840 --> 00:42:14,799 Speaker 3: You so much, I'm going to give you fifty five 717 00:42:14,880 --> 00:42:16,080 Speaker 3: million dollars. 718 00:42:16,640 --> 00:42:19,320 Speaker 2: But he's a musician and now he owns his rights. 719 00:42:19,360 --> 00:42:21,080 Speaker 2: This is a happy ending to the story, and it's 720 00:42:21,160 --> 00:42:25,839 Speaker 2: very clever. Now this did not work out as well 721 00:42:25,920 --> 00:42:29,799 Speaker 2: for the investors because just as David Bowie does, this 722 00:42:30,280 --> 00:42:34,200 Speaker 2: is really the peak of the music industry as we 723 00:42:34,320 --> 00:42:36,720 Speaker 2: know it, right, CDs are making a ton of money. 724 00:42:36,760 --> 00:42:39,600 Speaker 2: Everyone's like, this money will continue forever, and that's how 725 00:42:39,600 --> 00:42:44,120 Speaker 2: we're going to value the Bowie bonds. And then music 726 00:42:44,160 --> 00:42:47,160 Speaker 2: becomes essentially free on the Internet. People start to steal 727 00:42:47,200 --> 00:42:49,600 Speaker 2: it with Napster and LimeWire and all of this, and 728 00:42:49,840 --> 00:42:54,760 Speaker 2: music industry revenues plunge, including royalties paid to David Bowie songs, 729 00:42:55,480 --> 00:42:58,960 Speaker 2: and those bonds end up being rated junk at some point. 730 00:42:59,000 --> 00:43:04,719 Speaker 2: But but this drew the attention of the financial world, 731 00:43:04,840 --> 00:43:07,000 Speaker 2: and if you have a ton of money, it just 732 00:43:07,040 --> 00:43:09,920 Speaker 2: becomes another thing you're looking to invest in. 733 00:43:10,040 --> 00:43:14,080 Speaker 3: It's an asset cluss. I mean, I got interested a 734 00:43:14,080 --> 00:43:18,440 Speaker 3: few years ago in this company called Hypnosis Uh with 735 00:43:18,560 --> 00:43:21,560 Speaker 3: a G, so I'll try to spell it. Founded by 736 00:43:21,600 --> 00:43:24,920 Speaker 3: this guy Merk Mercuriatus, who is this music business guy 737 00:43:24,920 --> 00:43:28,960 Speaker 3: who started a company and it actually became publicly traded 738 00:43:29,000 --> 00:43:32,560 Speaker 3: for a while. And all they did was buy up 739 00:43:32,840 --> 00:43:34,800 Speaker 3: the rights two songs. 740 00:43:34,440 --> 00:43:35,520 Speaker 2: Tens of thousands of songs. 741 00:43:35,600 --> 00:43:38,800 Speaker 3: Yeah, billions they sent I think more than two billion dollars. 742 00:43:39,840 --> 00:43:42,600 Speaker 3: I wound up getting bought by Blackstone in the end 743 00:43:42,920 --> 00:43:45,160 Speaker 3: classic finance story. 744 00:43:45,200 --> 00:43:49,440 Speaker 2: Last year, investors including Blackstone, Carlisle, and Michigan's State pension 745 00:43:49,480 --> 00:43:52,319 Speaker 2: fund who shout out to pension funds, they've raised at 746 00:43:52,400 --> 00:43:56,120 Speaker 2: least four point four billion dollars using songs by Justin Bieber, 747 00:43:56,239 --> 00:44:01,439 Speaker 2: Lady Gaga, and John Lennon and Paul McCartney packaged into securities. 748 00:44:02,160 --> 00:44:06,000 Speaker 2: And you'll notice, Jacob, you recognize the names of those musicians. 749 00:44:06,520 --> 00:44:09,600 Speaker 2: A side effect of the financialization of music is that 750 00:44:09,640 --> 00:44:13,319 Speaker 2: it makes superstars even more more rich. 751 00:44:13,400 --> 00:44:14,879 Speaker 3: That's always heartwarming to hear. 752 00:44:15,280 --> 00:44:17,399 Speaker 2: Yeah, I mean, if you're a financial asset, it also 753 00:44:17,440 --> 00:44:20,000 Speaker 2: makes sense for these companies to spend more money promoting you, 754 00:44:20,360 --> 00:44:23,000 Speaker 2: meaning that you're worth more and the securities are worth 755 00:44:23,000 --> 00:44:25,439 Speaker 2: more and you'll make even more money. Basically, a lot 756 00:44:25,480 --> 00:44:28,400 Speaker 2: of musicians are where they were one hundred years ago 757 00:44:28,440 --> 00:44:32,000 Speaker 2: before as cap They're making a little bit from selling 758 00:44:32,040 --> 00:44:35,319 Speaker 2: the music that they own, but in order to make 759 00:44:35,360 --> 00:44:38,480 Speaker 2: real money, they got to start to perform in the 760 00:44:38,480 --> 00:44:42,200 Speaker 2: burlesque calls, you know, the beer halls, the restaurants, Shanley's 761 00:44:42,200 --> 00:44:44,759 Speaker 2: of Times Square and make their money from something that 762 00:44:44,800 --> 00:44:46,160 Speaker 2: hasn't been financialized yet. 763 00:44:46,719 --> 00:44:54,560 Speaker 3: T shirt sales Merch Merch. Today's live music was provided 764 00:44:54,560 --> 00:44:58,960 Speaker 3: by Ben f Heffrey. The show was produced, reported, and 765 00:44:58,960 --> 00:45:01,760 Speaker 3: written by Gabriel hundred Chang. It was engineered by Sarah Brughere. 766 00:45:01,800 --> 00:45:05,000 Speaker 3: Our showrunner and editor is Ryan Dilley. I'm Jacob Goldstein. 767 00:45:05,040 --> 00:45:06,920 Speaker 3: I'm on Exit, Jacob Goldstein. 768 00:45:06,800 --> 00:45:09,600 Speaker 2: Robert Smith at Radio Smith wherever you do that kind 769 00:45:09,640 --> 00:45:11,360 Speaker 2: of thing. Thanks for listening.