Opening Pandora’s Black Box: A Coasian 1937 View of Performance Rights Organizations in 2014


This article applies Ronald Coase’s analysis from his 1937 article on the Nature of the Firm to analyze the large music publishers’ recent decisions to withdraw “new media” digital rights to publicly perform musical compositions from the performing rights organizations ASCAP and BMI. The analysis examines how these publishers’ costs and benefits of using ASCAP and BMI have changed over time from technology and from the constraining effects of the 1941 antitrust decrees that govern ASCAP and BMI. Taking the effects of these changes into account, the music publishers’ decisions to use direct market transactions, despite substantial transactions costs savings associated with use of the performing rights organizations, is consistent with the broader comparative and dynamic analysis of the marginal costs and benefits of using these organizations contemplated by Coase in his 1937 paper.