The US Department of Justice has officially completed its review of the ASCAP and BMI consent decrees in the US – delivering a hammer blow to publishers and songwriters in the market, and celebratory news for the likes of Pandora.
The DoJ’s final ruling proposes no modifications to the 75-year-old consent decrees.
In what’s being seen as the most damaging result, the DoJ has ruled that both ASCAP and BMI must accept 100% licensing – meaning that if a licensee clears a track with one writer (and/or their PRO), it doesn’t need to bother doing so with his or her co-writers (and/or their PRO).
This upends the long-standing industry practice of fractional licensing in the US – creating logistical and legal challenges for rights-holders.
“We are extremely disappointed by the DoJ’s decision to issue a misguided and unprecedented interpretation of the consent decrees.”
With any chance of convincing the DoJ to change its mind now over, leading figures in the US publishing industry say they are turning their attention to legal lobbying – and Congress.
Sony/ATV CEO and Chairman Martin Bandier (pictured) said in response to today’s decision: “We are extremely disappointed by the DOJ’s decision to issue a misguided and unprecedented interpretation of the consent decrees that is contrary to how they have worked and how the business has operated over many decades.
“Not only does it contradict the views of the U.S. Copyright Office and the entire music industry, but it will bring significant uncertainty and disorder to a marketplace that has worked well for years, while leaving everybody in the licensing process, including songwriters, to try to figure out how 100% licensing might work.
“Instead of modernizing the consent decrees, this decision has created a host of problems that will now have to be addressed by the courts and must be addressed by Congress as well.”
The DoJ’s 22-page decision (which you can download here) offered one sliver of light for publishers, however.
It admits that the consent decrees are “inherently limited in scope” and that “a more comprehensive legislative solution may be possible and preferable”.
The DoJ also notes “the incongruity in the oversight over the licensing of performance rights and other copyrights in compositions and sound recordings” – a reference to the fact that labels and artists are free to negotiate their master rights with streaming services direct.
The DoJ suggests that the “protections provided by the consent decrees could be addressed through a legislative solution that brings performance rights licensing under a similar regulatory umbrella as other rights”.
In response to the DoJ’s decision, ASCAP and BMI are joining forces in a combined lobbying effort.
BMI is taking legal action and has initiated the process to challenge 100% licensing in Federal Court. Concurrently, ASCAP announced that it will pursue a legislative solution to ensure the continued availability of fractional licensing as well as other remedies to the consent decree regulations.
Mike O’Neill, President and CEO of BMI, said, “The DoJ’s interpretation of our consent decree serves no one, not the marketplace, the music publishers, the music users, and most importantly, not our songwriters and composers who now have the government weighing in on their creative and financial decisions.
“Unlike the DoJ, we believe that our consent decree permits fractional licensing, a practice that encourages competition in our industry and fosters creativity and collaboration among music creators, a factor the DoJ completely dismissed.
“The DOJ’s interpretation of our consent decrees serve no-one.”
Mike O’Neill, BMI
“As a result, we have no recourse other than to fight the DOJ’s interpretation in court. It won’t be easy, and we know it will take time, but we believe that it is the right thing to do and in the best interest of the industry at large.”
Elizabeth Matthews, ASCAP CEO, stated: “The DOJ decision puts the U.S. completely out of step with the entire global music marketplace, denies American music creators their rights, and potentially disrupts the flow of music without any benefit to the public.
“That is why ASCAP will work with our allies in Congress, BMI and leaders within the music industry to explore legislative solutions to challenge the DOJ’s 100% licensing decision and enact the modifications that will protect songwriters, composers and the music we all love.”
“The DOJ Decision puts the US completely out of step with the entire global music marketplace.”
Elizabeth matthews, ASCAP
The DoJ wrote in its statement on 100% licensing: “As our investigation proceeded, we discovered that there was significant disagreement in the industry about what rights must be conveyed by the blanket licenses (as well as other categories of licenses) that the consent decrees require ASCAP and BMI to offer.
“Some argued that, in order to effectuate the purpose of the consent decrees, the blanket license must grant licensees (also called ‘users’) the right to publicly perform all songs in the ASCAP and BMI repertories.
“Others believe that the blanket licenses offered by ASCAP and BMI instead confer only rights to the fractional interests in songs owned by ASCAP’s and BMI’s members and that music users must obtain separate licenses to the remaining fractional interests before playing the songs.”
It concluded: “We think the evidence favors the full-work side.”
Some say the blame for the decision must at least partly go on weak music business lobbying efforts.
“This is a classic example of the law of unintended consequences at work,” said one expert to MBW. “ASCAP and BMI bought their own kool-aid and never thought what might happen if they petitioned the DoJ on the consent decree regimes.
“They just thought they might get something on withdrawal. This was a very poor strategic choice in retrospect for the PROs – and a very good one for the lawyers that will litigate this up and down the country for years.”
Here comes one of those lawyers.
Paul Fakler is an entertainment attorney at Arent Fox, who represented a few different types of broadcasters in the DOJ review (terrestrial, cable, and satellite radio).
He told MBW: “After spending over two years investigating the functioning of the ASCAP and BMI antitrust consent decrees at the request of music publishers, the Department of Justice has finally released its formal closing statement for that investigation.
“The statement cogently and persuasively explains why the consent decrees remain vital and crucial to the fair functioning of music performance licensing in the United States. The statement also explains why the DOJ could not find that the various changes requested by the music publishers were in the public interest.
“Finally, and contrary to the steady stream of hyperbolic misrepresentations made in the press by the music publishing industry, the DOJ clearly explains that, based upon its investigation of historical industry practices, the express provisions of the PROs’ own songwriter agreements, as well as legal precedent relating to the consent decrees, those decrees have always required ASCAP and BMI to offer licenses to every whole song in their respective repertories and ASCAP and BMI have always in fact offered such licenses.’
“Without [100% licensing], the PROs would likely be subject to per se antitrust liability for price fixing.”
Paul Fakler, pro-broadcast lawyer
He added: “The statement clearly explains that nothing needs to change based upon the DOJ’s confirmation of the whole licensing requirement, because all commercially significant licensees have always taken license from each of ASCAP, BMI, and SESAC.
“Although all three offer whole work licenses, they have historically charged fees based upon their respective fractional representation, and distributed royalties to songwriters on a fractional basis. There is simply no harm, whatsoever, to songwriters from continuing this practice, which has been in place for decades.
“Moreover, as the DOJ makes clear in the statement, whole work licensing, which is necessary to allow users to make immediate and unplanned use of every song in a PRO’s repertory, is one of the key pro-competitive benefits that the Supreme Court has held to counterbalance the inherently anticompetitive features of collective licensing through the PROs.
“Without it, the PROs would likely be subject to per se antitrust liability for price fixing.”
NMPA President & CEO David Israelite commented: “The Department of Justice (DoJ) has dealt a massive blow to America’s songwriters.
“After a two year review of the consent decrees that govern ASCAP and BMI, career lawyers who were never elected nor confirmed to their positions, led by a lawyer who previously represented Google, determined that songwriters should have even fewer rights, less control over their intellectual property and be treated more unfairly than they already are.
“The Department ignored the voices of copyright experts, members of Congress and thousands of songwriters and delivered a huge gift to tech companies who already benefit from egregiously low rates.
“The DoJ has dealt a massive blow to America’s songwriters.”
David Israelite, NMPA
“The interpretation that the consent decrees demand that all works must be licensed on a 100 percent basis is both unprecedented and disastrous to the songwriting community. The decision represents a misunderstanding of copyright law and directly violates the legal guidance given by the Register of Copyright. The defiance displayed by these career antitrust lawyers in ignoring the legal opinion of the Register of Copyright is shocking.
“Washington bureaucrats should not be in the business of regulating music as they are neither capable of understanding or fixing the problems they’ve created.
“We are hopeful that through the legal process, conversations with those in Congress who understand copyright law, and ultimately the voices of those most affected, the creators themselves, we can find a path forward.”
In a pre-motion letter to Federal Judge Louis Stanton, BMI advised him of a proposed motion to interpret and potentially modify its consent decree.
Specifically, the letter requests the following relief:
Determination that BMI’s consent decree allows for the long-standing industry practice of fractional licensing, or,
Alternatively, an order by the court modifying the decree to allow for fractional licensing;
A reasonable transaction period after a final ruling, if compliance with the DOJ’s interpretation is required.
The full copy of BMI’s pre-motion letter can be found HERE.
