Monday, August 8, 2016

Music industry plans fight back as DoJ confirms consent decree conclusion

Written by Chris Cooke — America’s Department Of Justice has confirmed that it doesn’t see any need to reform the consent decrees that govern collective licensing in the US, but that – under its reading of the current rules – collecting societies BMI and ASCAP should start doing 100% licensing. The music industry’s official response to all this? “Fuck the fuck off”. Well, I’m para-phrasing slightly. But only very slightly.

As much previously reported, it was the music publishers which wanted the rules regulating the collective licensing of song rights Stateside to be reformed. There were various proposed reforms on the agenda, but a key priority was partial withdrawal, which would allow music publishers to license radio, bars, cafes and venues through their collecting societies BMI and ASCAP, but at the same time force digital services like Pandora into doing direct deals with each music publisher separately. That isn’t currently possible under the consent decrees.

But the DoJ – which oversees the consent decrees – hasn’t been persuaded by the arguments for reform. Instead it has focused on the 100% licensing point. Because songs are often co-written, they are also often co-owned. And because in the US songwriters must choose which collecting society they want to represent their performing rights – BMI, ASCAP or the smaller SESAC or GMR – that often means multiple societies represent the same song, each specifically controlling a different slice of the same copyright.

In most countries, where you have co-owned works a licensee must do separate deals with each individual owner, in a process that is sometimes called fractional licensing. Though in the US, with direct licensing, in theory any one co-owner can do a deal on behalf of all the other co-owners without actually consulting them, providing they share any income. This is called 100% licensing.

But agreements between co-owners often stop 100% licensing from happening even in direct dealing. And in collective licensing, as far as the publishers and songwriters are concerned, it has always been the case that – if BMI and ASCAP each own half a song – then you need licences from both to legally make use of that work.

But not so says the DoJ. “As our investigation proceeded” said the government agency yesterday, “we discovered that there was significant disagreement in the industry about what rights must be conveyed by the blanket licenses that the consent decrees require ASCAP and BMI to offer”

Putting both sides of the argument, it continued: “Some argued that, in order to effectuate the purpose of the consent decrees, the blanket license must grant licensees 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”.

But, crucially, the DoJ concluded that “we think the evidence favours the full-work side”. Which means that, in theory, BMI and ASCAP should now start to evolve their operations to be able to deal with the delivery of 100% licensing, while the smaller societies – which are not governed by the consent decrees – nevertheless need to work out what portion of their catalogue could now be licensed by their bigger rivals through a 100% license.

But the US music community, which has been hitting out at these proposals ever since BMI and ASCAP were briefed about what the DoJ had concluded back in June, isn’t planning on giving way on this point without a fight. The two societies have announced that they plan to work together in a bid to block 100% licensing and to continue to push for regulatory reform. BMI will do this by fighting the DoJ through the courts, while ASCAP will focus on lobbying Washington, noting the department’s own conclusion that new legislation might be better equipped to regulate music licensing than the old fashion consent decrees.

In a joint statement yesterday, BMI and ASCAP said: “United in their belief that the DoJ’s decision to mandate 100% licensing will cause unnecessary chaos in the marketplace and place unfair financial burdens and creative constraints on songwriters and composers, the two organisations are pursuing a joint campaign: BMI through litigation and ASCAP through legislative reform”.

They added: “BMI today announced it is taking legal action and has initiated the process to challenge 100% licensing in federal court. Concurrently, ASCAP announced that it will take the lead for the two PROs in pursuing a legislative solution to ensure the continued availability of fractional licensing as well as other remedies to the outdated consent decree regulations that disadvantage songwriters and composers in the digital age. In its recent public statement, the DoJ itself called for potential legislative relief”.

Commenting further, BMI CEO Mike O’Neill added: “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”.

He went on: “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. 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”.

Meanwhile, ASCAP boss Elizabeth Matthews added: “The DoJ decision puts the US 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”.

It remains to be seen what response the two societies now get, in both the courts and Congress. Efforts at copyright law reform in the latter could also seek to evolve the US compulsory licences that have created issues in the digital domain in recent years, which would be a sensible move. Though any significant legislative reform is going to be time consuming, even without the strong tech and broadcast lobbies in Washington who will almost certainly oppose many of the music industry’s proposals.

In the meantime, here are people commenting on the DoJ’s decision – on both 100% licensing and other reforms – from both sides of the debate…

Marty Bandier, boss of the world’s biggest music publisher Sony/ATV: “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 US 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 modernising 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”.

Gadi Oron, Director General of the global body for collecting societies, CISAC: “The global community of creators and societies represented by CISAC is bemused and extremely worried by the consequences of the decisions made by the Department Of Justice. These decisions have been made without taking into account the interests of creators and with total disregard for the international legal framework that authors’ societies operate within. ASCAP and BMI have decided to jointly challenge these decisions. We fully support and stand by their actions. We hope that their actions will lead to a fairer US licensing system that would work for all stakeholders”.

Michael Beckerman, boss of the tech lobby repping Internet Association: “The internet industry applauds the DoJ’s decision regarding the ASCAP and BMI consent decrees. Competitive dynamics in the music licensing industry are more problematic today than when the consents were first put into place, making the case for the consents stronger than ever before. ASCAP and BMI’s market power is at an all time high and should not be left unfettered. The legal certainty and the careful guidance provided by DoJ maps out helpful rules of the road regarding access to creative works. This is particularly relevant for music delivered through the internet, which must be afforded fair and equal treatment by all actors in the digital music ecosystem. We are pleased that the DoJ Antitrust Division agrees with our position and we commend its common sense decision”.

The MIC Coalition, which brings together various groups of music licensees, including broadcasters, net firms, and bar and restaurant chains: “The MIC Coalition applauds the Department Of Justice Antitrust Division for completing a thorough, multi-year review of the longstanding voluntary consent decrees governing ASCAP and BMI after consideration of extensive input from music publishers, music users and the PROs themselves. The decision to maintain current protections against anti-competitive behaviour ensures that even though ASCAP and BMI control more than 90% of the US music marketplace, music licensees can continue to access music under a system that fairly compensates music creators for their work”.

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