As we wrote in our previous articles on the music licensing issues being considered during this summer of copyright (here, here and here), one of the concerns driving many of the proposed reforms is the current demand of songwriters and publishing companies for a larger share of the music royalty pie. In licensing the public performance of musical compositions, ASCAP and BMI represent the vast majority of songwriters, with SESAC representing far fewer writers (together ASCAP, BMI and SESAC are referred to as the “PROs,” the performing rights organizations). ASCAP and BMI, having such a significant representation of musical compositions, have for over 50 years been subject to antitrust Consent Decrees that limit their operations and oversee the rates that they set for the use of their music. Among the many requirements under the consent decree are those that obligate ASCAP and BMI to license all users of music who are similarly situated under the same rates and standards, and the oversight of a “rate court” to determine whether rates are reasonable whenever either of the PROs can’t agree on the amount of those rates with a class of music users. In June, the US Department of Justice asked for public comment on several aspects of the consent decrees, and whether modifications of the decrees were called for. Comments on the DOJ notice are due today. Why was this proceeding started, and what is the DOJ looking at?
In two recent hearings examining music licensing, the motivations for ASCAP and BMI to seek changes in the consent decrees were discussed. The first proceeding was a Copyright Office roundtable held in Nashville in June, in which I was a participant. There, representatives of ASCAP discussed potential changes to the laws dealing with music licensing. The second was at the two part House Judiciary Committee hearing on music licensing held in late June. ASCAP and BMI representatives in these forums suggested that there were several objectives in their seeking these reforms, and several specific changes that were requested in the Consent Decrees. These include the following:
- Replacing the rate court judges who determine rates when ASCAP or BMI don’t reach an agreement with a company that uses music (currently US Federal District Court Judges in the Southern District of NY) with an arbitration panel.
- Instead of setting “reasonable rates” as required under the current consent decrees, the PROs request that a new standard be used to set rates – the willing buyer willing seller standard currently used in setting Internet radio sound recording performance royalty rates.
- Allow publishers to withdraw some of their compositions from the PROs for licensing to certain classes of companies – specifically to withdraw so that the publishers can negotiate with digital media companies at rates that are not overseen by a rate court, while still leaving those same compositions with the PROs to collect from business establishment services (retail businesses that use “background” music) and potentially over the air radio stations – companies where there are lots of licensees who pay small amounts, making it difficult for anyone but a large, well-established company like ASCAP or BMI to pursue
- Allow ASCAP and BMI to do more than simply license the public performance rights to music services – most likely allow them to provide reproduction and synch rights to the music that they license.
- To impose interim royalties on any service that asks to be licensed, until an appropriate rate for that service can be set
What prompted this desire to change the consent decrees, and what will the DOJ be doing with the information it collects? Continue Reading