ascap antitrust consent decree

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In the last few weeks, the press has been buzzing with speculation that the Department of Justice is moving toward suggesting changes in the antitrust consent decrees that govern the operations of ASCAP and BMI.  Those consent decrees, which have been in place since the 1940s, among other things require that these Performing Rights Organizations treat all songwriters alike in distributions based on how often their songs are played, and that they treat all services alike with users that provide the same kind of service all paying the same rate structure.  Rates are also reviewed by a court with oversight over the decrees when the PROs and music services cannot come to a voluntary agreement to arrive at reasonable rates.  The decrees have also been read to mean that songwriters, once part of the ASCAP or BMI collective, cannot withdraw with respect to certain services and negotiate with those services themselves while still remaining part of the collective with respect to other music users (see, e.g., our articles here and here about the desires of certain publishing companies to withdraw from these PROs to negotiate directly with certain digital services while still remaining in these PROs for licensing broadcasting and retail music users).

With this talk of reform of the consent decrees, Congress, particularly the Senate Judiciary Committee under the leadership of Senator Lindsey Graham, has reportedly stepped in, telling DOJ not to move to change the consent decrees without giving Congress the chance to intervene and devise a replacement system.  In fact, under the recently passed Music Modernization Act, notice to Congress is required before the DOJ acts.  Already, both the PROs and user’s groups are staking out sides.  What are they asking for?
Continue Reading ASCAP and BMI Consent Decrees Under Review – How Performing Rights Organizations, Antitrust Policy and Statutory Licenses Could Create a Controversy

Last week, after passage by both chambers of Congress and signature by the President, the ‘‘Orrin G. Hatch–Bob Goodlatte Music Modernization Act’’ became law. The law underwent a few changes on its journey to approval, adding new provisions in the Senate to those which we summarized here upon its initial passage by the House. The Act retained its same principal purposes. The driving force behind the Act was the desire to simplify the payment of “mechanical royalties” by digital music services for the reproduction and distribution of the millions of musical compositions that they use in the songs that they serve up to more and more consumers across the country. That simplification was accomplished through the creation of a new collective through which these royalties will be paid – essentially a one-stop shop where the statutory royalty will be paid. The collective will have the responsibility for finding the copyright holders and songwriters who share in the royalties – removing the need for the music services to have to identify and pay all of the appropriate rightsholders, a process that has resulted in legal claims for hundreds of millions of dollars against these services for not being able to find all the parties who are supposed to be paid for the mechanical royalties.

The general layout of the system for dealing with the payment of these royalties, through a collective to be established, remains essentially the same as in the initial House Bill. Other provisions were added in the Senate (and then approved again by the House) dealing with matters including pre-1972 sound recordings, Sirius-XM royalties, and the ability of existing music organizations to continue to do direct licenses for mechanical and other rights outside the new statutory system. We may write about those issues later. But the Senate addition likely to have the most significance for the most music users was one having nothing to do with mechanical royalties, but instead with the performance royalty for music works (musical compositions) that is paid by music services, radio stations, bars and restaurants and any other location that plays music that is heard by the public at large. The new language added by the Senate requires that, before the Department of Justice recommends any changes to the consent decrees governing ASCAP and BMI, the DOJ must first notify Congress of any changes that it will be suggesting to the courts that administer the decrees, so that Congress can decide if it wants to take action to block or modify any such changes. Why is that significant?
Continue Reading Music Modernization Act Becomes Law – Mechanical Rights To Become Easier Just As Performance Rights May Become More Difficult

On Friday, the US District Court judge who oversees the administration of the BMI Consent Decree rejected the recent Department of Justice interpretation that the antitrust consent decree required that, when BMI licensed music to music users, that license would embody the full musical work, not just a fractional interest that might be held by the songwriter who was the BMI member. DOJ’s decision stemmed from its review of the ASCAP and BMI antitrust consent decrees, which was initiated by ASCAP and BMI.  While ASCAP and BMI initiated the review looking for certain relief from provisions of the Consent Decrees that govern their operations (see our summary of the initial proposals here), in its decision, which we wrote about here, the DOJ decided that the only clarification of the consent decree that it would put forward was one that required 100% licensing by ASCAP and BMI.  100% licensing means that, if a song was licensed as part of the repertoire of ASCAP or BMI, the licensee would get rights to all of that song, even if there were multiple songwriters some of whom were not affiliated with ASCAP or BMI.  This interpretation was rejected by Judge Stanton, the Judge who oversees the BMI consent decree.  His decision can be found on the BMI website, here.

The Judge’s decision seems to be premised not on the policies and practicalities of licensing by ASCAP and BMI, but instead simply from an interpretation of the language of the BMI consent decree itself.  Moreover, the decision itself does not necessarily conclude that songs to which BMI holds less than a full right will necessarily be excluded from the BMI repertoire, only finding that “[i]f a fractionally-licensed composition is disqualified from inclusion in BMI’ s repertory, it is not for violation of any provision of the Consent Decree.”  The decision basically says that the rights conveyed by the BMI licenses to the songs in its catalog, and even the validity of the rights to even license any song in its repertoire, are not consent decree decisions, but instead decisions that are left to be determined in civil proceedings interpreting property and contract rights.  Seemingly, the Judge’s decision ends up raising more questions than it answers. …
Continue Reading BMI Judge Rejects DOJ Conclusion that Consent Decree Requires 100% of Songs – What Does that Mean for Music Services?

While this summer has perhaps not brought the big headlines in trade press about copyright issues involving broadcasters – particularly in the area of music rights – there still are many issues that are active. I addressed some of those issues in a presentation earlier this month at the Texas Association of Broadcasters Annual Convention. I did my presentation in conjunction with a representative of SoundExchange, where he covered the nuts and bolts of the obligations of broadcasters and webcasters to file royalties for the noninteractive digital performance of sound recordings (e.g. webcasting and Internet radio). While the rates for 2016-2020 are on appeal (see our articles here, here and here), these rates are effective pending appeal and webcasters need to be paying under them. In the Texas presentation, I covered some of the many other copyright issues that are on the horizon, many of which we have written about in the pages of this blog. The slides from my presentation are available here. They provide an outline of many of the pending matters.

The presentation covered the controversy about the Department of Justice decision on the ASCAP and BMI consent decrees, about which I wrote about here. That controversy continues, as the PROs seek judicial or legislative relief from the new DOJ requirement for 100 per cent licensing of split works (see my article for an explanation of what that means). In the interim, the radio industry is negotiating new royalties with both of these organizations, as the current license agreements expire at the end of this year (see our article here).
Continue Reading What’s Up With Music Rights for Broadcasters and Webcasters? – A Presentation on Pending Issues

The DOJ yesterday issued its long-awaited review of the ASCAP and BMI antitrust consent decrees. We wrote about the issues raised by the DOJ in its initial inquiry here. The questions that had been advanced in DOJ’s initial notice included (1) whether to allow music publishers to partially withdraw their catalogs from one of the PROs (Performing Rights Organizations) to negotiate directly with some class of music users (principally a review to determine if certain big publishers could negotiate digital rights directly, while allowing ASCAP or BMI to continue to license less lucrative and more difficult-to-administer music users like bars, restaurants and retail establishments), (2) whether to strengthen the payment and enforcement rights of the PROs (including questions of how services should be paying before rates for a class of user are established, and whether rate courts were appropriate for all disputes over rates), and (3) whether the PROs should be allowed to license more than just the public performance rights (perhaps getting into licensing mechanical rights, as their Canadian counterpart SOCAN and their US competitor SESAC are now doing – see our article here). The DOJ’s report decided to hold off on addressing any of these questions, and instead focused solely on one issue – requiring that the PROs offer full-work licensing on all songs within their catalogs (which the DOJ raised in a second request for comments about which we wrote here).

Already, there has been much angst within the PRO and publishing worlds about this decision, while there has generally been relief among the users of music that there were no fundamental changes in the way that music is licensed through the PROs. But just what are the issues with full-licensing of musical works?

The concept is basically that, when a user pays ASCAP or BMI for the right to use their catalog, the user should get all of the rights they need to publicly perform all of the songs in that catalog. Most users probably already assumed that they were getting all of those rights when they paid the PROs their monthly fees. But the DOJ discovered that there was a basic conceptual question about just what the user was getting when they paid their license fee – and that question could prove even more problematic were the DOJ to agree to some of the requested more fundamental changes in the consent decrees, such as allowing partial withdrawal of catalogs by publishers. The question is whether a user gets all the rights to the songs that are listed in a PRO’s catalog, or merely the “fractional interest” that is owned by the songwriter or publisher who is a member of that PRO.
Continue Reading DOJ Recommends No Changes in ASCAP and BMI Consent Decrees, And Requires Full-Work Licensing – How It Affects Music Users

The legal issues surrounding the use of music in broadcast and digital media is one of those topics that is usually enough to make eyes glaze over.  The importance of understanding these issues is illustrated by this week’s request from the Department of Justice for more information about the rights of songwriters to authorize ASCAP and BMI (often referred to as Performing Rights Organizations or PROs) to license their works to services like radio stations and webcasters when there are multiple songwriters who may not all be members of the same rights organization.  While we try to provide some explanations of some of those issues on this Blog, I wanted to point to a couple of other resources available to address some of these issues and to, hopefully, help make some of those issues understandable.

First, I wanted to note that I’ll be moderating a panel on current music issues at the NAB Radio Show in Atlanta on Thursday afternoon (the panel is described here) featuring representatives of the NAB, RIAA, BMI, Pandora and the Copyright Office.  Hopefully, we’ll be able to unpack some of the motivations and directions of the music royalty debates that are going on in Washington DC.  For those of you not able to make that panel, and even those of you who are planning to attend, a new source of information that provides a very good summary of the many music licensing issues now being considered by Congress and the courts is a report prepared by the Congressional Research Service released last week, available here.  The report explains in relatively simple terms how music licensing works in the United States, and describes many of the current legislative and judicial issues that currently could affect that licensing.  While obviously not addressing all of the subtleties of the arguments of all of the parties to these proceedings, the report does at least give a relatively neutral summary of the arguments of the parties.
Continue Reading Understanding Music Royalties – Congressional Research Service Releases Summary of the Law, While DOJ Asks for More Comments on ASCAP and BMI Consent Decree Reform

Press reports indicate that the Department of Justice is nearing the completion of its study of whether to suggest the revision of the antitrust consent decrees that have bound ASCAP and BMI for over a half century (see our summary of the issues that DOJ is considering here). Much of the impetus behind this review comes from claims from songwriters and their associated publishing companies that they simply are not receiving enough money from digital music services. In the music industry trade press, one can barely go a day without seeing some article about a songwriter whose song was played a million times on a digital music service like Pandora or Spotify, with the artist only receiving some relatively small amount of royalty revenue from that seemingly large number of plays. In looking at this question, I think that there are a number of issues that are misunderstood – perhaps the greatest being the meaning of big numbers – what is really meant when a song is played a million times by a digital music service. I’ve moderated two panels in the last month where royalty experts debated royalties generally and this topic specifically, and I will be moderating another at the RAIN Summit West in Las Vegas on Sunday. Before that discussion, and for those who won’t be at the RAIN Conference, I thought that it would be worth exploring some of this confusion about this issue here.

Last month, the Senate Judiciary Committee’s Antitrust Subcommittee held a hearing on the DOJ’s review of the antitrust consent decrees (video of the hearing, and written witness statements, are available here). During the course of the hearing, a songwriter representative, when asked by a Senator about the alleged impact of digital royalties on the songwriting community, made the assertion that when his song was played a million times on terrestrial radio, he could pay his bills, but when that song was played a million times on a digital service, he received only a few hundred dollars. While this kind of claim is made every day by songwriter representatives, and has contributed to the examination of music royalties being conducted by Congress (see our articles here and here), the Department of Justice and the Copyright Office (see our article here), in many ways, these claims seem to evidence a fundamental misunderstanding of the nature of digital services. It is truly a comparison of apples and oranges (or maybe apples and watermelons might be more appropriate) that has distorted the conversation about royalties. The claim was challenged at the Judiciary Committee hearing by a representative of Pandora, who pointed out that the million people reached by the million spins of a record on Pandora is the equivalent audience reached by something like 16 spins on a New York radio station. I thought that this exchange was crucial to the understanding of the issues involved in the examination of changes to the ASCAP and BMI royalty structure, yet I saw little or no coverage of the issue in press reports after the hearing.
Continue Reading How Misunderstandings about Big Numbers Distort the Debate over Songwriter Digital Music Royalties – As the DOJ Readies its Recommendations for Reform of the ASCAP and BMI Consent Decrees

The Songwriter’s Equity Act has once again been introduced in Congress (see our article about that Act when it was introduced in the last Congress). It proposes to make changes in provisions of the Copyright Act governing the way that songwriters are paid for the use of their musical compositions – with the obvious intent of raising the songwriters’ compensation. This legislative proposal is one reflection of the complaints by songwriters that they are not sufficiently compensated for the use of their music. It is interesting that this bill was introduced during the same week that ASCAP announced its first year of billion dollar collection for songwriter’s public performance royalties, and at the same time that the Senate explores more comprehensive changes to the antitrust consent decrees that govern ASCAP and BMI through a hearing held last week, with the Department of Justice review of these decrees expected in the not too distant future (see our article here).

The Act makes seemingly small changes in legislation, but those changes could have a significant impact on how rates paid to songwriters are computed. The first change proposed is to allow the rates set for the public performance of sound recordings (those royalties that digital music services pay to SoundExchange for the public performance of sound recordings – the actual recordings of songs as opposed to the performance of musical compositions for which ASCAP, BMI and SESAC pay songwriters) to be used as evidence by the judges setting rates for the public performance of musical compositions. That has been prohibited under current law. It is interesting to note that, under Copyright Royalty Board precedent, the Copyright Royalty Judges have in the past determined that the rates paid by music services for the public performance of musical compositions are not a precedent for the public performance of sound recordings, as they are different rights that are not necessarily of the same value. Yet this legislation seems to assume that the royalties for sound recordings are in fact instructive as to what those rates should be for public performances. While seemingly acknowledging the relevance, the legislation does not allow the reverse – stating that the legislation should not be seen as having any effect on the precedent already established by the CRB for the rates for the public performance of sound recordings, so that the rates for sound recordings should not be affected by this legislation.
Continue Reading Songwriter’s Equity Act Reintroduced – What Does It Propose?

The Copyright Office this past week released its Report following its study of music licensing in the US; a comprehensive report addressing a number of very controversial issues concerning music rights and royalties.  Whether its release during the week of the Grammy Awards was a coincidence or not, the report itself, which takes positions on many issues, is sure to initiate lots of discussion and controversy of its own.  The report was issued after two rounds of comments (the questions that were asked in each request for comments are detailed in our stories here and here) and three roundtables held in three different cities where representatives of music companies provided ideas on the questions asked (I participated in the Nashville session).  As detailed below, the report addresses some of the hot button issues in the music royalty space including the broadcast performance royalty, publisher withdrawals from ASCAP and BMI (see our article here), and pre-1972 sound recordings.

Before getting into the details of the proposals, it is important to note that the Copyright Office, unlike many other government agencies, does not itself make substantive rules.  Instead, it merely makes recommendations.  For any of the substantive proposals that it suggests in the Report to become law, Congress must act – which is never easy.  In the Copyright world, it is particularly difficult, as the rules and industry practices are so complex and often obscure, and where any change can have a very dramatic effect on some industry player or another.  Often, a simple change in the rules can take money from someone’s pocket and deposit into someone else’s.  Moreover, copyright is not an area where there are clear partisan divides.  Oftentimes, it matters more where a Congressman’s home district is than his or her party affiliation in their leanings on copyright matters.
Continue Reading Copyright Office Issues its Report on Music Licensing – Issues Include Broadcast Performance Royalties, Publisher Withdrawals from ASCAP and BMI, and Pre-1972 Sound Recordings

Last month, we wrote about the FCC issues facing broadcasters in 2015.  Today, we’ll look at decisions that may come in other venues that could affect broadcasters and media companies in the remaining 11 months of 2015.  There are many actions in courts, at government agencies and in Congress that could change law or policy and affect operations of media companies in some way.  These include not just changes in communications policies directly, but also changes in copyright and other laws that could have a significant impact on the operations of all sorts of companies operating in the media world.

Starting with FCC issues in the courts, there are two significant proceedings that could affect FCC issues. First, there is the appeal of the FCC’s order setting the rules for the incentive auction.  Both Sinclair and the NAB have filed appeals that have been consolidated into a single proceeding, and briefing on the appeals has been completed, with oral arguments to follow in March.  The appeals challenge both the computation of allowable interference after the auction and more fundamental issues as to whether an auction is even permissible when there is only one station in a market looking to give up their channel.     The Court has agreed to expedite the appeal so as to not unduly delay the auction, so we should see a decision by mid-year that could tell us whether or not the incentive auction will take place on time in early 2016.
Continue Reading What Washington Has in Store for Broadcasters and Digital Media Companies in 2015 – Part 2 – Court Cases, Congressional Communications and Copyright Reform, and Other Issues