DOJ review of antitrust consent decrees

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 “performing rights organizations” – ASCAP, BMI and SESAC – don’t get as much attention in these pages as do the royalties paid to SoundExchange for the use of “sound recordings.” The PROs collect for the public performance of the “musical work” or the musical composition – the words and music of a

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?

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 The Summer of Copyright Part 4 – The Department of Justice Reviews the ASCAP and BMI Consent Decrees – What Should Broadcasters and Music Services Know?