Last year the US Department of Justice (DOJ) announced that it was opening a review of antitrust consent decrees that govern the activities of two major US performing rights organizations (PROs): the American Society of Composers and Publishers (ASCAP) and Broadcast Music Inc. (BMI). The organizations administer public performance rights and collect royalties on behalf of over 90% of US songwriters and music publishers. As natural monopolies who possess enormous bargaining power through controlling the rights over the vast majority of the US music works, both PROs have been subject to antitrust lawsuits. As a result, since 1941 ASCAP and BMI have been governed by antitrust consent decrees, which limit their licensing practices in a number of important ways. For example, both PROs must grant blanket public performance licences over their entire repertoires to any user who asks for one. If a user and a PRO are unable to come to an agreement on a licence fee, the decrees specify that a reasonable rate should be set by a “rate court”. In addition, the PROs are prohibited from discriminating against similarly situated users. This provision, recently interpreted by the US courts as requiring publishers to either use PROs for administering their public performing rights for all purposes or for none at all,[1] is one of the main reasons behind the present review.
The recent unprecedented growth in the revenues of digital media services has prompted major music publishers, such as Sony, Universal and EMI, to consider licensing digital services directly, while leaving the traditional forms of music exploitation to be administered by PROs. Being free from extra regulations that come with collective licensing would strengthen the bargaining position of the publishers and would allow them to negotiate higher royalties with digital music platforms. The publishers are now warning that if the consent decrees are not modified to allow them to partially withdraw their rights, they would leave ASCAP and BMI altogether. This is a cause for concern for PROs, as complete resignation by major publishers could undermine the viability of the entire US collective licensing regime.
As part of the present DOJ review, over 240 organizations and individuals have submitted public comments in relation to potential modifications to the consent decrees. Predictably, the partial rights withdrawal option is strongly supported by PROs and major publishers. However, it is met with vocal opposition from numerous other parties. Music users, such as Netflix and Pandora, argue that allowing major publishers to licence rights directly would result in hold-ups, where music users would be forced to choose between paying higher rates, not being able to play the vast majority of popular music held in major publishers’ repertoires, or face the threat of copyright infringement liability.
Songwriters and independent music publishers argue that allowing partial rights withdrawals and direct licensing by publishers would result in loss of transparency, legal recourse and stronger bargaining position they enjoy under the PRO licensing structure. In addition, authors argue that while under PRO administration all royalties are split 50/50 between writers and publishers, it is questionable whether writers would continue receiving fair compensation once publishers start collecting the writers’ share under direct licences.
In general, most parties, except for the PROs and the major publishers, are of the opinion that the consent decrees are needed today more than ever to counteract the increased market concentration and the power imbalance in the music publishing industry.
Although it cannot be predicted with certainty what the DOJ’s final decision would look like, it has been reported that the department has expressed preference for allowing partial rights withdrawals. It is also unclear when the review will be completed. The DOJ issued a new request for public comments, now in relation to PRO licensing of jointly owned works, with the deadline of November 20th. Once the review is completed, the proposed modifications to the decrees would have to be approved by the same ASCAP and BMI rate court judges who prohibited partial rights withdrawals by publishers under the current consent decrees. This delay in the completion of the review and the uncertainty as to its outcome is a cause for concern for music creators, rights users and copyright collectives worldwide, who are left guessing what their relationships with ASCAP and BMI will look like in the near future.
Alexandra Grishanova is a JD Candidate at Osgoode Hall Law School and is enrolled in Osgoode’s Intellectual Property Law Intensive Program. As part of the program requirements, students were asked to write a blog on a topic of their choice.
[1] Broadcast Music Inc v Pandora, (2013) 2014 Copr L Dec P 30, 536 (US Dist Ct, S D NY); Pandora Media v American Soc of Composers, Authors and Publishers, (2015) 785 F. 3d 73. (US Ct App, 2d Cir).