DOJ Cites Music Industry’s Data Problem in Rejecting Changes to ASCAP, BMI Consent Decrees

577cc1d010909-imageThe U.S. Justice Department’s antitrust division formally closed its revue of the ASCAP and BMI consent decrees Thursday, issuing a lengthy statement spelling out why it decided not to make any changes to the decrees, at least for now, and why it now reads those decrees to require 100 percent licensing by the PROs of any works in their repertories even if they don’t represent 100 percent of the owners of those works.

The DOJ’s position was, to put it mildly, not universally popular within the music industry.

BMI immediately vowed legal action challenging the 100 percent requirement and sent a letter to the U.S. District Court overseeing its consent decree asking for a pre-motion conference.

David Israelite, president of the National Music Publishers Association (NMPA), appeared on the verge of a stroke.

“After a two year review of the consent decrees that govern ASCAP and BMI, career lawyers who were never elected nor confirmed to their positions, led by a lawyer who previously represented Google, determined that songwriters should have even fewer rights, less control over their intellectual property and be treated more unfairly than they already are,” he fumed in a statement. “Washington bureaucrats should not be in the business of regulating music as they are neither capable of understanding or fixing the problems they’ve created. We are hopeful that through the legal process, conversations with those in Congress who understand copyright law, and ultimately the voices of those most affected, the creators themselves, we can find a path forward.”

(Pro tip: Anytime you’re ranting about unelected Washington bureaucrats, you’re losing.)

Beneath all the noise, though, was this interesting digression into the absence of reliable and comprehensive data on the ownership of musical works and the way that absence relates to the consent decrees:

Modifying the consent decrees to permit fractional licensing would undermine the traditional role of the ASCAP and BMI licenses in providing protection from unintended copyright infringement liability and immediate access to the works in the organizations’ repertories, which the Division and the courts have viewed as key pro-competitive benefits of the PROs preserved by the consent decrees.

Allowing fractional licensing would also impair the functioning of the market for public performance licensing and potentially reduce the playing of music. If ASCAP and BMI were permitted to offer fractional licenses, music users seeking to avoid potential infringement liability would need to meticulously track song ownership before playing music. As the experience of ASCAP and BMI themselves shows, this would be no easy task. Today, in the context of compensating song owners, ASCAP, BMI, and other PROs must track and rely on song ownership information they possess to determine to whom to distribute funds collected from music users. But even with their years of experience in finding and compensating song owners and their established relationships with music creators, the PROs often do not make distributions until weeks or months after a song is played, and even then do so imperfectly…

The problems inherent in allowing ASCAP and BMI to engage in fractional licensing would be exacerbated by the absence of a reliable source of data on song ownership to which music users could turn to identify whether they possess rights to perform a song or from whom they could seek a license. The Division’s investigation uncovered that no such authoritative information source exists today, even for existing works, and, further, that songwriting credits for new releases may not be fully established until after the songs have been released. If music users cannot rely on ASCAP and BMI blanket licenses to avoid infringement exposure, they are likely to avoid playing songs – including new releases – that they are not confident they possess the right to perform. Nor are music users positioned to lead the creation of a comprehensive and reliable database of song ownership information. To the extent such a database could be created, songwriters, music publishers, and PROs have much greater access to the information necessary to do so.

ASCAP and BMI, of course, engage in fractional licensing today, or at least pretend to. Music users deal with the problem by getting licenses from both (along with SESAC) and letting the PROs sort out the splits among themselves.

The fees those licensees pay to each PRO are based on the PROs’ respective shares of the total repertoire they collectively represent, which may or may not bear any resemblance to their actual usage of particular songs or particular catalogs.

It’s a rough-and-ready system the industry has functioned under for decades. But it has the effect of discouraging innovation in the licensing of performance rights because because payment by market share would likely wash out the impact of any innovation.

What the DOJ has done, in effect, is to call the music publishers’ bluff: If you want to engage in fractional licensing you need to put in place the means by which a potential user could practically engage in fractional payments, such as by providing a comprehensive database of who is owed how much for what. But if you want to continue being paid based on market share, you can’t continue to pretend you’re selling fractional licenses.

Something tells me that won’t be the last word on the matter, though.

— Sweeting


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