DOJ Makes Smart Decision On Music Licensing… Music Publishers Completely Lose Their Shit
from the calm-down-people dept
For the past couple of years now, the Justice Department has been exploring the so-called “consent decree” around music publishing. This was an agreement, first made in 1941, and then reviewed in 2001, on how music performing rights organizations (mainly ASCAP and BMI) could operate without violating antitrust rules. Without such consent decrees, there was a quite reasonable fear that the performing rights organizations (PROs) would abuse their monopoly positions. This is not a theoretical argument. If you look around the globe, there are many, many, many, many, many stories of these organizations behaving badly.
In this case, ASCAP and BMI had been whining that because of those darn internet companies not paying enough, they need to get rid of the consent decree, mainly so that they can do more to jack up rates (there’s more to it, but the end result is they want to be able to withhold rights to force rates up). Of course, in opening up this can of worms, they also got the DOJ to start looking more closely at other practices, including an exploration into so-called split works or “fractional licensing.” The details here can get confusing, but in short: when a work has multiple copyright holders, many have argued that you need to get a license and/or approval from every copyright holder. But if you look at the legislative history of the 1976 Copyright Act, legislators made it clear that under the act, they intended to make it clear that any copyright holder in a work with multiple authors had the right to license the whole work.
And now… the DOJ has agreed. It issued an announcement with two key points: it would not take away the consent decree and it said that the law requires “full work” licenses, meaning a single copyright holder can grant a license for the entire work. This is a good thing. It’s a very good thing. The DOJ’s explanation for this is pretty straightforward:
In the end, the Division concluded that only full-work licenses could fulfill the purpose and meaning of the requirement in the consent decrees that ASCAP and BMI offer blanket licenses that provide users the ability to play all the songs in the PROs? repertories. Importantly, this does not mean that ASCAP and BMI are required to provide a full-work license to a work when their members cannot grant them the ability to offer such a license. That is, we do not suggest an interpretation of the blanket license that is inconsistent with the Copyright Act. Rather, if the members of ASCAP or BMI are unable to grant to their PRO the rights to license their works on a full-work basis, those works are ineligible for licensing by ASCAP or BMI.
Both sides in this debate pointed to past practices they believed supported their view of whether ASCAP and BMI licenses were full-work or fractional. We think the evidence favors the full-work side. Our determination begins with the language of the consent decrees themselves, which unambiguously require ASCAP and BMI to offer licenses to all works or compositions in their repertories, and not to interests in works. For example, in the case of ASCAP, it must provide a license to perform ?all of the works in the ASCAP repertory.?
Our view is also based on what is required for all participants in the industry to enjoy the substantial procompetitive benefits of the PROs? blanket licenses ? benefits that differentiate the PROs from joint price-setting entities that often present significant problems under the antitrust laws. The Supreme Court described blanket licenses in the BMI case as providing ?unplanned, rapid, and indemnified access? to the songs in the PROs repertories. Fractional licenses would not offer the benefits the Supreme Court described.
A full-work blanket license from ASCAP or BMI allows the music user to publicly perform, without risk of copyright infringement liability, all works in the licensing PRO?s repertory. Particularly for music users ? such as bars and restaurants ? that cannot meaningfully control in advance the music they play in public, this feature of the PROs? licenses benefits both the licensees as well as music creators in that it ensures that users can and will continue to play the creators? music.
Fractional licensing would not offer the same benefits to users. If a PRO?s license granted a user something less than a license to play a particular song, music users seeking to avoid infringement liability would face the daunting task of identifying and ensuring they obtained licenses from all fractional owners ? a challenge made more difficult by the lack of a comprehensive, reliable, and transparent catalog of rights. Under those conditions, even music users with control over the music they perform would have to curtail their performance of music until they were certain they had obtained licenses from all fractional owners. As BMI itself argued in a recent rate-court filing, a BMI license grants to a music user ?insurance against copyright infringement . . . and immediate access to more than 10.5 million works in BMI?s repertoire.? A fractional license could not provide these benefits.
A lot of this was rumored a month or so ago, and a bunch of songwriters and publishers freaked out about it. They shouldn’t be freaking out about it. This is actually good for them. Back when the expected result was leaked to the press, even Digital Music News, which frequently sides with the legacy industry, said directly that the songwriters’ freak out was wrong and that this was a good thing for the music world — and also notes that this could help finally create the holy grail in the music industry of a single database of published songs.
This should also help create more useful services that will get consumers to use authorized music sources, rather than unauthorized ones. As we’ve covered, ASCAP played some ridiculous tricks on music services like Pandora, and got slammed for it. But with full work licensing, such gaming will be even less possible, creating more openings for new music services to thrive.
Of course, the PROs, ASCAP and BMI, immediately lost their shit over this announcement and promised to fight back. BMI also announced that it will go to court to try to overturn this decision, while ASCAP has decided to focus on getting Congress to fix it through the legislative route (there’s a reason for this bifurcated approach: in the cases involving both organizations, both BMI and ASCAP recognize that BMI has a judge that seems more willing to accept BMI’s version of the story, whereas ASCAP’s slimy behavior was so egregious that the judge covering its case actually understands the issues at play).
The end result, though, is the same old story: ASCAP and BMI want to abuse their monopoly position to try to jack up rates. Meanwhile, by not allowing that to happen, most songwriters will actually be better off, allowing more useful services to thrive, creating more opportunities for revenue. It’s kind of insane that we have to point this out over and over again, but the legacy industry always fights against new innovations in the false belief that it will harm revenue — yet when they learn how to embrace the opportunities, it turns out that a larger audience has been created and there are even more ways to make money. But ASCAP and BMI, like the RIAA on the recording side, are so focused on controlling their turf rather than seeing the big picture that they miss this entirely.