Consent Decree Review Comments Expected to Highlight Divide Between Music Industry, Broadcasters
Music publishers and songwriters will likely part ways with broadcasters in forthcoming comments on the consent decree process due Wednesday, said parties on both sides in interviews last week. The Department of Justice Antitrust Division is reviewing the existing consent decrees for performing rights organizations (PROs) American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music Inc. (BMI) (CD June 5 p9). The consent decrees bar PROs from refusing a license to any organization that requests one, leading to rate negotiations. Broadcasters are reaping the rewards of a consent decree process that unfairly compensates songwriters, said music attorneys. The consent decree process keeps the potential monopoly power of PROs at bay, said broadcasters.
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Broadcasters are probably “pretty eager to see” the consent decrees “stay in place,” said Kevin Goldberg, Fletcher Heald copyright attorney. Goldberg said the rates broadcasters pay could be “much, much higher.” NAB will “recognize the service” consent decrees provide, which are often on the “back foot of these negotiations,” he said. The music industry will want “more flexibility” in what it can negotiate with broadcasters, which would allow it to offer public performance rights or synchronization licensing separately, said Goldberg. ASCAP and BMI have sought reforms to the consent decree process in favor of direct negotiations between music publishers and broadcasters (CD June 10 p12).
"Most” companies that pay for music content and organizations who represent them “will write in favor of maintaining the consent decrees,” said Dina LaPolt of LaPolt Law, an IP and entertainment firm. LaPolt said she’s “sure” that Pandora “loves the consent decrees because they barely have to pay songwriters anything.” She cited the ruling by Judge Denise Cote of U.S. District Court in New York that upheld Pandora’s right to perform all compositions in the ASCAP repertory last year (CD March 17 p11; Sept 19 p20). “Pandora only has to pay 1.85% of its annual revenue to ASCAP, while the service paid 49% of its revenue to record companies for use of master recordings in 2013,” she emailed: “I would expect that both Pandora and NAB would be in favor” of the consent decree “status quo.”
"Pandora is confident” that the DOJ review will “result in renewed awareness of the importance of the ASCAP and BMI consent decrees,” said Public Affairs Director Dave Grimaldi. The “protection” provided by consent decrees is “essential to a thriving music marketplace,” he said. “Recent allegations of anti-competitive behavior carried out by a handful of representatives of the music publishing industry bear witness to the ongoing importance of the ASCAP and BMI consent decrees,” said Gregory Barnes, Digital Media Association general counsel. “Broadcasters and songwriters have a decades-long partnership that has benefited their industries and listeners,” said an NAB spokesman: “The competitive protections afforded by the ASCAP and BMI consent decrees are crucial to the fair and efficient licensing of musical works that is core to this success.”
Abolish or Essential?
Consent decrees are “severely harming songwriters because the PROs cannot obtain fair market value for performance rights licenses,” said LaPolt. “Outright abolition would be the best scenario because the free market would lead to higher payments for songwriters,” she said. “Consent decrees also restrict rightsholders from granting partial rights to PROs,” she said. “Partial grants of rights should be allowed so that songwriters can directly negotiate with third parties where necessary to obtain the full value of their works,” said LaPolt. “If the consent decrees are not modified, major publishers representing a large portion of the works administered by the PROs might withdraw from the PROs entirely,” she said. It would lead to higher payments for songwriters using the publishers and be “bad” for music licensing because PROs have “administrative benefits,” she said.
The ASCAP and BMI consent decrees are “essential” to “limit the ability of the PROs to fully exert their monopoly power” over broadcasters, said the Radio Music License Committee and the Television Music License Committee in draft comments to the DOJ. “Collective licensing of the type engaged in by the PROs indisputably implicates the exercise of significant market power that can have anticompetitive consequences, most notably by eliminating competition among otherwise competing composers and music publishers for performances of their works.” The consent decrees “bar ‘gun to the head’ licensing tactics by requiring ASCAP and BMI to issue licenses to broadcasters on request,” said the draft. “The rate courts have interpreted this ‘reasonable’ fee standard as requiring them to set rates that most closely resemble those that would emerge in a competitive marketplace.”
There could be a “constitutional question” about a 73-year open docket for individuals that haven’t “yet engaged in the behavior in which the decree was supposed to regulate,” said music industry attorney Chris Castle, who represents artists and musicians and has worked with digital music services. “When does a consent degree become a writ of attainder?” Castle suggested that rate disputes should be brought before any federal court, rather than specially appointed judges, but said abolishing the consent decrees would be “pretty extreme.”
The “decrees are totally outdated and probably should be eliminated,” said Jonathan David Neal, ScoreSmith Productions CEO and composer. They “really restrict a fair market value for composers, songwriters and publishers,” he said, saying he would “prefer free market negotiations and solutions.” The consent decrees for ASCAP and BMI “keeps rates artificially low,” said Neal. There should also be “changes” made to “copyright laws to protect the music creators” and copyright holders, he said, citing compulsory licenses as such an issue.