Battle Over Consent Decrees Resumes in Round Two of Music Licensing Comments
Whether to repeal or maintain consent decrees loomed large in the second round of music licensing comments filed to the Copyright Office last week (http://1.usa.gov/1tIPlqs). Early copies of the comments, due Friday, were provided by broadcasters and artist attorneys and advocates. Music attorneys foresaw the eventual elimination of Copyright Act Section 115 in favor of direct deals, but the Future of Music Coalition (FMC) doubted whether such deals would be helpful to artists.
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The Justice Department’s 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 more than 230 comments filed by organizations and individuals (http://1.usa.gov/1mNNU5Q) to the decree review fell along the dividing line between those who pay for music and those who create and publish music (CD Aug 15 p6; Aug 11 p15; Aug 7 p9; Aug 6 p7; Aug 4 p12).
Consent decrees “remain essential to the functioning of the market for musical composition performance rights” by providing the “necessary protection against anticompetitive conduct and effects inherent in the collective licensing of musical composition performance rights,” said NAB. Without consent decrees, PROs could “extract supra-competitive pricing for their licenses,” it said. Consent decrees shouldn’t be “amended to allow the PROs to discriminate against certain licensees by allowing music publishers to selectively withdraw their catalogs with respect to some licensees but not others,” said NAB. “Allowing the PROs to facilitate discrimination against licensees would undermine not only the nondiscrimination principle, but also the very purpose of the Consent Decrees: to prevent anti-competitive conduct."
Publisher withdrawal from the PROs is an “imminent threat” if consent decrees aren’t “heavily modified or abolished,” said Dina LaPolt of LaPolt Law, an IP and entertainment firm. Collective licensing by ASCAP and BMI keeps “transactions costs low” and results in “higher royalty payments to their member songwriters,” she said. “Publisher withdrawal risks granting too much power to music publishers, who would control all aspects of musical composition licensing once they take on public performance licenses,” and implicates the concerns of “centralized power that motivated the consent decrees in the first place,” said LaPolt. “Enabling one group to control all licenses is just dangerous, while our current decentralized system offers many benefits.”
Publishers shouldn’t be allowed to withdraw partial licensing rights from PROs, said the Radio Music License Committee (RMLC). “The goal of the proponents of partial withdrawals has been to fashion a licensing scheme whereby licensees would end up paying supra-competitive license fees to all composers and music publishers.” Publishers want partial licensing rights to “circumvent the protections afforded to users by the ASCAP and BMI consent decrees and exploit their market power as against certain licensees without constraint,” said RMLC.
That Section 115 will be repealed seems “inevitable,” but there’s little “trust” among songwriters, music consumers and music publishers that a new licensing system would reward all parties appropriately, said music industry attorney Chris Castle, who represents artists and musicians and has worked with digital music services. Repealing and replacing Section 115 will take a “few years” on both the “legislative” and “implementation” sides, he said. “There is an abiding belief in many sectors of the creative community that the digital retailers are taking advantage of obfuscation and confusion about compulsory licenses to create a ‘hack’ around proper administration and payment.” Castle offered several “short term fixes” for relieving the “palpable distrust of digital music services,” including an audit of licensed sound recordings; an “opt out” for compulsory licenses; and abandoning minimum payments for such licenses, as proposed by the Copyright Office.
The Songwriter Equity Act (SEA) (HR-4079) (CD June 19 p11) would “help” Section 115’s statutory mechanical royalty rate that is “well bellow ... fair market value,” said LaPolt. By seeking a “willing buyer, willing seller standard” for the Copyright Royalty Board’s (CRB) rate setting, SEA “could provide an invaluable safeguard to prevent a reduction of the mechanical royalty rate to the detriment of our artists,” she said. But because SEA “still maintains a compulsory rate-setting process under CRB review, this solution still falls short of the most desirable outcome of free negotiation to determine license rates,” said LaPolt.
There’s a “troubling” trend toward the direct licensing of musical works for public performance, commented FMC. “Songwriters not under contract with the bigger publishers could find themselves in weakened PROs that are less effective in rate-setting negotiations.” Pandora’s licensing agreement with international music rights management company BMG (CD Sept 12 p12) shows that licensing is possible “without the so-called ‘nuclear option’ of full catalog withdrawal,” said the coalition. It said the agreement “raises questions about transparency and leverage for songwriters.”