Briefings on DOJ's ASCAP/BMI Consent Decrees Decision Seen Needed to Assess Aftereffects
DOJ's final decision on the review of its American Society of Composers, Authors and Publishers and Broadcast Music Inc. consent decrees isn’t available, but initial negative reactions within the music industry to early leaks on a potential decision not to alter the existing decrees could foreshadow serious aftereffects for the two top U.S. performing rights organizations (PROs), stakeholders told us. ASCAP and BMI decried DOJ’s proposed decision on its consent decrees reviews in statements Thursday, days after executives met with Antitrust Division officials. The PROs have been negotiating with Justice since 2014 to alter their consent decrees to partially withdraw digital rights from compulsory licenses. Justice’s potential decision to let stand the current ASCAP and BMI consent decrees is said to be coupled with an update to licensing rules that would allow 100 percent licensing, in which any partial owner of a song would be allowed to fully license that song. A DOJ requirement for 100 percent licensing would end the music industry’s longstanding practice of fractional share licensing.
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ASCAP is “deeply disappointed” by DOJ’s proposed decision, and particularly its proposed end to fractional share licensing, “especially given that thousands of ASCAP members wrote to the DOJ expressing serious concerns” about 100 percent licensing,” said CEO Elizabeth Williams in a letter to members. “This is not the final outcome of this process. ASCAP strongly disagrees with the DOJ's position, and we are carefully considering all of our options, including potential legislative and legal remedies.” BMI is frustrated the DOJ isn’t proposing any change to the consent decrees and pushing forward on 100 percent licensing, “a concept we never raised and one that the marketplace has worked out on its own over the last half-century,” said CEO Mike O’Neill in a statement. “We are surprised that the DOJ feels it needs to restructure a world that is efficient into one that we believe won’t be.” DOJ didn’t comment Friday.
Music industry executives and lobbyists echoed the PROs’ concerns about the DOJ’s proposed decision but said a good assessment of the decision won’t be possible until department officials brief non-PRO stakeholders about the decision. Justice is expected to begin briefing other music licensing stakeholders Tuesday, with a conference call with music licensees set for Wednesday, an industry lobbyist told us. The broad contours of decision likely conform to what ASCAP and BMI have described, but it’s difficult to separate those facts from the PROs’ “spin” on the decision absent official confirmation by DOJ officials, a music industry executive told us. “The devil really is in the details with this decision,” said music industry attorney Chris Castle. “I’ll be very interested to know what exactly is in the DOJ’s decision," he said: "It starts out as being bizarre based on what we’ve already heard, but it could devolve into Kafkaesque insanity depending” on how changes to the licensing rules play out.
A full assessment of the decision also would clarify what -- if any -- legal avenues the PROs and music publishers have to challenge the decision, a music industry executive told us. “Anything less than an actual amendment to the language in the consent decrees will eliminate most of the legal remedies that PROs and the publishers could seek” since leaving the current language in place doesn’t require any signoff by either set of parties, the executive said. “The feedback I’ve gotten is that the DOJ is not expected to” deviate much from its proposed decision, so the next indicator will be whether Antitrust Division head Renata Hesse and the New York “rate court” judges -- District Judges Denise Cote and Louis Stanton -- sign off on the decision, Castle said. If that happens, parties beyond ASCAP and BMI also will have a chance to weigh in on the decision. It’s likely that two other major PROs -- the Society of European Stage Authors and Composers and Global Music Rights -- would be allowed to comment since they would be affected by a move to 100 percent licensing, he said.
If the action turns out to be as bad for songwriters as ASCAP and BMI have indicated, the 100 percent licensing regime could cause major music publishers to withdraw their music catalog rights fully from the PROs and go in another direction for performance licensing, stakeholders told us. Publishers could choose to “do their own performance licensing,” which could cause both ASCAP and BMI to shrink significantly, Castle said. It’s also possible that the publishers could use ASCAP and BMI as “backroom vendors” for performance licensing, though such a relationship would still diminish both PROs’ power, a music industry executive said. Diminished coffers for both ASCAP and BMI could in turn cause problems for independent publishers and songwriters that are forced to stick with the PROs, the executive said.