‘Interim’ Licenses Could Cost YouTube Music Billions…

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The following comes from music industry attorney Steve Gordon, whose career experience includes Sony Music in-house counsel.  Gordon’s upcoming book, The Future of the Music Business: Fourth Edition, will be released in May.

As I previously reported, Irving Azoff is now threatening to sue YouTube in what his lawyer says could be a “billion” dollar lawsuit.  Azoff is trying to create the fourth US performing rights organization (PRO) and has demanded that YouTube take down 20,000 songs in which he claims his company, Global Music Rights (GMR), controls exclusive public performance rights.  But as I pointed out in my prior article, because of restrictions in ASCAP and BMI’s deals with their writers and in their membership rules, it is subject to question whether GMR has the rights that Azoff claims it has.

However, new information has come to light that makes it seem much more likely that Azoff can indeed enforce his threats. That’s because, according to knowledgeable sources, the existing licenses with ASCAP and BMI may be “interim” and not final licenses.

Under the Consent Decrees governing ASCAP and BMI, music users are authorized to perform any of the songs in the ASCAP and BMI repertories, upon their request for a license and pending the negotiation of a final license agreement (also referred to as a “license-in-effect”) or a determination of a reasonable fee by the respective “Rate Courts.”  Such temporary license grants are typically referred to as “interim” licenses and are not deemed final or licenses-in-effect.

If GMR acquired rights in some of those 20,000 songs during a time that ASCAP and BMI had only interim licenses with YouTube, it’s possible that YouTube may not rely entirely on its ASCAP and BMI licenses for songs withdrawn by GMR’s writers.


Indeed, it is not unusual for a PRO to have only an interim license with any particular potential licensee.  ASCAP and BMI, in particular, may have financial incentives not to enter into a final license quickly.  That’s because they operate under Consent Decrees, and under those Decrees ASCAP and BMI can enter into protracted negotiations without worrying about whether they will be paid for the period of time that those negotiations continue.  Ultimately, they will be paid retroactively.

And what happens if there’s an impasse?  Under the Consent Decrees, either the PRO or the potential licensee can haul the other into “Rate Court” if they can’t reach an agreement on rates.  At that point a federal judge will determine the rate after the parties’ attorneys present their cases. But when the final license goes into effect, it’s retroactive. That means the licensee has to pay ASCAP or BMI, as the case may be, for any period of time prior to the execution of the final license that the licensee used their music.

That may be the reason, if my sources are correct, that neither ASCAP nor BMI have final licenses with YouTube – they are probably holding out for higher rates than YouTube wants to pay. And they are in no rush to sue YouTube in Rate Court because such a move would cost a fortune in legal fees.

But if ASCAP and BMI only have interim licenses with YouTube, that could be a fatal chink in YouTube’s armor against Azoff’s GMR.


Here’s why: If ASCAP and BMI do not have final licenses in place with YouTube, and Azoff ‘s writers removed their songs from their repertoires, YouTube may not have the authority to play those songs.  The reason is that if there are no pre-existing final licenses or “licenses-in-effect” between ASCAP and BMI on the one hand and YouTube on the other, ASCAP and BMI may not have the right to continue to license those songs to YouTube.

As to songs left parked at ASCAP and BMI, YouTube is not at risk because the interim licenses include those songs.  But in regard to the songs that Azoff’s writers took with them, it seems that GMR could indeed start a humdinger of a lawsuit! Maybe even one that’s worth more than a billion dollars since statutory damages for willful copyright infringement are potentially $150,000 per song.

24 Responses

  1. Willis

    “Cost” is relative to “pay.” If they don’t pay, there is no cost.

    Reply
  2. Chris H

    Like I said previously, Irving doesn’t go into battle like this without a solid upper hand.

    Reply
  3. Rockstream

    Steve, if GMR’s position is this strong, why have they apparently not sent take-down notices? Wouldn’t they need to exhaust this remedy first?

    Reply
    • Paul Resnikoff
      Paul Resnikoff

      The takedown notice is what YouTube requires as part of its elaborate, DMCA-based loophole. I think Azoff is calling bullshit on the entire exercise. One reason is that YouTube can easily identify the tracks, the other is that under Azoff’s argument, they shouldn’t be there in the first place.

      Reply
      • Rockstream

        Paul, launching DMCA disputes by lawyering up is a step backwards. Azoff’s legal threats may help him and his clients but they will not help you and me. As then Secretary of State Henry Kissinger reportedly said when Khomeini-led Iran was at war with Hussein’s Iraq, it’s a pity they can’t both lose.

        Reply
    • Bandit

      Just wondering exactly how many take-down notices does someone have to submit before they have exhausted this “remedy” before filing a lawsuit?

      1, 5, 100, 10,000?

      Reply
  4. Remi Swierczek

    Very complicated, long shot, legal shenanigans with “armored and out of reach spaceship”!

    Dear Mr. Azoff,
    Invest half of the time and half of the cash assigned for your Google sling shot to education of Google monk how to abandon ad sworn around free music and collect 40X more money from direct music monetization.

    Conversion of ALL Radio and ALL streaming to discovery based music store will do just that.
    $100B music industry by 2020! SIMPLE with no single looser in sight!

    Reply
  5. Ricky Gordon

    I’ve got my fishing rod and I’m ‘gon wait patiently for the results. Irving Azoff and his Global Music Rights community know something and believe me, they’re preparing for the bout. I smell victory.

    Reply
    • Anonymous

      To to add my earlier comment: …Steve Gordon, Esq being the auger that he is, has cracked the combination of Azoff’s safe.

      Reply
    • Adam C Smith

      So many of us are counting on it, but even if Azoff succeeds, it won’t end there. More to do, more to do. 😉

      Reply
    • Anonymous

      he’s running a new PRO, artists have so little to do with the thing… Its the writers hes gunning for, artists is such a over used and cliche term, especially within popular music…

      Reply
      • Anonymous

        He sees a situation that is ripe to capitalize on. Everyone knew the tech industry wasn’t going to get away with fleecing musicians forever, so Azoff realized the first guy to go to war would probably reap the greatest reward.

        Reply
  6. Anonymous

    Just keep in mind that the only winner in any deal involving Azoff has been Azoff.

    Reply
  7. MusicTechie

    Thanks for continued coverage of music rights via internet video.
    This is the sort of article I subscribe for.
    Keep it up.
    I may even buy read Steve’s book.

    Reply
  8. Anonymous

    “Under the Consent Decrees governing ASCAP and BMI, music users are authorized to perform any of the songs in the ASCAP and BMI repertories, upon their request for a license and pending the negotiation of a final license agreement ”

    What if artists just stopped registering their songs with the PRO’s?

    Yes, I know it sounds nuts at first. But it seems to me that the core of the problem is this notion that once you register, you completely lose control of your music. Once you register it with a PRO, then anyone and everyone MUST be permitted to play it – even those whose business model hurts you.

    What if artists kept their hard work out of that communist model, and started requiring those who want to make money off playing their intellectual property to deal with them directly. Too complicated? Too many actors? Maybe long ago when there were thousands of local radio stations. Now the majority of “airplay” comes from a small handful of “broadcasters”. These “broadcasters” can set up web pages that allow individual artists to sign up their music and authorize it’s play on their system. If they offer too stupid a rate, they’ll get no decent acts signing up – and the good old reliable free market will accumulate thousands of choices and produce the music market the people and artists “choose”.

    Reply
    • Anonymous

      Alternatively, artists could set up web pages where outlets could sign up to play their music, at the artist’s pre-defined rates – and, same thing – a bunch of free market choices would decide who values what music enough to pay to play it.

      Reply
  9. Mike

    Could this end demand for some, many or all of the 20,000 songs Mr. Azzof and do more damage than good? Sorry, but if a songwriter’s songs aren’t good enough, no lawsuit, settlement or law will make anyone want to listen to them. Don’t count on this changing anything. Count on it making the music business worse.

    Reply

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