The Department of Justice (DOJ) announced last week that it will be reviewing both ASCAP and BMI’s consent decrees. The consent decrees, originally entered in 1941, were created to level the playing field and give businesses requesting licenses a competitive edge. When these consent decrees were created, nearly all of American music was controlled by ASCAP and BMI (which still holds true). However, the biggest difference now is their licensees have dramatically changed from the mom and pop shops they once were.
Elizabeth Matthews, Executive VP and General Counsel at ASCAP, explained at the ASCAP Music Expo this past April:
“Today, [our licensees] are multi-billion dollar, publicly traded corporations. They are all lawyered up. We’re talking about the Comcasts of the world. Disney, ABC, NBC, Google. They can take care of themselves.” She continued, “We believe… these consent decrees… are not working anymore. They don’t reflect the realities of how content gets distributed, how music gets consumed and it’s creating a problem throughout the entire music ecosystem.” – Elizabeth Matthews, Executive VP and General Counsel, ASCAP
Under these consent decrees, the moment someone requests a license from ASCAP or BMI, ASCAP or BMI must say yes. Before they can negotiate price.
Matthews used the analogy: “[It's like] if you wanted to buy a house and you couldn’t come to an agreement on the price of the house, you could still move in and redecorate and they can’t kick you out.”
And during negotiations, if the licensee doesn’t like the rate that ASCAP or BMI set, they can take them to ‘rate court.’ This is what happened with Pandora.
In Fall 2012, Pandora took ASCAP to rate court. The current royalty rate that Pandora pays to SoundExchange for the sound recording is about 14 times higher than the royalty rate Pandora pays to ASCAP or BMI for the composition. Under the current consent decree, ASCAP’s lawyers could not cite the sound recording royalty rate to plead their case for higher royalties.
The DOJ has not updated ASCAP’s consent decree since 2001 or BMI’s since 1994. Times have changed quite dramatically since these updates. iTunes, YouTube, Spotify and Pandora have forced the music industry to change the way it does business. However, ASCAP and BMI’s hands are tied to these outdated Consent Decrees.
The Songwriter Equity Act, which seeks to change the law altogether (section 114 of the US Copyright Act which deals with these consent decrees), is making headway in both Congress and the Senate. Representative Tom Marino (R-PA) a strong supporter of the bill, mentioned on April 25th that he believes that they could have a piece of legislation before the end the year. He said that the Judiciary committee is about 1/3 of the way through the evaluation process.
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“The Department understands that ASCAP, BMI and some other firms in the music industry believe that the Consent Decrees need to be modified to account for changes in how music is delivered to and experienced by listeners. The Department’s review will explore whether the Consent Decrees should be modified and, if so, what modifications would be appropriate.” – Department of Justice
The DOJ Requests Public Comments
The DOJ wants to hear from songwriters, composers, publishers, licensees and service providers “relevant to whether the Consent Decrees continue to protect competition.”
Specifically they are looking for comments on the following issues:
- Do the Consent Decrees continue to serve important competitive purposes today? Why or why not? Are there provisions that are no longer necessary to protect competition? Are there provisions that are ineffective in protecting competition?
- What, if any, modifications to the Consent Decrees would enhance competition and efficiency?
- Do differences between the two Consent Decrees adversely affect competition?
- How easy or difficult is it to acquire in a useful format the contents of ASCAP’s or BMI’s repertory? How, if at all, does the current degree of repertory transparency impact competition? Are modifications of the transparency requirements in the Consent Decrees warranted, and if so, why?
- Should the Consent Decrees be modified to allow rights holders to permit ASCAP or BMI to license their performance rights to some music users but not others? If such partial or limited grants of licensing rights to ASCAP and BMI are allowed, should there be limits on how such grants are structured?
- Should the rate-making function currently performed by the rate court be changed to a system of mandatory arbitration? What procedures should be considered to expedite resolution of fee disputes? When should the payment of interim fees begin and how should they be set?
- Should the Consent Decrees be modified to permit rights holders to grant ASCAP and BMI rights in addition to “rights of public performance”?
All comments should be submitted to ASCAP-BMIemail@example.com by August 6, 2014 and will be posted in their entirety for public review.
Ari Herstand is a Los Angeles based singer/songwriter and the creator of the music business advice blog, Ari’s Take. Listen to his new album, Brave Enough, on Spotify or download it on BandCamp. Follow him on Twitter: @aristake