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BMI and ASCAP say “reform our regulation!”, while the radio industry moans about fractional licensing again

By | Published on Wednesday 29 July 2020

LeAnn Rimes and Pharrell Williams yesterday headlined DecreeFest, a two day online extravaganza staged by the funsters at the US Department Of Justice that is entertaining the world by, erm, discussing the intricacies of collecting society regulation and the current review of the BMI and ASCAP consent decrees. Fun times.

The licensors and licensees of songs Stateside lined up to deliver some pretty familiar arguments as to why BMI and ASCAP need to be rigorously regulated on every possible level to ensure the continued existence of human civilisation itself. Or not, depending on which side you’re on.

“Without the framework the current consent decrees provide, a fair competitive market for the licensing of musical works simply would not exist”, said the boss of the National Association Of Broadcasters. Not so, countered the chiefs of BMI and ASCAP, with the former stating that a free market for music rights – cut free from consent decree regulation – “would create a more productive, efficient and level playing field for everyone”.

Collective licensing – where large groups of music-makers and music rightsholders license together through collecting societies – always creates competition law concerns, even though licensees benefit from the approach as much as the music community.

Quite how those concerns are dealt with varies greatly from country to country. Sometimes copyright law adds extra regulation to collective licensing. Sometimes it’s just hoped that general competition law – and the threat of legal action under such laws – will stop collecting societies from abusing any actual or virtual monopolies that they enjoy.

In the US, the two big collecting societies for song rights – the aforementioned BMI and ASCAP – are regulated via the consent decrees, agreements reached with the US Department Of Justice all the way back in the 1940s. This results in some pretty tough regulation of BMI and ASCAP’s operations, even though – unlike in many other countries – there is already more competition in the market place.

Firstly, there are multiple societies all representing the performing rights of songwriters in the US, with smaller organisations like SESAC and GMR as well as BMI and ASCAP. Plus, unlike in most other markets, the societies don’t have any exclusive rights over their members’ work, so licensees can always try to negotiate direct deals with writers and publishers that cut the societies out.

Add to that how much the marketplace for music rights has changed over the last 80 years – and especially the last two decades – and, the US music industry argues, there is an incredibly strong case for having the BMI and ASCAP consent decrees radically overhauled and, eventually, axed altogether.

A failure to reform the regulation, the industry would also argue, has had a major negative impact on the songs business, because the copyrights of songwriters and music publishers are repeatedly undervalued whenever the regulations kick in.

Referencing her society’s negotiations with the new breed of music-using companies – ie the tech giants that are, she added, “smart, savvy, all lawyered up and wildly under regulated” – ASCAP CEO Elizabeth Matthews explained at yesterday’s DoJ hearing: “I have yet to sit in a negotiation with one of these licensees and not feel as though songwriters’ hands were tied behind their backs due to these consent decrees. It’s crazy to think that songwriters are more regulated in 2020 than Facebook”.

Meanwhile, BMI CEO Mike O’Neill stressed how different the music marketplace is today compared to the early 1990s, the last time his society’s consent decree was amended.

“There is more competition in our space than ever before”, he noted. “We compete with other [societies] that are not regulated and are already operating with the benefits of a free market. Publishers are doing more and more direct deals with licensees. Even foreign licensing societies can compete with US [societies]. And if you look at the licensee equation … we are by no means the Goliath in that scenario”.

“Then, of course, technology has altered our daily lives”, he went on. “It has certainly transformed the way music is created, consumed and tracked. We have to evolve with those changes and adapt our practices to meet the needs of those we’ve been entrusted to serve. And that’s our songwriters, composers and publishers”.

This week’s discussion is happening because the the DoJ is the middle of a big review of the BMI and ASCAP consent decrees, even though a previous review just four years ago – that time requested by the music industry – concluded that everything was fine and nothing should change.

Hoping for a different conclusion this time around, BMI and ASCAP are proposing new streamlined consent decrees be introduced in the short-term, but with sunset clauses included that render the agreements entirely redundant in the longer term.

NAB CEO Gordon Smith noted how recently the consent decrees had been reviewed and then approved in his presentation to yesterday’s hearing. “Despite the DoJ finding less than five years ago that the decrees were essential to preserving competition, we are yet again being asked to consider modifications to them”, he stated.

“For broadcasters and many other licensees, this endeavour raises major concerns” he went on. “While NAB always welcomes conversation about ways to improve and modernise government ‘regulation’, most of the publicly proposed modifications would likely harm licensees and consumers, stifle innovation and frankly, entirely miss the point”.

Smith also used his presentation to have a good old moan about one of the outcomes of the last consent decree review – that being whether or not BMI and ASCAP can offer its licensees so called fractional licences. That’s to do with the fact that song copyrights are frequently co-owned, meaning that a BMI or ASCAP member may only control a portion of any one work.

BMI and ASCAP’s rules say that where that’s the case, a licensee can only use a song if they have 100% of the copyright covered through multiple deals. Whereas some licensees argue that, once they have a percentage of a song covered, they should be able to make use of that song, and BMI or ASCAP should then pass on a share of the money to whoever controls the other portion.

During the last consent decree review, the DoJ stated that – under its interpretation of the decrees – the society’s were obliged to operate the latter approach. But when BMI took the matter to court a judge ruled that, in fact, the system preferred by it and ASCAP, ie fractional licensing, was all fine. Which meant that, while the music industry didn’t get any of the reforms it wanted out of the last review, at least it got confirmation that fractional licensing was allowed.

And that’s something radio man Smith still isn’t happy about. “The single biggest change to the consent decree landscape in the last few decades is a federal court’s recent mistaken interpretation that the decrees do not require full work licensing”, he said. “Following the federal court’s ruling on the question of fractional licensing, licensees may very well pay ASCAP or BMI for the right to publicly perform works, but actually have no right to use them. Any discussion of modifying the decrees must start with requiring whole work licensing”.

Another big talking point during the last consent decree review was the partial withdrawal of rights, allowing BMI and ASCAP members to opt-out of some licences while staying in others. So, for example, writers and publishers could choose not to participate in BMI and ASCAP’s streaming deals, but still be part of their radio and concert licences. European law actually obliges societies to offer that flexibility. But the courts in the US ruled that the BMI and ASCAP consent decrees forbid it.

As noted, US publishers can still negotiate directly with the digital platforms if said platforms want to go that route themselves, but they can’t force direct deals on anyone. Not without them and all the writers they represent pulling out of BMI and ASCAP entirely, which no one really wants to do.

For the big publishers, getting the right to partially withdrawal rights was a key reason for campaigning for the 2016 consent decree review to happen in the first place, and it’s something those publishers would like to see happen this time around too.

Although, interestingly, O’Neill yesterday said that any shift to partial withdrawal should probably be a gradual shift. “We know the publishing community wants to include withdrawal of rights in any consent decree reform”, he noted, “Let me say, overall, we agree with this in concept, however, we don’t agree with the timing”.

His concern is that a sudden move to partial withdrawal – and the extra complexities it would involve – would provide momentum for those that reckon the performing rights of songs should be subject to a compulsory licence in the US, in the same way the mechanical rights are.

“I truly believe that advancing this issue now”, he added, “given how divisive this concept is with our music users – we will find ourselves with a push in Congress for compulsory licensing. To think otherwise is simply foolish”. And compulsory licences – it’s generally agreed across the music community – usually result in royalty rates going down.

Talking of issues that provide ammunition for tech and media companies that want more regulated and blanket music licensing, Smith also brought up the ongoing music rights data mess – ie the lack of a central, publicly accessible database that clearly lists the owners of each copyright and how co-ownership is split.

“Shockingly, there is no real-time database among the [societies] that indicates – with certainty – for what compositions licensees have contracted”, the NAB chief moaned. “What other business is asked to pay for something, yet they have no way of knowing what is included in the package?” The lack of such a database makes the whole fractional licensing thing an even bigger problem for licensees, he added.

That said, to be fair, BMI and ASCAP do a much better job of making databases of their respective repertoires publicly available than most other collecting societies around the world, and they are now collaborating on making that data even better. Something Matthews updated everyone on in her presentation.

Both ASCAP and BMI “feel strongly that we must create reliable and transparent data for licensees in order to drive a sustainable ecosystem for creators and music publishers”, she said.

She went on: “We believe that all licensees have the right to know what fractional share interests they are licensing from us. To that end, ASCAP and BMI are continuing to work on an initiative called Songview to provide a reconciled set of fractional share ownership information for all of the works in our respective repertoires. Our goal is to launch by the end of 2020”.

So there you go. Lots of consent decree chatter. And there’ll be even more today. Jon Bon Jovi’s headlining day two. And they said all the really exciting music events had been cancelled this summer!

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