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DoJ expected to support partial withdrawal in consent decree review

By | Published on Wednesday 8 April 2015

US Department Of Justice

The US Department Of Justice is expected to green light partial withdrawal from collective licensing after its review of the American music publishing industry, according to sources cited by Billboard.

As much previously reported, while the music publishing sector initially licensed most digital services through its collecting societies, a few years back the bigger publishers decided that they wanted to follow the lead of the labels and, in the main, license digital platforms directly.

This strengthens the negotiating hand of the publishers, because they are no longer subject to the extra regulation that comes with collective licensing, which likely means higher royalties. Though on the plus side for licensees, direct dealing usually means quicker deals, and generally makes multi-territory licensing easier.

That said, direct dealing is more complicated for the publishers than the labels because of the routine split between the ‘performing right’ and ‘mechanical right’ elements of the copyright in publishing. Streaming services need to exploit both elements, which means in Europe – where the big publishers do now licence most digital services direct – they do so via joint ventures with the collecting societies, which still ultimately control the performing rights.

But when the American publishers began to likewise pull digital out of their main performing right societies – BMI and ASCAP – the whole plan hit a major hurdle, when the courts ruled that, under collective licensing regulations Stateside, publishers either had to licence all their performing rights collectively, or none. They can’t licence digital services one way, and broadcast and public performance another.

Which led to the publishers calling on the DoJ to review the so called ‘consent decrees’ that regulate BMI and ASCAP. And while the music publishing community has a number of gripes about those consent decrees, which most people agree were written for a very different time in the music industry, the most important change the music publishers seek is the right to partially withdraw from collective licensing.

And it seems likely that the DoJ will now comply with that request, albeit with some conditions that might be less welcome amongst the majors, such as a ban on publishers that withdraw digital rights from sitting on the boards of the societies.

Another key change that will likely be made is that, for the first time, BMI and ASCAP will be allowed negotiate deals around their members’ mechanical rights. In Europe, while collecting society structures and publishing contract conventions mean a divide remains between mechanical and performing rights, generally the two sets of rights are bundled together when digital services are licensed. In the US the consent decrees currently forbid BMI and ASCAP from dealing in mechanicals, but that seems likely to change too.

So that’s all good news isn’t? Well, it is for the big publishers. But sources caution that, even though the DoJ is siding with the publishing sector on these issues, any revisions of the consent decrees will have to be approved by the judges who oversee BMI and ASCAP too. And many in the songwriting community are still concerned about how exactly partial withdrawal will work in America, and whether a system akin to that already up and running in Europe would or could be adopted.

But nevertheless, that big metaphorical hurdle is possibly now wobbling in the publishers’ favour.