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Music publishers set to hate at least one DoJ reform to US collective licensing

By | Published on Friday 31 July 2015

US Department Of Justice

What he gives with one hand he takes away with another. God that is. The sneaky little fella. But the US Department Of Justice maybe planning the same trick with its review of collective licensing rules in America, according to various sources cited by Billboard. Presumably the DoJ has been inspired by the Lord himself. This is what happens when you put “in God we trust” on your money.

So yes, as previously reported, the DoJ is busy reviewing the so called ‘consent decrees’ which regulate ASCAP and BMI, the two big performing rights organisations for the US music publishing sector, which provide licences on behalf of American publishers and songwriters for anyone needing permission to ‘perform’ (broadcast, stream, play in public) a song.

It was the publishers who wanted the review, not least because the majors want to stop the PROs from licensing their catalogues to streaming services. Mainly on the basis that, without all the rules and regs of collective licensing, the publishers could threaten to pull their repertories from a streaming service, and get a better deal on royalties in return.

But the US courts said that the publishers either had to licence all their performing rights collectively, or none, and that so called ‘partial withdrawal’ (eg just pulling digital from the PROs) is not an option under the consent decrees. The publishers want the decrees rewritten so partial withdrawal is possible, and word has it the DoJ is likely to recommend such a change to the courts that ultimately decide the rules.

Here’s the thing though, sources say that another new line the DoJ is proposing for the consent decrees could severely reduce the impact of partial withdrawal, and shake up collective licensing in other ways that could send the music publishing sector’s royalties down rather than up.

This second proposal relates to co-written – and therefore co-owned – songs, where multiple publishers and, often in the US, multiple PROs are involved. Under the current system, where you have a song with two writers, one a BMI member and one an ASCAP member, a licensee needs permission from both societies to use the work, with each society then collecting revenues on behalf of its member.

Of course, most licensees will have blanket licences from the societies, so don’t really notice this is what they are doing. But crucially, if they had a BMI licence but no ASCAP deal, the licensee could only use songs that are represented by the former in their entirety, if an ASCAP member has even a small share in the copyright of any one tune, the radio station or concert promoter isn’t licensed to make use of the work.

Now, technically under US copyright law any stakeholder in a copyright is actually empowered to licence the work in its entirety, providing they share any income with the other co-owners. But in practice, there are all sorts of scenarios where this doesn’t happen, the collective licensing of performing rights being one of them.

But the DoJ is seemingly considering inserting a line into the consent decrees that explicitly says that this should become practice in the collective licensing domain, oblivious of any society rules, or agreements between songwriters and/or publishers, that currently force so called ‘fractional licensing’, where licensees need separate agreements with each stakeholder.

What that would mean is: even if Sony/ATV et al pulled their digital rights from BMI and ASCAP, any songs in their catalogues co-owned with a publisher who was still using the PROs for digital would still be available for digital services to stream under their BMI and ASCAP blanket licences. It would also mean that Sony/ATV could license its repertoire in its entirety, even though they won’t own 100% of many of the songs in their catalogue.

Now, quite what would happen to co-owned works if and when partial withdrawal was allowed in the US has been discussed in legal circles ever since the majors first indicated their desire to shift digital over to direct licensing.

The DoJ’s proposal would at least provide some clarity, though the move is not popular with the American publishing community, who feel it would greatly weaken their hand at the negotiating table. And could actually result in the Pandoras of the world – and, indeed, licensees outside the digital domain – getting a better deal, because they could play BMI off against ASCAP when it comes to the repertoire that the two societies co-represent.

Publishers also argue that the proposal is based on an incorrect assumption by the DoJ, ie that because in theory under US copyright law any one stakeholder in a copyright work can wholly licensee it, that must be common practice across the industry in all licensing scenarios. One anonymous publishing exec quoted by Billboard says: “The DoJ’s [proposal] is factually inaccurate on what the industry’s customary practices are, and the repercussions of their stance as it is now are not being fully considered”.

Few have, as yet, gone on the record in dissing the DoJ on this proposal, though ASCAP CEO Beth Matthews confirmed in a statement, “ASCAP supports fractional share licensing coupled with transparency by all market players to effectuate digital withdrawals”.

Quite what impact this proposed rule would have across the board – as in how many songs in the Sony/ATV repertoire could still be licensed via BMI and ASCAP as a result of co-ownership with an indie – is hard to assess, what with there being no central database of copyright ownership.

Though that lack of a copyright database would arguably put pressure on the streaming services to still do deals with all parties – ie BMI, ASCAP, Sony/ATV, Warner/Chappell, Universal, BMG and Kobalt – anyway, because they wouldn’t necessarily know which songs were wholly controlled by a major or majors, and therefore were no-go works under their BMI and ASCAP licences.

Which means this DoJ proposal would be an incentive for the music publishers to continue being rubbish at sharing copyright ownership data, which would be a big down side. Though it would also likely make Pandora et al even more vocal on the need for some kind of global repertoire database, so perhaps actually it would speed things up in that regard.

Either way, there should be much debate to be had when the DoJ formally published its proposals for the all new consent decrees.