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US publishers and societies start to disagree on consent decree reform

By | Published on Wednesday 20 November 2019

US Department Of Justice

In a lengthy update on the consent decree review process, Billboard has identified two key differences of opinion between the US music publishing community and the collecting societies that said consent decrees regulate.

Collective licensing – when the music industry chooses to license as one through collecting societies – always raises competition law concerns, and no more so than in the US. To allay those concerns, the two big song rights societies in America – ASCAP and BMI – have long had agreements in place with the country’s Department Of Justice. These ‘consent decrees’ restrict how ASCAP and BMI operate to stop possible anti-competitive conduct.

Pretty much everyone in the music industry reckons that those consent decrees are no longer fit for purpose and need to be rewritten. And with the DoJ reviewing the consent decrees once again, everyone is saying so much more loudly.

BMI and ASCAP themselves want new significantly streamlined consent decrees that include sunset clauses that would allow for DoJ regulation to end entirely at some point in the future. Organisations representing broadcasters, venues, bars and tech companies reckon the current consent decrees should be kept in place unchanged.

There is plenty of support in the music community for BMI and ASCAP’s position. Although there are some detractors.

Rival society GMR argues that, while regulation relating to how BMI and ASCAP deal with licensees may be outdated, rules regarding how they treat their members are still needed. Meanwhile some groups repping songwriters reckon new rules are required to stop music publishers from unilaterally moving rights between different collecting societies without consulting the songwriters who wrote and are beneficiaries of those works.

Billboard’s new report hones in on a recent submission by an assortment of music publishers – probably coordinated by the National Music Publishers Association – which sees said publishers disagreeing with ASCAP and BMI on a couple of issues: partial withdrawal of rights and moves to allow ASCAP and BMI to represent mechanical rights.

Many music publishers have been pushing for partial withdrawal of rights for years now. Indeed it was one of the key reasons the music industry lobbied for the last consent decree review, in which the DoJ decided to make no changes. Basically, the publishers want the option to pull digital rights out of the collective licensing system. They could then force digital services into direct deals, while still allowing BMI and ASCAP to license their rights to broadcasters, the live sector, and any public space that plays music.

The desire to pull digital rights out of BMI and ASCAP first became big news when the music industry was in dispute with Pandora which, at the time, relied on a SoundExchange licence on the recordings side and BMI/ASCAP licences for songs. Under the current US system, although digital services are not obliged to use collecting society licences, they can always rely on them. Which weakens the negotiating hand of rights owners.

When the publishers tried to pull their rights out of the societies to get a better rate from Pandora the courts that oversee the consent decrees ruled that such partial withdrawal was not possible. If the publishers wanted to stop Pandora from licensing their songs via BMI and ASCAP they’d have to exit the societies entirely. Which would mean directly licensing every pub, bar and café. Such a move would also throw up questions about what publishers can and cannot do without the permission of their songwriters.

European law actually does the opposite in that it forces collecting societies to allow members to withdraw sets of rights (albeit only with writer and publisher approval). So the US publishers want to see the consent decrees rewritten to allow partial withdrawal in the US too. However, reports Billboard, BMI and ASCAP are not keen to make this a priority for consent decree reform at this time, seemingly because they fear it’s too controversial a change that will result in fierce licensee opposition that could scupper reform entirely.

It’s thought that the societies are basically adopting a “be careful what you wish for” line. Last time the publishers pushed for partial withdrawal, not only did they not get it, but the DoJ announced that the societies should be operating a 100% licensing system. That would mean that BMI would have to license 100% of a song even if its members only actually controlled 50% (passing the other 50% of the money over to another society).

The music industry fought back against that demand and ultimately won in court. But it seems that the societies fear that lobbying for things like partial withdrawal might result in licensees again pushing for a 100% licensing approach. Or even worse, the introduction of new compulsory licences covering various different uses of song rights.

The other key area of disagreement between the publishers and the societies seems to be mechanical rights. Currently ASCAP and BMI only represent the performing rights in songs, not the mechanical rights. BMI probably could be working with mechanical rights too, but ASCAP’s consent decree specifically bans such a thing.

While performing rights and mechanical rights are often licensed separately – and in all the Anglo-American markets there are separate societies for the two sides of the song copyright – more joined up thinking in the licensing process is generally a good thing. Especially since it was decided that a stream exploits both the performing and mechanical rights at the same time, so streaming services need licences for both elements.

Throughout all the hoo haa about how mechanical royalties are paid in the US – and the fundamentally flawed licensing system that resulted in songwriters going unpaid and streaming services getting sued – one simple solution to the problem was rarely discussed. That being to allow BMI and ASCAP – which are already licensing performing rights to the streaming services – to bundle the mechanical rights in.

Bundling performing and mechanical rights could work either by allowing BMI and ASCAP to directly control both sides of the copyright, like in much of Europe, or by having a separate society for mechanicals which appoints BMI/ASCAP to do most of the work, as happens with MCPS and PRS in the UK.

But publishers have generally been quietly resistant to this solution. Possibly because of fears it would result in songwriters demanding a direct payment of at least some mechanical rights income from the society (as happens in much of Europe), rather than all mechanicals money first passing through the publisher’s bank account. Or possibly because they don’t entirely trust the performing right societies to properly administrate and/or distribute a revenue stream which, in Anglo-American markets, is more tightly controlled by the publishers.

Either way, Billboard reports that in their letter to the DoJ, the publishers write that – if ASCAP and BMI were to get involved in mechanical rights – “their effectiveness as a performing rights organisation will be diminished”.

It remains to be seen where the consent decree review goes next. Though those lobbying on the licensee side – who want the consent decrees to remain unchanged – will be hoping that disagreements within the music community will strengthen their case. Divide and conquer and all that.