The Department of Justice (“DOJ”) in the United States is currently undertaking a review of the antitrust agreements (consent decrees) regulating ASCAP and BMI, which are the two leading American performance rights organizations (“PRO”), collecting fees from users of music on behalf of their members (publishers, songwriters etc.) and distributing them back as royalties.

The consent decrees came in place due to the PRO’s position as a somewhat monopoly over licensing publishers’ and songwriters’ public performance rights and they now set the rules for how the PROs can act and operate (including e.g. rate setting procedures and a royalty distribution system).

Partial withdrawal of digital rights

The review was called for, inter alia, since a number of major publishers asked for the consent decrees to be rewritten so that partial withdrawal of rights of exploitation in digital formats (streams in particular) from the PROs would be possible under the agreements (which is currently not the case, according to a court decision). In particular, the publishers want to be able to negotiate directly with digital music/streaming services (in order to secure higher rates), but at the same time continue to license out their catalogues of songs to other music users (such as radio broadcasters and physical venues) through the PROs.

Considering that major publishers have indicated that they may withdraw their entire catalogues from the PROs if the outcome of the review is not in their favour, the PROs support partial withdrawal of digital rights, asking however for the decrees to allow them to represent not only the performance rights in musical works, but also e.g. mechanical rights and synch licenses.

While the possibility to partially withdraw digital rights from the PROs would have positive implications for the big publishers, it has been discussed whether such rule change would pose risks to e.g. smaller independent publishers (who, naturally, are not in the same bargaining position as the major ones with regard to scoring good deals on royalties) as well as songwriters (who then will not be guaranteed equal payment with the publishers in accordance with the royalty distribution system under the current decrees).

Licensing of split works

The DOJ now seems to be looking further than the digital rights system in its review. The current practice when it comes to collective licensing of performance rights is that every co-writer/owner needs to agree in order to license a co-written song (i.e. split work). This implies that if one co-writer is an ASCAP member and the other one is a BMI member, the licensee needs approval, e.g. a blanket license (which provides for a right to use any song written by a member of the PRO in question), from both PROs to use the relevant song.

It is said that the DOJ now is considering allowing co-writers/owners of split works to issue licenses for the whole songs and, thus, that the current system of licensing shares of songs could constitute an antitrust violation. Note that in theory, according to US copyright law, a co-writer/owner is already entitled to grant a non-exclusive license to a co-written song (in its entirety) without permission, provided that any income is shared with the other co-writers. As mentioned above, this is however not how it works in practice.

In this context, this potential rule change is up for debate and needs to be carefully considered by the DOJ, since it is likely to have a significant impact on the music publishing industry. If such amendment is implemented, the effect of partial withdrawal of digital rights will probably be reduced, since music users, notwithstanding the partial withdrawal of a big publisher, would be able to continue to stream many (if not the majority) of the co-written songs in such publishers catalogue under its PRO blanket licenses (provided of course that such split work is co-owned with a PRO member). Furthermore, such amendment would imply that a licensee only needs one of several co-writer’s/owner’s permission to use a song and, thus, that publishers and PROs can license songs of which they only represent a share, most likely resulting in confusion and various issues with respect to payments of royalties etc.

By Petra Lennhede

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