DOJ Consent Decree Review Moving Fast, Reviewing Hundreds of Comments From Across the Industry

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“This process could result in something really good, really bad or nothing at all,” says a publishing-side executive.

By the end of this year, performing rights organizations could find themselves with the most negotiating power they have had since 1941 -- or the biggest lobbying fight of their lives on Capitol Hill. In the next few months, the Department of Justice (DOJ) will decide whether the consent decrees governing PROs ASCAP and BMI should be changed, left alone or perhaps even “sunsetted” -- terminated at a future date.

In an ideal world, ASCAP and BMI would like to see the decrees terminated, since that would let them negotiate more aggressively on behalf of publishers and songwriters and let them compete on an even playing field against their rivals, SESAC and Global Music Rights (GMR), which aren’t subject to such regulation, as well as foreign PROs. But it’s more likely that the decrees will be changed. So instead, they are pushing to have the decrees reformed to be identical and retain four ingredients that music users say are essential: allowing them to license catalogs immediately with a mechanism for concurrent payment of fees, rather than withholding fees until a royalty rate is set; retaining the rate court process for fee proposals when negotiations fail; continuing the practice of non-exclusive rights for PROs to allow for direct deals with publishers; and having PROs continue to offer adjustable blanket license alternatives.

Yet the industry is wary that the review could come back to haunt them.

Only two years ago the last consent decree review, undertaken at the behest of publishers, nearly ended in 100% licensing, meaning that music users would only need a license from one writer on a multi-authored song, rather than from all of them. That would have allowed licensees to shop for the lowest fees among the various writers, thus reducing music-performance publishing royalties and further distressing songwriters who claim their income is under attack in the streaming age.

There’s also the chance that the termination of the consent decrees will inspire Congress to pass legislation to regulate public performance organizations in much the same way the consent decrees do. Already, the powerful National Association of Broadcasters (NAB) says it is opposed to sunsetting the decrees and wants Congress and legislation involved in any reform -- which the PROs and publishers do not. At a music licensing symposium at Utah’s Hatch Center on Aug. 13, NAB president Gordon Smith said that if the DOJ decides to sunset the decrees, Congress should enact legislation to ensure that radio and other licensees have access to music without “exorbitant pricing” demands from music licensors. At the same event, BMI president Mike O’Neill said, “We have to be vigilant as there are some organizations that will take this moment [and use it] to their advantage at the expense of the American songwriter.”

Yet, according to Makan Delrahim, assistant attorney general for the DOJ's antitrust division, his department received 850 comments from all parts of the industry, so who known what kind of potential wishlists are lurking in the weeds that the DOJ might seize and act upon, meaning the outcome is anyone’s guess. 

If the decrees are terminated, ASCAP and BMI could change the way they operate to make themselves more competitive: According to industry observers, those could ask for exclusive licenses from songwriters, no longer accept every creator and form an invite-only subset of writers to compete with the lucrative deals that SESAC and GMR are offering.

Most publishers want the consent decrees updated, if not eliminated entirely, but there’s not much agreement on how. Sources say the National Music Publishers’ Association and the three major publishers are asking the DOJ to allow partial withdrawals from the blanket licenses so they can do direct multi-rights deals when it’s to their benefit but still be allowed to take advantage of the blanket license to deal with clubs, restaurants, retailers and other venues. 

The songwriting trade groups have divergent views, too. Both the Songwriters Guild of America and the Music Creators of North America say they can abide partial withdrawals but only if publishers agree to have PROs administer the royalties from direct deals. The Nashville Songwriters Association International, advocates a more cautious approach to change, saying the industry should wait to see what impact the Music Modernization Act’s reforms have on the marketplace before doing anything about the decrees.

Meanwhile, the industry players opposing sunsetting the decrees have tremendous clout in Washington and beyond, since the radio and restaurant businesses wield influence in far more districts than songwriters do -- which raises the possibility of a legislated solution. “Today, the PROs license to massive technology companies like Amazon, Apple, Google and Microsoft,” the Recording Academy’s comments read. "ASCAP and BMI have transitioned from Goliath to David. It’s absurd to suggest that ASCAP and BMI need to be constrained against these titans of industry.”

If the tech and radio industries lobby for legislation, they could trigger a Congressional process -- but as the NAB well knows, it is much easier to kill legislation than to shepherd a bill through the convoluted D.C. legislative process. 

On the other hand, if these powerful licensees do push for legislation, “even if the music industry is 100% unified, we are still a tiny spec on the playing field against these licensees,” worries an executive from the music publishing sector.

Yet, any push for legislation could be a double-edged sword for both sides. “If they move to bring legislation into play, the NAB knows there is no justification for radio to be exempt from paying royalties on sound recordings,” says one senior music executive.

In the end, the simplest outcome would arrive through negotiation -- something all parties favor -- which could form the basis for a future law. But there’s no telling what that outcome would be. As one music publishing leader puts it bluntly, “This process could result in something really good, really bad or nothing at all.”

This article originally appeared in the Aug. 24 issue of Billboard.