Martin Bandier, music publishing’s most powerful executive, pulled the industry back from the brink when he decided to finally renew an agreement with BMI, one of the two largest performance rights organizations.

Sony/ATV Re-Ups with BMI

The Sony/ATV chairman/CEO has been engaged in a high-stakes chess match involving himself along with other publishers, digital music services like Pandora, the top two PROs (BMI and ASCAP) and the U.S. Department of Justice.

The decision to re-up with BMI, following a move by Universal Music Publishing Group (UMPG) to do the same, ends a song licensing crisis that digital service providers in particular may have been enduring. Bandier, who has been under pressure to get this right, describes the agreement as being “back on safe grounds.”

“The important thing about our BMI deal is it offers stability to our writers and the people who want to use our repertoire,” he says.

But this deal, like other similar agreements, is believed to be relatively short term, according to people familiar with the terms, as Sony/ATV, which is partly owned by the Michael Jackson estate, continues to lead a push to fight for better rates from digital services that are able to operate under a court-mandated consent decree.

Bandier says, “In the current digital environment, it is critical that we reform the system, which does not fairly compensate songwriters and composers.”

Bandier, who controls almost a third of the publishing market, led other publishers last year to pull digital rights to their songs from BMI and ASCAP in order to gain leverage to directly negotiate a higher royalty rate with services like Pandora whenever their songs are played.

ASCAP and BMI, whose hands are tied by a court-mandated consent decree, are unable to negotiate rates for the publishers.

But Bandier’s strategy appeared to backfire in December after a challenge by Pandora led to a BMI rate court judge ruling that publishers seeking to withdraw digital rights from the PRO had to completely withdraw all songs and all rights -- throwing the entire publishing business into a state of confusion.

For tens of thousands of general licenses distributed to stores, bars, hotels and concert halls that are automatically renewed annually, it looked like those blanket licenses would no longer include the repertoire of major publishers -- accounting for nearly half the market (including UMPG and BMG songs). PROs provide the most efficient administration and reporting capabilities for collecting royalty payments from these venues. Individual publishers would find it extremely hard to replicate the PRO model.

Against that backdrop, BMI and ASCAP, as well as large publishers like UMPG and Sony/ATV, have approached the Justice Department about getting the consent decrees amended to allow for partial rights withdrawal so they can negotiate directly with Pandora. That is why all the deals announced recently, whether between BMI and publishers or publishers and Pandora, are all described as short term, probably six months to a year in length. By the time the deals expire, the rate courts will have set performance royalty rates.

In cutting short-term deals, publishers now have time to see what rates are set and if the Justice Department is willing to negotiate amending the consent decree. Staying with BMI in a short-term deal “gives us time to reflect -- we can look at the rate court decisions and for alternatives if need be, including whether the DOJ can see its way clear to amend the consent decree,” Bandier says.

If publishers don’t like the rates established by the courts, or if it appears that the Justice Department is dragging its heels on amending the consent decree, publishers will then have the option of completely withdrawing from the PROs. In the meantime, they have more time to prepare for that day, should it come.