While the BMI website says that four of the five largest music publishing catalogs have withdrawn from BMI, sources tell Billboard that most of those publishers have reached a stand-still agreement with digital music services and BMI while they continue to negotiate deals.
Those deals are being negotiated against the backdrop of a ruling by the BMI rate court judge, who said that publishers withdrawing digital rights have in fact withdrawn completely from BMI. While the songs of publishers like Sony/ATV and EMI Music Publishing, who withdrew their catalog solely for digital licensing on Jan. 1, 2013, and Universal Music Publishing Group, BMG and George Johnson Music, whose withdrawal became effective Jan. 1, 2014, are still part of existing licenses, any deals that expire as of Jan. 1, 2014 or since then, no longer include the above publishers' repertoire, according to the judge's decision.
Withdrawing publishers might have gotten a little more than they bargained for with that decision. While those publishers are perfectly happy to negotiate rates with big users like Pandora and Apple, and probably even the Radio Music Licensing Committee, they certainly don't want to get involved with licensing every music user. They are particularly not prepared to do general licensing to bars, clubs, stores and concert venues. Nor are they prepared to administer royalties reports and payments from digital services.
Consequently, sources say that the publishers have either been cutting short-term licensing deals or assuring music licensees whose deals expired at the end of 2013 that they won't sue for copyright infringement.
Meanwhile, the publishers are also negotiating with BMI about staying within their catalog, but are trying to shorten the period that BMI requires for withdrawal notification. While they are in a short-term grace period, publishers continue to negotiate with services for direct, voluntary licenses in the hopes that they won't have to withdraw from the PROs.
The BMI website describes the ongoing fracas as a "rapidly evolving situation," and encourages licensees to check back frequently over the coming days and weeks.
Sources say that Pandora is covered, at least short-term, for its licensing needs, but some publishers want to conclude a long-term voluntary deal with the service that would allow the publishers to stay within BMI.
In addition to Pandora, sources say that digital services like Myspace, Slacker, and Rdio either have BMI deals that are expired, or had a consent-decree license like Pandora did. The latter license occurs when a service requests a license from BMI or ASCAP. Because both PRO's operate under a consent decree agreement signed with the U.S. Dept. of Justice, it means that a service requesting a license from either of those PROs gets the right to immediately play their music.
But in a decision on a motion in the Pandora/BMI rate trial, the judge ruled that Pandora didn't have an interim license because the two sides hadn't agreed upon a rate, nor had the court ruled on a rate. Since other digital services are in the same position as Pandora, publishers have reached stand-still agreements with them too, sources say.
The caveat that a consent-decree license needs to have a discernible, agreed-upon rate turned upside down the logic behind a ruling in the ASCAP rate court, which said that the consent decree license was indeed an interim license and that Pandora had the right to play all ASCAP's catalog, including the same publishers who were trying to withdraw their digital rights. In the ASCAP decision, all those publishers are part of the ASCAP blanket license with Pandora until it expires on Dec. 31, 2015.
The short-term agreements with music users like Pandora are expected to remain in place while deals are negotiated and/or there is clarity on whether the U.S. Dept. of Justice is willing to amend the consent decrees that BMI and ASCAP operate under.
If the DOJ appears unwilling to amend the consent decrees, large music publishers say that the existing licensing structure will blow up, changing the face of music licensing in America. It is also why they are pushing hard for less stringent requirements on withdrawals.
They say they are unwilling to stay in an environment where the consent decrees result in below-market rates for their catalog. Up until now, Pandora has paid music publishers about 4.3% of revenues, while music publishers are looking for a deal similar to the one that iTunes Radio cut, which sources say offers music publishers a rate in the range of 10% of revenue.
Consequently, those publishers are looking around at contingencies if they have to withdraw from ASCAP and BMI, according to sources.
One of those contingency plans would be to possibly use ASCAP and BMI as administrators, but licensing executives in the digital music service camp say that such a move would make a sham of the ASCAP and BMI judges' rulings, which agree on at least one point -- that music publishers are either all-in or all-out of the PROs. In a move to put pressure on publishers that are said to be considering complete withdrawal if the Justice Department doesn't appear willing to amend the consent decrees, sources say BMI is telling publishers that if they withdraw, they won't handle administration.
That's a move that's likely to be welcomed in the digital music services camp. One such executive wonders how a publisher could withdraw and license a service and then try to cut a deal with BMI and ASCAP to handle administration. "That's like sidestepping the judge's decision," he complains.
Sources say Sony/ATV and EMI Music Publishing are scrutinizing their options, should they decide that withdrawal is the way to go. But in addition to building an infrastructure to handle administration and general licensing, other possibilities include turning to service providers like Music Reports Inc. or the Harry Fox Agency, which both can handle the daunting task of administration, or to potentially partner with SESAC, the smallest U.S. PRO, which is unhampered by a DOJ consent decree.