Music Industry Converges on D.C. as Consent Decree Review and Negotiations Ramp Up

KAREN BLEIER/AFP/Getty Images
The National Mall in Washington, DC.

The consent decrees that govern how the two largest U.S. performing rights organization interact with music users will be the focus of a lot of attention in Washington D.C. over the next two weeks.

The consent decrees -- which have been in effect since 1941 -- have been in the news recently because late last year both PROs and some of the largest publishers requested the Dept. of Justice amend them to allow publishers the ability to withdraw digital rights from blanket licenses and cut direct deals with digital music services. The DoJ responded to those requests by reviewing the consent decrees, asking interested parties to comment.

This week and next, sources say, the DoJ has called in the PROs, large music publishers, digital services and other music users for informal discussions on how that review is proceeding.

Meanwhile, the U.S. Senate Judiciary Committee's Antitrust Subcommittee will also hold a hearing on the consent decrees on March 10, and has asked for testimony from interested parties. While the panelists from the industry have yet to be identified, sources say they will consist of new ASCAP CEO Elizabeth Matthews, indie music publisher and ASCAP and NMPA board member Matt Pincus, founder and CEO of SONGS Music Publishing; Public Knowledge senior staff attorney Jodie Griffen, and likely executives from a music digital service and the radio industry.

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Moreover, sources say that the committee had asked Sony/ATV Music Publishing chairman/CEO Martin Bandier and Universal Music Publishing chairman/CEO Jody Gerson to provide testimony, but both declined.

"From the digital services point of view, it would be like Christmas day to get those two to publicly testify, where anything could be brought up, even some of the things that Judge Denise Cote wrote," when making her decision on what rate Pandora should pay to ASCAP, says one source. In that ruling, she criticized the major publishers for acting in coordination to achieve higher benchmarks through rates cut in direct deals.

Sources in the major label camp say that with the DoJ on the verge of making decisions regarding the consent decree, major label executives are cautious about what they say publicly.

Games of chess aside, a Sony/ATV spokesperson says Bandier simply wasn't available it to the hearing.

"Legislators are hearing constant lobbying from all the parties in the music industry on this topic, so this hearing is a natural byproduct of that lobbying," says one music industry executive.

"We look forward to the Antitrust Subcommittee's examination of digital music licensing practices and the impact on consumers, services, and songwriters," says Pandora spokesman Dave Grimaldi.

In general, copyright is receiving heightened attention because a number of factors are converging. For one, many in the industry agree that an overhaul of copyright is needed to update laws to deal with the digital age. As part of that process, the U.S. Copyright Office has issued a report making recommendations on how revision might proceed.

In the meantime, music publishers are hoping that the Songwriters Equity Act will be reintroduced before Congress. That act updates two sections of the U.S. Copyright act. Currently, the law stops federal rate courts from considering sound recording royalty rates when setting performance rates for songwriters and composers. This would be ended under the proposed legislation. The SEA would also encourage rate courts to try to set rates that reflect the market value for mechanical licenses.

As for the DoJ, music industry and digital services executives say that the agency is requesting various players come to Washington over the next two weeks because it is willing to share some of its thinking with regards to whether or how it will amend the consent decrees.

The discussions are expected to be posed by the DoJ as what-if scenarios. For instance, "If the DoJ were to tell publishers it was prepared to do 'X' to the consent decree, it would then ask the publishers how would they respond to that proposed change," explains one executive with knowledge of the planned meetings.


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