The Only Certainty Is Uncertainty: What the Dept. of Justice's Decision Means for Music Publishing

Almost everyone in the music-publishing business -- from executives to songwriters to collecting society lawyers -- has expressed frustration with the Department of Justice’s recent decision not to amend the antitrust consent decree that essentially regulates ASCAP and BMI. So far, though, they don’t seem to agree on how this decision will affect the music industry -- or even exactly what it means.

Two years ago, ASCAP and BMI asked the U.S. Justice Department to consider changes to the consent decrees they have operated under since 1941. Last week, the government told both societies that it would not only decline to adjust the decrees -- it would interpret them in a way that would further restrict the way those organizations license music. Both ASCAP and BMI will now have to offer “100 percent licensing” -- which means they will have to license all of the rights to any song they control some of the rights to. (They will then apparently have to pay the creators who aren’t affiliated with them.) If an ASCAP songwriter and a BMI songwriter collaborate on a song, for example, a radio station or online service would be able to license rights from whichever society would offer them for less. That would erode ASCAP and BMI’s pricing power -- and presumably lower the payments that they distribute to songwriters and publishing companies.

If it sounds simple, it’s anything but -- one executive told Billboard that the decision would result in “a cluster--- of epic proportions.” On the most basic level, ASCAP and BMI might have to figure out how to license songs they own parts of, while paying co-writers who aren’t affiliated with them, a task that’s more complicated than it might seem because it’s not always obvious who owns what percentage of a given composition.

Collecting societies and publishers are most worried that the proposed policy -- which is not final and could be challenged in court -- will allow companies that use music to get the rights they want for less money. But it also raises important questions about how a shrinking pie might be divided. This decision comes at a time when few mainstream pop hits have one songwriter, and many have more than two -- each of whom may be affiliated with a different collecting society.

For example, the Mark Ronson hit “Uptown Funk” was written as a collaboration among Ronson, Bruno Mars, Jeff Bhasker, and Philip Lawrence; producer Devon Gallaspy and Nicholas Williams (aka Trinidad James) also received credit for a sample of their song “All Gold Everything;” five members of the Gap Band later received writing credits after their music publisher pointed out similarities to the group’s song “Oops Up Side Your Head.” ASCAP controls 21.5 percent percent of the song through Mars and Lawrence, according to the organization’s Web site; the other songwriters are affiliated with BMI, according to ASCAP. Under the new rule, which the Department of Justice is giving ASCAP and BMI a year to implement, either society would be able to license the entire song. It would then assume the obligation of paying the writers it doesn’t represent, or more likely their collection society.

That, it turns out, is the easy part. The operations of collecting societies are complicated by that fact that SESAC, and now Irving Azoff’s new Global Music Rights agency, aren’t subject to the consent decrees that regulate ASCAP and BMI. (The decrees have their origins in Justice Department antitrust cases against those two organizations.) If SESAC and ASCAP each represent a writer who wrote half of a composition, ASCAP would have to license the entire composition or decline to license it at all; SESAC could still license part of it, but what would then happen to the other half? Will songwriters change their collecting society affiliations? Will collecting societies begin licensing individual compositions instead of all of a songwriter’s work? The Justice Department is expected to clarify the situation by the end of July.

There are also questions about how this will affect agreements among songwriters over who controls what rights. For example, if two songwriters affiliated with different collecting societies sign a contract that says a society that one of them is affiliated with controls their entire co-written composition, would the other writer’s society still be able to license the work? (Apparently not.) Can such contracts be written now? (Some sources say so.) What about foreign songwriters? (No one seems entirely sure.)

To get a sense of how this might work in practice, consider “Uptown Funk.” A year ago, Billboard estimated that the song had earned $2.67 million in U.S. royalties for its 11 songwriters -- $1.6 million of which came from radio airplay. Now, ASCAP and BMI could find themselves competing over which could license the entire song to radio at a lower price. Also, under this proposed policy, if a digital service used an ASCAP license to play the song, Lawrence would get his percentage from ASCAP, with which he’s affiliated; Bhasker, a member of BMI, would have to get his money from ASCAP, which would pay BMI. In the process, Bhasker’s share it could be subject to two administration fees, rather than one.

Speaking to The New York Times last week, Sony/ATV chief executive Martin Bandier compared the decision to the Brexit -- because “no one understands it.”

Copyright, especially as it affects collecting societies, usually involves the kind of legal logic that makes perfect sense to lawyers -- and only to them. This decision departs from that logic, however, because it seems as though it could create a system of ownership without control. To technology companies, which tend to see copyright as an impassable thicket of regulations, this is efficient and therefore sensible. To music lawyers, it seems like the government has stepped in and devalued intellectual property. Some wonder if the new interpretation of the ASCAP and BMI consent decrees is intended to affect SESAC and Global Music Rights as well.

The new policy would give certainty to technology companies, some of which maintain that ASCAP and BMI have always offered 100 percent licensing. (The U.S. Copyright Office believes otherwise, but it’s hard to say for certain because almost every company that uses music in a significant way has always had deals with all of the societies.) Indeed, the attempt to amend the consent decree have its origins in a rate-setting case between ASCAP and Pandora -- which also triggered a Justice Department probe and a $1.75 million settlement (that came with no admission of wrongdoing). That followed an attempt by some publishers to withdraw certain kinds of rights from Pandora. Other licensees may not care, as long as the total amount of money they pay for the use of music doesn’t rise.

What happens now is anyone’s guess. Certain songwriters may try to change collecting societies, or allow co-writers to license certain works on a contractual basis. Worse, songwriters may become less willing to collaborate with other writers represented by different collecting societies -- a significant issue given the amount of collaboration in pop music.

The only certainty here is uncertainty -- and further legal wrangling of one kind or another.