Publishing Industry Praises BMI Consent-Decree Decision -- But Outcome Remains Unclear

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While the music publishing industry is effusively praising Judge Louis Stanton’s ruling Friday -- which overturned the Department of Justice’s mandate that ASCAP and BMI must enter into full-works licensing -- the decision still leaves many matters unresolved. 

In his decision, Stanton said, “The consent decree neither bars fractional licensing nor requires full-works licensing.” (Since 1941, ASCAP and BMI have been governed by separate but similar consent decrees.) The DOJ’s controversial ruling on June 30 declared the opposite: that the consent decrees mandate full-works licensing (also known as 100 percent licensing). In full-works licensing, the licensee (music users such as digital services, radio and television) only needs the permission of one of a song’s writers (or his/her representative) in order to license the song; in fractional licensing, licensees must obtain a license from each writer of a song. The DOJ’s decision was roundly criticized by the publishing industry and praised by licensees.

Possibly the biggest unresolved issue in Stanton’s ruling is that it concerns BMI’s consent decree, not ASCAP’s. Thus, ASCAP and its writers -- nearly half of the publishing industry -- are still operating under the DOJ’s interpretation that fractionalized licensing is not permitted under the consent decrees. 

Which brings up the next big question: Will the DOJ appeal the decision to the U.S. Court of Appeals for the Second Circuit? And if it doesn’t make that appeal, where does that leave ASCAP?

The DOJ has 60 days after the decision to file an appeal, sources tell Billboard. If it chooses to do so, the Second Circuit will hear the arguments and make its decision. Even if that decision is consistent with Stanton’s ruling, what it will mean for ASCAP is unclear.

ASCAP chose to take its fight against the DOJ’s decision to Congress rather than challenging it in court because its rate court judge -- Denise Cote -- is seen by many as unsympathetic to the music publishing industry, while Stanton is seen as more sympathetic.

“The DOJ could appeal, and if they lose they can say, ‘It’s done and over,’ and not press further on the issue” against BMI or ASCAP, says National Music Publishers’ Association president/CEO David Israelite. “Or the DOJ can turn to ASCAP and say their mandate still apples to the ASCAP consent decree.

“But as irresponsible as DOJ has been on this matter,” he opines, “I don’t think even they would want two different rules applying to ASCAP and BMI. That would take an extraordinary level of hostility on their part to force that [dichotomy] on the marketplace.”

In the meantime, ASCAP could simply ignore the DOJ -- which gave both PROs a year to implement full-works licensing -- and at the end of that term, run the risk that the DOJ would take ASCAP to court. In that scenario, even if Cote ruled against ASCAP, the case would still likely wind up at the Court of Appeals for the Second Circuit.

Paul Fakler, a partner at the law firm Arent Fox LLP -- which represents several digital services -- slammed Stanton’s decision, saying that there was “not a lot of reasoning,” behind it. “To say he was fully briefed [on the matter] is silly,” Fakler tells Billboard. “Nobody expected him to rule on what had so far been submitted. Neither side had even put in a motion yet.”

Few expected the judge to make a decision on Friday -- the hearing was originally expected to be a conference on how the court would proceed, and at that point, BMI had only submitted a detailed letter to the court saying it would challenge the DOJ mandate (but had yet to place a motion on the matter); the DOJ had responded with a three-page letter saying why BMI was wrong in challenging the mandate, according to Fakler. But when Stanton realized how many involved parties had showed up for Friday’s conference, he decided to hold the hearing in court -- and made his decision almost immediately. Fakler, who attended the hearing, claims that it was obvious to him that Stanton had already written his decision beforehand.

However, Israelite responds that there have been a significant amount of arguments put forth publicly to the DOJ -- there certainly were many in the press -- and that Stanton was probably aware of them and decided to give both parties on Friday a chance to make their cases before he issued the ruling.

Moving forward, Fakler says the ruling is “relatively narrow” and doesn’t decide the key issue: Are BMI licenses full-work licenses, as the digital services contend, or fractional licenses, as the music-publishing community contends?

“As you know, both ASCAP and BMI say their licenses allow a music user to play any song in their repertoire, regardless of how much they control,” Fakler says. “The wording that allows immediate access to their entire repertoire is a pretty important argument to make, and the fact that [Stanton] didn’t address it in his ruling shows that he wasn’t fully informed and [hadn’t] allowed for a full airing of all the issues."

And the above are just the major issues raised by this ongoing situation. All parties agree on one thing: It’s too soon to predict the outcome.

“Most people ultimately think the same rules will apply to both ASCAP and BMI,” says one publishing executive who requested anonymity, “but it remains to be seen what path will be taken to get the industry there.” 


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