For over two years, music publishers and songwriters have petitioned the Dept. of Justice for changes to the 75-year-old rules they were governed by, requesting amendments in order to stave off dwindling royalty rates caused, in their view, by antiquated U.S. government regulations. Last week, in a decision one executive said would result in a "a clusterf---k of epic proportions," the DoJ announced that it would instead impose further rules on music publishers and songwriters -- all who now fear a further recession for their royalties.
In addition to refusing to amend the consent decree to allow partial withdrawals for music publishers from ASCAP and BMI's blanket licenses, the DoJ ruled that the consent decree requires those performance rights organizations (PROs) to engage in what's known as "100 percent licensing" for songs with multiple songwriters -- meaning a music licensee only needs a license from just one of the songwriters to utilize a song, instead of each of them. That's in contrast to the traditional fractional licensing -- which has up to now been the backbone of the music publishing industry -- whereby rights holders can only approve usage of their portion of a work.
One possibly litigious result of the ruling could involve a songwriter going to court for all of the royalties for a song they co-wrote, potentially insisting that they should be disbursing those royalties to their co-writers, not whoever licensed the work. Another case involves songs built brick-by-brick, especially sample-based music -- those works could potentially fall outside of the blanket licenses. Yet another: Works where there is an agreement between the songwriters that certain co-writers will not be allowed to license that work, forcing PROs to determine whether those agreements are in place and exclude the exempted co-writers from any blanket license.
The DoJ is said to be giving ASCAP and BMI one year to prepare for the shift to 100 percent licensing. If ASCAP and BMI choose not to adopt 100 percent licensing, the DoJ could file suit against them on antitrust grounds -- the reason for the consent decrees initially -- leaving a court to decide whether the PROs were in violation. Sources suggest that ASCAP and BMI's rate court judges, the people responsible for setting statutory license fees, also have to sign off on the DoJ's interpretation.
"The DoJ decision is very disappointing; it places unnecessary burdens on an already highly regulated marketplace, further impacting the livelihood of hundreds of thousands of songwriters," BMG U.S. president of creative and marketing Laurent Hubert said in a statement on the decision.
Beyond lower royalties, music publishers and songwriters also fear that the new decision will fundamentally change the way music publishing has operated for 100 years. The DoJ's decision "is going to cause a tremendous amount of uncertainty and chaos in a marketplace that has worked well... and will adversely impact everyone in the licensing process, including PROs, licensees, music publishers and most of all songwriters, who can ill-afford to hire lawyers to figure out their rights under this inexplicable ruling," Sony/ATV chairman and CEO Martin Bandier said in a statement. "The decision raises more questions than answers." Sony/ATV has been one of two majors leading the charge to get the consent decree amended.
"We are disappointed with the DoJ’s recommendation, which after years of hard work and discussion brings us no closer to much-needed consent decree reform than when we started," BMI president and CEO Mike O’Neill said in an internal e-mail to his staff. "Instead, the DoJ chose to address only the issue of 100 percent licensing, a concept we never raised and one that the marketplace has worked out on its own over the last half-century."
At ASCAP, CEO Elizabeth Matthews, writing on the organization’s website, addressed the organization’s songwriter members. "We want you to know that while the DoJ has expressed their views, this is not the final outcome of this process. ASCAP strongly disagrees with the DoJ's position, and we are carefully considering all of our options, including potential legislative and legal remedies."
Jody Gerson, chairman and CEO of Universal Music Publishing Group, the other major publisher pushing for changes to the consent decrees, wrote in an internal email to staff obtained by Billboard that her company's management "believes that the DoJ's decision is bad for songwriters, and we are deeply disappointed. The DoJ not only declined to update consent decrees that haven't been updated in over a decade and badly need to be modernized for today's market, but they also decided that ASCAP and BMI must engage in '100 percent' licensing." She predicted that 100 percent licensing will lead to "unfair prices that do not reflect the true value of the music that our songwriters create. It will also provide a disincentive to songwriters to work with fellow writers who are signed with a different PRO."
Tim Nichols, a co-writer of Tim McGraw’s "Live Like You Were Dying" alongside Craig Wiseman, echoed Gerson's concern in a statement. Nichols writes that he and Wiseman "belong to different PROs, and if 100 percent licensing had been in effect, I’m not sure we would have written that song. You would really be stepping all over writing relationships that are based on special creative chemistry."
"This determination is completely inconsistent with the manner in which ASCAP and BMI have issued public performance licenses," writes Warner/Chappell CEO Jon Platt in a statement released today (Jul 5), "It is especially alarming that the DOJ has come to this determination despite the overwhelming concerns expressed by ASCAP, BMI, NMPA, publishers, songwriters and even the U.S. Copyright Office."
Meanwhile, National Songwriters Association president Lee Thomas Miller, in a statement, called the DoJ decision "unimaginable and the worst possible outcome" for songwriters. "Earlier this year in Washington, D.C., I explained to DoJ that our profession was already decimated, and that mandating 100 percent licensing could put the final nail in our coffin. I am stunned and sickened."
Yet not everyone is so starkly disapproving. Public Knowledge, which positions itself as an advocate for both consumers and musicians, says it is pleased with the DoJ’s stance.
"It appears that the Department has agreed with our view that antitrust protections should not be removed at a time when the music publishing industry is more concentrated than ever," says Public Knowledge’s Raza Panjwani in a statement. "The state of the marketplace, and recent bad behavior by the publishers, have made it clear that granting the music publishers the changes they requested would serve as a green light for additional abuse."
Many music licensees, like the digital streaming services, agree with the DoJ's view, arguing that the industry has been operating under 100 percent licensing all along. One streaming service executive goes so far as to say the DoJ ruling changes nothing. "As far as we are concerned, we have been operating under 100 percent licensing, because both the ASCAP and BMI license says that if you have one you can play any song in their repertoire," he says. "The license doesn’t say you can only play their share."