Summarizing the ASCAP and BMI consent decrees
As you have been reading in plenty of places (including this blog), the Music Modernization Act of 2018 and the reforms put into place by it will continue to have a positive impact on those who create music. In recent months, discussion regarding possible termination of the ASCAP and BMI federal consent decrees has begun. This was noted in an article by Nate Rau in The Tennessean on March 3, 2019.
So just exactly what are these consent decrees? And why should we even want to see them terminated? The answer lies in monopoly and price-fixing litigation initiated by the United States Department of Justice over 80 years ago in the Southern District court of New York. In 1941, agreed orders, also known as decrees, were presented to and approved by the court. ASCAP has the most recent modified decree on its web site. This was signed in 2001. The BMI decree was amended last in 1994. If you can find the BMI decree, please send me the link.
Executives from both ASCAP and BMI have declared that the consent decrees, even in modified form, are outdated and make licensing music cumbersome for writers and publishers. But in my view, adjustments to the decrees are more likely to occur than complete termination.
One major item of discussion in the ongoing dialogue regarding the consent decrees is "full work" versus "fractional" licensing. In a "full work" situation, each performing rights organization ("PRO") may offer non-exclusive licenses to each work in its repertory, even if all authors are not affiliated with the PRO. In a "fractional" situation, each PRO only licenses the respective interest it has in a certain work. A licensee user would then be forced to obtain a license from other PROs representing co-owners before performing the work.
Based on past practices, the discussion about "full work" versus "fractional" licensing was moot because music users paid ASCAP, BMI, SESAC, or a combination of these based on the fractional market share. If one of the authors was, for instance, an ASCAP affiliate, the situation could easily be remedied by simply obtaining a license from a second author's PRO, whether SESAC or BMI.
As you probably realize, many song compositions have multiple authors. Pursuant to copyright law, such authors are considered as "tenants-in-common". Each owner has the right to grant a nonexclusive license to perform the entire work without the consent of co-owners as long as each co-owner is paid his or her respective pro-rata share of royalty proceeds.
A 2016 review by the Antitrust Division of the U.S. Department of Justice concluded that the consent decrees require full work licensing and allow users to obtain a license from a single PRO that would allow a user to publicly perform any song in the respective repertory without risking copyright infringement.
A 1979 U.S. Supreme Court ruling explained the benefit of the blanket license that BMI and ASCAP issue to many bars, restaurants, and venues around the country. In Broadcast Music, Inc. vs. CBS, Inc., the high court noted that a blanket license allows "immediate use" of compositions "without the delay of prior individual negotiations". The blanket license is a key component of the PRO role in the royalty process, and most industry insiders agree that all PROs continue to be vital to the business.
Other points of the decrees:
In my view, many of the key points of the decrees promote fairness in the licensing and royalty process and must be left intact. Adjustment, not termination, is the best way to proceed.
So just exactly what are these consent decrees? And why should we even want to see them terminated? The answer lies in monopoly and price-fixing litigation initiated by the United States Department of Justice over 80 years ago in the Southern District court of New York. In 1941, agreed orders, also known as decrees, were presented to and approved by the court. ASCAP has the most recent modified decree on its web site. This was signed in 2001. The BMI decree was amended last in 1994. If you can find the BMI decree, please send me the link.
Executives from both ASCAP and BMI have declared that the consent decrees, even in modified form, are outdated and make licensing music cumbersome for writers and publishers. But in my view, adjustments to the decrees are more likely to occur than complete termination.
One major item of discussion in the ongoing dialogue regarding the consent decrees is "full work" versus "fractional" licensing. In a "full work" situation, each performing rights organization ("PRO") may offer non-exclusive licenses to each work in its repertory, even if all authors are not affiliated with the PRO. In a "fractional" situation, each PRO only licenses the respective interest it has in a certain work. A licensee user would then be forced to obtain a license from other PROs representing co-owners before performing the work.
Based on past practices, the discussion about "full work" versus "fractional" licensing was moot because music users paid ASCAP, BMI, SESAC, or a combination of these based on the fractional market share. If one of the authors was, for instance, an ASCAP affiliate, the situation could easily be remedied by simply obtaining a license from a second author's PRO, whether SESAC or BMI.
As you probably realize, many song compositions have multiple authors. Pursuant to copyright law, such authors are considered as "tenants-in-common". Each owner has the right to grant a nonexclusive license to perform the entire work without the consent of co-owners as long as each co-owner is paid his or her respective pro-rata share of royalty proceeds.
A 2016 review by the Antitrust Division of the U.S. Department of Justice concluded that the consent decrees require full work licensing and allow users to obtain a license from a single PRO that would allow a user to publicly perform any song in the respective repertory without risking copyright infringement.
A 1979 U.S. Supreme Court ruling explained the benefit of the blanket license that BMI and ASCAP issue to many bars, restaurants, and venues around the country. In Broadcast Music, Inc. vs. CBS, Inc., the high court noted that a blanket license allows "immediate use" of compositions "without the delay of prior individual negotiations". The blanket license is a key component of the PRO role in the royalty process, and most industry insiders agree that all PROs continue to be vital to the business.
Other points of the decrees:
- PROs may not hold or license any rights in compositions other than the right to publicly perform them.
- PROs may not restrict the right of their members to license their compositions themselves or through another agent or organization.
- No granting of rights for over five years' time.
- No negotiation with, enforcement, or collection of funds from a movie theater.
- No license restrictions designed to obtain additional fees for the purpose of fixing or regulating such fees.
- PROs must issue a "through to the audience" license to broadcasters, online users, and other services that transmit content to other users.
- PROs must issue blanket licenses upon written request.
- Per program and per segment licenses must be issued upon request to cover incidental uses of music.
- Any writer who has had one work regularly published and any publisher whose work has been used or distributed for at least a year must be admitted to PRO membership.
- Time limits and requirement in writing for the determination of a reasonable fee for a requested license or a request by the PRO to the user for information required to quote a reasonable fee for the requested license.
In my view, many of the key points of the decrees promote fairness in the licensing and royalty process and must be left intact. Adjustment, not termination, is the best way to proceed.
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