A nearly 80-year era in the financial relationship between musicians and the listening public will continue following a late Trump administration decision not to seek changes to consent decrees that regulate the country’s two largest performance rights organizations. Also continuing is a years-long debate about whether the system in use since 1941 to assure universal access to blanket copyright licenses for millions of songs best serves both artists and consumers of musical entertainment.
The Department of Justice announced on Jan. 15 that it would not seek to modify or cancel the accords that constrain the economic power of the American Society of Composers, Authors and Publishers and Broadcast Music, Inc., which together control about 90% of the U.S. market. ASCAP’s catalog includes more than 10 million musical works, while BMI controls licensing for more than 12 million songs. “There is significant reliance on the decrees within the licensee community,” said Makan Delrahim, the former U.S. assistant attorney general for antitrust, during a webinar organized by Vanderbilt Law School. “Throughout the [antitrust] Division’s investigation, many licensees expressed the view that the decrees are largely working.”
Performance Rights Organizations collect royalties on the performance of copyrighted works by selling licenses to individuals or organizations who want to perform the works in public or broadcast them or who sells or streams digital music. PROs then distribute the performance royalties to copyright owners.
“Songwriters and composers have benefited from the organizations’ existence “because those who performed copyrighted music for profit were so numerous and widespread, and most performances so fleeting, that, as a practical matter, it was impossible for the many individual copyright owners to negotiate with and license the users and to detect unauthorized uses,” wrote Justice Byron White in a 1979 U.S. Supreme Court decision. Under the ASCAP and BMI accords, both PROs must offer licenses to any musical composition in their catalogs to any requester in exchange for either a negotiated fee or compensation determined by a federal judge.
The PROs provide compensation to “a whole bunch of musicians in one fell swoop instead of negotiating a separate copyright license” with every singer or songwriter whenever someone wishes to play a song, as John Francis, an instructor of antitrust law at the University of Colorado Law School and of counsel at Davis Graham & Stubbs, described their role. Absent antitrust oversight, the two leviathan organizations can fix prices for both licensees and royalty payments for copyright owners because they have monopoly power. The covenants resulted from two antitrust lawsuits filed by President Franklin Roosevelt’s administration against ASCAP and BMI for doing just that.
Delrahim acknowledged the continuing role of the government’s settlement contracts with ASCAP and BMI in protecting consumers from the risks that ASCAP’s and BMI’s market dominance create. “The crux of the decrees is to encourage competition,” he said, while also highlighting flaws in both edicts. “First and foremost,” Delrahim said, is their senectitude; when first adopted, “most Americans listened to music through the radio or on phonograph players. There were no cassette tapes, no CDs. The term ‘digital streaming’ would have been complete gibberish.” The former antitrust chief noted that the accords do not comport with contemporary listening habits and that they are inflexible, “locking in existing practices,” which prevent either PRO from “experimenting with innovative licensing terms to assess whether new or different terms would foster competition.”
ASCAP and BMI cited those criticisms and heralded the value of PRO services in a joint statement that lamented the DOJ decision to retain the decrees with no changes. “While we were disappointed that no action was taken, we are encouraged to see how the DOJ’s approach to these issues has evolved,” wrote ASCAP chief executive officer Elizabeth Matthews and BMI president and CEO Mike O’Neill. “Songwriters are the backbone of the music marketplace and must be paid fairly; blanket licensing is incredibly efficient; ASCAP and BMI are innovating to serve the needs of the industry; greater competition and not compulsory licensing is the answer; and the value of music is best decided in a free market.” Both organizations had insisted in a February 2019 statement that abandoning the court-enforced agreements would be the best way to help musicians. “We believe that a free market with less government regulation is hands down the best way for music creators to be rewarded for their hard work and intellectual property,” they said.
The MIC coalition, an alliance of companies that provide musical entertainment in public diners, pubs, inns and shops, and the Digital Music Association, on the other hand, welcomed Delrahim’s decision. Both had advocated for retention of the compacts. Garrett Levin, CEO of DiMA, argued in Billboard magazine last year that the ASCAP and BMI decrees have fostered the growth of a multi-company digital music industry that now serves about 100 million paid subscribers. “The critical antitrust protections afforded by the consent decrees have allowed collective licensing of public performance rights to be one of the stable pillars underpinning the growth of the modern music business,” Levin wrote. The MIC coalition, meanwhile, has expressed fear that abandonment of the pacts would risk reduced access to music in public venues. “The modification, elimination or even the possible sunset of the decrees at the present time would lead to chaos for the entire marketplace,” the group said in a June 2019 statement.
The ASCAP deal to end the New Deal-era antitrust case was last modified in 2001. BMI’s agreement with the U.S. government saw its last revision in 1994. The Department of Justice had announced its intent to begin its most recent review of the two decrees in June 2019. Other recent examinations of the conventions had occurred in 2014 and 2015.
A third PRO, the Society of European Stage Authors and Composers, is the only for-profit entity in the “big three” PROs and handles licensing of about one million compositions. Its licensing rates are regulated by a settlement agreement reached in a private antitrust case filed in 2012 by a coalition of most U.S. radio stations.
— Hank Lacey