The recent unprecedented growth in the revenues of digital media services has prompted major music publishers, such as Sony, Universal and EMI, to consider licensing digital services directly, while leaving the traditional forms of music exploitation to be administered by PROs. Being free from extra regulations that come with collective licensing would strengthen the bargaining position of the publishers and would allow them to negotiate higher royalties with digital music platforms. The publishers are now warning that if the consent decrees are not modified to allow them to partially withdraw their rights, they would leave ASCAP and BMI altogether. This is a cause for concern for PROs, as complete resignation by major publishers could undermine the viability of the entire US collective licensing regime.

As part of the present DOJ review, over 240 organizations and individuals have submitted in relation to potential modifications to the consent decrees. Predictably, the partial rights withdrawal option is strongly supported by PROs and major publishers. However, it is met with vocal opposition from numerous other parties. Music users, such as Netflix and Pandora, argue that allowing major publishers to licence rights directly would result in hold-ups, where music users would be forced to choose between paying higher rates, not being able to play the vast majority of popular music held in major publishers’ repertoires, or face the threat of copyright infringement liability.

Songwriters and independent music publishers argue that allowing partial rights withdrawals and direct licensing by publishers would result in loss of transparency, legal recourse and stronger bargaining position they enjoy under the PRO licensing structure. In addition, authors argue that while under PRO administration all royalties are split 50/50 between writers and publishers, it is questionable whether writers would continue receiving fair compensation once publishers start collecting the writers’ share under direct licences.

In general, most parties, except for the PROs and the major publishers, are of the opinion that the consent decrees are needed today more than ever to counteract the increased market concentration and the power imbalance in the music publishing industry.

Although it cannot be predicted with certainty what the DOJ’s final decision would look like, it has been that the department has expressed preference for allowing partial rights withdrawals. It is also unclear when the review will be completed. The DOJ issued a for public comments, now in relation to PRO licensing of jointly owned works, with the deadline of November 20th. Once the review is completed, the proposed modifications to the decrees would have to be approved by the same ASCAP and BMI rate court judges who prohibited partial rights withdrawals by publishers under the current consent decrees. This delay in the completion of the review and the uncertainty as to its outcome is a cause for concern for music creators, rights users and copyright collectives worldwide, who are left guessing what their relationships with ASCAP and BMI will look like in the near future.

Alexandra Grishanova is a JD Candidate at Osgoode Hall Law School and is enrolled in Osgoode’s Intellectual Property Law Intensive Program. As part of the program requirements, students were asked to write a blog on a topic of their choice.

[1] Broadcast Music Inc v Pandora, (2013) 2014 Copr L Dec P 30, 536 (US Dist Ct, S D NY); Pandora Media v American Soc of Composers, Authors and Publishers, (2015) 785 F. 3d 73. (US Ct App, 2d Cir).

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If you believe as I do that "voluntary collective licensing" is neither voluntary, collective nor a license, you will be interested in reading "," a very well-reasoned article by Bennett Lincoff.  Bennett is a distinguished member of the music bar, and illuminates several key flaws in the Choruss house of cards.  The article may be of particular interest to Canadians as there are striking similarities between the Electronic Frontier Foundation's "white paper" on voluntary collective licensing, Choruss and the proposal of the Songwriters Association of Canada.

Choruss is a very U.S.-centric idea.  Applying the scheme in the U.S. will be very difficult, but it will be near impossible to accomplish internationally.  Because Choruss has repeatedly said it will not block and filter, there is no way that Choruss can distinguish between U.S. repertoire, French repertoire, Canadian repertoire, or any repertoire.  It will essentially force international rights holders to participate in the scheme whether they like it or not.

I would add one thing to Bennett's article.  We have an agency in the US that licenses sound recordings online.  It's called SoundExchange.  The monies collected (by statute or contract) get paid directly to artists.  It's supervised by a joint board of stakeholders and is under heavy scrutiny.  I have to wonder if the same would happen with the Choruss or if the monies collected by Choruss would be paid to the sound recording copyright owners and applied to unrecouped balances.  This gets you to the same place more or less as Bennett gets to in his questioning of the wisdom of the covenant not to sue, and is an equally likely result.  So even if it turns out that Bennett is wrong in practice (although he is certainly right on the facts and the law), I think that it gets you to the exact same place.

I would also clarify one point that Bennett makes in his article.  One could come away from the piece with the idea that the major labels have never licensed for p2p.  That's not true.  I know because I did the deals.  It was very difficult to get the majors to agree a deal for p2p, but it was impossible to get the p2ps to take a license pre-Grokster and most of them preferred to shut down or become ghost ships rather than take a license post-Grokster, with a couple notable exceptions that are currently in litigation or being prosecuted.  So that opportunity passed.

And here we are.

Opinions expressed are those of the author and should not be attributed to anyone else.  Copyright 2008 Christian L. Castle. 

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