In Part 1 of this article, we reviewed the history to understand why Consent Decrees were put into place for ASCAP and BMI in 1941. In a nut shell, they were voluntary settlements between the PROs (Performing Rights Organizations) and the U.S. Justice Department designed to help resolve legal disputes, and prevent monopolistic practices in licensing performances of musical compositions.
The separate Consent Decrees for ASCAP and BMI have similar intent, although the terms are indeed unique. Here are the questions we will examine in Part 2 of this article; Are these restrictions still necessary and advantageous in today’s music licensing space? Are they outdated, or do they continue to achieve their original objectives?
So what are the stipulations in the Consent Decrees? Rather than getting too deep into the weeds on all the terms, I’ll just list some of the more substantive elements. They are:
• The PROs are restricted to license and collect royalties only for performance rights, and cannot license other rights such as mechanicals, print, synchronization, etc.
• They cannot become distributors of music products.
• Their performance licenses must be on a non-exclusive basis, and they must also offer per program or per-segment licenses.
• They cannot license or collect from movie theaters where music is synchronized in the film. (By the way, the U.S. is one of the few developed countries where these motion picture performance royalties are not collected).
• They cannot discriminate terms and fees between similarly situated users of music.
• They must offer licenses for all songs they represent.
• They must maintain a certain degree of accounting transparency and provide certain data when requested.
• There are certain definitions on how they accept, maintain, and terminate members.
• Perhaps the biggest Consent Decree issue is that PROs must allow music users to perform the songs they represent upon request of a license. In the event a negotiated license between the two parties cannot be reached in a timely manner, the negotiations are sent to a “rate court” (Southern District of NY), where a judge will determine the actual fee for the license.
Consent Decrees can be helpful because they allow a music service to license performances for all songs by negotiating an agreement with the PRO, and further allow that music service to perform the songs while rates are being determined. However, in the event the two parties do not come to an agreement, the rate setting process defined in the Consent Decrees is a separate Rate Court, which can come down to one judge’s opinion of what is fair. There are even specific rules the process must follow and limited conditions of what can be taken into account as part of those proceedings.
One of the bigger points of contention in today’s marketplace is that many copyright owners believe this process has yet to establish fair rates for digital uses. And that is one reason we’ve seen various music publishers threaten to withdraw their performance rights from the PROs. Music publishers are not constrained by consent decrees in their negotiations with digital performance services, as are the PROs, and therefore the publishers believe they can—and have—negotiated better rates. The industry appears to be pushing closer to a place where the free market will decide what these rates should be.
As the licensing of digital music has gotten more complex another question looms large. Instead of interactive streaming services paying a mechanical rate to one party, and a performance rate to a another, should the PROs be allowed an “all-in” license to cover both performance and non-performance components? The Consent Decrees clearly restrict that. But should that be allowed in the future? Maybe even the near future? (Remember, SESAC, the smallest of the PROs is not under a Consent Decree).
Should PROs have more freedom in negotiating rates under a willing seller, willing buyer concept? Should restrictions be lifted to allow music performances in film to be licensed and collected from movie theaters?
Even the U.S. Copyright Office has recently asked for public comments, with the questions, “Are the consent decrees serving their intended purpose? Are the concerns that motivated the entry of these decrees still present given modern market conditions and legal developments? Are there alternatives that might be adopted?”
Watch closely. There are many who believe things need to change soon, and predict they will. What do you think?
John Barker is President & CEO of ClearBox Rights, LLC, an independent rights managements company based in Nashville, TN. He is also Chairman of the Copyright Society of the South. John publishes a blog related to songwriting, publishing and copyright issues which can be found at http://clearboxrights.wordpress.com or www.clearboxrights.com.