8:33am PT by Ed Christman, Billboard
Dept. of Justice Makes a Dramatic Change for Music Licensing Official
The Dept. of Justice's antitrust office has issued a statement explaining the reasons it believes 100 percent licensing, or "full-works licensing," is required under the consent decree. Songwriters and music publishers, as well as the U.S. Copyright Office, have voiced vehement opposition to the mandate since word of the DOJ's rule change first came down in June of last year.
Previously, songwriters and the performance rights organizations (PROs) that represent them — primarily ASCAP, BMI and SESAC — were only allowed to license the portion of a song they controlled to users, like Spotify, of those works, in what's called fractional licensing. Under the new rule, any co-author or PRO of a song can license that entire ("full") work. Digital services have countered publishers' and songwriters' oppositions to the change by saying it doesn't change in any practical way how their businesses operate.
"As our investigation proceeded," the DOJ writes in a statement released this morning, "we discovered that there was significant disagreement in the industry about what rights must be conveyed by the blanket licenses (as well as other categories of licenses) that the consent decrees require ASCAP and BMI to offer." It went on to say "Some argued that, in order to effectuate the purpose of the consent decrees, the blanket license must grant licensees (also called 'users') the right to publicly perform all songs in the ASCAP and BMI repertories. Others believe that the blanket licenses offered by ASCAP and BMI instead confer only rights to the fractional interests in songs owned by ASCAP's and BMI's members and that music users must obtain separate licenses to the remaining fractional interests before playing the songs."
In the end, the DOJ concluded only full-work licenses could fulfill the meaning and purpose of the consent decrees. "We think the evidence favors the full-work side," the DOJ said.
As for fears that licensees would shop for rate discounts, the DOJ said, "In the unlikely event that a user obtains a license from only one PRO, that PRO would have reason to increase the rate for the license to account for the full share of all the songs" it oversees.
Regarding its interpretation that the consent decree requires ASCAP and BMI to accept full-works licensing, DOJ says it wrestled with whether the consent decrees imposed in 1941 continue to serve the purpose for which they were put in place, concluding that the consent decrees should remain in place. But it believes that the protections provided by the consent decrees could be addressed through a legislative solution that would also bring performance rights licensing under a similar regulatory umbrella.
"The [Antitrust] Division encourages the development of a comprehensive legislative solution that ensures a competitive marketplace and obviates the need for continued Division oversight of the PROs," it concluded.
UPDATE: BMI quickly announced that it was taking legal action to challenge the 100 percent licensing decision. The PRO has sent a letter to U.S. District Court Judge Louis Stanton requesting a pre-motion conference.
This article first appeared on Billboard.com.