This article originally appeared on The Daily Caller on October 13, 2016.
Last month, a judge in the Southern District of New York overturned a Department of Justice decision that could alter consumer access to music.
The DoJ oversees the licensing practices of the two largest collectives of the music industry, also known as Performance Rights Organizations (PROs). The American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music, Inc (BMI) operate under antitrust consent decrees with the DoJ. These consent decrees allow ASCAP and BMI to operate as monopolists in exchange for certain market protections, including restraints on monopoly pricing.
ASCAP, BMI, and their largest publisher affiliates want to scale back the restrictions in the consent decrees to increase the prices they charge to those who license music — impacting everyone from local retail stores and restaurants to hotels and digital music services. ASCAP and BMI have undertaken a major lobbying campaign, asking the DoJ to tone down the anticompetitive protections in the consent decrees, which would result in businesses across America paying more for music.
In addition, ASCAP and BMI asked the DoJ to change the way music has been licensed to a “fractional licensing” system. Fractional licensing would require each business to license rights with each owner of a song. This has never been done because a business like a restaurant or coffee shop has to license millions of songs as a form of insurance against copyright infringement. Businesses are able to license millions of works, because copyright law has guaranteed that all works can be cleared through just several music collectives. Fractional licensing would upend this “one-stop shopping” approach and grind the market for music rights to a halt.
Worse yet, businesses up and down Main Street would face increased copyright infringement liability under fractional licensing. And, by giving holdup power to anyone with a stake in a song, businesses would face the added nuisance of “copyright trolls,” who could leverage infringement claims to extort higher and higher payments.
After more than two years of careful review, including dozens of submissions and meeting with stakeholders, the DoJ opted to deny a move to fractional licensing by not making any changes to the consent decrees or to the way music is licensed. The evidence was overwhelming. All market evidence, contractual agreements, conflicting testimony by ASCAP and BMI, and most importantly, long-held legal precedents underscored the need for continued market protections and maintaining the status quo in licensing practices.
After last month’s ruling by the DoJ, ASCAP and BMI immediately ran to their friends on the Hill and in the courts seeking to circumvent the DoJ’s decision.
And, in a very surprising turn of events, a judge in the Southern District of New York overturned the DoJ’s ruling on fractional licensing during a preliminary conference with little testimony. This decision, which runs counter to Supreme Court precedent, is likely to be appealed. However, in the meantime, it could actually harm many songwriters and impact the way we, as ordinary consumers, access the music we love.
Of course, ASCAP and BMI have never posed fractional licensing as a means to pad its corporate profits — BMI just recently announced record revenues, as did ASCAP this past spring. Instead, ASCAP and BMI have spun this effort as pursuing just compensation for their struggling songwriter affiliates. This of course raises another question: if ASCAP and BMI are raking in record amounts, why are the songwriters not already sharing in this windfall?
Ironically, fractional licensing could harm the very songwriters ASCAP and BMI are so graciously trying to help. If businesses were required to license with every owner of a song, wouldn’t it only make sense to license in the most cost-effective way? This means a local bar or radio station would likely opt to play only songs in which they could secure all rights in one place rather than licensing with multiple different entities. This means that overall songwriters who maintain full ownership or songwriters of a particular song who belong to the same collective will have a huge advantage in terms of royalty earnings.
If businesses are forced to pick music based upon factors like acquisition costs and infringement liability, it will also impact the music we enjoy in our daily lives. Chances are the playlists will get shorter and shorter.
This judge’s decision should be overturned, and businesses across America as well as music lovers and songwriters should hope that the DoJ moves forward with an appeal.
