Sony/ATV music publishing on collective rights management rules review

Sony/ATV respectfully submits that the Consent Decrees should clarify, whether by amendment or otherwise, that each copyright owner (i.e., a music publisher) may, in its discretion, designate particular types of users or uses that the owner will authorize ASCAP or BMI (as the case may be) to include in their respective collective licenses, with the copyright owners exclusively reserving the right for themselves to license such rights to all other users or uses. ASCAP and BMI also should be required, on a nondiscriminatory basis, to accept these limited grants of public performance rights from copyright owners.

In sum, since the first consent decree was entered in 1941 against a PRO, the Department and the Court have sought to encourage direct licensing by copyright owners to improve the performance of the market. The problem is that, until recently, the costs of direct licensing of public performances were so great that the effort was largely futile. With today’s technology, however, that is no longer true in what are the most important new methods of delivering music to consumers.

Notwithstanding the considerable benefits, both for music users and music owners, provided by ASCAP and BMI in the licensing of performing rights in musical compositions, the regulation put in place to restrain the market power of the PROs has ended up significantly burdening the income payable to writers, composers and copyright owners by imposing significant costs not replicated in a free market. In addition, at least in the view of copyright owners, the rate court process has not successfully resulted in license rates and terms that realistically correspond to what would be produced in a free market. Indeed, the strictures of the Consent Decrees, which limit the differentiation in license terms, has stifled the ability of copyright owners to experiment with new delivery systems for music and to support the growth of competition in the delivery of music to consumers.

Licensing performing rights to interactive or non-interactive streaming music services or cloud music services – or, for that matter, to satellite radio or streaming music video – does not involve the costs associated with licensing and policing thousands of widely dispersed restaurants, bars, hotels, and cabarets, which necessitated the creation of the PROs. The number of technology –driven music services is small, easily identifiable, and readily reachable (and frequently of substantial magnitude), so that the costs of search-matching a new media service with the copyright owners of musical compositions – and license negotiation are manageable in the ordinary course of business.

Technology-driven music services are marketed and accessed nationally (or even internationally) over the Internet. They are readily and inexpensively identifiable by copyright owners and can be monitored for infringement through computer-driven programmatic means. Moreover, these services maintain digital data that track every song that is played, how often, by whom and when. Copyright owners can utilize these data, or can hire an administrator to utilize these data, to prepare accurate accountings to songwriters and other rightsholders. This is in stark contrast to the situation with bars, clubs and restaurants, which do not retain or provide such rich data and for which the PROs must resort to using complex, proprietary algorithms in order to estimate which songs are played and how often for the purpose of accounting and payment.

The PROs are large organizations that license a large variety of music users, have demanding oversight over their licensing, and lack flexibility in the types of licenses they are willing (and permitted) to issue. Dealing with a PRO gives the licensee only those administrative solutions that the PRO is offering. There are, however, third party services in the market that offer alternative administrative services

If copyright owners license directly, they can choose the best among the available administration solutions. Especially when these administrative solutions are outsourced, competition to provide better and more efficient administrative solutions will intensify among third-party providers as well as ASCAP and BMI (and also incentivize the PROs to improve their services to provide more cost effective administrative solutions in order to compete with new market entrants), with the result that licensees, songwriters and music publishers will all benefit from better services.

Contrary to the concerns that have been expressed by some, Sony/ ATV believes that direct licensing offers greater transparency in how royalties are calculated, collected and distributed. While there are writers and writer associations that may believe that ASCAP and BMI’s respective allocation and distribution methodologies for royalty payments are “transparent,” in reality, the methods used by ASCAP and BMI to allocate payments to the various music publishers and writers are complicated and often opaque. The “transparency” of which some writers and writer associations speak is typically the division of royalties between publisher members and songwriter members; however, this division is only a small piece of the transparency equation.

Publishers that retain the exclusive rights to license will have an important new dimension on which to compete in the signing of songwriters. Yet under the ASCAP and BMI new media licenses, songwriters receive surprisingly little even for compositions that are performed millions of times. While revenues from technology-driven music services may be comparatively small today, they are the most promising potential source of growth in the music industry as streaming music companies increasingly replaces the prior business models that have existed in the music industry for decades.

The Consent Decrees should not be amended or clarified to permit ASCAP or BMI to license any rights in musical compositions other than performing rights. Especially given the tremendous rate of change in the music business with the decline of traditional media and its replacement by streaming music services, and the extent to which the Consent Decrees impose a comprehensive regulatory regime on licensing public performance rights in musical compositions, these decrees should be reassessed regularly (at least every five years) and with public participation. To this end, the Consent Decrees should be amended to include a provision for such a reassessment.