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Public comment by National Cable & Telecommunications Association on review of collective rights management rules

From the perspective of providers of audio-visual television programming, the Consent Decrees continue to serve very important purposes, acting as safeguards to constrain ASCAP’s and BMI’s substantial market leverage, while providing a framework that facilitates licenses for program providers and fair compensation for music creators.

Without the protections contained in the Consent Decrees, ASCAP and BMI would be in a position to extract excessive rates from licensees through the threat of copyright infringement litigation. The Consent Decrees also reduce what might otherwise be sizeable transaction costs for all parties and reduced availability of both programming and music.

The necessity for the Consent Decrees is particularly important in order to facilitate the public performance of programming that incorporates pre-recorded music for which the grant of blanket licenses minimizes the opportunity for “holding up” users who wish to utilize the programming. In large part because of the “music in the can” problem, cable program networks, since the advent of cable television, have relied upon the blanket license framework in the ASCAP/BMI Consent Decrees in connection with such programming.

The Decrees provide a number of other protections to users, including: a) the requirement that ASCAP and BMI grant licenses to applicants upon written request; b) the right to secure a “reasonable” fee determination by the federal court overseeing the Decrees in the event the user and ASCAP/BMI cannot reach a negotiated resolution; c) the right to obtain a ”through to the audience” license covering all distribution utilized by an originating service provider through to the end user; d) the requirement that ASCAP/BMI offer a license at a comparable fee to all similarly situated music users; e) the requirement that ASCAP/BMI provide a per-program or per-segment license option as a check on market power; and f) the requirement that ASCAP/BMI may only secure a non-exclusive grant of rights from its members, which enables users to secure direct licenses from individual ASCAP/BMI members outside of the blanket licenses.

Performance rights are often licensed by different parties than synchronization and other rights, and there is little transparency in the system. Even one song often is controlled by multiple composition rights holders, the performance rights for which are administered by multiple publishers and performance rights organization (“PROs”).

The rights to receive royalties from songs may be tied up in estates or disputed. There is no technical means to locate the owner of performance rights in pre-existing content that is licensed to NCTA’s members for exhibition. Doing away with the existing Consent Decree licensing structure after operating under it from the very beginning of the television industry would therefore be unwarranted, inefficient, and extremely expensive.

With respect to audio-visual works, and “music in the can,” any attempt to withdraw performance rights from ASCAP and BMI should be considered a violation of the Consent Decrees and a misuse of market power in violation of the antitrust laws. It should not be countenanced in any way. If any amendments to the Consent Decree are contemplated or proposed, affirmative steps should be taken to protect against any attempt to misuse market power associated with the decades of previously created programming with “music in the can.” Partial withdrawals would need to be structured in a way to avoid accumulation of market power by market participants without the protections afforded by the Consent Decrees.

There is no any benefit to audio-video content producers from permitting ASCAP or BMI to license additional rights. Although, in theory, ASCAP and BMI rights are nonexclusive, in practice PRO members typically do not license performance rights to their works at the time synchronization rights are acquired. The net result would be a transfer from a system in which competition is functioning to one in which prices would be set through collective negotiations by two (or more) large organizations with monopoly power, subject to regulation by courts and the government. The net result would likely be a significant reduction of competition and extend the failures of the performance rights system to new markets. This extension would have all of the effects of monopoly that the antitrust laws are designed to prevent-inefficiency, higher prices, lower output, and less innovation.

The Consent Decrees should provide explicitly that when a user applies for a license under the provisions of the ASCAP and BMI Decrees, the user obtains a license to all rights then currently in the catalogues of the PROs and its members and all rights subsequently added to these catalogues for the course of the license. Doing so would prevent publishers from using withdrawals to “punish” entities that do not capitulate to ASCAP/BMI license demands, or to adversely affect licensees while negotiations or rate-setting litigation is pending.

ASCAP and BMI should be required to publish their methodologies for determining music usage, the content of their catalogues, the method of setting rates for users and for songwriters, and, where ASCAP/BMI licenses users on a percentage-of-revenue or other formulaic basis, the rates at which it has done so. The lack of transparency in the current system is a significant impediment to concluding transactions; creating greater transparency in these respects would have significant efficiency benefits.

The existing ASCAP and BMI song databases are fundamentally inadequate for users seeking to identify, for example, the songs licensable on a publisher-by-publisher or writer-by-writer basis. ASCAP and BMI should be required to identify, with specificity, all the songs which they are able to license, searchable by publisher and writer, as well as by title of the audio-visual work, including information regarding co-ownership, along with (where available) corresponding performing artist and sound recording information.

On a practical level, ASCAP and BMI would be heavily advantaged by an arbitration procedure where they are aware of the array of licenses and benchmarks available, but the licensee is not. Therefore, users would have a huge information deficit, putting them at a significant disadvantage in an arbitration setting.