CMU Daily reports that The US Department Of Justice has distributed a so called Civil Investigative Demand, or CID, to the two main performing rights societies in the US music publishing domain, ASCAP and BMI, as well as the two dominant music publishers Universal and Sony/ATV/EMI.
The initial review of the publishers’ actions began with the rate trial against Pandora, one of several internet radio services that are grinding up against the majors in order to settle streaming rates. Pandora’s representatives alleged that the labels had been working together to change bylaws within ASCAP and BMI that would allow for partial withdrawals—in other words selling the rights to play all of your catalogue aside from the biggest draws, so that publishers can charge higher rates for a Rihanna than a Raekwon, for example. Judge Denise Cote agreed with Pandora in her decision.
The document request notices are part of the DoJ’s review of the consent decrees that regulate the collective licensing of song performance rights in the US and are set against a backdrop of both Universal and Sony/ATV seeking to directly licence digital services such as Pandora. A court previously ruled that, under the current consent decrees, publishers cannot just withdraw their digital rights from the collecting societies – to stop licensing Pandora through the collective licensing system the publishers would need to withdraw from the societies completely.
The DoJ’s investigation is likely to go beyond just the withdrawal of digital rights and may have a wider remit which might deliver extra benefits, giving the collecting societies even more freedom to adapt or expand. Conversely publisher believe it might also have negative affects on the US publishing sector. In particular, the DoJ looks set to consider whether there has been any collusion between the two biggest music publishers and the American societies in their attempts to control the way digital services secure song rights in the US – not least in light of comments made by Judge Denise Cote last year when considering the dispute between Pandora and ASCAP in which she talked of ‘co-ordinating’ activity having taken place between the major publishers.
Interestingly The UK’s Music Managers Forum has responded to the letter sent by Sony/ATV chief Marty Bandier to American songwriters allied to the music publisher, in which he said that complete withdrawal from the performing right collecting societies ASCAP and BMI Stateside was an option if current efforts to reform collective licensing rules were not successful. In a statement, the MMF said that it agreed with Sony/ATV that the consent decrees governing US collective licensing were in dire need of reform, and that it hoped the DoJ’s review would do so. But the trade group added that it was “alarmed at the suggestion by any music publisher, especially one with such considerable market power as Sony/ATV, that they would withdraw from the performing right organisations”.
The MMF points out that a move, by the publishers, to direct licensing, where blanket licences are required, would further complicate the music licensing eco-system. The MMF also argue that Sony/ATV may not have the right to withdraw many of the works in its catalogue written by non-US writers, because those writers have likely retained control over the allocation of their performance rights, even though the publisher shares in the revenue. The MMF is also no doubt looking at the ‘equity shares’ the major record labels have gained from licensing services such as Spotify – gains that are not shared with artistes – saying: “Writers’ contracts routinely state that they are not entitled to be paid a share of revenue that is paid as advances, lump sums or is not able to be ‘directly and identifiably’ attributed to their work. How confident can writers be that they will be paid their shares of direct licence monies?”