The Justice Department announced this week that it will review the regulatory agreements created in 1941 that govern ASCAP and BMI. It is likely that, as a result, a lobbying fight will surge between technology giants like Pandora and Google against music companies and songwriter groups. If changes to the regulatory agreements are not made, major music publishers, including Sony/ATV and Universal, may withdraw from ASCAP and BMI.
As explained in the Complete Music Update, “In the U.S., ASCAP and BMI are governed in no small part by their ‘consent decrees,’ which arguably put more restrictions on the two societies than many of their counterparts around the world. And those restrictions have caused problems for the big music publishers in recent months as they seek to revamp the way they work with digital services.”
These 73-year-old consent decrees require ASCAP and BMI to supply licenses to music outlets upon request. If the two parties don’t agree on a rate for the licenses, federal judges decide.
“The Justice Department’s review calls for a 60-day period for public comments about the consent decrees. The department could then recommend changes to regulation, which would be reviewed by judges in the United States District Court for the Southern District of New York, in Manhattan,” reports The New York Times.
In the Fall of 2012, Pandora began litigation against ASCAP in hopes of decreased rate for public performance licenses. As a result, ASCAP and BMI are using the review to ask for more flexibility in licensing, along with the replacement of court processes with arbitration.
In March, in response to Pandora’s fight to seek a lower rate for public performance licenses, ASCAP released a statement explaining that, “ASCAP will continue to be on the frontlines in the fight for fair compensation for songwriters and composers in the digital age.”
“The fact is, streaming is growing more and more popular — and so is the value of music on that platform… Perhaps the biggest takeaway from this rate court proceeding, given the contrary views as to appropriate benchmarks and the extraordinary cost to both sides, is a recognition that we need to take a fresh look at the system that regulates music licensing, including the outdated ASCAP consent decree, to make sure it reflects the realities of today’s music marketplace and consumer behavior.”
“The review process may serve to wring more money from digital radio services, but it will not generate nearly enough revenue to replace those lost CD sales — though it could simply drive some innovative music companies out of business altogether,” suggests GigaOM. “A better approach would be for Congress to consider leveling the royalty radio rates across platforms – terrestrial, satellite and Internet — in a way that supports both musicians and innovation.”