Department of Justice Revisits 1941 Music-Licensing Rules

The Department of Justice will soon ask for public input on the status of two legal agreements that have been the foundation of music licensing since 1941, said sources. Advocates of overhauling the rules said that artists are harmed, earning less in the digital age. Those who believe the regulations should stay in place counter that the rules have created a stable marketplace. The review of these music licensing rules comes as the DOJ revisits consent decrees written decades ago for several different industries.

The Wall Street Journal reports that, “staffers for Senate Judiciary Committee Chairman Lindsey Graham (R-South Carolina) are planning a series of meetings … with stakeholders to discuss a possible legislative effort to create a new licensing system that could serve as a replacement.”

The current rules “apply to the American Society of Composers, Authors and Publishers [ASCAP] and to Broadcast Music Inc. [BMI], the two most dominant performance-rights organizations” that license about 90 percent of the music in the U.S. on behalf of songwriters, composers and publishers. That near-monopoly “has raised concerns about their power to suppress competition.”

The DOJ sued the groups many decades ago, requiring them to “make their full portfolios available and established so-called rate courts in Manhattan to settle licensing disputes.” But “some songwriters and music publishers, said the agreements no longer make sense and result in them receiving smaller payments than what they might obtain in a free-market negotiation.”

The beneficiaries of the status quo, they argue, are the large streaming music companies. Music publishers also “object to a provision of the consent decrees that prevents them from partially withdrawing their rights from ASCAP or BMI to negotiate their own digital music rights directly with online services.”

ASCAP stated that, “its goal in the government’s decree-review process would be to identify changes that could benefit copyright holders and licensees to allow for innovation and an efficient marketplace.” Among those in favor of maintaining the rules are the member of the MIC Coalition, which includes “broadcasters, streaming services, restaurants, bars, hotels and other venues that play music.”

For its part, however, the DOJ has “signaled it believes many of its decades-old antitrust decrees are outdated and ought to be wiped out, or at least modernized.” The DOJ is also considering a consent decree “that has governed movie distribution for 70 years.” “We have been in discussions over the past year with stakeholders in the nearly 1,300 outstanding antitrust division consent decrees, including the ones involving the music industry,” said Justice Department spokesman Jeremy Edwards.

The Music Modernization Act, which was passed last year, “addressed related industry issues and revamped the music-licensing system around royalties that are paid to songwriters for the right to reproduce recordings of their compositions.”