Sky is not falling in the wake of DOJ decision on music consent decrees

The conversation over music licensing in the wake of the Department of Justice’s (DOJ) decision on the music consent decrees has become increasingly political; meaning full of outrage, personal attacks, and misleading or false information.

In just the few days since the DOJ’s announcement to close its review of the ASCAP and BMI consent decrees, there have been vicious attacks against the capable lawyers at the DOJ and the Antitrust Division’s current head Renata Hesse.

{mosads}Not only are these attacks wrong and unprofessional, they are moving the conversation further away from the simple facts of the DOJs closing statement. Those simple facts are:

  • Congress has always intended that the default rule be 100% licensing (search for “tenants in common”).
  • There is substantial evidence that is how the industry has been operating to date.

In response to BMI’s misleading statements to Judge Stanton on this topic in a pre-motion letter, the DOJ found it necessary to file its own pre-motion letter that thoroughly destroyed BMI’s arguments. The DOJ used BMI’s own statements and case law to show that BMI and ASCAP are currently required to license full compositions. The DOJ also stated that neither BMI nor ASCAP could demonstrate a reason to modify the consent decrees to allow fractional licensing.

This drama stems from a decision by the Antitrust Division to make no change to a consent decree that only governs the licensing practices of ASCAP and BMI. The DOJ did not ban fractional licensing in music industry at large. The DOJ only confirmed that ASCAP and BMI have to continue to operate under the current rules of consent decrees that they agreed to in order to continue practices that would in most industries be completely illegal.

These consent decrees exist because the DOJ and the Supreme Court have recognized that, in the music industry, these normally illegal practices also create tremendous value for all parties involved. The DOJ seriously looked at fractional licensing and determined that if the consent decrees were modified to allow it, this value would be lost. This is the same value that the Supreme Court used in determining that blanket licenses by BMI are not illegal under the antitrust laws. Meaning without this value, the legality of ASCAP and BMI could be called into question again.

This escalation into personal attacks is unusual because the DOJ’s decision to do nothing appears to have no effect on the current music licensing world. Every online music service of note has licenses with every performance rights organization, which includes ASCAP and BMI. Many also have direct licenses with publishers, meaning that every online music service should already have a license to 100% of all music that they play, multiple times. The world today is the same as the world two weeks ago, meaning there is no new incentive to end these relationships.

Despite what you may hear, the sky is not falling in the wake of the DOJ’s closure of its review of the consent decrees. The world today is largely business as usual for the music industry.

Balto is an antitrust attorney based in Washington D.C. specializing in consumer protection, intellectual property, and health care. He previously served as Policy Director at the Federal Trade Commission and as an attorney in the Justice Department’s antitrust division.


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