Music Licensing: The ASCAP and BMI Consent Decrees

Music Licensing: The ASCAP and BMI Consent Decrees

March 17, 2020
Music Licensing: The ASCAP and BMI Consent Decrees
On June 5, 2019, the U.S. Department of Justice (DOJ)
holder’s permission. Thus, any entity or venue seeking to
announced that it was opening a review of two consent
perform musical works publicly generally needs to seek
decrees that play a critical role in the music industry. The
permission (i.e., a license) from songwriters and/or
decrees regulate the copyright licensing activities of the two
publishers, and typically pays them a fee (i.e., a royalty).
largest U.S. performing rights organizations (PROs): the
American Society of Composers, Authors and Publishers
Performing Rights Organizations
(ASCAP) and Broadcast Music, Inc. (BMI). DOJ is to
Congress first gave songwriters the exclusive right to grant
consider whether or not to pursue modifications to, or
permission for and collect money from public performances
termination of, the consent decrees. The U.S. District Court
in 1897. However, tracking each copyright holder and each
for the Southern District of New York (SDNY) would need
public performance was challenging. To address such
to approve any proposed changes to the consent decrees.
logistical difficulties, songwriters and publishers formed
PROs and assigned PROs their public performance rights.
PROs enable lyricists and composers (referred to
The PROs, in turn, issue public performance licenses on
collectively here as “songwriters”) and music publishers to
behalf of their member songwriters and publishers.
collect royalties when copyrighted musical works are
Licensees generally obtain a blanket license, which allows
performed publicly, that is, when music is played on the
them to perform publicly any of the musical works in a
radio, through a streaming service, or in a nonprivate
PRO’s catalog for a flat fee or a percentage of total
setting. As a result of antitrust lawsuits, however, ASCAP
revenues. After charging administrative fees, PROs split the
and BMI have long operated under consent decrees with
public performance royalties they collect among members
DOJ, which constrain their activities. Changes to or
based on play frequency, among other factors.
termination of the consent decrees could significantly affect
the amount of money that radio stations, orchestras,
SESAC and GMR. Two PROs active in the United States
restaurants, cafes, clubs, and other businesses pay to
are SESAC (formerly the Society of European Stage
perform musical works publicly, as well as the amount of
Authors and Composers), founded in 1930, and Global
money that songwriters and publishers receive for their
Music Rights (GMR), founded in 2013. In part because
works.
they are not bound by consent decrees, SESAC and GMR
differ from ASCAP and BMI in several ways. SESAC and
Copyright in Musical Works
GMR operate as for-profit corporations, and membership is
Copyright attaches to a work upon its creation and fixation
by invitation only. SESAC administers other copyrights in
in some tangible medium of expression, such as in a score
addition to public performance licenses.
or a digital or analog recording. While copyright exists
from the moment a person creates and fixes a work,
An organization representing broadcast radio stations, the
copyright holders must register their works with the U.S.
Radio Music License Committee (RMLC), has asserted that
Copyright Office to bring a lawsuit for infringement. For
SESAC and GMR have each violated antitrust laws. In
works created today, copyright generally lasts until 70 years
2012, RMLC sued SESAC, claiming that it charged rates
after the death of the work’s author.
disproportionate to the number of works it licenses. RMLC
settled its lawsuit with SESAC in July 2015, and the parties
Two distinct types of copyrights applicable to music are
agreed to binding arbitration in the event they could not
available under the law. The copyright in a musical work
agree to a royalty rate. In 2016, RMLC sued GMR, alleging
covers the creativity of the music’s composer and lyrics’
that licensing its catalog of songs on an all-or-nothing basis
writer. The copyright in a sound recording covers the work
was an abuse of market power. GMR countersued RMLC,
of the performers, producers, and engineers of a particular
alleging that RMLC was a buyer’s cartel, and contending
recording. For more information, see CRS Report R43984,
that its representation of virtually all commercial radio
Money for Something: Music Licensing in the 21st Century,
stations was anticompetitive. The lawsuits between GMR
by Dana A. Scherer.
and RMLC are ongoing. A federal judge in California is
overseeing these lawsuits.
Many songwriters work with music publishers and often
assign their copyrights to them. In turn, the publishers pay
ASCAP and BMI. Songwriters formed ASCAP, the first
songwriters an advance against future royalty collections
U.S. PRO, in 1914. To strengthen their bargaining power
and promote the songs. Under the law, copyright holders
vis-à-vis ASCAP, broadcasters in 1939 founded and
have exclusive rights to reproduce their work, distribute it,
financed a competing PRO, BMI. ASCAP and BMI now
and perform it publicly. The public performance right
handle public performance rights for most musical works.
prohibits others from streaming, broadcasting, or playing a
Both are nonprofit organizations. Although publishers may
musical work for public listening without the copyright
affiliate with multiple PROs, each songwriter may affiliate
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Music Licensing: The ASCAP and BMI Consent Decrees
with only one. Thus, a song with more than one songwriter
and BMI on the appropriate royalty, it may petition the rate
may appear in the catalogs of multiple PROs. For example,
court to set a reasonable fee.
former Beatle Paul McCartney is an ASCAP member,
while the estate of John Lennon, with whom McCartney
DOJ’s Review of the Consent Decrees
wrote many songs jointly, is a GMR member. Whether the
DOJ has periodically reviewed the consent decrees since
consent decrees require that the granting of public
1941. The parties last amended the ASCAP consent decree
performance rights to such “split works” requires the
in 2001 and the BMI consent decree in 1994, in both cases
approval of all parties concerned, not just of a single PRO,
with the approval of the rate court. In June 2014, DOJ
has been a matter of controversy.
announced that it would explore modifications to the
consent decrees after ASCAP and BMI solicited a review.
Figure 1. Payments to ASCAP and BMI for Public
On August 4, 2016, DOJ completed its review and decided
Performance Licenses
not to seek termination or modification of the consent
(Figures in $ billions)
decrees. However, at the conclusion of its review DOJ
announced that, pursuant to its interpretation, the consent
decrees required the two PROs to issue 100% licenses to all
“split works” in their catalogs. If this interpretation had
taken effect, either ASCAP or BMI could have granted
rights to use a song, even if some of the songwriters or
publishers who owned performance rights were members of
another PRO. In September 2016, SDNY ruled that
contrary to DOJ’s interpretation, BMI’s consent decree
permits “fractional licensing,” that is, requiring a user to
obtain a license from each copyright owner. The U.S. Court
of Appeals for the Second Circuit upheld that decision in
December 2017.

Source: ASCAP and BMI annual reports.
The current review of the ASCAP and BMI consent
Notes: ASCAP and BMI collect royalties during their fiscal years
decrees, which began in June 2019, seeks public comment
(ending December 31 and June 30, respectively).
on whether the consent decrees continue to serve the public
interest; whether modifications to the consent decrees are
The ASCAP and BMI Consent Decrees
needed to enhance competition or efficiency; whether
After their formation, both ASCAP and BMI offered only
termination of the consent decrees would serve the public
blanket licenses covering all songs in their respective
interest; how a termination should proceed; and whether
catalogs. Thus, to license one song in ASCAP’s or BMI’s
differences between the ASCAP and BMI consent decrees,
catalog, a user had to purchase a “blanket license” for the
or differences between ASCAP and BMI and the two PROs
entire catalog. In addition, both PROs forbade members
not subject to consent decrees, adversely affect competition.
from entering into direct licensing agreements with music
DOJ has received nearly 900 comments from the public on
users.
these issues; its review is ongoing.
Beginning in the 1930s, DOJ investigated and eventually
PROs and the Music Modernization Act
sued ASCAP and BMI for anticompetitive business
The 2018 Orrin G. Hatch-Bob Goodlatte Music
practices. DOJ alleged that the practice of offering only
Modernization Act (MMA; P.L. 115-264) contains several
blanket licenses illegally conditioned the sale of one good
provisions giving Congress greater oversight of DOJ with
on the purchase of another (a practice known as “tying”),
respect to its review of the consent decrees. First, the MMA
and constituted price-fixing in violation of Section 1 of the
requires DOJ to, upon request, brief any Member of the
Sherman Act (15 U.S.C. §1), which prohibits agreements
House and Senate Judiciary Committees regarding the
that unreasonably restrict competition. In 1941, both
status of any PRO consent decree review. Second, the
ASCAP and BMI settled these cases, entering into consent
MMA requires that DOJ, before seeking to terminate a
decrees with DOJ. These consent decrees attempt to
consent decree, notify the Judiciary Committee
balance the efficiencies gained by PROs’ collective
chairpersons and ranking members. The notification must
licensing against promoting free and fair competition.
include a written report on DOJ’s process, the public
The ASCAP and BMI consent decrees are separate
comments it received, and information regarding the impact
agreements, but share some basic features. First, they
of the proposed termination on the market for licensing
require that ASCAP and BMI obtain only the nonexclusive
public performances. The Senate Judiciary Committee
right to license musical performances; that is, songwriters
report on the MMA expressed “concern that terminating the
retain the right to license their public performance rights
ASCAP and BMI decrees without a clear alternative
individually. Second, ASCAP and BMI must grant a license
framework in place would result in serious disruption in the
to any applicant on terms equal to similarly situated
marketplace, harming creators, copyright owners, licensees,
licensees, and accept as a member any songwriter who
and consumers.”
meets minimum requirements. Under the consent decrees,
Kevin J. Hickey, Legislative Attorney
ASCAP and BMI are subject to oversight by the SDNY,
Dana A. Scherer, Specialist in Telecommunications Policy
sometimes called the “rate court” in this context. If a
IF11463
potential licensee cannot reach an agreement with ASCAP
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Music Licensing: The ASCAP and BMI Consent Decrees

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