United States: The Future Of PRO's (Performing Rights Organizations) – ASCAP, BMI And SESAC

Historically, Performing Rights Organizations (PRO's) ASCAP, BMI and SESAC have collected and distributed royalty revenues solely from the performance of musical compositions in the United States; however, very recently, SESAC has purchased the Harry Fox Agency – the leading United States mechanical rights organization. If SESAC has now become the only music rights organization that can issue singular licenses for both the performance and mechanical rights associated with musical compositions, what does the future hold for the remaining PRO's – ASCAP and BMI ? What advantage does SESAC now have in the modern digital music and streaming era – how are ASCAP and BMI going to effectively compete for publisher and creator members?

The answers are very unclear. "SESAC's acquisition of HFA (the Harry Fox Agency) is part of a previously announced strategy...to pursue a simplified and more efficient, multi-right, multi-territory licensing model .... The transaction enables SESAC to enhance value by offering music streaming and other digital platforms greater efficiency and transparency in the music licensing process, thereby delivering better monetization outcomes for its affiliated writer and publisher clients." SESAC News (7/7/2015) ASCAP and BMI undeniably desire a similar strategy to SESAC but, unlike SESAC, their hands are tied under antiquated Consent Decrees originally entered in 1941. United States v. ASCAP, 41 Civ. 1395 (S.D.N.Y.) and United v. BMI, 64 Civ. 3787 (S.D.N.Y). Since the entry and subsequent amendments to the Consent Decrees, immense technological transformations have undoubtedly shifted and changed the ways music is heard and consumed. Streaming services such as Pandora, Spotify and iTunes Radio are making music more accessible to more people than ever before "[b]ut the regulatory regime that governs how public performances are licensed has failed to keep pace." Public Comments of the American Society of Composers, Authors and Publishers Regarding Review of the ASCAP and BMI Consent Decrees (August 6, 2014) See also Public Comments of Broadcast Music, Inc. U.S. Department of Justice, Antitrust Division, Review of Consent Decree in United States v. Broadcast Music, Inc. (August 6, 2014)

In order for ASCAP and BMI to effectively compete with SESAC and to most efficiently service their members, their licensees and the general public, the Consent Decrees need modification. First, ASCAP and BMI must be permitted to allow the partial withdrawal of rights by its members, particularly its publisher members. The Consent Decrees have to date been construed to allow publisher members to either use ASCAP or BMI for ALL of their performance rights or for NONE. See Broadcast Music, Inc. V. Pandora Media, Inc. 13 CIV. 4037 (LLS), 2013 WL 6697788 (S.D.N.Y. Dec 19, 2013); see also ASCAP-BMI Consent Decrees Future of Music Coalition (October 3, 2014). This all or none interpretation is resulting in the imminent threat to ASCAP and BMI that its major publisher members may wholly withdraw which would be catastrophic.

Secondly, the Consent Decrees must be amended to allow ASCAP and BMI to offer one stop shopping to digital music platforms (as SESAC can now do with HFA as part of its rubric). In other words, ASCAP and BMI must be allowed the capability to license mechanical rights, synch rights and lyric rights in addition to performance rights.1

And, thirdly, the rate court created pursuant to the Consent Decrees which resolves price disputes on licenses issued by ASCAP and BMI must be replaced by a more expeditious and more economical alternative that can be continually informed; wherefore, continually cognizant of competitive market rates being paid for comparable licenses.

In conclusion, SESAC's decision to purchase HFA was brilliant given the current digital environment for music listening and consumption. SESAC has obtained a clear competitive edge over ASCAP and BMI as it can now not only license bundled rights but it can track and distribute royalties due on such bundled rights to its members. ASCAP and BMI can compete going forward only if the Consent Decree clouds are lifted by the Department of Justice. In my opinion, these clouds need be lifted as collective licensing agencies such as ASCAP, BMI and SESAC have been and continue to be assets for the creators and publishers of music given the billions of performances they are capable of competently licensing and monitoring each year across a multitude of media.

So the ever evolving music industry must wait and see.

Footnote

1 Unlike the ASCAP Consent Decree, the BMI Consent decree does not specifically preclude BMI from licensing mechanicals; however, BMI is seeking explicit clarification from the Department of Justice as historically under the Consent Decree, BMI has not licensed mechanicals and has only licensed performance and synch rights for the broadcast of music (not internet use). See Public Comments of Broadcast Music Inc. Id. Pp 16-17.

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