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DOJ Decision on Consent Decrees and Fractional Licensing Good News for Competitive Music Marketplace

· August 4, 2016

Today the Department of Justice announced it would make no changes to the antitrust consent decrees that govern coordinated action by the music performing rights organizations (PROs) known as ASCAP and BMI.  In addition, the Department has concluded that the existing language of the decrees requires “full-work” licensing, and consequently prohibits so-called “fractional licensing.”  This means that for songs with multiple songwriters (which are increasingly prevalent in popular recorded music) any individual songwriter or rightsholder can license the song, as long as they distribute royalties to the other rightsholders.  In a “fractional licensing” system, PROs would purport to issue blanket licenses only to fractions of songs, thus requiring licensees to license the remaining fractions from other rightsholders.  DOJ’s conclusion will maintain important protections in the ASCAP and BMI consent decrees.  This news confirms leaks from the end of June, when Billboard had reported that the Department of Justice was moving toward denying requests to amend the ASCAP and BMI consent decrees.  

Until now, the Department of Justice had maintained that the review was still ongoing.  The DOJ had been examining the ASCAP and BMI consent decrees for several years, coinciding with a federal appellate court’s finding of “troubling coordination” in the music publishing sector.  DOJ solicited one round of comments in August 2014 on several competition issues, followed by a second round of comments in November 2015 specifically on jointly owned works and fractional licensing.  CCIA filed comments in response to both of these requests, as did a wide variety of stakeholders.

As DisCo has discussed before [1] [2], the consent decree review process has provided an important opportunity for discussing the need for transparency in the music marketplace and ways to resolve music licensing gridlock.

Today’s news is good news for a competitive music marketplace, as the consent decrees are an important mechanism for protecting competition in the music industry.  Preserving the consent decrees and explicitly prohibiting fractional licensing will also help alleviate the “weaponized uncertainty” problem, because it will prevent rightsholders from saying “no” as frequently, and will facilitate more transactions that make more music available on more lawful services.

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