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US Department Of Justice’s digital licensing review underway, though could wider remit result in bad news for the publishers?

By | Published on Monday 14 July 2014

US Department Of Justice

The US Department Of Justice has distributed a so called Civil Investigative Demand, or CID, to the two main performing rights societies in the US music publishing domain, ASCAP and BMI, as well as mega-publishers Universal and Sony/ATV/EMI.

The document request notices are part of the DoJ’s review of the consent decrees that regulate the collective licensing of song performance rights in the US. As previously reported, Universal and Sony/ATV want to start licensing digital services like Pandora directly rather than via ASCAP and BMI, because they reckon that they can secure more favourable rates when not subject to the collective licensing regulations.

But last year a court ruled that, under the current consent decrees, publishers cannot just withdraw their digital rights from the collecting societies. To stop licensing Pandora through the collective licensing system the publishers would need to withdraw from the societies completely, meaning they’d have to licence broadcasters, gig promoters and public space owners directly too. Which isn’t something any publisher really wants to do.

Though – having called for the consent decrees to be rewritten to allow just digital withdrawal – the big publishers have also threatened to withdraw from collective licensing in its entirety in the US if they don’t get their way. Sony/ATV chief Marty Bandier last week reaffirmed that that option was under consideration if the DoJ doesn’t conclude that more flexible rules are required as a result of its current decree review.

The arrival of the CIDs is a sign that the DoJ’s review is now properly underway, which is good news because these things can be long drawn out, and Universal and Sony/ATV would really like the matter to be resolved, in their favour, sooner rather than later.

Though Billboard reports that an internal memo distributed within ASCAP, about the CID, notes that the DoJ’s investigation is likely to go beyond just the withdrawal of digital rights. The wider remit might deliver extra benefits, giving the collecting societies even more freedom to adapt or expand, but it might also have negative affects on the US publishing sector.

In particular, the DoJ looks set to consider whether there has been any collusion between the two biggest music publishers and the American societies in their attempts to revamp the way digital services secure song rights in the US.

This part of the investigation likely relates to comments made by judge Denise Cote when considering the dispute between Pandora and ASCAP last year, in which she talked of ‘co-ordinating’ activity having taken place between the major publishers. Given the consent decrees exist to allay the competition law fears of collective licensing, claims of collusion between the big rights owners might, some experts reckon, result in a stricter rather than relaxed consent decree at the end of this review.

The publishers seem optimistic though, saying they’d appreciate the chance to formally rebut any claims of inappropriate collaboration between rival rights owners, and that ultimately the CID is about getting over the current digital hurdle. According to Billboard, Bandier said the arrival of the CID was “positive because it shows that the DOJ is taking seriously the concept of modifying the consent decree. Hopefully, by the end of the year, we can have something positive, a modified consent decree, so we won’t have to withdraw [from the performing rights societies]”.