After more than two years of review, countless public comments and some professional mudslinging, the Department of Justice has decided that the best way to preserve competition and fairness in the music marketplace is to reject requests to inject anticompetitive behavior into music licensing consent decrees.
Preserving competition in music licensing will go a long way toward ensuring the continued growth of the music industry.
You wouldn't know this was a promising development judging by the reaction of some within the industry. An article in Billboard breaking the news of the Justice Department's decision quotes an unnamed music publishing executive mischaracterizing the decision, "This decision will create a clusterf--k of epic proportions for the U.S. music publishing industry."
On the contrary, Justice's action appears to clarify what the current consent decrees require. This is, in fact, a fantastic outcome for consumers and small businesses as well as broadcast and digital entities, because all DOJ did was reaffirm the existing rules that so-called "fractional licensing" isn't lawful.
Nothing will change save for the hangover publishers and performance rights organizations will experience as they come to the harsh realization that the process they kick-started two years ago to further enrich themselves and freely wield and abuse their market power backfired. And for all the right reasons: the common-sense antitrust protections provided under these consent decrees are as modern and necessary today as they ever were.
Sony/ATV's CEO expressed disappointment with the outcome, suggesting that the DOJ's decision will "cause a tremendous amount of uncertainty and chaos in a market place that has worked well for years..."
He's half right. The consent decrees are working and don't need to be changed. Where he's wrong is that this lack of action by the DOJ represents a change in law or process; it doesn't. Under these consent decrees, 100 percent licensing was and is the law of the land.
The public record of this proceeding clearly reveals this: every PRO license under the consent decree granted the licensee 100 percent use of the work within that PRO's repertoire. Seriously, consider the logic: if music publishers were taken at their word that fractional licensing has been standard operating procedure within these consent decrees, why would they have needed any clarification from DOJ? Why? Because they're not telling the truth: fractional licensing under the consent decrees has been anything but status quo.
The DOJ's reaffirmation of the consent decrees will benefit everyone associated with music, including bar and restaurant owners, songwriters, artists, broadcasters and streaming companies alike. Had the 100 percent, or blanket license regime been dismantled, as the publishers sought, every one of these stakeholders would have been required to determine and acquire the rights for every tune they spin from every single rights holder no matter how many exist, known or unknown. Talk about a clusterf--k of epic proportions. Taken to the extreme, such an upending modification could have led to a world without music. Now though, thanks to the antitrust experts at the DOJ, the rules of the road have been reaffirmed and clarified, and the existing, orderly licensing regime will remain in effect.
While the publishers and PROs' acts of desperation aimed at harming streaming companies has and likely will continue unabated, they're simply biting the hand that feeds them. This year digital music is expected to become a $7 billion market, up from $6.3 billion in 2015. The biggest contributor to that rise: streaming. According to an analysis of the industry by Sony Music, revenues from paid streaming will be up 74 percent in 2016 and the revenue lost from the slowing of CD sales and downloads has been offset by streaming royalty payments.
This doesn't paint the picture of the need for consent decree reform. Instead, the consent decrees are as important to the future of music than they've ever been during my lifetime.
The DOJ's wisdom to let the agreements stand in the face of immense pressure by anticompetitive monopolists proves the ongoing need for the consent decrees. There's still a huge risk of rights holders colluding to raise royalty rates, which is why we need the consent decree to remain in place.
My organization, CALinnovates, has urged the DOJ to come down on the side of fairness, innovation and competition. It appears they have decided to do just that. We applaud the DOJ for its stance and look forward to its official announcement in the coming weeks. Perhaps then we can finally turn the page on this unfortunate sideshow from music's return to prosperity.