CMU Daily 18.01.21: US Department Of Justice decides against reforming the BMI and ASCAP consent decrees, Labels expected to argue against ER on streams at tomorrow's select committee hearing

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US Department Of Justice decides against reforming the BMI and ASCAP consent decrees

Having read 877 submissions and listened to two full days of presentations and debates last summer, the US Department Of Justice has decided to make no changes at all; in any way, shape or form; of any kind or variant; not even a little change; not even a slight re-edit; not even a change of font; to the consent decrees that regulate American collecting societies BMI and ASCAP.

Everything will carry on as normal. Including the moaning, presumably. You know, about how the American collecting societies are over-regulated in a way that takes away income from ever songwriter who ever had a song played or performed within the United States. Because, you know, they kind of are and it kind of does.

The Department Of Justice announced a review of the BMI and ASCAP consent decrees in 2019, despite having conducted a similar review just a few years earlier. The music industry has long argued that the two big collecting societies representing the performing rights of songwriters and music publishers in the US are over-regulated.

It's certainly true that, although collective licensing is regulated to an extent in most countries, because of the monopoly concerns when the music industry starts licensing as one, the consent decrees regulate BMI and ASCAP in a much more severe way. Despite BMI and ASCAP being much less powerful than their counterparts in other countries, especially Continental Europe.

Once the latest review of the consent decrees had been announced, BMI and ASCAP proposed a number of reforms that would have relaxed the regulation and also provided a sunset clause that could result in DoJ oversight of the two societies' operations ultimately winding down altogether.

Those reforms were generally supported by the music industry at large, although some music publishers argued that the relaxation of the rules should go further. In particular, the publishers want partial withdrawal to be allowed, so that individual publishers could opt out of certain BMI and ASCAP licences, forcing licensees to instead negotiate direct deals.

Such a system would allow publishers to continue to use the collective licensing system for things like radio and live music, but force digital services into doing direct deals covering the performing rights in songs. It was a failed attempt to force Pandora into direct deals that resulted in the publishers lobbying for the previous consent decree review.

This time round BMI and ASCAP seemed to think that pushing for partial withdrawal was too ambitious, and that demanding it could scupper their chances of getting other reforms. Or even provide ammunition for groups lobbying on behalf of licensees, some of which were actually pushing for increased regulation.

Two key fears was that the consent decree review might result in 100% licensing or more compulsory licensing. The former would mean that where BMI or ASCAP only represent a portion of a song, they'd be forced to nevertheless include 100% of the song in their licence, passing on a share of any money collected to other co-owners.

The societies currently operate a fractional licensing model, so that only their share of any one work is included in a licence. After the last consent decree review the DoJ concluded that the societies were actually obliged to operate a 100% system, though BMI successfully disputed that in the courts.

More compulsory licensing would see an increase in the scenarios where a songwriter and music publisher is obliged to license their music, such as already exists in the US for mechanical rights. It's generally agreed that compulsory licensing, with rates often set by judges, result in the royalties paid to the music industry going down.

Given those concerns, the news that the DoJ has decided to make no changes at all to the BMI and ASCAP consent decrees got a mixed reaction from the music community. Everyone is annoyed that much needed reforms won't happen. But on the upside, at least there'll be no forced 100% or compulsory licensing.

On the former, DoJ's Assistant Attorney General Makan Delrahim said on Friday: "The Antitrust Division [of the DoJ] in the past took the position that the ASCAP and BMI consent decrees require [100%] licensing".

"The US Court Of Appeals for the Second Circuit disagreed, affirming a district court decision that the BMI consent decree - which contains similar language as the ASCAP decree - permits fractional licensing. Whether ASCAP and BMI should offer [100%] licences remains a subject of considerable debate. What is clear for present purposes, following the Second Circuit's ruling, is that the BMI consent decree does not require BMI to do so".

On the latter, he noted: "Compulsory licensing is not the answer. In the early days of the music industry, some observers worried that, without compulsory licensing, the nascent industry would not survive".

"They feared that large, corporate interests would use exclusive licensing arrangements to tie up distribution channels, exclude new market entrants, and prevent consumers from accessing the full range of available works. Too often, however, it has been creators - songwriters, artists, and other rightsholders - who have received the short end of the stick under compulsory licensing".

"Compulsory licensing also runs counter to the principles that form the very foundation of the free market and rights in intellectual property", he added. "Those principles hold that the best, most efficient way to allocate resources - and the most effective way to maximise consumer welfare - is through allowing parties to negotiate, to set prices based on supply, demand, and available information".

"Antitrust law serves as a crucial backstop when market conditions become distorted or when industry actors attempt to stifle the free and full exchange of goods. Compulsory licensing, however, does not permit this sort of market-based negotiation - quite the opposite".

Although deciding not to make any changes at this time, Delrahim noted that the music licensing market is still in flux as the digital market matures and new kinds of music services continue to emerge.

With that in mind, he concluded that "the ASCAP and BMI consent decrees should be reviewed every five years, to assess whether the decrees continue to achieve their objective to protect competition and whether modifications to the decrees are appropriate in light of changes in technology and the music industry".

Responding to Delrahim's remarks, the bosses of BMI and ASCAP - Mike O'Neill and Elizabeth Matthews respectively - said in a joint statement that "while we were disappointed that no action was taken, we are encouraged to see how the DoJ's approach to these issues has evolved".

"In his closing remarks, AAG Makan Delrahim recognised several important truths that we have long understood: Songwriters are the backbone of the music marketplace and must be paid fairly; blanket licensing is incredibly efficient; ASCAP and BMI are innovating to serve the needs of the industry; greater competition and not compulsory licensing is the answer; and the value of music is best decided in a free market".

Noting that a no-change outcome, while not ideal, is not the worst possible conclusion, O'Neill and Matthews continued: "We knew that reaching consensus would not be easy. It soon became clear that key industry participants could not agree on how best to move forward. Unfortunately, we also found that some were using this review to advocate for even greater restrictions in our decrees, either for their own benefit or in an effort to regulate the marketplace as a whole through BMI and ASCAP".

"We were concerned that the lack of consensus in the market could lead to a legislative push resulting in unwarranted government regulation of our industry in the form of compulsory licensing", they added. "In addition, our victory in confirming the industry-wide practice of fractional licensing would have been revisited".

"These factors would absolutely not be in the best interest of our songwriters, composers and publishers, and indeed, would represent a major step backward. Although it would have been wonderful to see our decrees modernised, we would rather they remain as they are, than see an outcome that could adversely affect music creators for generations to come".

They then concluded: "The formal close of this review means we can put this matter behind us for the near future and continue to champion the rights of our songwriters, composers and publishers, protect the value of their creative work, and partner with our licensees to help ensure music is delivered to the public".

Needless to say, the no-change conclusion was welcomed by those lobbying groups that had spoken out against any reform or relaxation of the rules.

That includes the US National Association Of Broadcasters, whose CEO Gordon Smith said this weekend: "NAB is very pleased that the Department Of Justice will not move to make changes to the ASCAP and BMI consent decrees. We appreciate the willingness of DoJ to have an open mind and to conduct a comprehensive review of all of the possible issues raised by stakeholders concerning modifying or eliminating the decrees".

"DoJ's decision not to take action will ensure that ASCAP and BMI continue to fairly and efficiently license musical works in a manner that is pro-competitive", he added. "Broadcasters look forward to continuing to work with the performance rights organisations for the mutual benefit of songwriters, music licensees and listeners".

Meanwhile, the MIC Coalition, which lobbies on behalf of various groups of music licensees, stated: "The MIC Coalition is extremely pleased with today's announcement. The announcement essentially reconfirms the finding of the previous administration which concluded that the music industry has 'developed in the context of, and in reliance on, consent decrees and that they therefore should remain in place'".

"We could not agree more with such sentiments", it added. "The ASCAP and BMI consent decrees guarantee a competitive and efficient licensing regime that benefits songwriters and music licensees, alike. Maintaining this framework will ensure that millions of American businesses can efficiently and fairly pay for the right to play and perform live and recorded music, which is crucial as venues struggle to open their doors again in the wake of the pandemic, and as more Americans access music from an ever-growing array of platforms".

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Labels expected to argue against ER on streams at tomorrow's select committee hearing
The proposal that so called equitable remuneration be paid on streams is likely to be a big talking point again tomorrow in the third oral hearing as part of the inquiry into the economics of streaming by the UK Parliament's culture select committee.

While there remains plenty of online criticism of the big streaming services themselves over the royalties that they pay, at the previous two oral hearings as part of the select committee's inquiry most attention has focused more on how the music industry slices its digital pie. Which is to say, the focus hasn't really been on how much money Spotify et al pay into the music industry, but rather how that money is then shared out between labels, publishers, artists and songwriters.

The narrative to date has been that record labels take too big a slice of the digital pie, both in terms of how monies are split between the recording rights and the song rights, and how labels share recording royalties with artists.

The latter, of course, depends entirely on the deal that has been done between the label or distributor and the artist.

The share the artist receives can vary hugely, from about 5% to 100%. The artists at the lower end of that massive royalty bracket are likely earning from older record deals signed long before streaming was a thing, and how those legacy record contracts have been applied to digital has been repeatedly criticised during this inquiry.

Some of those who argue that artists - and especially those currently on the lower royalty rates - should get a bigger slice of the digital pie have proposed equitable remuneration as a way that Parliament could make that happen.

ER is a system that already applies to things like radio and public performance. It's a principle via which all artists - including session musicians - are automatically paid a share of monies generated by radio and public performance licences at industry standard rates. In the main, ER does not currently apply to streaming.

On one level ER would be a simple way to ensure all artists get a minimum payout when their music is streamed, oblivious of whatever their individual record or distribution deals may say. But on another level, it's a rather complicated simple solution. Which might sound like a contradiction in terms, but remember, we are talking about music licensing here. Simple things are always complicated.

Most labels oppose the idea of ER on streams. And tomorrow it's the turn of major record companies to speak before the select committee, meaning MPs will hear for the first time the official arguments against such an approach.

Though we pretty much know what those arguments will be. Partly because they were presented when the Music Managers Forum staged its digital dollar roundtables a few years ago, and the labels' position hasn't really changed since then. And partly because the labels have been officially and unofficially communicating their position ahead of tomorrow's select committee hearing.

Speaking to the Mail On Sunday, one major label source said: "If regulations order streaming platforms to pay artists a specific share, we would have less to invest in breaking new artists and the platforms may put up subscription costs".

Meanwhile, the boss of record label trade group BPI, Geoff Taylor, told the newspaper: "Introducing new regulation to a successful and growing music sector would threaten to reduce the value of the UK music business, undermine investment into new talent and new music – leaving fans and artists worse off – and reduce the UK's global competitiveness".

It remains to be seen how those arguments hold up when David Joseph from Universal Music, Jason Iley from Sony Music and Tony Harlow from Warner Music log on to the select committee hearing tomorrow.

Before the major label bosses speak, MPs will hear from the CEOs of UK collecting societies PRS and PPL, Andrea Martin and Peter Leathem respectively.

The ER debate puts PPL into an interesting position, because it administers the ER system in the UK. Applying ER to streams poses an assortment of questions that really need to be answered before any extension of equitable remuneration to digital takes place, and PPL is best placed to consider, research and answer those questions.

However, although also representing performers, PPL is ultimately owned by the labels. So quite how keen it will be to take on that task, if MPs suggest that it should, remains to be seen.

So, all in all, as select committee hearings go, tomorrow could make for interesting viewing.

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NTIA welcomes Supreme Court ruling on business interruption insurance
The Night Time Industries Association has welcomed a ruling in the UK Supreme Court last week regarding insurance payouts to companies negatively impacted by the COVID pandemic, although it added that it is still processing the judgement to figure out exactly what it means for its members.

During the original COVID lockdown, the NTIA and others criticised a number of insurers for refusing to pay out to companies that had business interruption policies which – those companies argued – should have kicked in as soon as the government ordered high street business to close their doors in a bid to combat the spread of the coronavirus.

Responding to that criticism, the UK's Financial Conduct Authority took eight insurers to court to basically get a judicial opinion on how various common phrases in insurance policies should be interpreted in the context of COVID-19. Of particular interest were phrases relating to business interruption caused by disease or government measures that force temporary closure.

The FCA hoped that its action would provide clarity on the various common phrases it had identified, to save each individual policyholder that had been denied a business interruption payout from having to separately fight their claim through the courts.

The High Court made its ruling back in September, in a judgement that then FCA interim CEO Christopher Woolard said was "a significant step in resolving the uncertainty being faced by policyholders".

Both insurers and the FCA then appealed that ruling, with the Supreme Court reaching its conclusions last week. In the main, the top court allowed the FCA's appeal but dismissed the appeal made by the insurers, which is good news for those companies who, based on the original High Court ruling, can no longer be denied payouts on their business interruption policies.

Welcoming last week's judgement - which should benefit venues, clubs and other night-time businesses - the NTIA said in a joint statement with insurance broker NDML: "We are pleased that the Supreme Court has provided a positive assessment of a number of insurance policies that will affect our clients".

"However", they added, "we also know that the devil is in the detail and therefore we are currently engaged in a meticulous reading of this judgement in order to ensure that we provide as many clients as possible with the maximum available coverage in light of the Supreme Court's directions".

NTIA boss Michael Kill said on Friday that the judgement was a "moral victory" for those businesses denied payouts from insurers when such payments should have been made. "We are extremely pleased that the Supreme Court has dismissed the insurers appeal claims and supported the rights of thousands of businesses to be able to claim against there business interruption insurance".

While confirming that he and NDML were still going through the detail of the judgment and how it will impact on different kinds of policies, Kill urged insurers to now do the right thing and make payments to those favoured by the court rulings as quickly as possible.

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Warner Music signs distribution deal with Sky Digital India
Warner Music has signed a deal to distribute recordings managed by Punjabi music group Sky Digital India. The major's Indian division will provide distribution services within India itself, while its ADA label services business will represent Sky Digital's catalogue elsewhere in the world.

"The Punjabi music scene is absolutely exploding at the moment and Sky Digital's artists already have a huge fanbase in India", says Jay Mehta, Managing Director of Warner Music India. "We're in a great position to help connect them with even more music fans both here and around the world. This deal is a key milestone in the development of Warner Music's presence in India".

Gurkaran Dhaliwal, Managing Director of Sky Digital India, adds: "It is highly exhilarating for Sky Digital to be in partnership with Warner Music. We're excited about the possibilities for our entire region of North India to engage in the worldwide music industry. Through this deal with Warner Music, and the indomitable strength and scale that this region carries, we can expand together and achieve great success".

Sky Digital India aggregates the content of more than 40 record labels in India. Largely working with Punjabi music, it also represents a small number of labels that release music in Hindi, Haryanvi and Bhojpuri. The company also manages several Punjabi-focused YouTube channels.

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Spotify's podcasts gamble not paying off, says Citi
Podcasts! It's all about podcasts! The future of streaming services is podcasts! Podcasts are where the smart money is going! Except that it might not be. Analysts at US bank Citi last week told clients that Spotify's big bet on podcasts doesn't appear to be turning the company into a big profit machine.

Spotify has, of course, spent millions of dollars on acquiring podcast companies and securing exclusivity deals with big name podcasters over the last couple of years. The acquisitions were part of a strategy to diversify the Spotify business, which dominates premium music streaming but is still not profitable and - in the music space - arguably suffers because it has the same catalogue of tracks as all its competitors.

But has that strategy paid off? No. Or at least not yet, reckons Citi. Its analysts argue that the big podcast push has not resulted in "a material positive inflection in app downloads or premium subscriptions". As a result, it advised investors to sell their stock in the company. We've still got a Spotify share you can buy, if anyone's interested. Just one, but it's very well cared for.

"If we were to see a material positive inflection in app downloads or premium subs (from higher gross adds or materially lower churn), we would alter our view", says Citi's report. "But our fear is that if podcasting doesn't provide a way for Spotify to shift away from music label dependence, [Wall] Street may reassess the underlying value of the business. And, that would be bad for Spotify's multiple and equity value".

Spotify stock fell just over 6% to $319.82 a share before close of trading on Friday. This down from an all time high of $353.11 earlier this month. The price is still more than double what it was a year ago though.

Elsewhere in podcasting news, tech website The Information reports that Apple is reportedly considering launching a podcast subscription service.

The move would see the current dominant podcast aggregator charge customers to listen to podcast programmes. It's not exactly clear what this would mean - although Apple would possibly offer podcasters the opportunity to charge a fee to access exclusive content within the Apple Podcasts app.

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Mojo covermount CDs stranded in Europe due to Brexit
This month's Mojo magazine has been delayed as its covermount CDs are stranded in mainland Europe due to new post-Brexit trade rules. Stranded in 1997, more like! But seriously, Brexit is bullshit.

In an email to subscribers on Friday, Mojo explained that "the CDs, which are produced in the EU, are not yet in the UK".

It is not clear when the CDs might arrive and be paired up with physical copies of the magazine. However, in the meantime, subscribers are being offered early access to the digital edition of this month's issue.

Of course, Mojo's covermounts are not the only delivery to fall foul of new rules that have come into force following the UK's exiting from the EU, despite a trade deal having been agreed at the last minute. Many businesses have found importing to and exporting from Europe challenging due to those recent rule changes.

A few audiophiles having to wait for a free CD is possibly not as bad as the Scottish fishing industry collapsing. Still, it highlights the failure of the British government to deliver anything close to what was promised to Brexit supporting voters.

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Phil Spector dies
Music producer and convicted murderer Phil Spector has died, aged 81. The cause of his death has not been confirmed, but he was diagnosed with COVID-19 last month.

Spector was convicted in 2009 of the murder of actor Lana Clarkson at his Beverly Hills mansion six years earlier. She had accompanied him back to his home in early 2003 after meeting the producer in a club where she worked. At some point during the night she was shot dead.

The producer claimed that Clarkson had taken one of his guns and shot herself, while the prosecution argued it was he who pulled the trigger, probably by accident. They paraded a string of other women before the jury who said that Spector had at some point pulled a gun on them too during late night liaisons.

At the first trial, the jury couldn't reach a unanimous decision, but on second hearing he was found guilty and handed a minimum nineteen year prison sentence, which he was still serving at the time of his death.

Prior to his conviction, Spector was one of the most successful and best known music producers of all time. He made a name for himself with his "wall of sound" production technique, building up dense layers of harmonies and orchestral instruments, which produced a string of pop hits in the 1960s and became highly influential too.

Music-wise, Spector is possibly still best known for his work with 1960s girl groups The Crystals and The Ronettes, but he also worked with artists including The Righteous Brothers and The Beatles. As well as producing the latter's final album, 'Let It Be', he also worked on various solo projects by George Harrison and John Lennon.

From 1968 to 1974, Spector was married to Ronettes vocalist Ronnie Spector, his second wife. She later accused him of subjecting her to years of abuse, and said that she had given up all future recording royalties and custody of their three adopted children in their divorce settlement because Spector had threatened to hire a hitman to kill her if she did not.

In a statement posted on Instagram following the announcement of her ex-husband's death, Ronnie Spector says: "It's a sad day for music and a sad day for me. When I was working with Phil Spector, watching him create in the recording studio, I knew I was working with the very best. He was in complete control, directing everyone. So much to love about those days".

"Meeting him and falling in love was like a fairytale", she goes on. "The magical music we were able to make together was inspired by our love. I loved him madly, and gave my heart and soul to him".

However, she continues: "As I said many times while he was alive, he was a brilliant producer, but a lousy husband. Unfortunately, Phil was not able to live and function outside of the recording studio. Darkness set in, many lives were damaged".

Nevertheless, she concludes, "I still smile whenever I hear the music we made together, and always will. The music will be forever".

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Dionne Warwick and Chance The Rapper to record charity single
Following a slightly unusual Twitter exchange last year, Dionne Warwick and Chance The Rapper have now announced that they are set to record a single together. Proceeds from the release will go to two charities chosen by the musicians.

"Chance and I will be getting in the studio very, very soon", says Warwick in a video posted on Twitter. "It's gonna be a pleasure working with him and his organisation, called SocialWorks, as he's working with mine, Hunger: Not Impossible".

"We're going to try to do some wonderful things for people that are desperately in need", she continues. "Those who are hungry, those who are homeless, those who need education, all the good stuff that they've been missing for too long".

"So keep your eyes and ears open, because we're getting in that studio soon and we're going to give you something that you cannot resist".

The collaboration came into being after Warwick tweeted a question to Chance The Rapper back in December.

"Hi, Chance The Rapper", she wrote. "If you are very obviously a rapper why did you put it in your stage name? I cannot stop thinking about this".

He tweeted back that he was "freaking out" that Warwick even knew who he was, but failed to answer her query. In the end, she kind of answered it herself and then made the offer of working together, saying: "Of course I know you – you're THE rapper – let's rap together – I'll message you".

It's not clear if Warwick plans to rap on the new track, despite what she said there. After all, in another tweet, she announced: "I am now Dionne The Singer".

Responding to Warwick's announcement of their collaboration, Chance The Rapper tweeted: "This is going to be so good for so many. Thank you Dionne The Singer! We gon make a difference with this one".

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