RESPONSE
OF
THE
SONGWRITERS
GUILD
OF
AMERICA,
INC.
TO
THE
SOLICITATION
OF
PUBLIC
COMMENTS
BY
THE
UNITED STATES
DEPARTMENT
OF
JUSTICE
REGARDING
THE
QUESTION
OF
THE
CONTINUED
EFFICACY
OF
THE
CONSENT
DECREES
TO
WHICH
THE
PERFORMING
RIGHTS
SOCIETIES
KNOWN
AS
AMERICAN
SOCIETY
OF
COMPOSERS,
AUTHORS AND
PUBLISHERS ("ASCAP") AND BROADCAST MUSIC, INC.
("BMI")
REMAIN
SUBJECT
SONGWRITERS
GUILD
OF
AMERICA,
INC.
5120 Virginia Way, Suite C 22
Brentwood, Tennessee 37027
August
6, 2014
FOR
SUBMISSION
TO
Chief, Litigation
III
Section
Antitrust
Division
U.S.
Department
of
Justice
450
5th
Street
NW, Suite 4000
Washington, DC 20001
1
I.
INTRODUCTION
A. SGA
SGA is the oldest and largest U.S. national organization run exclusively by and for the creators
of
musical compositions and their heirs, with approximately five thousand members nationwide and
over eighty years
of
experience in advocating for music creator rights on the federal, state and local
levels. SGA's membership is comprised
of
songwriters, lyricists, composers and the estates
of
deceased members. SGA provides a variety
of
administrative services to its members to ensure that
songwriters receive fair and accurate compensation for the use
of
their works, including contract
analysis, copyright registration/renewal filings, termination rights notices, and royalty collection
and auditing.
Moreover, SGA takes great pride in its unique position as the sole, non-conflicted organizational
representative
of
the interests
of
American and international music creators, uncompromised by the
frequently competing and "vertically integrated" interests
of
other copyright users and assignees.
B.
Summary
of
SGA's
Positions
on
the
PRO
Consent
Decrees
At the outset
of
these comments, SGA wishes to make clear that, with a single, crucial exception, it
stands side by side with its PRO colleagues in supporting the principle that the Consent Decrees to
which the PROs remain subject are severely in need
of
modification in order to mitigate the unfair
economic results that these World War
II
era directives are causing to music creators in the 21st
century.
1
In recent filings by both ASCAP and BMI with the U.S. Copyright Office concerning the
issue
of
licensing reform in the performing rights area, the PR Os joined SGA in arguing that all
1
Eliminating the consent decrees
in
their entirety
is
beyond the scope
ofSGA's
comments, but SGA would welcome
the opportunity to address the issue
if
it becomes a serious consideration
of
the DOJ.
2
music creators deserve fair market value for the use
of
their works on all platforms, and that the
Consent Decrees are crippling the ability
of
the PR Os to establish market rates for the performance
of
musical compositions in digital environments on behalf
of
such songwriters and composers.
SGA further elaborated on this serious problem at a recent consultation with the Antitrust Division
of
the Department
of
Justice in Washington, DC on July 8, 2014. At that meeting, SGA asserted its
strong belief that the Consent Decrees desperately need to be modified in order to make it possible
for American and international music creators to realize fair compensation, free from the artificial
devaluation
of
royalty rates that result from strict judicial interpretation
of
the decades-old Consent
Decrees. By way
of
example, SGA highlighted the untenable results
of
recent rate-setting
decisions concerning the digital music streaming company Pandora
2
,
the entire business model
of
which is built upon the use
of
musical compositions at rates far below market value. The Pandora
situation stands as a stark example
of
the need to address the market inequities that flow from the
Consent Decrees before further, irreparable harm is caused to the American music creator
community and to American culture.
On the question
of
how to accomplish reform
of
the current Consent Decree model, SGA is in full
accord with the PR Os on four
of
the five basic principles each has articulated as being essential to
accomplishing the task.
3
The four points on which SGA lends its full support to the PROs are: (1)
the need to shift performance royalty rate-setting from rate court judges to private arbitrators; (2)
the imperative for recognition
of
an evidentiary presumption that direct, arms-length licenses (the
terms
of
which are fully disclosed) voluntarily negotiated by copyright holders who have
withdrawn rights from a PRO provide the best evidence
of
reasonable market rates; (3) the related
2
re Petition
of
Pandora Media Inc., 12-cv-08035, U.S. District Court, Southern District
of
New York.
3
See, for example, Williams, Paul. "Music Licensing From a Songwriter's Perspective." Recode, 9 July 2014. Web. 04
Aug.2014. 3
Congressional adoption
of
the "willing-buyer/willing seller" standard in rate setting for musical
compositions, and; (4) the extension to PROs
of
the ability to license bundled rights beyond the
singular right
of
public performance to new media services.
The very detailed arguments marshaled by the PR Os in support
of
these four essential reforms in
their recent public comments, which will undoubtedly be repeated in their submissions to the DOJ
as part
of
the current process, make it unnecessary for SGA to set forth in greater detail the finer
points
of
these principles beyond noting its full and enthusiastic support for them. Thus, rather
than engaging in the redundant process
of
repeating those many points on which SGA is in
agreement with the PROs, SGA's Comments will focus on the one critical area in which there is
strong disagreement between the songwriter community on the one hand and the PROs and their
music publisher members on the other: the wholly unnecessary extension to music publishers, in
light
of
the other suggested reforms,
of
the authority to engage in the partial withdrawal
of
rights
from the PROs. SGA is in vehement disagreement with the music publishers and the PROs that
such a concession is either necessary or proper
if
the other reforms are instituted, and urges the
DOJ to refrain from granting such a concession without consideration
of
the serious harm to the
music creator community that such action could cause.
4
Specifically, it is
SGA's
belief that granting such a "partial withdrawal" concession to music
publishers, without guarantees
of
(i) full disclosure and transparency throughout the entire direct
licensing process and (ii) direct payment from the source
of
gross royalties due to music creators
through their PROs, will result in catastrophic losses to songwriters and composers due to
obfuscation and oversight inability and failure. Moreover, SGA also believes that this concession
4
United States
of
America
v.
American Society
of
Composers, Authors and Publishers. New York Southern District
Court. 4
would all but guarantee the eventual economic collapse
of
the PRO collective licensing system that
for over one hundred years has served the needs
of
the U.S. music creator community.
As noted, even though SGA remains in virtually unanimous accord with the PROs on its other
positions regarding the Consent Decree and related legislative reforms, the remainder
of
SGA
s
'
Comments will be devoted nearly exclusively to detailing the reasons why the partial withdrawal
concession would ultimately destroy the ability
of
the PR Os to continue in business. Partial
withdrawal would also irreparably harm the creators who make up the very class
of
citizens that the
U.S. Constitution and the U.S. Copyright Act seek to protect over the interests
of
copyright
assignees and users. SGA is particularly concerned that the support for partial withdrawal by the
PROs is apparently being directed by their major music publisher members, who together control
nearly 70%
of
the world's music copyrights
5
,
and whose threatened partial or full withdrawal
would likely compromise the PROs' existence.
In sum, SGA has determined that allowing partial withdrawal would be devastating to creators and
PR
Os because it would likely cause four distinct categories
of
harm:
(
1)
the elimination
of
any semblance
of
transparency by music publishers in any direct performing
rights licensing deal
of
their choosing, enabling them to completely obfuscate licensing terms from
music creators including such crucial information as the inclusion
of
advances, administrative fees,
equity interests, and other remuneration in which music creators have a rightful expectation to
share;
5
Tanner, John
C.
"Digital Music:
In
Search
of
Biz Model." Bloomberg Business Week. Bloomberg,
11
June 2007.
Web. 04 Aug. 2014.
s
(2) the shifting
of
all low-overhead, high-yield collection and licensing functions from the PR Os to
in-house music publishing staffs, leaving only the most costly, labor intensive administrative
functions to the PROs (and thereby shifting hugely burdensome, per transaction costs to the
remaining members within the PRO). Such a practice would result in the very opposite effect
of
the cost-spreading benefits intended to be realized through the collective licensing process, and
would likely destroy the ability
of
the
PR
Os to survive economically;
(3) the providing to music publishers
of
the means to recoup advances issued to music creators out
of
an income stream (the writer's share
of
performance royalties) for which the music publisher did
not bargain in setting the amounts
of
the advances and the terms
of
the publishing deals, and over
which it has had no expectation
of
control after more than a century
of
collective licensing
precedent, and;
( 4) the introduction
of
chaos into the performing rights marketplace, with
a) co-writers
of
musical compositions left without a viable, cost-effective means by which
to collect their royalties under direct licenses issued by music publishers
of
their co-
creators;
b) foreign writers being completely disenfranchised from the rights granted to them under
the rules
of
their local performing rights societies, with the ability
of
music creators and
PROs to exercise oversight concerning the licensing, royalty collection and distribution
process rendered a virtual impossibility; and
c) the expectation
of
a right to affiliate with the PRO
of
one's choice completely removed
from the American music creator experience.
6
II.
DISCUSSION
A.
The
Elimination
of
Transparency
The rights
of
music creators to receive fair compensation for the use
of
their creative works flows
directly from the mandate set forth in Article
I,
Section 8
of
the U.S. Constitution, authorizing
Congress to enact laws to encourage the progress
of
science and the arts. U.S. Const. art.
I,
§
8.
Congress, pursuant to that mandate, has enacted laws setting forth protections for creators and
inventors starting with the Copyright Act
of
1790, passed in the very first U.S. Congressional
session. Act
of
May 31, 1790, ch. 15, 1 Stat. 124.
One
of
the most valuable rights in the so-called "bundle
of rights"
granted to creators under the
copyright laws, as they have developed since 1 790, has been the right
of
public performance. At
first, however, creators
of
musical compositions were not able to realize this critical value. The
exercise
of
performance rights by individual music creators and copyright owners in the 19th and
very early 20th centuries proved to be thoroughly unwieldy and almost wholly non-remunerative.
Columbia Broad. Sys., Inc. v. Am.
Soc'y
of
Composers, Authors & Publishers, 400
F.
Supp. 737,
741
(S.D.N.Y. 1975).
By the early 1900s, in fact, songwriters and music publishers had recognized that the widespread
performance
of
musical works would "render it impossible for individual composers and publishers
to enforce effectively their performance rights individually." 2-8 Melville B. Nimmer
& David
Nimmer, Nimmer on Copyright,§ 8.19[A] (2010). The cost
of
"negotiating individual licenses for
performances
of
musical compositions in every restaurant, nightclub, concert hall and ballroom
7
in the country" was found to be prohibitive. 2 Paul Goldstein, Goldstein on Copyright§ 7.9 (3d ed.
2007).
Goldstein explains the genesis
of
the
PR
Os in this context:
By 1914, writers and publishers
of
musical compositions concluded that,
if
they were to
enjoy the full economic measure
of
their performance rights, they would have to organize
into a single collecting society that could, for a flat fee, offer users the right to perform any
work in the society's repertory, and then distribute the collected fees among society
members.
Id.
Thus, in 1914 music creators and music publishers established the performing rights society
ASCAP, specifically to help music creators avoid the staggering costs
of
direct licensing and
marketplace monitoring, to enable the collection from users
of
fair market fees for their public
performance
of
music, and to ensure distribution
of
such fair market fees to creators and copyright
owners based upon actual
or
estimated use
on
a per musical composition basis.
Since the inception
of
ASCAP, and the subsequent establishment
of
BMI and a third U.S. PRO
known as SESAC, America's songwriters have placed their trust in these PROs to collectively and
fairly enforce their public performance rights. In tum, the PROs have consistently acted to protect
the rights and financial security
of
creators.
The
PR
Os have done so by enforcing the public performance right through the issuance
of
blanket
licenses to users, the pursuit
of
legal actions against unlicensed infringers, the collection
of
royalties, and by ensuring the proper calculation
of
usage
on
which the distribution
of
such
8
royalties to creators and copyright owners is based. Perhaps
of
greatest significance in terms
of
developing such trust, however, is the fact that the PROs distribute such earned royalties directly
and
separately to the songwriter
and
the music publisher, from
pooled
royalties, the collection
of
which has been based upon licensing arrangements the complete terms
of
which are transparent.
The result
of
the establishment
of
this transparent, direct payment, blanket license system has been
the development
of
public performance royalties into a crucial income stream for music creators,
frequently comprising the principal means by which songwriters and composers are able to make a
living as Congress and the Founders intended. The public has benefited enormously by this
system, as well, though the widespread availability
of
licensed music and the steady creation
of
more and greater musical compositions by fairly compensated creators.
In connection with the activities
of
the PR Os in their role as administrators
of
the public
performance right, a very distinct pattern
of
music industry custom and practice has developed.
Historically, most songwriters have assigned the rights in their musical works upon creation to
music publishers, which act on the songwriter's behalf to license such works, collect royalties, and
monitor the marketplace for licensing opportunities and unlicensed uses. Music publishers split the
collected royalties with songwriters in agreed upon ratios, and frequently issue monetary advances
to music creators at the threshold
of
publishing agreements, recouping such advances against
royalties collected on behalf
of
the writer over the course
of
the agreement.
In this regard, one uniform practice over the past century has been the recognition that public
performance rights in the works that are the subject
of
a music publishing agreement will be
licensed and administered by a third party PRO on behalf
of
both the songwriter and the music
publisher, and that such PRO will pay royalties earned thereon in the agreed upon ratios separately
9
and directly to the songwriter and
to
the music publisher. This is especially true in regard to the
works
of
foreign music creators, whose musical works are often deemed assigned by law to the
creator's local performing rights society, and sublicensed
to
ASCAP, BMI and SESAC through
various contractual arrangements between societies, not through deals between the creator and a
U.S. sub-publisher.
Though most music publishing agreements between U.S. songwriters and music publishers do not
specifically prohibit music publishers from licensing performance rights directly to users, virtually
every music publishing agreement concluded in the U.S. over the past one hundred years has made
reference to the fact that it is anticipated that such rights will be licensed and royalties paid directly
to each party by a PRO
of
which both the songwriter and music publisher are members.
In this regard, it should be noted that industry custom and practice have long dictated that the
musical performance right consists
of
one half "writer's share" and one
half
"publisher's share."
The writer's share is always paid directly by the PRO to the writer or his or her heirs. The
publisher's share is sometimes paid in full to the music publisher (which then keeps or splits such
share with the songwriter according to the terms
of
the music publishing agreement), and
sometimes paid by the
PRO-pursuant
to the instructions
of
the
parties-in
partial shares directly
to both the music publisher and to the songwriter's self-owned and administered business/
publishing entity. Through such industry custom and practice, music creators have been assured
that they
will actually receive their earned royalties pursuant to the transparent terms
of
the
licenses issued. The role
of
the PRO in ensuring that payment is in
fact
delivered correctly to the
songwriter cannot be over-emphasized.
10
A second and related issue
of
custom and practice, however, must also be noted as being far less
beneficial to music creators. Music publishers sometimes sub-license their entire catalogs to third
parties, such as administrators and sub-publishers in territories outside the U.S. To ensure that
their songwriters have no ability to share in the advances and monetary guarantees received by the
music publisher under such sub-licensing arrangements, music publishing agreements with
songwriters almost invariably and explicitly exclude the songwriter from participating in such
catalog-wide advances, providing that songwriters will be paid only when royalties are actually
earned on a title by title basis under such sub-agreements.
This is one
of
the most problematic areas
of
the songwriter-music publisher relationship, due to the
vast potential for abuse, especially in the area
of
direct blanket licensing
of
performing rights
where performances are extremely difficult to track on a per title basis outside
of
the structure
of
the PROs. Under such a scenario, music publishers may receive and hold monies that may or may
not eventually be paid to the songwriters who created the works that are the basis for the advances
and guarantees negotiated by the music publishers in the first place. When the PROs are excluded
from the royalty licensing and distribution process, songwriters are prejudiced both by their
ignorance
of
the license terms negotiated with users by publishers, and by their inability to
calculate for themselves what they are actually owed on a title basis under such licenses.
Until recently, due to the customs and practices
of
the music industry regarding the roles
of
the
PROs, the rare issuance
of
direct performance licenses by music publishers was not a substantial
issue
of
concern for songwriters in regard to the sharing
of
advances and guarantees due to the
relatively
de
minimis amounts
of
royalties at stake. Now, however, glaring evidence has come to
public attention which illustrates that some music publishers may be increasingly using their
professed need to drastically expand their direct licensing
of
performing rights in order to gain
11
market value outside
of
the PRO Consent Decree structure for another, far more insidious reason:
to obfuscate licensing terms,
and
to re-direct money into their own coffers that might otherwise
have been payable to music creators as royalties.
Once again, SGA wishes to point out that it does not dispute the legitimacy
of
arguments that the
Consent Decrees are depriving both music creators and music publishers from realizing anywhere
near the full value
of
the performing rights in their copyrighted musical works, and emphatically
supports the four reforms discussed above in Section
lB
of
these Comments. However, as the
following testimony
of
Linus Barry Knittel (an executive
of
the copyright licensee DMX) revealed
for the very first time in Broadcast Music, Inc. v. DMX, Inc.,
08
Civ. 00216 (LLS) [at 996-1000],
that the danger posed to music creators by the facilitation
of
direct licensing by music publishers
outside
of
the PRO collective licensing system is not only real, but palpable:
Question:
[W]e
talked
about
the
arrangement
with
Sony.
Are
there
other
publishers
with
whom
DMX
has
entered
into
agreements
where
there
are
advances?
Knittel:
Yes
...
There
are
a
number
of
smaller
publishers
that
we've
given
advances
to
...
...
Question:
Now
you
discussed
this
morning
...
how
you
actually
went
about
obtaining
a
direct
license
with
at
least
Sony
--one
major--
correct?
And
you
talked
about,
I
believe,
the
fact
that
there
was
an
advance
made
that
totaled
$2.7
million,
correct?
12
Knittel:
The
advance
was
$2.4
million,
I
believe.
Question:
And
there
was
a
$2.4
million
advance
and
a
second
agreement
that
covered
Sony's
administrative
expenses
for
$300,000,
and
that's
how
you
get
to
the
$2.7
million
total,
correct?
Knittel:
That's
correct.
Were it not for this testimony, it is likely that no songwriter or composer (whether or not he or she
had or has works in the Sony music publishing catalog or in the EMI catalog recently acquired by
Sony) would ever have known that Sony had received advances and administrative fees from DMX
for the direct licensing
of
performing rights, let alone undisclosed remuneration worth $2. 7 million.
Moreover, years later it remains unclear whether DMX advances and administrative fees were ever
shared with music creators by any music publisher, whether other remuneration in the form
of
equity stakes and technology fees were paid by DMX to any music publisher, and which other
music publishers as noted by DMX received advances and fees other than Sony.
SGA believes it is highly likely that the DMX situation is the very tip
of
the iceberg concerning the
economic harm already done to music creators through the direct, opaque licensing
of
performing
rights by music publishers to numerous other licensees. Because
of
this, SGA urges DOJ not only
to reject concessions to music publishers to allow partial withdrawal from PROs (an action that will
inevitably increase the practice
of
direct licensing by permitting music publishers to exclude certain
lucrative categories
of
licensing while still retaining the right to unfairly take advantage
of
collective licensing through the PROs), but to look closely at potential safeguards that might be put
in place to prevent the opaque nature
of
any direct licensing deals from depriving music creators
of
the royalties due them from music publishers.
13
Furthermore, SGA wishes to point out that despite announcements by some major music publishers
that they may continue to utilize the services
of
the
PR
Os to distribute royalties to music creators
directly, even following the partial or full withdrawal
of
their catalogs, not a single such publisher
has announced that it intends to share with those PROs full and complete data concerning the
upstream terms
of
its licensing arrangements, including fees, advances and related contractual
benefits. That particular issue was one
of
the key subjects addressed in recent correspondence
between SGA and its international partners in the Music Creators North America ("MCNA")
alliance and the European Composers and Songwriters Alliance ("ECSA") on the one hand, and
ASCAP and BMI on the other.
It
is
SGA's
firm belief that the views expressed in those written
exchanges are extremely relevant to DOJ's examination
of
the Consent Decrees, and attaches them
to these Comments as Exhibit
1.
The content
of
this correspondence is self-explanatory as to the
problems and issues that have arisen as a result
of
the accelerated movement by music publishers
toward the direct licensing
of
performing rights.
B. Cherry Picking and Cost Shifting Within the PROs
One
of
the most troubling aspects
of
the suggested partial withdrawal concession is that it would
give music publishers the ability to "cherry pick" those performing rights licenses it wishes to issue
directly, inevitably leading to the withdrawal by major publishers
of
most or all low-overhead,
high-yield licensing opportunities from the PROs, while leaving them with the most costly, labor
intensive and low yield licensing activities still to perform. The resulting steep rise in cost per
transaction rates to the PROs would severely impact their remaining, smaller music publishers and
writer members that rely exclusively on the PROs for their performing rights licensing, collection,
distribution and monitoring services. They would effectively now be subsidizing the costs
of
the
major publishers without the benefit
of
the efficiencies and savings intended by the collective
14
licensing system. This, in turn, would inevitably lead to a steep decline in net revenues distributed
by the PROs to their members, and eventually to the decline and disappearance
of
the PROs and
the sell-off
of
smaller publishing companies (which would no longer able to compete in the
marketplace) to the major music conglomerates.
This type
of
scenario has seemingly been played out before by the publishers in regard to the music
industry's largest mechanical rights licensor, The Harry Fox Agency, Inc ("HFA"). Following the
apparent relaxation
of
HF A rules governing partial withdrawal
of
catalogs and rights by its music
publisher principals approximately ten years ago, SGA believes that the "cherry picking" by
publishers
of
their most lucrative mechanical licensing opportunities commenced in earnest. This,
in turn, is suspected to have led in part to a substantial decline in HF A revenue collections and
commissions, the undesirable shifting
of
cost per transaction burdens from the major publishers to
the smaller independents that continued to rely on HF A as their sole mechanical licensing,
collecting, distribution and monitoring agent, and most damagingly, the diminishment
of
HF
A's
ability to serve as a watchdog and auditor for music publishers and their songwriter assignors over
the activities
of
the major record labels (that,
of
course, own the major music publisher members
of
HFA). SGA calls upon DOJ not to facilitate a repeat
of
that process in any way.
C. The Recoupment
of
Music Creator Advances From Formerly Exempt Sources
Yet another highly damaging result for music creators that could stem from the extension
of
partial
withdrawal concessions to music publishers centers on potential, unanticipated and unfair changes
to the music community's longstanding songwriter and composer advance structure.
15
For the past century, music publishers have calculated advances to music creators at the threshold
of
music publishing deals under the assumption that the songwriter's share
of
performance
royalties (writer's share and sometimes a retained portion
of
the publisher's share) will flow
directly from the PRO to the writer and the writer's self-owned business/publishing entity. As th
e
music publisher will therefore not be enabled to recoup the advance out
of
such shares paid directly
by the PRO, the amount
of
the advance to the songwriter is determined (and thereby diminished)
with this practice in mind.
It
is highly likely that once music publishers regularly control the collection
of
the writer's share
(including any related publisher's share retained by the writer as co-administrator)
of
performing
rights income, the recoupment
of
advances out
of
that formerly sacrosanct royalty stream will be
initiated by music publishers though such a right was clearly never bargained for. This unfair
result would grant a
double windfall to music publishers. The publisher would have succeeded
both in recouping any outstanding advance on a work more quickly, and in having acquired the
work for a reduced advance payment in the first place.
Once again, SGA calls upon DOJ not to facilitate this practice and result through partial
withdrawal concessions, which would be devastating to songwriters and composers.
D. Chaos in the Performing Rights Marketplace
Finally, SGA would like to point out several
of
the other practical and enormously deleterious
effects
of
direct licensing
of
performing rights by music publishers, some
of
which are bound to
create the kind
of
marketplace chaos and instability that will inevitably lead to substantial
economic losses among songwriters and composers:
16
1.
Co-Writes
A survey
of
the most popular musical recordings in any given week in the United States reveals
that the vast majority are recordings
of
musical compositions created through the collaboration
of
multiple songwriters or composers. This category
of
composition is known throughout the music
industry as a "co-write." The Billboard Hot 100 Chart for the week
of
August 2, 2014, by way
of
example, shows that
just
7
of
the 100 musical compositions represented were written by a single
writer, while 93% were co-writes. Some musical compositions that week had as many as 8-15 co-
writers. The randomly chosen Billboard Hot 100 Chart for the week
of
April 14, 2012 contained
just 6 songs written by a single composer. This phenomenon has profound implications as to the
efficacy
of
a performing rights licensing system that relies upon direct licenses issued by just one
of
the sometimes many co-owners
of
co-written musical compositions.
U.S. copyright law has been interpreted by the courts to create a "tenancy in common" among the
various co-owners
of
a work. (17 USC 201(a)). Thus, any co-owner may license an entire work on
a non-exclusive basis to a third party user (provided the value
of
the work is not thereby
destroyed), with the duty only to account to each co-owner for his, her, their or its
(if
it is a
corporation) share
of
the remuneration realized. In the context
of
performing rights licensing, the
complications
of
a system whereby a direct licensing publisher would have the responsibility to
account to multiple co-creators/owners with little or no information concerning such persons or
entities (or whether, for that matter, such persons or entities had licensed the user through their own
PRO or directly at different rates) would result in chaos, and worse, in most music creators never
getting paid. Even a system that allowed direct licensors to pay co-writer shares
of
royalties
through the PROs would suffer from a total lack
of
transparency, again resulting in music creators
never seeing their proper earnings or being able to monitor and audit the licensing music publisher
for lack
of
privity. Under such conditions, PROs would also be left with little ability to monitor the
17
marketplace in any meaningful way, leading to enormous drops in collections affecting mainly
creators and small, independent music publishers. To foster the widespread institution
of
such a
system by making partial withdrawal concessions to music publishers would be a grave disservice
to the entire music creator community.
2. Foreign Works and Composers
Following a meeting in London on June 6, 2014 among representatives
of
SGA, MCNA, and The
Music Managers' Forum ("MMF"), a UK based organization representing the interests
of
mainly
British recording artists (many
of
whom are songwriters and composers), MMF published a public
statement on July 15, 2014 illustrating the further complications and chaos that would result from
the broad adoption
of
direct licensing systems for performing rights in the U.S. Specifically, MMF
points out that music publishers, in fact, lack the authority to withdraw rights from the PROs on
behalf
of
foreign songwriters and composers:
Sony/ATV cannot
withdraw
any non-US writers' works from
the
U.S.
PROs
and issue licences
for
their
work
as
they do
not
own
the
right in any songs
written
by any
writer
who
is
a direct member
of
a
PRO
outside
the
USA.
These non-U.S. writers assign
their
performing right directly and
exclusively
to
their
local
PRO
on a global basis. The right
is
owned by the
PROs
who have the sole
authority
to
issue licences -
to
the
exclusion
of
the
writer
and the publisher. These non-U.S. rights
are passed exclusively
to
the
U.S.
PROs
by the non-U.S. societies
....
The global
network
of
non-profit
PROs
has
served the consumer,
the
music users and
the
song
writing
and publishing community well
for
over a century. Despite the challenges
of
the digital
environment,
PROs
provide economies
of
scale and streamlined licensing which keep transaction
costs manageable. Writers sit on
their
Boards and
can
influence policy. While the
PROs
may
not
be
perfect, they allow creators a voice and a direct income stream. Adjustments
to
this system
should
be
nuanced and carefully
thought
through. More importantly
to
our
members' clients,
solely national focus poses a grave threat
to
the livelihoods
of
every writer, American
or
not.
18
Once again, SGA stresses that enabling the growth
of
a licensing system that would have profound,
negative effects on market stability, the ability
of
U.S. and foreign creators to control and monitor
the performed uses
of
their works, and that might engender harsh backlash from international
societies and other nations against American songwriters and composers presents a serious threat to
the survival
of
the American music creator community.
It
is
SGA's
belief that the views expressed
by MMF in its public statement are extremely relevant to DOJ's examination
of
the Consent
Decrees, and SGA attaches them to these Comments as Exhibit
2.
3. The Right
of
American Music Creators to Affiliate With the PRO
of
their Choice
As noted earlier in these Comments, "virtually every music publishing agreement concluded in
America over the past one hundred years has made reference to the fact that it is anticipated that
such rights will be licensed and royalties paid directly to each party by a PRO
of
which both the
songwriter and music publisher are members. "
6
For over a century, in other words, every American songwriter and composer from George
Gershwin, Yip Harburg and Duke Ellington to Dolly Parton, Bob Dylan and Beyonce have had a
more than reasonable expectation that they would forever be able to rely on the protections
of
their
PRO
of
choice as their right, to protect them and their most vital stream
of
income. Suddenly,
however, in 2014, U.S. music creators are being told that is not the case. Major music publishers
have asserted that they may unilaterally disenfranchise songwriters and composers from their PROs
as to musical works controlled by those publishers, and that there is nothing those music creators
can do about it.
6
"Amicus Brief
of
the Songwriters Guild
of
America." Broadcast Music, Inc.
v.
DMX Inc. I 0-3429-cv. U.S. District
Court for the Southern District
of
New York. December, 2010. 19
SGA does not subscribe to that theory, nor does it believe that a vast majority
of
American
songwriters and composers do either. In fact, SGA believes that the attempted withdrawal
of
rights
by music publishers from PROs, including the writer's shares attached to those rights, will result in
widespread litigation initiated by the creator community. Such a scenario would be nothing short
of
disastrous. In the face
of
potentially hundreds
of
breach
of
contract lawsuits against the music
publishers, as well as international outrage led by foreign composer groups and their local
societies, there would be a terrible chance for the collapse
of
performing rights royalties as a viable
income stream, concomitant damage to the already diminished viability
of
music creation as a
means to earn a living in the U.S., and the disappearance
of
the American PROs themselves.
Once again, SGA implores DOJ to address the enormous inequities
of
the Consent Decrees as
quickly and efficiently as possible, without creating the means for music publishers to more easily,
through partial withdrawal, disenfranchise American creators from their PROs.
III. Conclusion
SGA believes that the Consent Decrees to which the PROs remain subject are severely in need
of
modification in order to mitigate the unfair economic results that have devastated the songwriter
community.
Moreover, SGA agrees with the PROs about: (1) the need to shift performance royalty rate-setting
from rate court judges to private arbitrators; (2) the imperative for recognition
of
an evidentiary
presumption that direct, arms-length, transparent licenses voluntarily negotiated by copyright
holders who have withdrawn rights from a PRO provide the best evidence
of
reasonable market
rates; (3) the related Congressional adoption
of
the "willing-buyer/willing seller" standard in rate
20
setting for musical compositions, and; ( 4) the extension to
PR
Os
of
the ability to license bundled
rights beyond the singular right
of
public performance to new media services.
There is one very important area where SGA diverges from the PROs; SGA has determined that
the granting
of
partial withdrawal concessions to music publishers would spell the ruin
of
the music
creator community because
of
four distinct categories
of
harm that such action would likely cause,
by unnecessarily making direct licensing
of
performing rights a viable and attractive option for
music publishers under any circumstances:
(
1)
the elimination
of
any semblance
of
transparency by music publishers on any direct
performing rights licensing deal
of
their choosing, enabling them to completely obfuscate
licensing terms from music creators including such crucial information as the inclusion
of
advances, administrative fees, equity interests, and other remuneration that music creators
have a rightful expectation to share in;
(2) the shifting
of
all low-overhead, high-yield collection and licensing functions from the
PROs to in-house music publishing staffs, leaving only the most costly, labor intensive
administrative functions to the PROs (and thereby shifting hugely burdensome, per
transaction costs to the remaining members within the PRO). Such a practice would result
in the very opposite effect
of
the cost-spreading benefits intended to realized through the
collective licensing process, and would likely destroy the ability
of
the PR Os to survive
economically;
(3) the providing to music publishers
of
the means to recoup advances issued to music
creators out
of
an income stream (the writer's share
of
performance royalties) for which
21
the music publisher did not bargain in setting the amounts
of
the advances and the terms
of
the publishing deals, and over which it has had no expectation
of
control after more than a
century
of
collective licensing precedent, and;
( 4) the introduction
of
chaos into the performing rights marketplace, with
a) co-writers
of
musical compositions left without a viable, cost-effective means by
which to collect their royalties under direct licenses issued by music publishers
of
their co-creators;
b) foreign writers being completely disenfranchised from the rights granted to them
under the rules
of
their local performing rights societies, with the ability
of
music
creators and PROs to exercise oversight concerning the licensing, royalty
collection and distribution process rendered a virtual impossibility; and
c) the expectation
of
a right to affiliate with the PRO
of
one's choice completely
removed from the American music creator experience.
As the sole, non-conflicted organizational representative
of
the interests
of
American and
international music creators, SGA thanks the DOJ for this opportunity to comment.
Respectfully submitted,
The Songwriters Guild
of
America
Rick
F.
Carnes, President
Songwriters Guild
of
America
5120 Virginia Way, Suite C 22
Brentwood, Tennessee 37027
Charles
J.
Sanders, Counsel
Attorney At Law, PC
29 Kings Grant Way
Briarcliff Manor,
NY
10510
22
EXHIBIT 1
Music Creators North America
European Composer and Songwriter Alliance
October
18, 2012
Vja Emajl and Flrst Class Maj!
Mr. John
Lo
f
rumento
Chi
ef
Executive
Officer
AS
CAP
One
Li
nco
ln Plaza, New York, NY
10023
Re:
Request
for
Information
Concerning
Direct
Licensing
of
Performing
Right
s
Dear John :
Th
is
request
for
information
is
submitted
jo
in
tl
y
by
Music Creators
North
America
(Music Creators NA) and
the
European Composers and
Songwriters
Alliance (ECSA},
which
have
recently
formed
an a
lli
ance
to
protect
and
advance the
rights
of
mus
ic
creators
throughout
the
United States, Cana da and Europe.
Togethe
r, Music
Creators
NA
and
ECSA
represent
national
music
creator
organizations and
the
ir
members
fr
om
over
thirty
nations,
all
of
which
organizat
ions
operate
independently
and solely on behalf
of
mus
ic
creators
and
their
heirs.
As
you are well aware, a
situahon
has
recently
arisen
that
is causing
enormous
concern
to
music
creators
throughout
the
world
. Mul
ti-nationa
l and local
US
mus
ic
publishers
have
begun
expand
ing
the
practice
of
licensing
US
performing
rights
directly
to
copyright
users, bypassing
the
US
perform
ing
rights
societies. We
believe
that
it is
at
best
u
nclear
that
such
music
publishers
have
the
ri
ghts
to
do
so,
especially in regard
to
works
already
exclusively assigned
to
foreign societies
by
music
creators, issues
that
we are
fu
lly
investigating.
Such
direct
li
censing deals
are
comp
letely
opaque
to
the
composer
and
songwrite
r
commun
i
ty
and in
addit
ion
underm
ine
the
exclusive
assignment
of
the
perform
ing
right
that
Canadian,
European and
UK
music
writers
vest
in
the
ir
PROs.
Much
of
what
we do
know
about
these
arrangemen
ts is based
upon
what
has been g
ll
eaned
from
the
t r
anscripts
produced in t he
OMX
l
itigations,
which revealed
through
sworn
test
i
mony
t h
at
certain
music publishers
may
have
recei
ved
substantial, up-
fron
t financial
benefits
(among
other
advantages)
that
were neit
lh
er
reported
to
nor
shared
with
their
affiliated
songwriters
and composers in
that
instance, and
potentia
ll
y in
many
others.
It
is
our
further
beli
ef
that
the
DMX dea l in particul
ar
--and
direct
perform
ing
rights
licensing deals in
general--
threaten
to
seriously di
minish
(and
have
already
dim
i
nished)
the
value
of
performing
rights
in
the
US, causing
the
loss
of
tens
of
millions
of
dollars in
US
performing
rights
revenues
to
music
creators.
Our
concern
over
th
is
trend
is hei
ghtened
by
our
understanding
that
the
Sony
/ EMI Music
5120
Virgin
ia
Way
, Suit e
C22
B
re
ntw
o
od
,
TN
37027
Pho ne : (
615
)
742
·
9945
l
23
Publishing
Group,
whose
comb
ined
cata
logs
we
be
lieve
r
epresen
ts well
over
thirty
percent
of
the
US
music
publishing
market
,
has
apparently
in
formed
t he
US
PROs
(including
ASCAP)
of
its
intention
to
remove
all
new
media
rights
from
the
societies
starting
on
January
1,
2013.
We
are
extremely
concerned
that
this
action
alone
will
financial
ll
y
eviscerate
t
he
ab
ility
of
t he
PROs
to
cont
in
ue
functioning
as
the
guardians
of
songwriter
and
music
publis
he
r
performing
righ
ts
interests
as
they
have
fo
r
the
past
full
century.
If
the
vert
ically
integrated
broa
d
cast
i
ng/music
copyright
entity Universal Music Publ
ishing
Group
were
to
follow
su
it,
we
fear
that
th
e
US
p
erform
in
g
rights
collective
licensing
system
--
established in large
part
to
prov
ide
secu
rity
to
music
creators
--
could
comp
le
tely
collapse.
We
are
aware
of
the
complexity
of
competition
l
aws
in
the
US
,
and
t h
at
certain
sensitivities
must
be
observed
in
ensuring
that
the
ant
it
rust
l
aws
are
properly
observed. We
are
,
in
fact
,
carefully
examin
i
ng
those
laws and t h
eir
potent
ial
application
to
the
formula
tion
of
so
lut
ions
to
the
issues
we
face.
Under
any
circumstances,
however,
it
is
clear
that
no
law
exists
to
pr
event
the
disclosure
of
basic
factual
information
concerning
important
.aspects
of
th
e d
irect
licensing issue,
inclu d
in
g t
he
potent
i al
effect
of
dir
ect licensing
on
(i}
the
r
jgh
ts
and
i
ncome
s
of
m
usic
crea
tor
s in t
he
US
and
elsewh
ere;
(i
i)
the
ab
ili
ty
of
the
US
PROs
to
function
effectively
as
the
guar
dians
of
US
performing
rights
for
creators;
and
,
(iii)
the
ability
of
music
creators
to
achieve
the
transparency
necessary
to
proper
ly oversee
t
he
lice
ns
ing
of
the
ir
rights
and
t
he
collection
and
distribu
tion
of
their
royalties.
The
fo
llowi
ng
questions
request
information
fr
om ASCAP
regarding
how
t h·e
remova
l
of
certain
rights
from
the
organizat
i
on,
for
the
purpose
of
direct licens
ing
by
music
p
ublis
he
rs,
may
affect
the
organizat
ion
and
the
music
creators
affiliated
wi
th
it.
1) Can you
prov
ide a
list
of
the
direct
licensing
agreements
already
completed,
or
an
ticip
ated
, t h
at
have
resulted
jn t he
remova
l
of
rig
ht
s
from
ASCAP
in
the
la
st
five
years? Can
you
prov
ide
an
estimate
of
what
percentage
of
ASCAP's
reperto
ir
e has
been affected
by
these deals?
How
w
ill
this
affect
the
ability
of
ASCAP
to
effect
i
vely
operate
as
the
representative
of
US
perform
i
ng
rights
on behalf
of
music
creators,
especial
ly
if
t
he
trend
continues?
2)
What
is
ASCAP's
view
of
how
the
practice
of
d
ir
ect
licensing
will
affect
the
rights
and
incomes
of
music
creators
in
t he
US
and
abroad?
M
ore
speci
fically,
how
might
direct
licensing
of
p
erformance
rig
hts
by
music
publishers
rather
than
ASCAP
affect
transparency
-
that
is,
the
abi
l
ity
of
music
creators
to
monitor
the
lic
ens
i
ng
of
t h
eir
rights
and
the
proper
and
accurate
pa
ymen
t
of
royalt
i es? Does ASCAP h
ave any
ability
to assist
or
represent
i
ts
music
creator
membe
rs
in
securing t
he
informat
io
n
they
need
from
their
respective
music
publishers
regarding
the
deta
i
ls
of
any
direct
performing
rig
hts
licensing
agreements
secured
by
the
publishers, so
that
proper
royalty
payments
may
be
mo
nitored
by
creators
and
in
appropriate
cross
collateraliza
ti
ons
against
advances can be
avoided
or
corrected? And
how,
if
at
all,
does ASCAP
intend
to
communicate
to
i
ts
music
creator
members
informat
ion
5120
Virginia
Way
,
Su
i
te
C22
Bren twood,
TN
37027
Phone:
(6
15
)
742
·
9945
2
24
concerning
fut
ure
deals
involving
t
he
direct
licensing
by
music
pub
lis
hers
of
performi
ng
rights
now ad
ministered
by
t he organ ization?
3) Do ASCAP
's
a
ffili
at
io
n
agreements
with
its
music
creator
members
and
foreign
soci
eties
i
mpact
the
ability
of
music
publishers
to
directly
license
performing
ri
ghts
in a
work
on
behalf
of
in
d
iv
idual
music
creators,
or
the
ab
ility
of
such
music
creators
(or
h
eirs)
to
demand
that
ASCAP license
rights
and
co
lle
ct
roya
lt
ies t ied
to
the
"wri
ter
's
share"
of
such
work
on
their
behalf
, w h
ether
or
not
a
music
publisher
licenses
their
share
of
such
work
direct
ly?
4 )
What
policies
or
pr
ocedures
are
in place
to
prevent
an ASCAP
music
pub
lis
her
board
member
from
remai
ning
on
the
board
when
the
company
he
or
she
represents
removes
,
or
proposes
to
remove,
a
substant
ial
portion
of
works
or
of
specific
rights
in
such
works
from
the
soc
i
ety,
giving
at
l
east
the appearance
of
a
conf
l
ict
of
inte
rest
wi
th
respect
to
both
ASCAP
and
its
mus
ic
creator
affil
iates?
Is
there
any
proh
i
bition
in
place
that
would
prevent
ASCAP
from
providing
independent
legal
counsel
for
the
mus
ic
creator
members
of
its
board,
the
specific
role
of
wh
ich would
be
to
ensure
that
they
are
fully
apprised
of
the
legal
rights
of
music
creators
on
issues
of
con
fli
ct
w
ith
p
ub
lishers?
ASCAP
is
a
signatory
to
the
CISAC Professional Rules
for
Music Societies
approved
earlier
this
year,
which
stipulates
as an
important,
overarc
hing
principle
that
every
CISAC
organizatio
n
must
"con
duct
it
s
operations
w
ith
integrity
,
transparency
and
effic
i
ency."
It
is
our
concern
that
ASCAP's
ability
to
fulfill
these
obl
igations
may
be
deeply
compromised
by
the
recent
act
io
ns
of
music
publ
ishers
regard
ing
the
direct
licensing
is
sue
,
and
that
the
answers
to
t he
above
quest
ions
wi
ll assi
st
the
music
creator
community
in
un
d
ers
ta
nding
the
facts
behind
the
current
challenges
presented
by
the
di
rect
licensi
ng
of
perform
ing
rights
in
the
US. We
are
hopeful
that
the
framing
of
solutions
w
ill
flo
w
from
a
greater
understanding
of
the
full
c
ir
cu
mstances
su
rrounding
these
serious
pro
blems.
We
look
forward
to
receiving
the
requested
in
for
ma
t io n
and
any
additiona
l t
ho
ught
s
you
may
have
on
the
matters
raised above,
and
to
discussing t
hem
with
you.
We
would
greatly
appreciate
your
substantive
reply
to
this
letter
prior
to
October
31,
2012,
and
we
thank
you
for
your
kind
assistance.
With
regards
,
Alfons
Karabuda
Execut
i
ve
Chai
rman:
ECSA
c.c. Paul Wil
liams,
ASCAP
R
ic
k Carnes
Co-Chair: Music
Creators
NA
5120
Virginia
Way
, Sui
te
C22
Brentwood,
TN
37027
Phone:
(6
15
)
742
·
9945
3
25
ECSA
Memb
ers
http://www.composeralliance.org/article.en.6.members
& links.html
Music
Creators
North
America
Members
Songwriters Guild
of
America
Songwriters Guild Foundation
Songwriters Associ ation
of
Canada
La
Societe professionnelle des auteurs
et
des compositeurs du Quebec
Screen Composers
Gu
ild
of
Canada
5120 Virginia
Way,
Su
it e
C22
Br
e
ntw
o
od
, TN
37027
Phon
e :
(615)
742-
9945
4
26
AS
CAP
0
Joh
n
A
LFrumento
c 1
ief
Execu,
tive
Off
icer
January
10,
2013
.Via
Email
<rickcarn
Rick
Carnes
Co-Chair,
Music
Creators
North America
Via Email
<alfons.karabu
Alfons Karabuda
Executive Chairman,
European Coomposer and Songwriter Alliance
Re
. Request
for
lnfonnatjon
Concerning
Direct
Licensing
of
Perfom1ing
Rights
Dear
Rick
and Alfons:
Please
accept
my
apologies
fo
r the delay
in
rcsponding
to
your
letter
of
October
2012.
Although
your
letter,
as
entitled. seeks infonnation on direct licensing. your
letter
also
seeks
infonnution
regarding
the
withdrawal
of
rights with
rcspect
to
certain
"New
Media
Tran
missions"
As
tlte
latter
topic
was
scheduled
for
discussion
at
ASCAP 's recent
October
and
December
2012
Board
meetings,
I
was
somewhat
constrained
in rcplymg
until
that
topic
had
been
fully
vetted.
Accordingly,
in
order to give
you
a complete
rcply,
we
waited until
after
the conclusion
of
those
mee
t
ings
.
At
the
outset. let
me
say that ASCAP embraces
your
organizations'
missions
to
represent
music
creators
and
thei
r
hei
rs: end
second,
that
I do regret the confusing nature
of
recent
press
coverage
concerning
both the
issues
of direct
licensing
and
the
withdrawal
of
certain
"New"
Media"
1ights
. I
hope
tluu this leucr
may
serve
to
dispel
Some
of
this
confusion
as
well as clanfy
ASCAP's
position.
Constraints
on
ASCAP
vis-a-vis
Direct
Licensing
by
U.
S.
Publishers
ASCAP devotes
itself to
achieving
the
most
efficient,
cost
effective
means
ofliccnsing
and
distributing
the
maximum
royalties
we
can
to
our
members
Indeed,
ASC
AP
has
achieved
an
administrative
operating ratio
of
11%
one
of
the lowest
of
any
performing
right
organization
("PRO')
io
the
world
: and this achie
v
cmen1
is despite certain
con
straints
imposed
oo
ASC
AP
by its
consent
decree or t
he
Amended Second
Final
Judgment
(AFJ2").
Pursuan
t
to
Article
IV
of
AFJ2, .. ASCAP is hereby
enjoined
and
restrained
from
: . .
(B)
Luniting.
restricting,
or interfering
with
the
right
of
any
member
to iss\le, directly or
through
an
agen
t other than a
performing
rights organization,
non-
A
merican
SOC
IETY
OF
COMPOSERS,
AL
TH
ORS
&
PUBL
S
HE
RS
S
.
A
S
CAP Building
C
O
Lincoln PL
New York
NY 10023
2
1
621
622
3
F
..
x
212
1
09
5
l
.
mail
JLofrumento
.
.@
ascap.
l
com
Web
te
http://www.
ascap
.com
27
Letter
to
Messrs.
.
Carnes
&
Karabuda.
cont'd.
page
2
exclusive licenses
to
music users for rights
of
public
performance."
In short, ASCAP
may
not
interfere
with
any
members'
choice to license directly. Moreover, as you know,
the
power
to
issue a direct
l
icense
here
in
the
United States,
is
typically held by a
publisher, eilher
by
reason
of
that
publisher's ownersh
ip
of
th
e copyright in the musical
work.
or
by
reason
of
an administrative
or
other
contractual
relationship giving thnt
publisher
legal
oontrol
over
the
licensing
of
the
underlying musical
work.
ASCAP is not privy
to
many or most
of
the
terms
of
the contracts between
publishers
and
their administered
or
controlled publishers
ancVor
writers,
nor does ASCAP, as a
third
party
to
such contracts. have any
standing
to
enforce
rights in these
contracts
ASCAP
is
only
infonned
as
to
what
entity
is
the
controlling
or
administering
publisher and
the
works
which fall under the contract.
DMX
Direct
Licenses
With
respect
to
the
direc
t
licenses which
certain
ASCAP
and
BMI
publishers
entered
wi
th
the
entity
now known as
DMX,
ASCAP
shares
in
the frustration
that
certain
publishers openly
decided
to license
with
DMX
at
rates. which bad the
net
effect
of
lowering the rate which ASCAP (and BMl)
now
·
receive
for
a
blanket
license to !heir
rcspective
repertories. n
ot
otherw
ise
directly
licensed.
Nonetheless,
the decisi
on
by
certain publishers
to
license directly was their own to
make,
and one with which ASCAP
could not
interfere.
Both
BMI,
and then later ASCAP, sought
in
rate court to obtain a
higher rate
than
DMX
was willing
to
pay
either
of
them, in light
of the
direct
licenses.
Neither BMI nor ASCAP was able
to
prevail.
In
stead,
DMX's
''rate," to which certain
publishers agreed,
was
ru
led by both rate
courts
as the appropriate
benclunark.;
and,
the
Second
Circui
t
for
the
U.S. Court
of
Appeals
Confirmcd
those
rulings.
Furthe
r,
because
of
the
requirement
in o
ur
respective
consent decrees
that
US
'PROs,
like
ASCAP
and
BMI,
license
similar1y
situat
ed
users
"similarly,"
the
outcome oftbe OMX
case h.
as
required that
ASC
AP and
BMI
offer lower
rates
to all suppliers
of
background/foreground
music. Whether
those
publisbcrs which
enga
ged
in
direct
licensing
proceedcd
to
distribute:
those
royalties
to
lheir
contractual
partners.
administered publisbers and writers.
is
a con
tr
actual matter
between
those parties to
wh
i
ch
.A
SCAP
is
not
privy
and does not
ha
ve
standing to
inquire.
Notwithstanding
this
lack
of insight.
we
believe,
that
overall,
royalty receipts
in
aggregate both to ASCAP and
BMI,
and the direct licensees, from all
th
ese types
of
services
wi
ll
be
lower go
in
g
forward.
Constraints vis·a-vis
DMX
and forcjgn
writers
On
the
specific issue
of
whether D
MX
could obtain from BMI's publishers the right
to
license directly foreign affiliated
writers'
rights,
the
BMI
DMX rate
court
ruled
that BMI
and
DMX
couJd
rely on a
pu
bli
sher's
representation that
it
held those rights. ASCAP's
trial
followed the decision in
BM
l'
s trial, and thus,
ASCAP
was legally
constrained
in
its
ability
to
challenge those findings.
28
Withdrawal
of New
Media Transmission
Rights
The
act
of
direct
licens
in
g
repertory to a
particular
music
user should
be
considered
separate and apart
from
the
act
of
withdrawing
certain
rights
in
repertory
for
certain
categories
of
music users.
Here,
I can
confim1
that
ASCAP
's Board,
comprised
of half
writers and
half
publishers, has allowed for
the
possibility
of
the withdrawal
of
certain
di
gital
pub
lic
performance
rights lo
permit
certain
types
of
non-public
performance
rights
to
be
licensed or "bundled"
in
tandem. I
must
emphasize
to you
these
reflect a
narrow
category
of
rights for a defined
se
t
of
music users.
these
categories
of
New
Media
public
performance
rights, -
if
withdrawn
from
ASCAP, include those New Media
services - which require,
in addition to a public
performance
right;
(1)
a reproduction or
mechanical
license (e.g
..
Rhapsody, Spotify); (2) a
license
for
the public
performance
of
a sound recording (e.g.,
S
l
acker);
(3) a synchro
ni
zation licen
se
or
other
license
as
sociated
with
the underlying musical composition
for
short-form music videos and
audiovisual
content
uploaded by users
(e.g.
, YouTube); or, (4) a license
to
transmit music via a cloud
locker type service (e.g .. iTunes
Maleh,
Amazon Music).
ASCAP
will co
r1t
inue
to
license and distribute royalties
for
the many prominent online
and mobile
services
not
included
in
these categories. including
bu!
nol limited
to
long
form
, audiovisual streaming services. such as Nctflix, Hulu, and Amazon
VOD
(i.e
.
video
on
demand)
. ln addition,
any
"New Media
Transmission'
services
that
are
oper3ting
under
existing
li
censes
with ASCAP will
not
be
affected by the withdrawal
until
the expiration
of
their ongoing ASCAP licenses.
You
have
expressed
concern
that
the "'withdrawal
of
right
s''
will
"financially
evis
cerate
the
ability
of
P
ROs
to
continue
functioning
us
th
e
guardians
of
songwriter
and music
publisher
performing
rights
interests
..
(quot
in
g your letter at page 2). At
this
point
in
time, it
is
important to emphasize here that overwhelmingty. the vast majority
of
ASC
AP's nearly
$1
billion in revenues - 98.5% or
more- are
not touched
by
these
narrow
categories
for
which New
Media
T
ransmi
ssion
licen
sing
rights
were
withdrawn
or
ma
y
be
withdrawn.
Moreover
,
any
music
user that
is
eligible
for
a
"through
to
the
audience"
under
AS
C
AP's
consent decree
is
expressly
precluded
from
tJ1e
scope
of
rights
that may
bc
withdrawn.
111is
means.
by
way
of
illustration, that ASCAP
will
continue
to
license
and
collect
fo
r
aJ
l other public performance rights. including
performances
on
radio,
satellite radio, te
le
vision,
cable
,
and those
med
iwns'
activities
online
(i.e
..
the
website and mobile
platfom
activities
of
these broadcast radio and television stations,
cable
programs
and
cable operators)
as
well
Jive
performances
and any New
Media
services
not
aftected
by the withdrawal
of
rights.
The
policies
and
procedures appl icable to
the
modifica
ti
on
of
au ASCAP member's grant
of rights
for
certa
in
New Media Transmissions are
set
forth
in
Section
1.12
of
ASCAP's
Compend
ium
,
available
at
http
://www.ascap/com/members/~/media/Fi.
les/Pdf/members/
govern
i
ng.
doc
uments
/
Compendium-of-ASCAP-Rules-Regulations.ashx.
ASCAP al
so
will continue to license and distribute royalties for
all
New Media serv
ices
oo
behalf
of
members
who
have not withdrawn their
works
from
the
ASCAP
repertory.
29
Constraints
on Withdrawal
of
Foreign Affiliates
in
t
he
U.S
.
Lastly,
as a result
of
the
meeting
of
ASCAP's
Board in December, an important
point
of
clarification
was added
to
Section
l
.1
2 of the Compendium:
with
respect
iO foreign
PRO
members affiliated
with
ASCA
P for the U.
S.,
they
will
be
presumed excluded
from
an
exercise of withdrawal
of
rights
for
New Media Transmissions unless authority to the
contrary
is
provided.
The newly added text to
the
Compendium shall read that any
ASCAP
Member seeking to withdraw righ
ts
in
a
work
in
which a writer or publisher
affiliated
wi1h
a
forei
gn
PRO
has
an interest in that
work
"may'
not
withdraw
that
Member
·s or
the member
of the
foreign
PRO'S
rights
in
rlrgt
work
for
New
Media
Transmissions
unless
and
until
rhe
foreign
PRO member hos
complied
with the rules
of
the foreign
PRO
applicable
to
its
members to
give
effect
19
such
q
withdrawal"
(Emphasis added).
Questions
Posed
Your
letter
posed a series
of
four
sets
o(
questions.
Wh
i
le
it
is
my hope that
much
of
what
has
been
set forth above responds contextually.
in
large
part
to
your
questions,
we
will
endeavor
to
provide some more specific answers where we can.
Question
Se
t
#1
ASCAP
cannot provide
you
wi
th a lisl
of
direct
licensing
agreements .. already
completed
..
for
the simple reason that unless they
have
been made public t
hrough
coun
procedures
or
otherwise, such
as
was
the case
with
certain ASCAP
publis
hers
which
entered
direct
licenses
with
DM'X,
these
agreements
are
confidential,
pr
op
rietary
arrangements
between
an
authorized publisher and a music user. Thus. while ASCAP
ma
y
be
notified
of
a
direct
license,
it
is
not
at liberty to disclose
its
existence to
the
public.
You
have
asked
what percentage
of
A
SCAP's
repertory
has
been
affected
and
how
it
might affect
tl1e
ability
of
ASCAP
to operate
effectively.
As
noted above, the vast
majority
of
ASCAP's
licensing activities and resulting
io
nearly
$1
billion
in
revenues
last
year,
or
at
present 98.5%
of
which, remain
unaffected
Question
Set
#2
You
have
asked what
ASCAP's
view is on the
prac
t
ice
of direct
licensing's
affect on
the
right
s
and
incomes or
music
creators
in
the
U.S.
and
abroad,
and
its impact on
transparency
with regard
to
the payment
of
royalties.
As
no
t
ed
above,
and
again
here,
the
vast
majority
of ASCAP's
licensing activities, and associated revenues will remain
unaffect
ed.
To the degree
that
ASCAP
can provide
transparency
for
its members.who
rn.ay
have
wit
hdrawn
rights
for
New
Media
Transmissions,
ASCAP's Board
has
authorized
ASCAP to
offer
"back
office"
services
for
processing any
New
Media
Transmission
ro
yalties,
which
may
have been directly licensed, using
ASCAP
's
databases
and
i
nt
erfaces that
are
intended
to
be
as
transparent
as
p
ossible,
and
accessib
le
directly
by
all members via their
online
ASCAP Member
access
accounts.
30
Letter
to
Messrs.
Carnes
&
Karabuda
,
cont'd,
page
5
You
have
also asked
whether
ASCAP
has
the
"ability
to assist or
represent
its music
creator
members
in
securing the informacion they
need
from
t
hei
r respective music
publishers regarding
the details
of
any
direct
performin
g
rights licensing
agreements
secured
by
publishers,
so
that proper royalty payments
may
be
monitored by creators and
inappropriate
cross
collateralizations s
against
advances can
be a
avoided or
corrected?"
(quoting your
letter
at page 2).
As
discussed
above,
ASCAP
is
not
privy
to
the
contractual
relations between publishers and
administered
publishers
and
writers,
including whether advances may
or
may
not
be cross
collateralized
and
if
so to
what
extent. Therefore. it follows
that
ASCAP
would not
be
in
a position to provide such
infonnation.
Howeve
r,
ASCAP's
Board
has
authorized
ASCAP
to
offer
"back office ..
processing services for the distribution
of
New Media
Transmission
royalties which
may
have
been
directly licensed by publishers. To
the
extent
that
ASCAP
is
asked
to
and
docs render such services. ASCAP intends
to
render them
at
the
highest
level
of
transparency
as
possible.
Question
Set
# 3
You
have
asked
generally
about
the
affiliation agreements
of
foreign PRO creator
members
with ASCAP and
to
wha
t
extent
it impacts the ability
of presumably
ASCAP
music publishers
to
license
performing
rights directly
on
behalf of these
Creator
members
or
allow these foreign
PRO
members to demand that ASCAP license their
"writer's
share,"
regardless
of
whether the ASCAP publisher seeks
to
license directly.
With
respect
to
the issue
of
withdrawal
of
rights
of
foreign PRO members
affiliated
with
ASCAP
for
the
U.S
. via
their
ASCAP publishers,
based
on
exploratory
discussions
with
several
foreign
PROs,
ASCAP's
Board
decided that
the
most
cautious
approach was
to
adopt a presumption
that
such a
wid1drawat
for
a
foreign
PRO member
by
a
U.S.
publisher
may
not be
effectuated
unless
supporting
documentation
is
provided.
As
for
the right
of
U.S.
ASCAP publishers
to
license
directly, this again
re
mains
a matter
of
co
ntractual
relations
to which ASCAP
is
not privy. Moreover,
as
also discussed above,
ASCAP
is
constrained by
irs
consent decree
from
in
terfering
in
attempts by its members
to license
directy,
This
has
been
the case for decades
now.
In
some
cases,
our
publishers believe that a
direct
license
may
be
the only
opportunity
a writ
er
member
has
to have his
or
her creation
exploited,
w1d
that
is
a choice reserved
to
these contractual
parties.
In
any
event,
we
cannot interfere
wicb
the
exercise
of
the exercise
of
these rights
by
our
members.
Jn
th
is
third
group
of
questions. you
have
also
asked whether
ASCAP
could insist
on
licensing a
foreign
PRO
member's
writer
share-
via
ASCAP
and
notwithstanding an
effon
by
an ASCAP
publisher
member
to
license
the
publisher share directly. There are
two
answers to this. The first, as with
many
other questions
that
you
have
raised,
rests
on
the
precise
contractual
re
lation
between
the
foreign
PRO
writer
member and the
U.S.
publisher,
and
again
that
is
a relationship
to
which
we
are not privy.
Presumably
,
if
such
a
contractual
relationship prohibited direct licensing, the parties
to
that contracl could
so
inform ASCAP and
we
would
notate
our records accordingly. The
second
is how
U.S.
Copyright
Law operates in this
context.
Unlike other jurisdictions,
to
the extent
that
a
31
Music Cr·eators North America
European Composer and Songwriter Alliance
October
18, 2012
Vi
a Email and First Class Mail
De
l
Bryant
P
resident
and CEO
B
MI,
In
c.
7
Wor
ld Trade Ce
nt
er
250 Green
wi
·ch
Street
N
ew
Yo
rk, NY
10007
-
0030
Re: Requ
est
for
Info
rmat
i
on
Concerning Dir
ect
Li
censing
of
Performing
R
ig
hts
Dear Del:
T
his
request
for
info
rmation
is
submitte
d
jointly
by Music Creators
No
rth
America
(Music Creators
NA
) and
the
European Composers and
Songwriters
Alliance
(ECSA),
w hich have rece
ntly
formed
an a
lli
ance
to
prot
ect
a
nd
advance the ri
ghts
of
mus
ic
cr
eato
rs
throughout
the
United States, Cana da and E
uro
pe.
Toget
her, Music
Creators
NA
and
ECSA
represent
national
music
creator
organizations and
the
ir
members
from
over
thirty
nations
, all
of
w
hic
h organizations operat e in
de
pende
ntl
y
and solely on behalf
of
m usic
creators
and
their
heirs
.
As
you are wel l aware, a
situation
has
rece
nt
ly
arisen
th
at
is causing e
normou
s
concern to
music
creators
throughout
the
world
. Mul
ti
-n
at
ional and local
US
mus
ic
p
ublis
he
rs
have
begun
exp
anding t he
pract
i
ce
of
licensing
US
per
f
or
ming
r
ights
d
ire
ctly
to
copyr
igh
t users, bypassi
ng
t
he
US
perform
in
g rights societies.
We
b
elieve
that
it is
at
best
unclear
that
such
mus
ic publishers ha
ve
the
r
igh
ts
to
do so,
especially in rega
rd
to
works
already
exclusively assigned
to
foreign
societies
by
music
c
re
a
tor
s, issues
that
we are
fully
investig
at
ing.
Such
direct
licens
in
g deals
are
comp
l
etely
opaque
to
the
composer
and
songwr
it
er
commu
n
ity
and in add
iti
on
u
ndermine
the
exclusive
assignment
of
the
performing
right
that
Ca
nad
ian,
E
uro
pean and
UK
music
w
riter
s
vest
in t h
eir
PR
Os.. Much
of
what
we
do
k
now
about
th
ese a r
rangements
is based up
on
what
has been gleaned
from
the
tra
nscripts
produced
in t he D
MX
lit
igations,
wh
i
ch
revealed
through
sworn
t
est
im
ony
t h
at
certain
mus
ic
pub
lishers
may
have
received substantial, up-
front
financial bene
fit
s
(among
other
advantages) that were neitlher
reporte
d
to
nor
shared
with
their
affi
l
iated
so
ngw
riters
and composers in
that
insta
nce, and
potent
ially
in many
others
.
It
is
our
further
beli
ef
tha
t
the
DMX deal in
part
icul
ar
--and
d
ire
ct
performing
rights
lice
nsin
g deals in
general--
threa
ten
to
ser
io
us
ly d
im
inish
(an
d have
alr
e
ady
d
iminis
he
d)
the
value
of
p
erform
ing
rights
in
the
US, causing
the
lo
ss
of
te
ns
of
m
illi
ons
of
dollars in
US
pe
rform
ing rig
ht
s revenues
to
mus
ic cre
at
ors. Our concern
over
th
is trend is h
eightened
by ou r under
stand
ing
that
the
Sony
/ EMI Music
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Publishing Group, whose
comb
ined catalogs
we
be
lie
ve
represents well
over
thirty
percent
of
the
US
music
publishing
market
,
has
apparently
in
formed
t he
US
PROs
(including
BMI
}
of
its
intention
to
remove
all
new
media
rights
fir
om
the
societies
starting
on
January
1,
2013.
We
are
extremely
concerned
that
this
action
alone
will
fi
nanciallly eviscerate the ab
ility
of
t he
PROs
to
cont
in
ue
functioning
as
the
guardians
of
songwriter
and
music
publis
he
r
performing
righ
ts
interests
as
they
have
for
the
past
full
century.
If
the
vert
ically
integrated
broadcast
i
ng/music
copyright
entit y
Un
iversal Music Publishing Group
were
to
follow
su
it,
we
fear
t h
at
the
US
p
erformi
ng
rights
collective licensing
system
--
established in large
part
to
prov
ide
security
to
music
creators
--
could complete
ly
collapse.
We
are
aware
of
the
complexity
of
competition
laws
in
the
US
, and t h
at
certain
sensitivities
must
be observed
in
ensuring
that
the
ant
it
rust laws
are
properly
observed. We
are
, in
fact
,
carefully
examin
ing
those
laws and
their
potent
ial
application
to
the
formu
la
tion
of
solutions
to
the
issues
we
face.
Under
any
circumstances,
however,
it is clear
that
no
law
exists
to
prevent
the
disclosure
of
basic factual
info
r
mation
concerning
important
.aspects
of
the
d
ir
ect
licensing is.sue,
inclu d
in
g
the
potent
ial
effect
of
direct
licensing
on
(i)
the
r
jgh
ts
and incomes.
of
m
usic
crea
tor
s in t he
US
and elsewhere ;
(i
i)
the
ability
of
the
US
PROs
to
funct
ion
effectively
as
the
guar
dians
of
US
performing
rights
for
creators;
and,
(iii)
the
ability
of
music
creators
to
achieve
the
transparency
necessary
to
proper
ly oversee
the
li
censing
of
the
ir
rights
and
the
collection and
distribu
t
ion
of
the
ir
royalt
ies.
The
fo
llowi
ng q
ues
tions
request
information
from
BMI
regarding
how
the
removal
of
certain
rights
from
the
organization,
for
the
purpose
of
di
rect
licensing
by
music
p
ublis
hers,
may
affect
the
organization
and
the
music
creators
affilia
ted
with
it.
1) Can you
prov
ide a
list
of
the
direct
licensing
agreements
already
completed,
or
an
ticip
ated, t h
at
have resulted jn t he
remova
l
of
righ
ts
from
ASCAP
in
the
last
five
years? Can
you
prov
ide
an
estimate
of
what
percentage
of
ASCAP's
repertoire
has
been affected
by
these deals?
How
will
this
affect
the
ability
of
ASCAP
to
effect
i
vely
operate
as
the
representative
of
US
perform
ing
rights
on behalf
of
music
creators,
especially
if
the
trend
continues?
2)
What
is
ASCAP's
view
of
how
the
practice
of
d
ir
ect
licensing will
affect
the
rights
and incomes
of
music
creators
in t he
US
and
abroad? M
ore
specifically,
how
might
direct
licensing
of
performance
rig
hts
by
music
publishers
rather
than ASCAP
affect
transparency
-
that
is,
the
abil
ity
of
music
creators
to
monitor
the
lic
ensing
of
t h
eir
rights
and
the
proper
and accurate p
ayment
of
royalt
i
es?
Does ASCAP
have
any
ability
to assist
or
represent
it s
music
creator
members
in
securing
the
information
they
need
from
their
respective
music
publishers
regarding
t he
deta
ils
of
any
direct
performing
rig
hts
licensing
agreements
secured
by
the
publishers, so
that
proper
royalty
payments
may
be
mo
nitored
by
creators and i
nappropriate
cross
collateralizations
against
advances can be avoided
or
corrected? And
how,
if
at
all,
does
ASCAP
intend
to
communicate
to
i
ts
music
creator
members
informat
ion
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concerning
future
deals
lnvo
lvlng
th
e d
ire
ct
licensing by music publlshers
of
performing r ights now administered by
the
organization?
3) Do ASCAP's affiliation agreeme
nts
with
its
music creator members and foreign
societies
impact
the
ability
of
music publishers
to
directly
license performing
righ
ts
In
a
work
on beh
alf
of
individual music creators,
or
the
ability
of
such
music
creators
(or
heirs)
to
demand
that
ASCAP
license rights and collect royalties tied to
the
"'writer's share"
of
such,
work
on
th
eir
be
half
,
whether
or
not
a music publisher
licenses
their
share
of
such
work
d
irect
ly
?
BMI is a signatory
to
the
CISAC Professional Rules
for
Music Societies approved
earlier this year, which stipulates as an
importan
t,
overarching p
ri
nciple
that
every
CI
SAC
organization
must
"'conduct i
ts
operations with
Integrity,
transparency and
efficiency.N
It
is
our
concern
that
BMI's abi
lity
to
fulfill these obligations
may
be
deep
ly
compromised
by
the
recent
act
ions of music publishers
regar
ding
th
e direct
licensing issue,
and
th
at
the
answers
to
the above questions will assist the music
creator
community
in
understand
ing
the
facts behind
the
current challenges
presented
by
the direct licensing
of
performing rights in
the
US.
We
are hop
efu
l
that
th
e framing
of
solutions will flow f
rom
a
greater
understand
in
g of
the
fu
ll
circumstances surrounding these
serious
pro
blems.
We
look forward to receiv
in
g
the
requested
information
and
any
add
ition
al
thoughts
you
may
have on
the
matters
raised above, and
to
discussing
th
em
with
you. We
would
greatly
appreciate
yo
ur substan
tiv
e reply
to
this l
etter
prior
to October 31,
2012, and we
th
ank
you
for
your
kind assistance.
With regards,
A
lf
ons Karabuda
Exec
utive
Chairman:
ECSA
Rick Carnes
Co-Chair: Music Creators
NA
ECSA
Member
s
http://www.composeralliance.or
oor/article
en
.6.
members
& links
html
Mus
i
Creators
North
Am
e
ric
a
Memb
ers
Songwriters Guild
of
America
Songwriters Guild Foundation
Songwriters Association
of
Canada
La
Societe
professionnelle des auteurs
et
d
es
compositeurs du Quebec
Screen Composers Guild
of
canada
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2) 220-4440
Del
R. Bryant
President
Chief
Executive
Officer
December
2012
Dea
r
Alfons
J
nd
Rick
:
Please excuse
the
delay in
our
response
to
your
request
fo
r informaliun
dated
October 18,
2012.
The
weather
on
the
Cast
Coast
of
the
U.S.
was
particularly
unfavorable
during
the
week
when
Our
r
esponse
was
due, and I
am
afraid we
are
re caught a
li
ttl
e
off
guar
d
by
the
severit
y
ur
the
impact
in
lower
Man
hat
ten
where
BMl's
offices
are
located.
I
am
pleas
ed
to be able to
tell
yo
u that
our
New
York
offices
are
once
again
open
for
business,
and
that
all
of
our
New
York-based
employees
are
safe.
We
are
do
ing
everything
we
can
to
ccnt
inue to
serve
our
wr
iters
and
publishe
rs
duri
ng
the
recove
ry
.
PleJse also
accept
our
sin
cere
app
reciation
for
yo
ur
efforts
in
r
eaching
out
to
us
,
and
for
your
organ
ization's
careful
an
d
thoughtful
consideration
and
diligence
in
try
ing
to
understand the
situation
in
the
U.
S.
relating
to
direct licensing
and
rights
withdrawal
that
seems to
hP.
a
popular t
opic:
for the
trade
press in
r
ecent
weeks. Please understand
that
BMI takes
very
seriously its
responsibillty
under
the
CI
SAC
Professional
Ru
les
that
you r eference
at
the
end
of
your
letter
,
and
welcomes
the
opportunity to
try
to
expla
in
its
perspective
on these
matte
rs.
Direct
Licensing
in
the
U.S
.
As
you
have
pointed
out in
your
letter,
competition
la
w
and
the
opperations
of
the
U.S
.
PROs
differ
from
other
territories.
BMI
oper
ates
un
der
a
Consent
Decree
(a
complete
and
accurate
but
unofficial
copy or
whlch
is
attached
heretoj.
Pursuan
t
to
Article
IV
(A)
ot
the
BMI
Consent
Decree,
BMI
ca
n
not
r
efuse
to
a
ll
ow ils
members
to
enter
into
a
non-exclusive
direct
license
with a
music
user rnaking d i
rect
performances
to
the puolic in
the
Un
it
ed States,
and
BMl's
affillat
io
n
agreements
(current forms
of
which are
also
attached)
expressly
set
forth
the
right
to
enter in
to
direct
l
icenses
a,d
the
responsibility
of
affiliates
to
notify
BMI with resp
ect
thereto.
As
you
know,
it
is
customary
in
the
U.S. t
or
songwriters
to
assign
their
copyrights
to
music
publ
ishers
and/or
Lo
enter
in
to
co
pu
blishing
ur
administration
ag
reements
wit
h
music
·
publishers.
ursuant .....
lo
those
agreements,
the
music publi
publisher
is
usual
y
authorized
to
license
and
administer
the
writer's
interest In the
rnusical
work
. In line
wit
h this custom. and consistent
with
BMl
's
obligations
under
its
Consent
Decree
and the provisions
of
Its
affi
li
ation
agre
e
ments,
it
follcws
th
at
BMl
wou
ld recognize a
di
rect
license
from
a music
pub
lisher
to
a music user as
valid
for
both
the
music pub lisher's
own
35
57 Would Trade Center, 250 Greenich STreet, New York NY 10007-0030 (212)220-5100 Fax: (21
E-Mail: c
rry
performing
right l
share
and
t
he
share
of
t
he
writer(s)
il
r
epresents.
Sin
ce
the
mus
ic
publisher,
not
BMI.
is
the
licen
sor
in
the
case
of
a
direct
lice
nse,
the
writer's share
in
the
royalties
from
the
exploitation
of
t
he
work
under
the direct
license
wo
uld
flow
from
the
pu
blisher
and
not
f
rom
BMI
,
and
royalty
dist
rib
ut
ions
would
be
governed
by
the
provisions
of
the
agreement
be
tw
een
th
e
wr
it
er(s)
and
the
music
pub
lisher, not the
writer's
affiliation
agreement
w
it
h BMl.
As
you
al
so
know,
direct
l
ice
nsing
in
the
U.
S.
is not
a
new
phenomenon.
Indee
d, while
BMI
strongly
believes
in
the
value
and
efficiency
of
collective
licensing
for
many
of
our
customers,
there
are
certainly
instan
ces
where
a
pub
lishe
r
mi
ght
de
cide,
at its
own
discretion,
t hat
a
d
ir
er
.t
license
is in
th
e
best
interests
of the publisher and its
wri
te
r(s).
If,
for
example,
you
are
a rig
hts
owner
whose music is
no:
nftP.n
performed,
a
direct
license that
includes
a
promise
of
increased
usage
by
a
customer
that
does
nnt
n
ee
d
access
to the rest
of
the
BMI
repertoire
co
uld be
one
such
ins
tance.
Wit
h
respect
to
the
OMX rate
cases
referenced in
your
letter,
and the
BMI
rate
case
with DMX in
particular
.. th
ere
are
tw
o
aspects
worth noti
ng
.
First,
BM
I
believed
,
and
strenuously
argu
ed
iin that
proceeding,
t hat individual
dirP.c:t
l
licenses
entered
into
by
OMX
wer
e not
pmper
b
P.n
c:hmarks
for
de
ter
mining
the
rea
sonable
value
of a
BMI
blanket
license
for
It
s entire repertoire. As
no
t
ed
In the
previous
paragraph, t here may
be
any nu
mber
nt
reasons
why
an
individual
rights
owner
may
·
make
an
informed
decision
to
en
ter
Into a
direct
license
and
may
value
that
licen
se
in
a
manner
dif
feren
t
ly
than
a
PRO
would
value
a blanket
l
ice
nse
ta
the
wor
ks
ot
it
s
collec
t
ive
me
mb
ers
hip
.
BMI
believes
that
t
he
direct
license
and
the collect
ive
license
are
two
entirely
different
products
and
one
should
not
b
~
used
to
assess
tne
reasonableness
of the
other
Unfo
rtunat
ely,
BMI's
rate
court
determi
ned
that the u
ni
fo
rm
rate
for
the
direct
licenses
that
DMX
entered
i
nto
wi
th
some
music
publishers
in the U
.S
.
con
stituted
th
e
basis
for
a
ra
te
benchmark
for t
he value
of
all
of
the
rights owners
rep
res
ente
d by B
MI
.
This
was
t he
conclusion
even
t
h
oug
h
ma
ny
·
oth
er
BMI
ri
gh
ts owners ex
pr
essly rejected
the
offer
of
e
nt
ering into a
direct
lincense
with
DMX.
Sec
on
d,
being well-aware
of
the
differe
nt
wa
ys
in which
p
erfo
rm
i
ng
rights are held
and
licensed in
territori
es
outside
of
th e
U.S.,
BMI
raised
the
issue
of
whether
DMX'
s
direct l
icenses
(i
nclud
i
ng
It
s
direct
license
with
Sony)
cov
ered
the
writer's
share of
royalties
for
performances
of
foreign
works
by
DMX.
The
BMI
Rate
court held that
DMX
was entitled
to
rely
on
a
pu
bl
is
her's
re
presentation
that
it
controls
the
write
rs'
share
to foreign works. Here is the actual text
from
the
Cou
r
t's
d
ecisio
n:
"T
he parties dispute
wh
et
her
direct
license
credits
cOaimed
by
DM
X for
perfRrmDQFH
s
of
foreign
works
licensed
by
BM
I
through
on
agreement
with
a
foreign
performing
rights
society
sh
ould
be
presumed
to
include
the
writer'
s
share
,
;n
addition
to
the
pu
blisher's
share.
BMI
proposes
that
only
the
publisher
's
share
be
included
unless
DMX
provides
it
with
evidence
that
the
writer's
share
was
intended
to
be
directly
licensed,
because
there
is
a
generall
uncer
tainty
whether
publishers
have
the
righ
t
to
dir
ectly
license
a
foreign
writer's share. DMX pr
oposes
that
r
he
writer's
share
be credited
unless
BMI
is
notified
by
the
f
oreign
society
that
the
direct
license
does
not
cover
the
writer's
share
In
its· pre-
36
trial
brief
DMX
notes
that
the
publishers
have
Represented
to
it
that
they
have
the
right
to
grant
DMX
permission
to
perform
the
foreign
writers'
works.
(DMX
Br.
at
63).
The
trial
testimony
reveals
that
Sony,
after
entering
its
direct
license
with
DMX,
represented
to
BMI
that
ir
had
the
right
to
enter
into a
direct
license
on
beholf
of
both
their domestic
and
foreign
writers,
and
BMI
accepted
those
representations.
(Tr.
at
G08
-09).
DMX
should
likewise
be
entitled
to
rely
on
the
representations
it
has
received
from
publishers.
In
circumstances
where
such
permission
is
not
assumed
os a
matters
of
course
BMI
should
accept
DMX's
represen
tation
that
it
has
in
fact
been
obtained,"
Our
reading
of
th
is
decision
is tnat
OMX
was
entitled
to
rely
on the
representation
from
U.S.
publishers
with
respect
to
foreign
works,
and
BMI
was
compelled
to
accept
those
representations
as
well. The
court did
not
rule
on
the
ve
racity
of
any
such
representations,
however,
and
it
would
seem
to
leave
open
the
possibility
that the
rights
owner
of a
foreign
work
could
challenge
the
representation.
[To
the
extent that
it
is
dP.tP.rmined
that
performances
ot
any
foreign
works
were
not
properly
covered
by
the
direct
license
for that
the
writer's
share
is
not
so
covered),
BMI
should
be
paid
for
any
such
foreign
works
on
behalf of
the
foreign
writers
under
the
OMX
AFBL
license
crediting
formula.
BMI
is
prepared
to
work
with
OMX
and/or
the
U.S.
publishers
on
your
behalf
lo
ensure
that
your
members
receive
the
performance
royalties
that they
are
entitled
tc
receive
from
BMI.]
Rights
Withdrawal
Wi
th
respect to
the
issue
of
the
nights
withdrawals that
you
reference
in
your
letter,
BMI
respects
the
interests
ot
our
affiliates
:c
seek
tair
remuneration
tor
the
exploitation
of
their
musical
works.
BMI
maintains
that,
through
collective
licensing,
BMI
can
deliver
fair
remuneration
through
the
establishment
ot
reasonable
rates
tor
performing
right
licenses
with
our
customers,
the
administration
of
those
licenses
with
the
benefit
of
the
economies
or
sca
le
inherent
in
representing
a
large
amount
of
repertoire
and,
finally,
the
timely
distribution
of
reasonable
royalties
for the
performances
we
license.
BMI
also
recongnizes
however
that
there
has
beem
constant
downward
pressure
on
the
blanket
license
rates
established
by
the
U.S.
PROs
for
the
use
of
cheir
respective
repertoires
(see,
for
example,
the.
recent
petiti
o
n
by
internet
music
service
Pandora
seeking
lo
lower
the
rates
that
it
would
pay
lo
another
U.S.
PRO).
B
MI
also
appreciates
the
significant
time,
expense,
and
uncertainty
nf
rate
court
li
tigation.
Although
we
firmly
believe
that
the
solution
for
publishers
is
not
to
move
away
from
collectively
licen
sing,
but
rather
t o
collectively
support
improvements
to
the
current
process,
we
cannot
force
our vision
on
rights
holders
or
fault
them
tor
pursuing
alternatives.
At
the
same
time
,
we
recognize
that
alternatives
to
o
ur
blanket
license
could
subs
tantially
alter
both
the
legal
and
business
relationships
and
expectations
among
the
U.S.
PROs
and
t
hei
r
respective
writers
and
music
publishers,
as
well
as
the
foreign
PROs
w
it
h
whom
we
have
entered
into
reciprocal
representation
agreements,
While
it
is
our
hope
that
wi
ll
not
be
the
case,
we
do
appriciate
the
concerns
that
you
are
expressing
on
behalf
of your
members.
As
such
we
welcome
the
opportunity
to
commerce
a
Meaningful
dialogue
with
you
and
your
members
and
our
affiliated
music
publishers
in
order
to
ensure
that
BMI
can
continue
to
serve
your
mutual
interests
efficiently
and
effectively.
37
With
these
thoughts
in mind,
we
turn
to
th
P.
specific
questions
in
yo
ur
letter.
Answers to
u ucstions
1.
You
have
requested
a
list
of
the
direct
licensing
agreements
already
completed
or
antic:ipated
that
have
resulted
in
the
removal
of
rights
from
our
repertoire1
in
the
last
five
years.
Please
understand
that,
assuming
you
are
referring
to
direct
licensing
agreements
where
a
BMI
affiliate
decides
to
license
a
music
user directly,
as
opposed t
to
dlrect
licensing
th
at
takes
place
pursuant
to
a
rights
withdrawal,
there
are
hundreds,
if
not thousands
of such
direct
licenses,
many
nf
which
we
re
granted
by
individual
composers
and/or
smaller
music
publishers
for
individual
works
or
smaller
catalogs
and
for
specific
uses
Accordingly,
we
dn
not
believe
t
hat
it
is
practival
appropriate
or
potentially
even
relevant, to
produce
such
a
list
Additionally,
due
to
the
nature
of
many
of
these
direct
licenses,
it
is
impossible
to
assess
the
impact
that
they
have
or
BMI's
ability
tc
effectively
operate
as
a
representative
of
U.S.
performing
nights.
Some
music
users
essentially
limit
their
use
of music
to
that
which
they
can
secure
via
a
direct
license
Th
is
obviously
has a
significant
i
mpact
on
BMI's
ability
to
license
these
customers,
but
may
be
entirely
appropriate
and
in
the
best
interests of
the
music
creators
on whose
behalf
the
direct
license
was
issued
Also,
some
rights
owners
have
intentionally
sought
direct
licensing
opportunities
where
music
usEr:s
have
l'etrained f
ro
m
using
their
music
-fits
use
would
give
rise
to
the
obligations
accompanying
a
PRO's
blanket
license.
In
many
cases,
both
in
the
U.S.
and
abroad
this
has
opened up
an
opportunity
for
music
creators
to
receive
royalties
trom
performances
that
wouldn't
otherwise
have
occured.
These
examples
clearly
affect
BMI's
ability
to
license
these
exploitations,
but
it
would
not
be
fair
to
say
that
they
have
necessarily
had
a
negative
impact
on
our
ability
lo
effectively
operate
as
a
representative
of
U.S.
performing
ri
g
ht
s en
behalf
of
music
creators.
We
believe
we
can
and
will
continue
to
do
so
with
the
vast
majority
of
our
customers
for
the
benefit
of
both
the
domestic
and
foreign
writers,
and
the
music
publishers,
that
we
represent.
On
the
ot
hP.T
hand,
we
recognize
that
t
hP.
direct
licenses
in
th
P.
DMX
matter
may
be
more
relevant
to
your
inquiry,
not
because
they
were
direct
licenses,
but
because
of
the
impact
that
they
have
had
on
lowering
PRO
rates
for
commercial
background
music
services.
We
also
recongize
that
the
issue
of
righ ts
withdrawals
could
have
an
impact
on
the
ut
i
lity
of
the
blanket
license
upon
which
the
marketplace
has
relied
for
efficient
and
effective
licensing,
As
such,
we
welcome
the
opportunity
to
discuss
the
DMX
case
and
the
broader
question
of
rights
withdrawal
with
you
in
greater
detail
at
your
convenience.
Wh
i
le
:he
questions
in
you
r l
etter
are
directed
to
ASCAP,
we
assume you
meant these
to
be
directed
to
BMI
and
we
have
asnwered
the
M
accordingly.
38
2.
You
have
inquired
as to
BMI's
view
of
how
the
practic.e ot
direct
licensing
(presumably
in the
context
uf
both
traditional
direct
licensing,
as
well
as
in
the
context
of
rights
withdrawals)
will
attect
the
rights
and
incomes
of
music
creators
in
the
lJ.5.
and
abroad,
and
in
particular,
how
it
relates
lo
transparency
and
the
ability
lo
monitor
licensing
and
the
proper
and
accurate
payment
of
royalties,
Generally,
we
believe
that
the
interests
of
music
publishers
and
music
creators
(and
indeed,
BMI's)
are
well
aligned
when
il
comes
lo
obtaining
fair
remuneration
for
exploitations
of
their
musical
works
around
the
world,
and
we
expect
that
we
will
cont
nue
to
work
together
to
ensure
that
will
continue
to
be
the
case
. We
may
be
able
to assist
our
writer
members
by
abtaining
th
P.
information
they
need
from
their
respective
music
publishers
regarding the details
of
any direct perforrr.ing rignts licensing arrangements
a,d
the
royalties
payable
to
the
writers
with re
spec.t
thereto Indeed, music
publishers
may
welcome
such
a
role
for
BMI
to
the
extent l hal
it
may
ease
!heir
burden
to
report
and
pay
royalties
for
directly
licensed
performances
to
songwriters.
rurther.
if
BMI
is
retained
to
administer
direct
licenses
on
behalf
of a music
publisher
affiliate
as
some
recent
reports
have
suggested,
we w
ill
be
in
an
even
better
position
to
ensure
that
our
writer
affiliates
remain
well informed
as
to
the
relevant
details
ot
any ot
these
direct
licenses.
3.
You have
asked
whether
affiliation
agreements
with music
creators
and
(reciprocal
representatio'l
agreements]
with
foreign
societies
impact
the
ability
of
music
publishers
to
enter
into
direct
licenses.
With
respect
lo
U.S.
works,
BMI's
affiliation
agreements
with
its
writers
give
BMI
the
right
to
license
the
writer's
interest in
their
musical
works,
subject
to
their
right
to
enter
into
non
exclusive
direct
licenses.
This
is
also
true
for
BMI's
affiliation
agreements
with
its
publishers.
It
is
our
experience
that
it is
usua
ly
the
music
publisher
t
hat
enters
into
a
direct
licensing
agreement
with
a
user
on
behalf
cf
itself
and
the
songwriter(s)
it
represents.
In this
regard,
tne specific terms
of
the publishing
agreement
between
the
writer and the
music.
publisher
will
con
tr
ol the
relationship
and tne
ability
ofa
pub isher
to
directly
license
a
writer's
work
With
resper.t
to
foreign
works
for
which
BMI
obtains
the
right
tn
license
such
works
under
reciprocal
representation
agreements
with
foreigh
societies,
the
ability
of
a
publisher
lo
directly
icense
the music
creator's
interest
in
musical
works
depends
on
tnat
foreign
writer's
a
no
t
hat
music
publisher's
agreements with
each
other
and
the
foreign
society.
While
it
might
be
difficult
for
BMI
(due
to
its Consent Decree, U
.S
. competition law and the recent
OMX
decision)
to
independently
assert
its
right
to
license
the
writer's
interes: in a
foreign
work
irrespectivP.
nf
what
the music
publisher
has
purported
to
grant
under a
direct
license,
ll
docs
nol
neccessarily
follow
that
BMI
would
be
precluded
from
doing so
if,
in fact, BMI, through its
reciprocal
representation
agreement
with
foreign
societies,
and
not
the
mJs1c publisher, has
the
right
to
license
the
writer's
interest
in the
work(s).
We
would
welcome
your
support
in
helping
to
clarify
lh
is
situation
so
that
we
can
ensure
:hal
BMI
is
members' expettations.
39
you
again
fo
r
reaching
out
lo
BMI
for
its
perspective
On
these
issues
We
look
forward
to
continuing
the
discussion
wii
h
you
and
our
music
publisher
members
to
ens
u
re
that
BMI
is
adequately
serving
its
affiliates,
and
the
fore
ign
societies'
members
and
affiliates
that
have
entrusted
their
performing
rights
in
the
U.S.
to
BMI.
40
pRegards,
EXHIBIT 2
British Music Managers Forum Responds
to
Sony/
ATV's Letter
to
US
Songwriters 15 July
2014
The Music Managers Forum shares the concerns expressed by Sony/ATV
as
to
the complexity
of
licensing
systems in
the
USA
and worldwide. Part
of
the problem
is
indeed the constraints in the
USA
on licensing
negotiations imposed by the outdated Consent Decrees
that
govern
ASCAP
and BMI and prevent them
securing a fair market rate
for
their
members. That
the
US
Department
of
Justice
is
currently reviewing
the Consent Decrees
is
a positive development.
However, on behalf
of
our songwriter clients, the MMF
is
alarmed at
the
suggestion by any music
publisher, especially one
with
such considerable market power
as
Sony/ATV,
that
they would
withdraw
from
the
performing right organisations
(PROs)
and
attempt
to
issue licences directly
to
US
users thus
complicating licensing.
Sony/ATV cannot
withdraw
any non-US writers' works from the
US
PROs
and issue licences
for
their
work
as
they do
not
own the right in any songs
written
by any
writer
who
is
a direct member
of
a
PRO
outside
the
USA.
These non-US writers assign
their
performing right directly and exclusively
to
their
local
PRO
on a
global
basis.
The right
is
owned by
the
PROs
who have the sole authority
to
issue licences -
to
the
exclusion
of
the
writer
and
the
publisher. These non-US rights are passed exclusively
to
the
US
PROs
by the
non-US societies.
Publishing contracts outside the
USA
only give the publisher a right
to
share in the revenue from the
performing right,
but
not
ownership
of
the
right itself. For example,
as
long
as
The Beatles,
the
Rolling
Stones, Coldplay,
Jean
Michel Jarre and Adele etc. continue
as
members
of
their
local
PRO,
no
US
publisher
can
issue licences
for
their
work.
As
far
as
we're aware,
the
letter
from Sony/ATV was
not
sent
to
non
US
writers, once again highlighting
the
complications posed
for
licensees
of
territorial posturing in a global
digital marketplace.
41
While
the
MMF
is
wholly sympathetic
to
Sony/ATV's frustrations, the threat
of
withdrawal
is
an
issue
for
the entire global community
of
composers and societies. There are at least
four
other
reasons
why
US
withdrawal and direct licensing are a risk
to
writers' livelihoods.
1. Potential licensees will still have
to
go
via the
PROs
as
well
as
the
publishers which could lead
to
differential pricing and more complicated and more costly transactions.
2.
Writers' contracts routinely state
that
they are
not
entitled
to
be
paid a share
of
revenue
that
is
paid
as
advances, lump sums
or
is
not
able
to
be
"directly and identifiably" attributed
to
their
work. How confident
can
writers
be
that
they will
be
paid
their
shares
of
direct licence monies?
3.
Co-writing songs
is
a common practice. How does a co-writer signed
to
a
different
publisher get
paid when
his
writing partner
is
signed
to
a publisher who
is
issuing direct licences?
He
has
no
contractual relationship
with
his partner's publisher
to
rely upon.
4.
The
PROs
allocate unique identifiers
to
each song
or
composition (the International Standard
Works Number
or
ISWC).
These have
now
been allocated
to
over
95%
of
the world's musical
works and
their
use
across the globe ensures
that
usage and works are correctly matched and
writers paid
what
they are entitled
to
be
paid. Many music publishers operate
their
own, different
identifiers. The lack
of
common
work
identifiers between publishers and
the
PROs
complicates
revenue allocation.
The global
network
of
non-profit
PROs
has
served the consumer, the music users and
the
song
writing
and
publishing community well
for
over a century. Despite the challenges
of
the
digital environment,
PROs
provide economies
of
scale and streamlined licensing which keep transaction costs manageable. Writers sit
on
their
Boards and
can
influence policy. While the
PROs
may
not
be
perfect, they allow creators a voice
and a direct income stream. Adjustments
to
this system should
be
nuanced and carefully
thought
through.
More importantly
to
our
members' clients, solely national focus poses a grave
threat
to
the
livelihoods
of
every writer, American or not.
7
7
Once before Sony/ATV led
the
charge
with
a direct licence
to
a
US
music service. The result
has
been a disaster
for
the
whole
music community. Every song
writer
and music publisher in
the
world
is
still paying back
US
$150 million
to
background music
services in
the
US
as
a result
of
an ill-advised direct licensing deal concluded by Sony/ATV and
other
independent publishers in
the
US.
These direct licences were agreed
at
a fee 70%
less
than
the
licensee was paying via
the
PROs!
It
is
a
matter
of
public record
that
Sony/ATV accepted
an
advance
of
US$2.3 million and
an
administration fee
of
US$400,000
from
DMX, a
major
US
background music service. Buried in
the
agreement was a per location licence fee
that
was 30%
of
what
DMX
was paying
the
PROs.
Bad
for
business?
Not
for
DMX. The
US
Rate Court proceedings
that
followed
had
the
effect
of
reducing
the
licence fee
for
every background music service in
the
USA.
The global music
community
is
still refunding
the
licence fees
to
background music services in
the
USA
as
a result and licences going
forward
sit
at
30%
of
the
former
PRO
value. Writers and
publishers will never recover
from
the
damage
to
the
value
of
their
royalty income in this sector
of
the
market
..
42
