DEPARTMENT OF JUSTICE

Remarks Regarding the Antitrust Division’s Closing of
its Review of the ASCAP and BMI Consent Decrees

RENATA HESSE
Acting Assistant Attorney General
Antitrust Division
U.S. Department of Justice

Remarks as Prepared for the Delivery
In Washington, D.C.

Washington, D.C.
August 4, 2016

 The Antitrust Division today released a statement concerning our investigation into
potential modifications to the ASCAP and BMI consent decrees. These decrees have been in
place since 1941, when the Department of Justice reached settlements with both ASCAP and
BMI that resolved antitrust lawsuits related to those organizations’ joint licensing of competing
songs. The consent decrees were designed to preserve the procompetitive benefits of joint
licensing while at the same time protecting against the anticompetitive potential inherent in
such agreements among competitors.
After a lengthy investigation, we have determined that it is not appropriate to seek
modification of the consent decrees at this time. While much has changed in the music
industry since the consent decrees were established in 1941, they remain at the core of how
performance rights have been and will continue to be licensed; these decrees enable businesses
to access music efficiently and ensure that songwriters are compensated for their creative work.
We believe that pursuing the requested modifications at this time would disrupt the status quo,
would not be consistent with the purposes of the consent decrees, and would not be in the
interest of consumers.
We do believe it is important, however, to provide our interpretation of the meaning of the
licenses required by the decrees. We did not set out to address this question as part of our
review, but were informed by stakeholders that, once this question was raised, our failure to
resolve it would lead to significant uncertainty in the industry. Since the blanket license is a
central component of the licensing framework established by the decrees, and is relied upon by
songwriters and users alike for the effective functioning of performance rights licensing by
ASCAP and BMI, ensuring clarity regarding its scope became an important goal of our review.
This interpretation should not significantly change the status quo in music licensing. Indeed, it
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 is consistent with how the industry has effectively been operating for many years. Our purpose
in stating our views publicly is simply to make clear what the consent decrees have always
required so that any practices that have developed that are inconsistent with those requirements
can be adjusted accordingly.
We opened the current investigation in 2014 after ASCAP and BMI requested that we
consider various proposals to modify the consent decrees, including, most prominently, that
they be permitted to allow large music publishers to “partially withdraw” their songs from
ASCAP and BMI for purposes of licensing to digital music services such as Pandora or Spotify.
As our investigation proceeded, we discovered that there was significant disagreement in the
industry about what rights must be conveyed by the blanket licenses (as well as other categories
of licenses) that the consent decrees require ASCAP and BMI to offer. Some argued that, in
order to effectuate the purpose of the consent decrees, the blanket license must grant licensees
(also called “users”) the right to publicly perform all songs in the ASCAP and BMI repertories.
Others believe that the blanket licenses offered by ASCAP and BMI instead confer only rights
to the fractional interests in songs owned by ASCAP’s and BMI’s members and that music
users must obtain separate licenses to the remaining fractional interests before playing the
songs.
As the Division considered the original requests to modify the consent decrees to permit
partial withdrawal, we realized that we could not assess the likely impact of the proposal
without first understanding precisely what is granted by the PROs’ licenses. Consider a song
with multiple co-authors where all the authors belong to the same PRO. What would happen in
the event that a publisher that controlled some, but not all, of that song’s authors’ interests
withdrew digital rights from the PRO? What rights would the publisher withdraw? What

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 rights would be left in the PRO? Would the blanket license still offer the right to play that song
since some of its authors would remain in the PRO? Thus, the question of what the consent
decrees require of ASCAP and BMI became a necessary step in considering any modifications.
In the end, the Division concluded that only full-work licenses could fulfill the purpose and
meaning of the requirement in the consent decrees that ASCAP and BMI offer blanket licenses
that provide users the ability to play all the songs in the PROs’ repertories. Importantly, this
does not mean that ASCAP and BMI are required to provide a full-work license to a work
when their members cannot grant them the ability to offer such a license. That is, we do not
suggest an interpretation of the blanket license that is inconsistent with the Copyright Act.
Rather, if the members of ASCAP or BMI are unable to grant to their PRO the rights to license
their works on a full-work basis, those works are ineligible for licensing by ASCAP or BMI.
Both sides in this debate pointed to past practices they believed supported their view of
whether ASCAP and BMI licenses were full-work or fractional. We think the evidence favors
the full-work side. Our determination begins with the language of the consent decrees
themselves, which unambiguously require ASCAP and BMI to offer licenses to all works or
compositions in their repertories, and not to interests in works. For example, in the case of
ASCAP, it must provide a license to perform “all of the works in the ASCAP repertory.”

Our view is also based on what is required for all participants in the industry to enjoy the
substantial procompetitive benefits of the PROs’ blanket licenses – benefits that differentiate
the PROs from joint price-setting entities that often present significant problems under the
antitrust laws. The Supreme Court described blanket licenses in the BMI case as providing
“unplanned, rapid, and indemnified access” to the songs in the PROs repertories. Fractional
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 licenses would not offer the benefits the Supreme Court described.
A full-work blanket license from ASCAP or BMI allows the music user to publicly
perform, without risk of copyright infringement liability, all works in the licensing PRO’s
repertory. Particularly for music users – such as bars and restaurants – that cannot
meaningfully control in advance the music they play in public, this feature of the PROs’
licenses benefits both the licensees as well as music creators in that it ensures that users can and
will continue to play the creators’ music.
Fractional licensing would not offer the same benefits to users. If a PRO’s license granted
a user something less than a license to play a particular song, music users seeking to avoid
infringement liability would face the daunting task of identifying and ensuring they obtained
licenses from all fractional owners – a challenge made more difficult by the lack of a
comprehensive, reliable, and transparent catalog of rights. Under those conditions, even music
users with control over the music they perform would have to curtail their performance of
music until they were certain they had obtained licenses from all fractional owners. As BMI
itself argued in a recent rate-court filing, a BMI license grants to a music user “insurance
against copyright infringement . . . and immediate access to more than 10.5 million works in
BMI’s repertoire.” A fractional license could not provide these benefits.
Industry participants have raised a number of concerns about how full-work licensing
might impact the current music-licensing landscape. Songwriters, in particular, have expressed
concerns about their ability to continue to collaborate with members of other PROs if ASCAP
and BMI grant full-work licenses. This is based on a concern that users would go to only one
PRO to get access to songs that have multiple owners. The Division understands these
concerns but believes that there are facts that reduce the likelihood that music users will engage
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 in this sort of gamesmanship. Virtually all significant music users today obtain licenses from
both ASCAP and BMI (as well as from at least one other PRO, SESAC). Users will continue
to have every incentive to license from both ASCAP and BMI since they each already hold 100
percent interests in a sufficient number of works that licensees will continue to regard the
infringement protections offered by each PRO’s license to be essential.
As music users continue the practice of obtaining licenses from both ASCAP and BMI,
nothing will stop them from continuing the practice commonly used today in the industry of
paying each PRO based on the fractional interests in songs controlled by the PRO’s members.
Again, based on the Division’s investigation, we see no reason why today’s full-work licensing
but fractional payments practice cannot continue into the future – with each songwriter
continuing to be paid by the PRO with which he or she has affiliated. In the unlikely event that
a user obtains a license from only one PRO, that PRO would have reason to increase the rate
for the license to account for the full share of all the songs it licenses (rather than according to
the shares on which the license fee is normally calculated).
Songwriters have also expressed a concern that if ASCAP and BMI must offer full-work
licenses, the PROs will reduce the prices of their licenses (and thus the amounts the PROs remit
to their songwriter members) in order to attract significant music users. We think this is
unlikely, particularly in a world in which music users continue to need licenses from both
ASCAP and BMI, because a PRO that reduced its licensing fees would risk losing members to
other PROs.
Others have expressed concern that our interpretation will cause many works to become
unavailable through the PRO licenses. It is true that the decrees’ full-work licensing
requirement prevents ASCAP and BMI from including in their blanket licenses any songs they
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 cannot offer to users on a full-work basis. However, the default position under U.S. copyright
law allows any individual co-owner of a work to license the entire work on a nonexclusive
basis. Therefore, many jointly owned works in ASCAP’s and BMI’s repertories can be
licensed on a full-work basis. Indeed, songwriter members of both ASCAP and BMI expressly
granted to the PROs the right to license songs in which the member was contributing only a
fractional interest.
The Division understands that, in some instances, songwriters may have entered into
contracts that prevent a single co-writer from licensing a co-written song on a full-work basis.
In those instances, songwriters that want their songs to be included in the PROs’ blanket
licenses can renegotiate their songwriting arrangements to achieve that goal. In order to allow
ASCAP and BMI time to work with their members to identify the songs that cannot be included
in their repertories and to allow songwriters to determine whether they want their songs
licensable through ASCAP and BMI (and to adjust their relationships accordingly), for the next
year the Division will not seek to have the ASCAP or BMI rate courts enforce the full-work
licensing requirement.
While the Division has at this time decided that it will not pursue any of the proposed
modifications to the consent decrees, we have not ruled out the possibility of pursuing
modifications, including to allow for partial withdrawal, sometime down the road. At this time,
we believe it important that ASCAP, BMI, and other stakeholders work to continue the
successful existing licensing practices taking into account the Division’s views on the consent
decrees’ requirements regarding blanket licenses.

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