Songwriters Win Royalty Decision as Judge Rejects U.S. Rules

  • Federal judge grants BMI request to undo DOJ licensing terms
  • U.S. issued decision on ASCAP, BMI consent decrees in August

A federal judge in New York rejected the U.S. Justice Department’s changes to decades-old rules governing music royalty payments that critics said would upend longstanding practices for how music is licensed, handing a victory to songwriters and publishers.

U.S. District Judge Louis Stanton in New York said Friday the department’s antitrust division was wrong to say in August that the royalty framework set out in consent decrees requires “full work” licensing by performing-rights organizations. That potentially gave streaming services an advantage in obtaining rights, critics said.

Ownership of a song is often shared by a number of collaborators represented by different groups. The Justice Department’s decision meant online services could obtain fractional rights to a song or album from one of those organizations, and co-writers represented by another group would have no choice but to go along.

“Nothing in the consent decree gives support to the division’s views,” Stanton said.

The department’s position angered groups like the American Society of Composers, Authors and Publishers, known as ASCAP, and Broadcast Music Inc., known as BMI, which collect royalties on behalf of songwriters.

Disastrous View

“The DOJ’s disastrous views on 100 percent licensing have been rejected by a federal judge,” David Israelite, chief executive officer of the National Music Publishing Association, said in a statement. “This is a huge win for songwriters and a huge win for the rule of copyright law.”

Martin Bandier, chairman and CEO of Sony/ATV Music Publishing, the world’s largest music publisher, also celebrated the judge’s ruling.

The department’s decision “would have upended decades of licensing practices and caused uncertainty and disorder to everyone in the marketplace,” Bandier said. “We can now focus once again on working on behalf of our songwriters.”

Music publishers had asked the department to rewrite agreements governing how songwriters get paid by radio stations and streaming services. They were seeking changes to the rules to obtain a larger share of revenue from online services, something closer to what music labels receive for their recordings.

Publishers’ Royalties

The publishers have bemoaned the royalties they receive from streaming services like Spotify Ltd., Pandora Media Inc. and YouTube. Streaming has supplanted CD sales and digital downloads as the largest source of revenue for the U.S. music industry. 

Instead, after a two-year investigation, the department announced its view on full-work licensing, enraging songwriters and publishers. The department said Friday it was reviewing Stanton’s decision.

ASCAP and BMI are subject to consent decrees that resolved antitrust lawsuits brought by the U.S. in 1941 alleging that each organization had unlawfully exercised market power.

Matthew Schruers, vice president of law and policy at the computer and communications industry association, which represents technology companies like Pandora and Google, said he expects the department to appeal the decision.

“Today’s decision will increase uncertainty for music licensees and threatens to complicate an already opaque licensing landscape,” he said in an e-mail.