Music Licensing Bill Moves Ahead to Full Senate

The Department of Justice will have to report to the Senate before eliminating certain court-supervised antitrust rules guiding the music business, under legislation approved by a Senate committee.

The Senate Judiciary Committee amended and approved a music copyright bill, the Music Modernization Act (S. 2823), by unanimous voice vote June 28, sending it to the full Senate for a floor vote. The measure seeks to improve the relationship between music copyright holders and music streaming services.

The changes, adopted in a manager’s amendment, place hurdles before Department of Justice efforts to reduce antitrust limits on music royalty organizations.

Makan Delrahim, the head of the DOJ’s Antitrust Division, has said recently that the government would re-evaluate its role in maintaining some 1,300 decrees under which federal courts monitor anti-competitive activity across all industries. The amended changes includes a section responding to Delrahim’s comments.

Businesses Sought to Keep Decrees

Two of the antitrust division’s decrees apply to the American Society of Composers, Authors, and Publishers (ASCAP) and Broadcast Music Inc. (BMI). The two organizations offer blanket licenses to businesses that play music and distribute royalties to copyright owners.

The amended bill mandates the Justice Department to report to the House and Senate Judiciary committees if the deparment seeks to end the ASCAP and BMI consent decrees. The department also has to include an explanation for such a decision.

A coalition of industry organizations representing businesses such as radio stations, restaurants, and retailers supports the decrees because they limit ASCAP and BMI’s ability to set licensing rates without supervision. The coalition asked Senate Judiciary leaders to consider the DOJ’s plans to re-evaluate the decrees when marking up the bill.

The coalition, which had asked lawmakers to restrain the Justice Department, issued a statement praising the amendment.

“The bipartisan effort reflects a unified message from music users” who “wrote to the DOJ asking it to preserve the ASCAP and BMI consent decrees in order to protect their ability to play music, host new and local artists, and avoid substantial marketplace chaos,” the coalition said in a statement.

Music licensees worry that without government oversight, ASCAP and BMI could set music licensing rates at anti-competitive levels. The two organizations have long sought to be free to set royalty rates without court supervision.

“We hope the Senate will move swiftly to pass a version of this bill that preserves the much-needed benefits for music creators,” ASCAP said in a statement.

BMI didn’t immediately respond to Bloomberg Law requests for comment.

Some senators said they planned to offer more amendments when the bill reaches the Senate floor, but they didn’t stand in the way of committee approval.

Standards for New Royalty Organization

The largest section of the bill would create a new royalty collecting organization, which can grant blanket licenses to interactive music streamers such as Spotify. Streaming services now must obtain licenses from individual copyright owners or notify the Copyright Office of their intent to use the music. As a result, the Copyright Office has been buried in notices, and copyright holders have experienced delays in obtaining royalties.

The amendments add more rules governing a new organization to collect music royalties from streaming services. The organization’s directors would have term limits set by the Copyright Office and it would be required to submit annual reports of its operations.

The amendments also set standards for transparency and auditing of the new royalty collecting organization and set guidelines for how the organization should handle unclaimed royalties.

Another new section would direct the Copyright Office to educate the public about the new collective once it’s established, educate copyright holders on how to claim royalties, and submit a report on unclaimed royalties after the first two years of operation.

In April, the House of Representatives approved a companion bill (H.R. 5447) on a 415-0 vote.

(Updated with additional reporting throughout)

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bloomberglaw.com

To contact the editor responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com