Here’s something no one in the music industry will tell you — the DOJ’s new rules on 100% PRO licensing are good for venues and event producers.
If you read Billboard or any of the trade magazines, it’s Armageddon at ASCAP, BMI and the other Performing Rights Organizations (PROs) that handle the publishing licenses for the vast majority of North America’s songwriters. For the last eight decades, these organizations have offered venues and restaurants a blanket license on their catalogs, meaning a license holder could play large repertoires of music without having to negotiate licensing deals with individual songwriters.
In 2014, the PROs asked the DOJ to update the rules governing performances licenses and to solidify into law the practice of “fractional” licensing of a song, meaning co-writers of a composition were only able to license the portion of a song they had written. The change would mean the full licensing of a song from beginning to end would require a license from all co-authors and the PROs they work with.
Fractional licenses are not useful for many types of businesses. Most venues, nightclubs and restaurants that play recorded music never purchase partial licenses. Whether it’s through a jukebox, Karaoke machine or a warm up song for a concert, most venues and clubs tend to play a song from beginning to end, requiring a blanket license to play in its entirety. Fractional license would force venue owners to obtain multiple licenses for a single song. The result would be that most business would be forced to buy licenses from all three PROs, leaving them little leverage over prices. Anyone’s who’s purchased a license from a group like ASCAP or SESAC knows the rates tend to wildly fluctuate, with little explanation or warning. A switch to fractional license would give the PROs even broader power to jack up licensing costs.
The DOJ’s recent ruling does away with partial licensing in favor of 100% licensing, meaning any author of a song can issue a license for the entire song. The PROs say the new system will “cause chaos” in the publishing world and lead to a precipitous drop in income for songwriters and composers.
Wrong. Here’s some real talk — 100% licensing will infuse some badly needed price competition in the music publishing world and make the PROs more responsive to the hundreds of thousands of restaurants, venues and club that pay a collective $15 billion a year for licensing.
Restaurant, club and venue owners often have little control over what music is played in their establishments. Music is generally selected by a DJ or a performer, meaning “these music users cannot switch to a different song if they lack the rights to publicly perform a song. Their only recourse under a fractional licensing regime,” the DOJ report reads, “might be to simply turn off the music.”
Compounding the problem is a lack of clarity over each PRO’s catalog — there is no central database letting the public know which songs are covered by which PROs. Under a fractional licensing system, it’s very difficult for a venue manager to know if their license covers an entire song. If you buy a license from BMI or SESAC, you should be able to see a list of songs that are covered under the license. A switch to 100% licensing will give venue managers clarity on which songs they can play without liability.
“Finally, allowing fractional licensing might also impede the licensed performance of many songs by incentivizing owners of fractional interests in songs to withhold their partial interests from the PROs,” the DOJs report reads. “A user with a license from ASCAP or BMI would then be unable to play that song unless it acceded to the hold-out owner’s demands, providing the hold-out owner substantial bargaining leverage to extract significant returns.”
Bottom line — venues and other businesses that play music are an important income stream for songwriters and composers. These businesses often spend thousands of dollars a year on music licenses and it’s their right to know what they are paying for. A fractional licensing system leaves law-abiding license holders vulnerable to claims of infringement, especially since there is no central database on songwriter licenses. 100% licensing allows business owners to continue to compensate songwriters while protecting their own business from infringement claims.