Myers Berstein
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Licensing Issues Faced by the Music Industry

It is no secret that the music industry has suffered financially from illegal downloads, and many believe music services such as Pandora (an online music streaming service) do not pay songwriters nearly enough. Remember when Taylor Seift pulled her music from Spotify not too long ago? Musicians feelings aside, courts have lately ruled in favor of Pandora.

Recently, the American Society of Composers, Authors and Publishers (ASCAP), joined by Universal Music Publishing, Sony/ATV Music Publishing, and EMI Music Publishing, appealed a district court's 2013 (finding that the consent decree governing Pandora-ASCAP licensing activities unambiguously precludes partial withdrawals of public performance licensing rights). ASCAP also appealed the district court ruling from March 2014 that set the Pandora-ASCAP licensing rate for 2011 through 2015, specifically objecting to the rate for years 2013-2015.

ASCAP is a performing rights organization that represents almost half of the country's composers and music publishers. Since it has monopoly power in the performance rights market, it is subject to a consent decree, which requires ASCAP to grant any music user who makes a written request a non-exclusive license to perform all of the works in ASCAP's repertory. So, for example, if a restaurant makes a written request for such a license, the parties agree on a reasonable fee, and the restaurant will be able to play any music that ASCAP has the performance rights to. This is a convenient way for places of business to play music publicly, since they need only obtain blanket licenses from ASCAP or Broadcast Music, Inc. (BMI), the other major performing rights organization in the United States.

Around 2010, some ASCAP members worried that the organization was receiving below-market rates for licenses to new media companies like Pandora. These members sought the ability to partially withdraw from ASCAP, so that they may have the right to negotiate with and license their works directly to new media music users. EMI threatened to withdraw completely if publishers were not allowed this right. ASCAP modified its rules to allow this practice, and EMI withdrew its new media licensing rights in 2011. Sony and Universal followed suit in 2013. All three publishers eventually entered into direct licenses with Pandora.

After a few years of legal battles surrounding licensing rates, a court ultimately set the rate at 1.85% of Pandora's revenue for each of the five years of the license, though ASCAP had argued the rate should increase in subsequent years of the license. In 2013, Pandora challenged the issue of partial withdrawals. The court ruled in Pandora's favor, concluding partial withdrawals were not permitted under the consent decree.

Licensing issues are not uncommon in a variety industries, from tech to fashion to food trucks. If your business is struggling with licensing issues, contact the experienced licensing attorneys at MYBE Law today.

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