Starving Songwriters? DOJ’s New Mandate Poses a Major Dilemma for Musical Artists

September 20, 2016

What would happen if songwriters boycotted writing music?
The Songwriters of North America, a songwriters’ advocacy organization, has filed a complaint against the U.S. Department of Justice, claiming that the agency created a new “100 percent mandate” rule that will prohibit multiple authors from fractioning their share of a song for licensing purposes. This is the latest development in the years-long debate between songwriter organizations and the agencies that mandates the music licensing system- a system that is struggling to keep up with the changing way the world listens to music.
To understand the issues that the new mandate creates for songwriters, it is important to understand the current music copyright system.
The current system for copyrighting and licensing music was designed for the pre-digital age, when radio was the primary source for distribution of music. Today, however, digital providers like Spotify and Pandora have taken over, and the once-clear licensing regulations are now murky and difficult to apply. In 2015, the United States Copyright Office issued a report recommending sweeping reforms to the existing music licensing system. Many individuals and associations have weighed in on the proposed reforms- the Digital Media Association (DiMA) criticized* the Office for missing a “significant opportunity to truly advance copyright, music licensing, and the music marketplace….”

Indeed, it seems that the most recent step the DOJ has taken to change licensing regulations has been met with contempt from an important part of the music industry- the songwriters.

A song has two copyrightable parts: the sound recording and the musical work itself, which includes lyrics (if any). These two rights are licensed by their respective owners through different types of licenses, depending on the vehicle through which the song is distributed: a mechanical license for the reproduction and distribution of a song (e.g., CDs and digital downloads); or a public performance license for a public performance which also includes digital audio transmission (e.g. music streaming service like Spotify or Pandora). Just as the copyright in the sound recording (usually owned by songwriters or music publishing companies) and the copyright in musical work (usually owned by the recording artist or their record label) are separate—even where they pertain to the same song—so are the different licenses required to use the materials they protect. For example, as a music-streaming service, Spotify would have to procure both the mechanical license for the musical work AND the public performance license for the sound recording.
While mechanical licenses are distributed on a song-by-song basis, more than 90% of public performance licenses in America are distributed, en masse, by one of several performing rights organizations (PROs).  This means that a licensee has the right to access any of the musical works in the PRO’s collection (a licensee would obtain what is called a “blanket license” to do this). However, the fact that the vast majority of America’s public performance licenses are held in two of America’s largest PROs has also become a problem, thanks to the DOJ’s new mandate.
The 100% Mandate and the Problems It Creates:
In order to authorize their works to be streamed, broadcast or otherwise played for the public, songwriters and composers typically join a performing rights organization (“PRO”) early in their career so that the PRO can issue licenses and collect royalties on their behalf.  The two biggest PROs are ASCAP and BMI, covering about 90% of the music played in America. When a song has more than one author (as many do), the authors license their shares of the work separately. This is a process that is called “fractional licensing”, and the DOJ’s new mandate essentially eliminates the option for this process.
Writers and composers who have collaborated together to write a song will no longer be allowed to license only their proportionate share of that work through the PRO of their choice. Instead, under the Antitrust mandate, ASCAP and BMI are now required to provide “full-work” (or “100%”) licenses for all of the songs they represent, even when the PRO in question does not represent all of the co-writers of the song—or face an antitrust enforcement action (the “100% Mandate”). “[T]he new rule mandates that songs that cannot be licensed by either ASCAP or BMI on a 100% basis due to contractual restrictions—or for any other reason—will not longer be eligible to be included in that PRO’s repertory,” the complaint says. The PROs “have long administered and collected royalties for only the shares of songs they represent” through fractional licensing, the songwriters say. They claim that a 100 percent mandate would not allow copyright holders to continue dividing their rights this way.
Part of the group’s outrage stems from the promise the DOJ made in August of this year when it said it would not rewrite decades-old agreements governing songwriter royalties. However, according to the complaint, the Antitrust Division did just that by requiring that copyright holders offering their works for license through ASCAP or BMI cannot divide their rights. It is clear that the Dept. of Justice is attempting to create new regulations to better fit the current state of the music industry, but when their regulations continue to burden songwriters and artists, many worry that these changes will only stifle innovation and creativity in the music industry- after all, the cliché “starving artist” life is only sustainable for so long.