From the NAB Newsroom:
The 2nd Circuit released its decision in the Department of Justice’s appeal of the Southern District of New York’s interpretation of the BMI consent decree related to “fractional licensing.” The case arose out of DOJ’s two-year long review of the ASCAP and BMI consent decrees which concluded in August 2016. DOJ had rejected all of the PROs requested changes and issued an interpretation on the ability of the PROs to engage in fractional licensing, where BMI’s and ASCAP’s licenses would only cover the fractions of works attributable to their respective songwriters. DOJ supported NAB’s view, and concluded that the plain language of the consent decrees prohibits ASCAP and BMI from licensing anything less than full works, ensuring that a licensee who obtains a blanket license from the PRO has immediate access to every song in its repertoire and is indemnified for any claims of copyright infringement.
BMI appealed that conclusion to its rate court judge in the Southern District of New York, and that court agreed with BMI that the decree does not prevent fractional licensing. DOJ appealed the judge’s decision to the Second Circuit and NAB joined an extensive number of other licensees to support DOJ’s request for reversal.
The 2nd Circuit agreed with BMI and the rate court judge. The Court concluded in a short opinion that the consent decree does not explicitly prohibit fractional licensing. With respect to the arguments raised by NAB and other licensees about the harmful competitive effects of permitting fractional licensing, the Court noted that those issues were beyond the scope of the issue presented and that if DOJ agrees with NAB and others about competitive harm, it can seek a modification of the consent decree or bring an antitrust enforcement action.
This decision will likely have a significant impact on both radio and television broadcasters, who will no longer be able to rely on BMI and ASCAP blanket licenses to indemnify them from copyright infringement claims for all songs in the PROs’ catalogs. Instead, broadcasters will have to determine what fractions of songs they have licensed from BMI and ASCAP and where to obtain the remaining rights to play any songs not fully controlled by those two PROs. Such licenses could come from SESAC, GMR, or even music publishers themselves. The decision also increases the need for improved data transparency from the PROs, an issue that NAB has been advocating for on the Hill extensively.