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Revising or scrapping 78-year-old agreements could have broad industrywide implications

Justice Department officials and lawmakers are considering an overhaul of longstanding music-licensing rules that have pitted songwriters and publishers against the businesses, broadcasters and digital streaming services that want to play their compositions. The government’s review could have major implications on the multibillion-dollar music industry.

Opponents of the current system say the rules unfairly disadvantage artists and limit music publishers from striking their own licensing deals, leading to musicians earning smaller payments in the digital era. Supporters say the rules have created a stable marketplace for businesses that license music, and argue that wholesale changes could severely disrupt the entire industry.

The Justice Department in the coming weeks is expected to call for public input on whether it should modify or terminate two legal agreements that have governed how music has been licensed since 1941, according to people familiar with the matter. The review is part of a broader Justice Department effort to revisit agreements, known as consent decrees, that were crafted decades ago across of range of industries.

With the future of the two antitrust agreements uncertain, staffers for Senate Judiciary Committee Chairman Lindsey Graham (R., S.C.) are planning a series of meetings, the first of which took place on Monday, with stakeholders to discuss a possible legislative effort to create a new licensing system that could serve as a replacement, the people familiar with the matter said.

The agreements apply to the American Society of Composers, Authors and Publishers and to Broadcast Music Inc., the two most dominant performance-rights organizations, or PROs, that together license about 90% of the music in the U.S. on behalf of songwriters, composers and publishers.

Ascap and BMI administer public performance rights, or the right to play a composition in public—on the radio, TV or streaming services, or in a restaurant, nightclub or other venue. The organizations allow such businesses to obtain blanket licenses to play large catalogs of musical works. But the fact that the groups control the copyrights for millions of compositions also has raised concerns about their power to suppress competition, which is what prompted the Justice Department to sue them many decades ago.

The agreements, which have been amended over time but not recently, aim to guarantee reasonable licensing rates that don’t discriminate between similarly situated businesses seeking to play copyrighted music. The settlements required Ascap and BMI to make their full portfolios available and established so-called rate courts in Manhattan to settle licensing disputes.

Both organizations operate on a not-for-profit-basis; they collect money from the licensees, pay expenses and distribute the rest to their publishers and songwriters.

Opponents of the decrees, including some songwriters and music publishers, said the agreements no longer make sense and result in them receiving smaller payments than what they might obtain in a free-market negotiation. They also say large digital companies that offer streaming music have benefited disproportionately from the current licensing structure at the expense of artists.

Music publishers in particular object to a provision of the consent decrees that prevents them from partially withdrawing their rights from Ascap or BMI to negotiate their own digital music rights directly with online services.

“Writers aren’t able to earn a fair market wage,” said forensic accounting and royalty expert Cedar Boschan. “They can’t charge what the market will bear for their work as a result of the consent decrees.”

Ascap said its goal in the government’s decree-review process would be to identify changes that could benefit copyright holders and licensees to allow for innovation and an efficient marketplace. “The system will not change overnight. We know that we need a sensible transition process to ensure minimal disruption for Ascap members and our licensees,” Ascap Chief Executive Elizabeth Matthews said.

“Modernizing BMI’s decree will benefit songwriters, composers and licensees alike, and we believe any changes should come after a thoughtful and careful review process,” said BMI CEO Mike O’Neill. “However, until we know what direction the Justice Department will take, any speculation at this point is simply premature.”

The MIC Coalition, which represents broadcasters, streaming services, restaurants, bars, hotels and other venues that play music, is among the supporters of maintaining the decrees. The group said the decrees have protected licensees from anticompetitive behavior and promoted a functional music marketplace, and that they shouldn’t be modified or terminated until Congress is able to enact a legislative alternative—something the PROs are wary of.

“Any attempt to sunset or immediately terminate these decrees would severely disrupt that marketplace and cause demonstrable harm to the entire music ecosystem, especially music creators, licensees and consumers,” the coalition said.

The Justice Department has signaled it believes many of its decades-old antitrust decrees are outdated and ought to wiped out, or at least modernized. The department already has moved to cancel dozens, and it is currently reconsidering others, including one that has governed movie distribution for 70 years.

Justice Department antitrust chief Makan Delrahim didn’t include the music decrees in the initial list he targeted for revision or discarding. But he has made clear in public remarks that a review was coming, having questioned whether the 78-year-old settlements still make sense for a music industry that has evolved dramatically.

“We have been in discussions over the past year with stakeholders in the nearly 1,300 outstanding antitrust division consent decrees, including the ones involving the music industry,” Justice Department spokesman Jeremy Edwards said. The department is continuing to study the competitive impacts of the decrees, some of which are more than 100 years old, he said.

On Capitol Hill, Sen. Graham sent Mr. Delrahim a letter earlier this month saying a termination of the decrees “without first working with my committee and the Congress as a whole to establish an alternative licensing framework, could severely disrupt the entire music licensing marketplace.”

He invited the Justice Department to participate in the legislative discussions. For now, Senate Judiciary Committee discussions with industry participants are informal and exploratory, the people familiar with the matter said. A committee spokeswoman declined to comment.

While Congress remains a source of gridlock in many policy areas, music rules have been one issue where common ground has been possible.

Last year lawmakers passed the Music Modernization Act, which addressed related industry issues and revamped the music-licensing system around royalties that are paid to songwriters for the right to reproduce recordings of their compositions.