In what could prove to be a landmark decision for the music industry, the U.S. District Court judge for the Southern District of New York ruled that Broadcast Music Inc. (BMI) was authorized to conduct fractional licensing.According to Reuters, the Department of Justice could not require BMI to change the manner in which it collects and distributes performance royalties.

The decision

Judge Louis Stanton asserted that, under the consent decree implemented by the Department of Justice, as applied to BMI, fractional licensing is permitted. Specifically, the judge's decision clarified that the consent decree does not ban fractional or 100 percent licensing of a composition. This means that the performance rights organization can license only the portions of compositions written and published by its member artists.

The decision contradicted the Department of Justice's previous ruling that mandated BMI and the American Society of Composers, Authors and Publishers (ASCAP) to employ 100 percent work licensing. According to a Billboard report, these organizations were then given one year to implement the new full works licensing requirements. This decision has garnered criticism from across the music industry, from artists to songwriters and to record labels.

The difference between fractionalized licensing and full works licensing

The decision was significant because of the implications of full works licensing versus fractional licensing. The music publishing industry supports fractional licensing, which requires licensees such as YouTube, Pandora, Spotify, SiriusXM and various other digital or online streaming outlets to obtain a performance license from all copyright owners/publishers of each song. With full works licensing, the licensee would only need to obtain a public performance license from one copyright owner/publisher, because each copyright owner/publisher would have the right to license the public performance rights in the full work.

Following the judge's decision, BMI is now free to continue fractional licensing of performance rights, which represents a big win for the music industry.

The decision's potential impact

It remains to be seen how this ruling will unfold for the music industry, as well as ASCAP. However, it is clear now that the Justice Department's consent decrees do not obligate BMI to offer full works licensing, which ensures that BMI writers and publishers will continue to be able to separately license their share of public performance rights in their works.

Several other copyright owners and entities in the music business are taking action after this decision as well. ASCAP also plans to file a similar lawsuit against the Department of Justice with respect to its consent decree.

Significance of the decision

Ultimately, Reuters reported that, as BMI accounts for 700,000 writers and music publishing companies, while ASCAP has 575,000 members, the decision could have a massive effect on the music industry. BMI and ASCAP license public performance rights for approximately 90 percent of the music featured in all media outlets, including movies, television shows, online music streaming and digital radio services, restaurants and various other public performance locations.

Do you have any questions? Would you like to discuss the matter further? If so, please contact me, Jill Michael, at 201-806-3364.