U.S. Justice Department loses fight with BMI over fractional music licensing

By Diane Bartz

By Diane Bartz

WASHINGTON (Reuters) - The government lost a fight with music licensing giant BMI on Friday over whether it needed to change how it collects royalties for music.

The Justice Department had said in August that it would require the American Society of Composers, Authors and Publishers, or ASCAP, and Broadcast Music Inc, or BMI, to only license music to digital streaming services, radio and television stations, bars and other music users if they could issue a "full-work" license.

Requiring full-work licenses raised complications for a certain group of songs - no one knows how many - where songwriters did not agree to give each other joint ownership to the songs. ASCAP and BMI had been issuing "fractional" licenses for songs and assuming that if services took licenses with both ASCAP and BMI that all royalties would be paid.

BMI challenged the Justice Department's decision, and a hearing was held at 3 p.m. on Friday in the U.S. District Court for the Southern District of New York.

In his ruling, which was issued just before 5 p.m., Judge Louis Stanton took issue with the Justice Department, citing a decades-old consent decree between BMI and the government, which is still in effect.

"Nothing in the consent decree gives support to the (Justice Department Antitrust Division's) views," wrote Stanton. "It (the consent decree) does not address the possibilities that BMI might license performances of a composition without sufficient legal right to do so."

The Justice Department has similar consent decrees in effect with ASCAP and BMI. The change had affected both of them but only BMI challenged it in court.

BMI President and Chief Executive Officer Mike O’Neill said in a statement that he was "gratified" by the Judge's ruling. "Today’s decision is a victory for the entire music community,” he said.

ASCAP also said it was pleased with the decision. "This is terrific news for all of us in the songwriting community as we continue to work on modernizing the consent decrees to reflect the real world," said ASCAP CEO Beth Matthews in a statement.

Justice Department spokesman Mark Abueg said that the government "has received the order and is reviewing it."

The court oversees consent decrees which govern the complicated world of music royalties, where songwriters and publishers hire ASCAP, BMI and other performance rights groups to license songs to the streaming services and others.

ASCAP and BMI license about 90 percent of music heard online and in movies, TV shows and bars. ASCAP counts some 575,000 U.S. composers and songwriters among its members, while BMI has some 700,000 songwriters, composers and music publishers.

ASCAP represents such artists as Beyonce, Billy Joel, Katy Perry and Hans Zimmer, while BMI is home to Willie Nelson, Carlos Santana and Rihanna.

(Reporting by Diane Bartz; Editing by Chris Reese)