Boxoffice - May 2019

EXECUTIVE SUITE
JUSTICE DEPARTMENT TO REVIEW
MUSIC LICENSING RULES:
COULD COST U.S. EXHIBITORS
$250M ANNUALLY
BY
JOHN FITHIAN
NATO President & CEO
JACKIE BRENNEMAN
NATO General Counsel
and Director of
Industry Relations
ESTHER BARUH
NATO Director of
Government Relations
Current activities at the United States Department
of Justice could cost the domestic exhibition
industry $250 million per year or more.
Did that get the attention of NATO members
reading this column? If so, please read on!
What Is the Justice Department Trying to Do?
Led by Assistant Attorney General Makan
Delrahim, the current Antitrust Division of the
U.S. Department of Justice (DOJ) believes that
legacy consent decrees constitute an inappropriate
antitrust enforcement tool. Simply put, AAG
Delrahim does not want the government involved
in long-term oversight of any particular industry
based on consent decree provisions that may be
decades old. Instead, he believes that legislation and
case-specific litigation should establish the appropriate
parameters of competition. Given that philosophy,
the Division has filed dozens of motions in
courts around the country to terminate many such
consent decrees.
Now the Division stands ready to challenge two
decrees with specific impact on motion picture
exhibitors. First, in August of 2018, the Division
published its intention to examine the Paramount
Consent Decrees, which establish detailed rules of
the road in the motion picture distribution and
exhibition industries. The Division conducted a
public comment period, and NATO submitted
comments. The Division will soon go to court with
its thoughts.
Though the Paramount decrees are well known
to many in the industry, and though this magazine
has covered that issue previously (see the October
2018 issue), there is now a second decree under
potential scrutiny that is less known in our industry,
but which could have a substantial financial impact
on every theater operator in the country. Specifically,
the Division is evaluating whether to seek termination
of the consent decree governing the American
Society of Composers, Authors and Publishers
(ASCAP). That consent decree establishes a broad
framework for how music is licensed for performance
in the U.S., including the music included in
movies exhibited by cinema owners. Specifically, the
consent decree provides that movie theater owners
do not have to pay fees for the music in movies.
What Is a Public Performance Right and Who
is ASCAP?
Under U.S. copyright law, one of the exclusive
rights of a copyright owner is the right of public
performance. Movie theaters publicly perform
the copyrighted movies and trailers they exhibit,
including the music in the movie’s soundtrack.
Theaters may also publicly perform music in their
lobbies, concession areas, in-complex restaurants
and bars, and restrooms.
Businesses seeking to play background music
or even live music (such as the music played in a
movie theater’s lobby) require flexibility to play a
wide variety of music and to make spontaneous
programming decisions. Given the volume of
musical artists and businesses that perform their
work, and the speed of decision making, it would
be highly impractical for individual businesses to
negotiate the performance of individual songs or for
artists to realistically enforce their rights. Performing
Rights Organizations (or PROs) were formed
to collectively license many copyrighted works on
a blanket basis in order to provide the flexibility
business owners required while compensating
the artists. Under a blanket license, a licensee can
publicly perform any of the musical compositions
in the PRO’s repertory for a single fee, with the fees
being divided among the artists within a particular
PRO’s catalog.
ASCAP was the first, and remains one of the
largest, PROs in the United States. Other PROs
now include BMI, SESAC, and GMR. (Any
NATO member exhibitor who has received any
communication from one of these organizations
should contact NATO.) By controlling monopolies
in must-have blanket licenses for copyrights,
the PROs amassed substantial market power,
which in turn led to antitrust claims. Those
claims culminated in consent decrees between the
DOJ and individual PROs.
24 MAY 2019