Boxoffice - May 2019

boxofficepro

The Official Magazine of the National Association of Theatre Owners

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

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