Sony/ATV Threatens the Nuclear Option Against Pandora…

What happens when the largest publisher in the world isn’t allowed by law to deal directly with digital services like Pandora? Well, one option is a complete and total withdrawal from collection societies ASCAP and BMI, and the end of typical songwriter licensing as we know it.

The following letter was sent by Sony/ATV chairman and CEO Martin Bandier to songwriter and sub-publisher members this week.

Dear Songwriters and Publishers,

I’m reaching out to share some important news with you about our rapidly changing industry and what we’re doing about it. As you may recall, last year I wrote to you to announce that Sony/ATV had taken the lead in protecting your rights in the digital space by withdrawing certain digital performance rights from ASCAP and BMI.

There were numerous reasons for this withdrawal. One was that ASCAP and BMI operate under antiquated antitrust consent decrees which dictate how they negotiate and grant licenses. As a result, the performance rights licensing process is often lengthy, expensive and results in artificially deflated rates.

By withdrawing certain rights and entering into direct deals, the process becomes more efficient, less costly and, ultimately, more transparent and beneficial for everyone.

Unfortunately, in two legal decisions at the end of last year, the Federal Courts ruled that music publishers could not selectively withdraw public performance rights from ASCAP and BMI. In other words, a publisher had to keep all of these rights (including digital) with the two performing rights societies, or leave altogether.

As a result, all of our performance rights currently remain with ASCAP and BMI.

Like you, we passionately want digital music services to be successful as they provide fantastic new ways for music lovers to listen to music and have the potential to generate significant new revenues for all of us. However, because the current system results in what we believe to be inequitable royalty rates, the amount being paid to songwriters is unacceptably low and in no way reflects the vital contribution you make to the success of these services.

To overcome the challenges of the present legislative and regulatory system, we are aggressively pursuing the following activities:

Working on your behalf with the U.S Department of Justice to revise the consent decrees and allow partial withdrawal of performance rights.

Appealing the rate court decisions so that partial withdrawals are permitted.

Exploring other options, including the potential complete withdrawal of all rights from ASCAP and BMI.

It is our hope that the DOJ and appeals process will recognize the benefits and fairness produced by partial withdrawals of performance rights. This would enable us to remove only those rights that we believe we can more efficiently license ourselves (e.g. digital), and keep other rights with ASCAP, BMI or others where collective licensing (e.g. for bars, restaurants and venues) makes sense for the writers, publishers and licensees.

That being said, because the DOJ and legal process is not fully within our control, we may have no alternative but to take all of our rights out of ASCAP and BMI. We recognize that full withdrawal is a significant step and we are carefully looking at all of the issues associated with this, including speaking with potential partners to assist us.

All of us at Sony/ATV take our responsibility as your music publisher very seriously. We know we face some difficult decisions ahead that will impact our business for years to come.

We are optimistic that we will overcome these issues and set the stage for a better future for you, our songwriters. As the streaming market continues to grow rapidly, we are excited about all of the opportunities that lie ahead. We will be sure to keep you updated as important and significant events develop.

Sincerely,

Martin Bandier

Chairman & CEO

Sony/ATV Music Publishing