Opinion ID: 2583
Heading Depth: 3
Heading Rank: 3

Heading: The Broadcast Music Comparison

Text: In Broadcast Music, the Supreme Court considered antitrust claims by Columbia Broadcasting System, Inc. (CBS), against Broadcast Music, Inc., and the American Society of Composers, Authors and Publishers (collectively the organizations), with respect to the organizations' respective issuance of blanket performance licenses to the CBS television network, i.e., licenses to perform any, some, or all of the copyrighted musical compositions owned by that organization's members or affiliates. CBS asserted that the issuance of blanket licenses in exchange for fees negotiated by the respective organizations was price fixing, and hence per se illegal. The district court, following a trial on issues of liability, ruled that blanket licensing did not fall within the per se rule; the court of appeals reversed, holding that blanket licensing was a form of price fixing and thus was per se illegal. The Supreme Court reversed the court of appeals, holding that blanket licensing is not per se illegal, but rather should be subjected to a more discriminating examination under the rule of reason, 441 U.S. at 24, 99 S.Ct. 1551, because it cannot be said that the practice facially appears to be one that would always or almost always tend to restrict competition and decrease output, rather than one designed to increase economic efficiency and render markets more, rather than less, competitive, id. at 19-20, 99 S.Ct. 1551 (internal quotation marks omitted). The Supreme Court stated: The blanket license, as we see it, is not a naked restrain[t] of trade with no purpose except stifling of competition,... but rather accompanies the integration of sales, monitoring, and enforcement against unauthorized copyright use.... [The organizations] and the blanket license developed together out of the practical situation in the marketplace: thousands of users, thousands of copyright owners, and millions of compositions. Most users want unplanned, rapid, and indemnified access to any and all of the repertory of compositions, and the owners want a reliable method of collecting for the use of their copyrights. Individual sales transactions in this industry are quite expensive, as would be individual monitoring and enforcement, especially in light of the resources of single composers. Indeed, as both the Court of Appeals and CBS recognize, the costs are prohibitive for licenses with individual radio stations, nightclubs, and restaurants, ... and it was in that milieu that the blanket license arose. A middleman with a blanket license was an obvious necessity if the thousands of individual negotiations, a virtual impossibility, were to be avoided. Also, individual fees for the use of individual compositions would presuppose an intricate schedule of fees and uses, as well as a difficult and expensive reporting problem for the user and policing task for the copyright owner. 441 U.S. at 20, 99 S.Ct. 1551 (quoting White Motor Co. v. United States, 372 U.S. 253, 263, 83 S.Ct. 696, 9 L.Ed.2d 738 (1963)). Although individual copyright owners remained free to grant direct licenses for the performance of their works, the organizations reduce[d] costs absolutely by creating a blanket license that is sold only a few, instead of thousands, of times, and that obviates the need for closely monitoring the networks to see that they do not use more than they pay for. [The organizations] also provide[d] the necessary resources for blanket sales and enforcement, resources unavailable to the vast majority of composers and publishing houses. 441 U.S. at 21, 99 S.Ct. 1551 (footnotes omitted). The Court stated that [t]his substantial lowering of costs, which is of course potentially beneficial to both sellers and buyers, differentiates the blanket license from individual use licenses. The blanket license is composed of the individual compositions plus the aggregating service. Here, the whole is truly greater than the sum of its parts; it is, to some extent, a different product. Id. at 21-22, 99 S.Ct. 1551. The Court concluded, we have some doubt  enough to counsel against application of the per se rule  about the extent to which this practice threatens the central nervous system of the economy, ... that is, competitive pricing as the free market's means of allocating resources. Not all arrangements among actual or potential competitors that have an impact on price are per se violations of the Sherman Act or even unreasonable restraints. Mergers among competitors eliminate competition, including price competition, but they are not per se illegal, and many of them withstand attack under any existing antitrust standard. Joint ventures and other cooperative arrangements are also not usually unlawful, at least not as price-fixing schemes, where the agreement on price is necessary to market the product at all. Id. at 23, 99 S.Ct. 1551 (quoting United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 226 n. 59, 60 S.Ct. 811, 84 L.Ed. 1129 (1940)) (emphases added). Salvino seeks to distinguish Broadcast Music on the basis that (1) the individual copyright owners granted the organizations only nonexclusive rights to license the performance of their works and remained free to grant performing rights licenses directly to users; (2) the blanket license granted by the organizations was a package product that no individual copyright owner could offer; and (3) in Broadcast Music, [i]t was found that the arrangement actually increased output and facilitated competition (Salvino brief on appeal at 18). Only the first of these factors provides a distinction, but it is a distinction that loses significance in the context of the differences between the music and sports industries. Taking the three factors in reverse order, we note first that Salvino's statement that the Broadcast Music Court found that blanket licensing increased output and facilitated competition finds little support in the Supreme Court's opinion. If by increased output, Salvino means that there were in fact more music performance licenses, the opinion squarely contradicts Salvino's statement. Although there [we]re no practical impediments preventing direct dealing by the television networks if they so desire[d, h]istorically they ha[d] not done so. Broadcast Music, 441 U.S. at 12, 99 S.Ct. 1551. Indeed, until the Broadcast Music lawsuit, CBS had never sought any kind of performance license other than blanket licenses from the organizations. Accordingly, there was no increased output in the sense of the number of licenses granted. The Court itself used the term output in the music industry to refer to the creation of musical compositions and merely noted that blanket licensing was unlikely to cause composers to cease producing compositions. See id. at 22 n. 40, 99 S.Ct. 1551. Further, in the present case, as discussed in Part II.C.1. above, there has been no evidence of any reduction in output. Instead, since MLBP became the Clubs' exclusive licensing agent for all retail products bearing Club intellectual property, the number of licenses granted has multiplied. Nor do we see either (a) support for Salvino's suggestion that the Broadcast Music Court held blanket licensing to have facilitated competition (Salvino brief on appeal at 18) or (b) a meaningful distinction between Broadcast Music and the present case with respect to what in fact was facilitated. The availability of blanket licenses had not led to direct licensing by individual copyright owners; indeed, the Broadcast Music Court stated that to the extent that the blanket license is a different product, the organizations had created a market in which individual composers are inherently unable to compete fully effectively, 441 U.S. at 23, 99 S.Ct. 1551. What the blanket license was held to have facilitated was dealings between copyright owners and those who desire[d] to use their music, id. at 10, 99 S.Ct. 1551  much in the same way that MLBP's licensing activities facilitate the use of the Clubs' intellectual property by those who desire to use it on products they wish to market. The second distinction urged by Salvino is the fact that the blanket license at issue in Broadcast Music was a product that no single copyright owner could offer. But this fact reveals not a difference but a similarity. MLBP can offer a license that covers all of the intellectual property of all of the MLB Clubs; no one Club could offer such a license, for no Club has the right to license the intellectual property of any other. Accordingly, even if direct licensing for retail products were available from each Club, any purveyor of memorabilia who wanted to offer products bearing the intellectual property of more than one Club could not obtain the necessary authorization from a single Club. Only MLBP can offer licenses to use the intellectual property of more than one Club, and it can grant a license to use any, some, or all of the Clubs' intellectual property. Accordingly, MLBP offers a large number of products that the individual intellectual property owners cannot match. Finally, as discussed in Part I.B.2. above, the Clubs retain only limited rights to grant licenses directly, e.g., with respect to product giveaways in their home stadia and activities such as cruises and fantasy camps; they have given up the right to license products using their intellectual property for retail sales, making MLBP their exclusive licensing agent with respect to those products. Thus, it is true, as Salvino argues, that the rights of the individual MLB Clubs to license their own respective intellectual property are more limited than the unfettered direct licensing rights of the copyright owners in Broadcast Music. We conclude that this distinction is insignificant, however, in light of the fact that the MLB Clubs exist as members of a sports league, and their interests are interdependent. That interdependence and Major League Baseball's need for competitive balance among the Clubs distinguish the Clubs from the individual composers and publishers of music who were the subject of Broadcast Music; those factors are not characteristic of the music industry. And those factors, among others, discussed in Part II.C.5. below, plainly foreclose the imposition of per se or quick-look liability.