U.S. Supreme Court Broadcast Music, Inc. v. CBS, Inc., 441 U.S. 1 (1979) Broadcast Music, Inc. v. Columbia
Broadcasting System, Inc. No. 77-1578 Argued January 15,
1979 Decided April 17, 1979 441 U.S.
1 ast|>* 441 U.S.
1 CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE SECOND
CIRCUIT Syllabus Respondent Columbia Broadcasting System, Inc. (CBS), brought
this action against petitioners, American Society of Composers,
Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI), and
their members and affiliates, alleging, inter alia, that
the issuance by ASCAP and BMI to CBS of blanket licenses to
copyrighted musical compositions at fees negotiated by them is
illegal price-fixing under the antitrust laws. Blanket licenses
give the licensees the right to perform any and all of the
compositions owned by the members or affiliates as often as the
licensees desire for a stated term. Fees for blanket licenses are
ordinarily a percentage of total revenues or a flat dollar amount,
and do not directly depend on the amount or type of music used.
After a trial limited to the issue of liability, the District Court
dismissed the complaint, holding, inter alia, that the
blanket license was not price-fixing and a per se violation of the Sherman Act. The Court of Appeals reversed and
remanded for consideration of the appropriate remedy, holding that
the blanket license issued to television networks was a form of
price-fixing illegal per se under the Sherman Act and
established copyright misuse. Page 441 U. S. 2 Held: The issuance by ASCAP and BMI of blanket licenses
does not constitute price-fixing per se unlawful under the
antitrust laws. Pp. 441 U. S.
7 -25.

															(a) "It is only after considerable experience with certain
business relationships that courts classify them as per se violations of the Sherman Act." United States v. Topco
Associates, Inc., 405 U. S. 596 , 405 U. S.
607 -608. And though there has been rather intensive
antitrust scrutiny of ASCAP and BMI and their blanket licenses,
that experience hardly counsels that this Court should outlaw the
blanket license as a per se restraint of trade.
Furthermore, the United States, by its amicus brief in the
present case, urges that the blanket licenses, which consent
decrees in earlier actions by the Government authorize ASCAP and
BMI to issue to television networks, are not per se violations of the Sherman Act. And Congress, in the Copyright Act
of 1976, has itself chosen to employ the blanket license and
similar practices. Thus, there is no nearly universal view that the
blanket licenses are a form of price-fixing subject to automatic
condemnation under the Sherman Act, rather than to a careful
assessment under the rule of reason generally applied in Sherman
Act cases. Pp. 441 U. S.
7 -16.

															(b) In characterizing the conduct of issuing blanket licenses
under the per se rule, this Court's inquiry must focus on
whether the effect and, here because it tends to show effect, the
purpose of the practice are to threaten the proper operation of a
predominantly free-market economy. The blanket license is not a
"naked restrain[t] of trade with no purpose except stifling of
competition," White Motor Co. v. United States, 372 U. S. 253 , 372 U. S. 263 ,
but rather accompanies the integration of sales, monitoring, and
enforcement against unauthorized copyright use, which would be
difficult and expensive problems if left to individual users and
copyright owners. Although the blanket license fee is set by ASCAP
and BMI, rather than by competition among individual copyright
owners, and although it is a fee for the use of any of the
compositions covered by the license, the license cannot be wholly
equated with a simple horizontal arrangement among competitors, and
is quite different from anything any individual owner could issue.
In light of the background, which plainly indicates that, over the
years, and in the face of available alternatives, including direct
negotiation with individual copyright owners, the blanket license
has provided an acceptable mechanism for at least a large part of
the market for the performing rights to copyrighted musical
compositions, it cannot automatically be declared illegal in all of
its many manifestations. Rather, it should be subjected to a more
discriminating examination under the rule of reason. Pp. 441 U. S.
16 -24. Page 441 U. S. 3 (c) The Court of Appeals' judgment holding that the licensing
practices of ASCAP and BMI are per se violations of the
Sherman Act, and the copyright misuse judgment dependent thereon,
are reversed, and the case is remanded for further proceedings to
consider any unresolved issues that CBS may have properly brought
to the Court of Appeals, including an assessment under the rule of
reason of the blanket license as employed in the television
industry. Pp. 441 U. S.
24 -25.

															562 F.2d 130, reversed and remanded.

															WHITE, J., delivered the opinion of the Court, in which BURGER,
C.J., and BRENNAN, STEWART, MARSHALL, BLACKMUN, POWELL, and
REHNQUIST, JJ., joined. STEVENS, J., filed a dissenting opinion, post, p. 441 U. S. 25 . Page 441 U. S. 4 MR JUSTICE WHITE delivered the opinion of the Court.

															This case involves an action under the antitrust and copyright
laws brought by respondent Columbia Broadcasting System, Inc.
(CBS), against petitioners, American Society of Composers, Authors
and Publishers (ASCAP) and Broadcast Music, Inc. (BMI), and their
members and affiliates. [ Footnote
1 ] The basic question presented is whether the issuance by
ASCAP and BMI to CBS of blanket licenses to copyrighted musical
compositions at fees negotiated by them is price-fixing per
se unlawful under the antitrust laws. I CBS operates one of three national commercial television
networks, supplying programs to approximately 200 affiliated
stations and telecasting approximately 7,500 network programs per
year. Many, but not all, of these programs make use of copyrighted
music recorded on the soundtrack. CBS also owns television and
radio stations in various cities. It is " the giant of the world
in the use of music rights,'" the "`No. 1 outlet in the history of
entertainment.'" [ Footnote
2 ] Since 1897, the copyright laws have vested in the owner of a
copyrighted musical composition the exclusive right to perform the
work publicly for profit, [ Footnote
3 ] but the legal right is not self-enforcing. In 1914, Victor
Herbert and a handful of other composers organized ASCAP because
those who performed Page 441 U. S. 5 copyrighted music for profit were so numerous and widespread,
and most performances so fleeting, that, as a practical matter, it
was impossible for the many individual copyright owners to
negotiate with and license the users and to detect unauthorized
uses. "ASCAP was organized as a clearing-house' for copyright
owners and users to solve these problems" associated with the
licensing of music. 400 F.
Supp. 737 , 741 (SDNY 1975). As ASCAP operates today, its 22,000
members grant it nonexclusive rights to license nondramatic
performances of their works, and ASCAP issues licenses and
distributes royalties to copyright owners in accordance with a
schedule reflecting the nature and amount of the use of their music
and other factors. BMI, a nonprofit corporation owned by members of the
broadcasting industry, [ Footnote
4 ] was organized in 1939, is affiliated with or represents some
10,000 publishing companies and 20,000 authors and composers, and
operates in much the same manner as ASCAP. Almost every domestic
copyrighted composition is in the repertory either of ASCAP, with a
total of three million compositions, or of BMI, with one
million.

															Both organizations operate primarily through blanket licenses,
which give the licensees the right to perform any and all of the
compositions owned by the members or affiliates as often as the
licensees desire for a stated term. Fees for blanket licenses are
ordinarily a percentage of total revenues or a flat dollar amount,
and do not directly depend on the amount or type of music used.
Radio and television broadcasters are the largest users of music,
and almost all of them hold blanket licenses from both ASCAP and
BMI. Until this litigation, CBS held blanket licenses from both
organizations for its television network on a continuous basis
since the late 1940's, and had never attempted to secure any other
form of Page 441 U. S. 6 license from either ASCAP [ Footnote 5 ] or any of its members. Id. at
752-754

															The complaint filed by CBS charged various violations of the
Sherman Act [ Footnote 6 ] and
the copyright laws. [ Footnote
7 ] CBS argued that ASCAP and BMI are unlawful monopolies, and
that the blanket license is illegal price-fixing, an unlawful tying
arrangement, a concerted refusal to deal, and a misuse of
copyrights. The District Court, though denying summary judgment to
certain defendants, ruled that the practice did not fall within the per se rule. 337 F.
Supp. 394 , 398 (SDNY 1972). After an 8-week trial, limited to
the issue of liability, the court dismissed the complaint,
rejecting again the claim that the blanket license was price-fixing
and a per se violation of § 1 of the Sherman Act, and
holding that, since direct negotiation with individual copyright
owners is available and feasible, there is no undue restraint of
trade, illegal tying, misuse of copyrights, or monopolization. 400
F. Supp. at 781-783.

															Though agreeing with the District Court's factfinding and not
disturbing its legal conclusions on the other antitrust theories of
liability, [ Footnote 8 ] the
Court of Appeals held that the blanket license issued to television
networks was a form of price-fixing illegal per se under
the Sherman Act. 532 F.2d 130, 140 (CA2 1977). This conclusion,
without more, settled the issue of liability under the Sherman Act,
established copyright misuse, [ Footnote 9 ] and required reversal of the District
Court's Page 441 U. S. 7 judgment, as well as a remand to consider the appropriate
remedy. [ Footnote 10 ]

															ASCAP and BMI petitioned for certiorari, presenting the
questions of the applicability of the per se rule and of
whether this constitutes misuse of copyrights. CBS did not
cross-petition to challenge the failure to sustain its other
antitrust claims. We granted certiorari because of the importance
of the issues to the antitrust and copyright laws. 439 U.S. 817
(1978). Because we disagree with the Court of Appeals' conclusions
with respect to the per se illegality of the blanket
license, we reverse its judgment and remand the cause for further
appropriate proceedings. II In construing and applying the Sherman Act's ban against
contracts, conspiracies, and combinations in restraint of
trade, Page 441 U. S. 8 the Court has held that certain agreements or practices are so
"plainly anticompetitive," National Society of Professional
Engineers v. United States, 435 U. S. 679 , 435 U. S. 692 (1978); Continental T.V., Inc. v. GTE Sylvania Inc., 433 U. S. 36 , 433 U. S. 50 (1977), and so often "lack . . . any redeeming virtue," Northern Pac. R. Co. v. United States, 356 U. S.
1 , (1958), that they are conclusively presumed illegal
without further examination under the rule of reason generally
applied in Sherman Act cases. This per se rule is a valid
and useful tool of antitrust policy and enforcement. [ Footnote 11 ] And agreements among
competitors to fix prices on their individual goods or services are
among those concerted activities that the Court has held to be
within the per se category. [ Footnote 12 ] But easy labels do not always supply ready
answers. A To the Court of Appeals and CBS, the blanket license involves
"price-fixing" in the literal sense: the composers and publishing
houses have joined together into an organization that sets its
price for the blanket license it sells. [ Footnote 13 ] But this Page 441 U. S. 9 is not a question simply of determining whether two or more
potential competitors have literally "fixed" a "price." As
generally used in the antitrust field, "price-fixing" is a
shorthand way of describing certain categories of business behavior
to which the per se rule has been held applicable. The
Court of Appeals' literal approach does not alone establish that
this particular practice is one of those types or that it is
"plainly anticompetitive" and very likely without "redeeming
virtue." Literalness is overly simplistic and often overbroad. When
two partners set the price of their goods or services, they are
literally "price-fixing," but they are not per se in
violation of the Sherman Act. See United States v. Addyston
Pipe & Steel Co., 85 F. 271, 280 (CA6 1898), aff'd, 175 U. S. 11 (1899). Thus, it is necessary to characterize the challenged
conduct as falling within or without that category of behavior to
which we apply the label " per se price-fixing." That will
often, but not always, be a simple matter. [ Footnote 14 ]

															Consequently, as we recognized in United States v. Topco
Associates, Inc., 405 U. S. 596 , 405 U. S.
607 -608 (1972), "[i]t is only after considerable
experience with certain business relationships that courts classify
them as per se violations. . . ." See Page 441 U. S. 10 White Motor Co. v. United States, 372 U.
S. 253 , 372 U. S. 263 (1963). We have never examined a practice like this one before;
indeed, the Court of Appeals recognized that, "[i]n dealing with
performing rights in the music industry, we confront conditions
both in copyright law and in antitrust law which are sui
generis. " 562 F.2d at 132. And though there has been rather
intensive antitrust scrutiny of ASCAP and its blanket licenses,
that experience hardly counsels that we should outlaw the blanket
license as a per se restraint of trade. B This litigation and other cases involving ASCAP and its
licensing practices have arisen out of the efforts of the creators
of copyrighted musical compositions to collect for the public
performance of their works, as they are entitled to do under the
Copyright Act. As already indicated, ASCAP and BMI originated to
make possible and to facilitate dealings between copyright owners
and those who desire to use their music. Both organizations plainly
involve concerted action in a large and active line of commerce,
and it is not surprising that, as the District Court found,
"[n]either ASCAP nor BMI is a stranger to antitrust litigation."
400 F. Supp. at 743.

															The Department of Justice first investigated allegations of
anticompetitive conduct by ASCAP over 50 years ago. [ Footnote 15 ] A criminal complaint was filed
in 1934, but the Government was granted a mid-trial continuance and
never returned to the courtroom. In separate complaints in 1941,
the United States charged that the blanket license, which was then
the only license offered by ASCAP and BMI, was an illegal restraint
of trade, and that arbitrary prices were being charged as the
result of an illegal copyright pool. [ Footnote 16 ] The Government sought Page 441 U. S. 11 to enjoin ASCAP's exclusive licensing powers and to require a
different form of licensing by that organization. The case was
settled by a consent decree that imposed tight restrictions on
ASCAP's operations. [ Footnote
17 ] Following complains relating to the television industry,
successful private litigation against ASCAP by movie theaters,
[ Footnote 18 ] and a
Government challenge to ASCAP's arrangements with similar foreign
organizations, the 1941 decree was reopened and extensively amended
in 1950. [ Footnote 19 ]

															Under the amended decree, which still substantially controls the
activities of ASCAP, members may grant ASCAP only nonexclusive
rights to license their works for public performance. Members,
therefore, retain the rights individually to license public
performances, along with the rights to license the use of their
compositions for other purposes. ASCAP itself is forbidden to grant
any license to perform one or more specified compositions in the
ASCAP repertory unless both the user and the owner have requested
it in writing to do so. ASCAP is required to grant to any user
making written application a nonexclusive license to perform all
ASCAP compositions, either for a period of time or on a per-program
basis. ASCAP may not insist on the blanket license, and the fee for
the per-program license, which is to be based on the revenues for
the program on which ASCAP music is played, must offer the
applicant a genuine economic choice between the per-program license
and the more common blanket license. If ASCAP and a putative
licensee are unable to agree on a fee within 60 days, the applicant
may apply to the District Court Page 441 U. S. 12 for a determination of a reasonable fee, with ASCAP having the
burden of proving reasonableness. [ Footnote 20 ]

															The 1950 decree, as amended from time to time, continues in
effect, and the blanket license continues to be the primary
instrument through which ASCAP conducts its business under the
decree. The courts have twice construed the decree not to require
ASCAP to issue licenses for selected portions of its repertory.
[ Footnote 21 ] It also
remains true that the decree guarantees the legal availability of
direct licensing of performance rights by ASCAP members; and the
District Court found, and in this respect the Court of Appeals
agreed, that there are no practical impediments preventing direct
dealing by the television networks if they so desire. Historically,
they have not done so. Since 1946, CBS and other television
networks have taken blanket licenses from ASCAP and BMI. It was not
until this suit arose that the CBS network demanded any other kind
of license. [ Footnote
22 ] Page 441 U. S. 13 Of course, a consent judgment, even one entered at the behest of
the Antitrust Division, does not immunize the defendant from
liability for actions, including those contemplated by the decree,
that violate the rights of nonparties. See Sam Fox Publishing
Co. v. United States, 366 U. S. 683 , 366 U. S. 690 (1961), which involved this same decree. But it cannot be ignored
that the Federal Executive and Judiciary have carefully scrutinized
ASCAP and the challenged conduct, have imposed restrictions on
various of ASCAP's practices, and, by the terms of the decree,
stand ready to provide further consideration, supervision, and
perhaps invalidation of asserted anticompetitive practices.
[ Footnote 23 ] In these
circumstances, we have a unique indicator that the challenged
practice may have redeeming competitive virtues, and that the
search for those values is not almost sure to be in vain. [ Footnote 24 ] Thus, although CBS is
not bound by the Antitrust Division's actions, the decree is a fact
of economic and legal life in this industry, and the Court of
Appeals should not have ignored it completely in analyzing the
practice. See id. at 366 U. S.
694 -695. That fact alone might not remove a naked
price-fixing scheme from the ambit of the per se rule,
but, as discussed infra, 441 U. S. here we
are uncertain whether the practice on its face has the effect, or
could have been spurred by the purpose, of restraining competition
among the individual composers.

															After the consent decrees, the legality of the blanket license
was challenged in suits brought by certain ASCAP members against
individual radio stations for copyright infringement. The stations
raised as a defense that the blanket license was a form of
price-fixing illegal under the Sherman Act. The parties Page 441 U. S. 14 stipulated that it would be nearly impossible for each radio
station to negotiate with each copyright holder separate licenses
for the performance of his works on radio. Against this background,
and relying heavily on the 1950 consent judgment, the Court of
Appeals for the Ninth Circuit rejected claims that ASCAP was a
combination in restraint of trade and that the blanket license
constituted illegal price-fixing. K-91, Inc. v. Gershwin
Publishing Corp., 372 F.2d 1 (1967), cert. denied, 389 U.S. 1045 (1968).

															The Department of Justice, with the principal responsibility for
enforcing the Sherman Act and administering the consent decrees
relevant to this case, agreed with the result reached by the Ninth
Circuit. In a submission amicus curiae opposing one
station's petition for certiorari in this Court, the Department
stated that there must be "some kind of central licensing agency by
which copyright holders may offer their works in a common pool to
all who wish to use them." Memorandum for United States as Amicus Curiae on Pet. for Cert. in K-91, Inc. v.
Gershwin Publishing Corp., O.T. 1967, No. 147, pp. 10-11. And
the Department elaborated on what it thought that fact meant for
the proper application of the antitrust laws in this area:

															"The Sherman Act has always been discriminatingly applied in the
light of economic realities. There are situations in which
competitors have been permitted to form joint selling agencies or
other pooled activities, subject to strict limitations under the
antitrust laws to guarantee against abuse of the collective power
thus created. Associated Press v. United States, 326 U. S.
1 ; United States v. St. Louis Terminal, 224 U. S.
383 ; Appalachian Coals, Inc. v. United States, 288 U. S.
344 ; Chicago Board of Trade v. United States, 246 U. S.
231 . This case appears to us to involve such a
situation. The extraordinary number of users spread across the land
the ease with which a performance may be broadcast, the sheer
volume Page 441 U. S. 15 of copyrighted compositions, the enormous quantity of separate
performances each year, the impracticability of negotiating
individual licenses for each composition, and the ephemeral nature
of each performance -- all combine to create unique market
conditions for performance rights to recorded music." Id. at 10 (footnote omitted). The Department concluded
that, in the circumstances of that case, the blanket licenses
issued by ASCAP to individual radio stations were neither a per
se violation of the Sherman Act nor an unreasonable restraint
of trade.

															As evidenced by its amicus brief in the present case,
the Department remains of that view. Furthermore, the United States
disagrees with the Court of Appeals in this case, and urges that
the blanket licenses, which the consent decree authorizes ASCAP to
issue to television networks, are not per se violations of
the Sherman Act. It takes no position, however, on whether the
practice is an unreasonable restraint of trade in the context of
the network television industry.

															Finally, we note that Congress itself, in the new Copyright
Act., has chosen to employ the blanket license and similar
practices. Congress created a compulsory blanket license for
secondary transmissions by cable television systems, and provided
that,

															"[n]otwithstanding any provisions of the antitrust laws, . . .
any claimants may agree among themselves as to the proportionate
division of compulsory licensing fees among them, may lump their
claims together and file them jointly or as a single claim, or may
designatee a common agent to receive payment on their behalf."

															17 U.S.C.App. § 111(d)(5)(A). And the newly created compulsory
license for the use of copyrighted co,positions in jukeboxes is
also a blanket license, which is payable to the performing rights
societies such as ASCAP unless an individual copyright holder can
prove his entitlement to a share. § 116(c)(4). Moreover, in
requiring noncommercial broadcasters to pay for their use of
copyrighted music Congress again provided that,
"[n]otwithstanding Page 441 U. S. 16 any provision of the antitrust laws" copyright owners "may
designate common agents to negotiate, agree to pay, or receive
payments." § 118(1). Though these provisions are not directly
controlling, they do reflect an opinion that the blanket license,
and ASCAP, are economically beneficial in at least some
circumstances.

															There have been District Court cases holding various ASCAP
practices, including its licensing practices, to be violative of
the Sherman Act, [ Footnote
25 ] but even so, there is no nearly universal view that either
the blanket or the per-program licenses issued by ASCAP at prices
negotiated by it are a form of price-fixing subject to automatic
condemnation under the Sherman Act, rather than to a careful
assessment under the rule of reason. III Of course, we are no more bound than is CBS by the views of the
Department of Justice, the results in the prior lower court cases,
or the opinions of various experts about the merits of the blanket
license. But, while we must independently examine this practice,
all those factors should caution us against too easily finding
blanket licensing subject to per se invalidation. A As a preliminary matter, we are mindful that the Court of
Appeals' holding would appear to be quite difficult to contain. If,
as the court held, there is a per se antitrust violation
whenever ASCAP issues a blanket license to a television network for
a single fee, why would it not also be automatically illegal for
ASCAP to negotiate and issue blanket licenses to Page 441 U. S. 17 individual radio or television stations or to other users who
perform copyrighted music for profit? [ Footnote 26 ] Likewise, if the present network licenses
issued through ASCAP on behalf of its members are per se violations, why would it not be equally illegal for the members to
authorize ASAP to issue licenses establishing various categories of
uses that a network might have for copyrighted music, and setting a
standard fee for each described use?

															Although the Court of Appeals apparently thought the blanket
license could be saved in some or even many applications, it seems
to us that the per se rule does not accommodate itself to
such flexibility, and that the observations of the Court of Appeals
with respect to remedy tend to impeach the per se basis
for the holding of liability. [ Footnote 27 ] Page 441 U. S. 18 CBS would prefer that ASCAP be authorized, indeed directed, to
make all its compositions available at standard per-use rates
within negotiated categories of use. 400 F. Supp. at 747 n. 7.
[ Footnote 28 ] But if this,
in itself or in conjunction with blanket licensing, constitutes
illegal price-fixing by copyright owners, CBS urges that an
injunction issue forbidding ASCAP to issue any blanket license or
to negotiate any fee except on behalf of an individual member for
the use of his own copyrighted work or works. [ Footnote 29 ] Thus, we are called upon to
determine that blanket licensing is unlawful across the board. We
are quite sure, however, that the per se rule does not
require any such holding. B In the first place, the line of commerce allegedly being
restrained, the performing rights to copyrighted music, exists at
all only because of the copyright laws. Those who would use
copyrighted music in public performances must secure consent from
the copyright owner or be liable at least for the statutory damages
for each infringement and, if the conduct is willful and for the
purpose of financial gain, to criminal penalties. [ Footnote 30 ] Furthermore, nothing in the
Copyright Act of 1976 indicates in the slightest that Congress
intended to weaken the rights of copyright owners to control the
public Page 441 U. S. 19 performance of musical compositions. Quite the contrary is true.
[ Footnote 31 ] Although the
copyright laws confer no rights on copyright owners to fix prices
among themselves or otherwise to violate the antitrust laws, we
would not expect hat any market arrangements reasonably necessary
to effectuate the rights that are granted would be deemed a per
se violation of the Sherman Act. Otherwise, the commerce
anticipated by the Copyright Act and protected against restraint by
the Sherman Act would not exist at all, or would exist only as a
pale reminder of what Congress envisioned. [ Footnote 32 ] C More generally, in characterizing this conduct under the per
se rule, [ Footnote 33 ]
our inquiry must focus on whether the effect and, here because it
tends to show effect, see United States v. United States Gypsum
Co., 438 U. S. 422 , 438 U. S. 436 n. 13 (1978), the purpose of the practice are to threaten the
proper operation of our predominantly free-market economy -- that
is, whether the practice facially appears to be one that would
always or Page 441 U. S. 20 almost always tend to restrict competition and decrease output,
and in what portion of the market, or instead one designed to
"increase economic efficiency and render markets more, rather than
less, competitive." Id. at 438 U. S. 441 n. 16; see National Society of Professional Engineers v. United
States, 435 U.S. at 435 U. S. 688 ; Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. at 433 U. S. 50 n.
16; Northern Pac. R. Co. v. United States, 356 U.S. at 356 U. S. 4 .

															The blanket license, as we see it, is not a "naked restrain[t]
of trade with no purpose except stifling of competition," White
Motor Co. v. United States, 372 U. S. 253 , 372 U. S. 263 (1963), but rather accompanies the integration of sales, monitoring
and enforcement against unauthorized copyright use. See L.
Sullivan, Handbook of the Law of Antitrust 59 P. 154 (1977). As we
have already indicated, ASCAP 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, 562 F.2d at 140 n. 26, 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. Historically,
the market for public performance rights organized itself largely
around the single-fee blanket Page 441 U. S. 21 license, which gave unlimited access to the repertory and
reliable protection against infringement. When ASCAP's major and
user-created competitor, BMI, came on the scene, it also turned to
the blanket license.

															With the advent of radio and television networks, market
conditions changed, and the necessity for and advantages of a
blanket license for those users may be far less obvious than is the
case when the potential users are individual television or radio
stations, or the thousands of other individuals and organizations
performing copyrighted compositions in public. [ Footnote 34 ] But even for television
network licenses, ASCAP reduces costs absolutely by creating a
blanket license that is sold only a few, instead of thousands,
[ Footnote 35 ] of times, and
that obviates the need for closely monitoring the networks to see
that they do not use more than they pay for. [ Footnote 36 ] ASAP also provides the necessary
resources for blanket sales and enforcement, resources unavailable
to the vast majority of composers and publishing houses. Moreover,
a bulk license of some type is a necessary consequence of the
integration necessary to achieve these efficiencies, and a
necessary consequence of an aggregate license is that its price
must be established. D This 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 Page 441 U. S. 22 sum of its parts; it is, to some extent, a different product.
The blanket license has certain unique characteristics: it allows
the licensee immediate use of covered compositions, without the
delay of prior individual negotiations, [ Footnote 37 ] and great flexibility in the choice of
musical material. Many consumers clearly prefer the characteristics
and cost advantages of this marketable package, [ Footnote 38 ] and even small performing
rights societies that have occasionally arisen to compete with
ASCAP and BMI have offered blanket licenses. [ Footnote 39 ] Thus, to the extent the blanket
license is a different product, ASCAP is not really a joint sales
agency offering the individual goods of many sellers, but is a
separate seller offering its blanket license, of which the
individual compositions are raw material. [ Footnote 40 ] ASCAP, Page 441 U. S. 23 in short, made a market in which individual composers are
inherently unable to compete fully effectively. [ Footnote 41 ] E Finally, 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," United States v. Socony-Vacuum Oil Co., 310 U. S. 150 , 310 U. S. 226 n. 59 (1940), 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.

															Here, the blanket license fee is not set by competition among
individual copyright owners, and it is a fee for the use of any of
the compositions covered by the license. But the blanket license
cannot be wholly equated with a simple horizontal arrangement among
competitors. ASCAP does set the price for its blanket license, but
that license is quite different from anything any individual owner
could issue. The individual composers and authors have neither
agreed not to sell individually in any other market nor use the
blanket Page 441 U. S. 24 license to mask price-fixing in such other markets. [ Footnote 42 ] Moreover, the
substantial restraints placed on ASCAP and its members by the
consent decree must not be ignored. The District Court found that
there was no legal, practical, or conspiratorial impediment to
CBS's obtaining individual licenses; CBS, in short, had a real
choice.

															With this background in mind, which plainly enough indicates
that, over the years and in the face of available alternatives, the
blanket license has provided an acceptable mechanism for at least a
large part of the market for the performing rights to copyrighted
musical compositions, we cannot agree that it should automatically
be declared illegal in all of its many manifestations. Rather, when
attacked, it should be subjected to a more discriminating
examination under the rule of reason. It may not ultimately survive
that attack, but that is not the issue before us today. IV As we have noted, n 27, supra, the enigmatic remarks of the Court of Appeals with
respect to remedy appear to have departed from the court's strict, per se approach, and to have invited a more careful
analysis. But this left the general import of its judgment that the
licensing practices of ASCAP and BMI under the consent decree are per se violations of the Sherman Act. We reverse that
judgment, and the copyright misuse judgment dependent upon it, see n 9, supra, and remand for further proceedings to consider any
unresolved issues that CBS may have properly brought to the Court
of Appeals. [ Footnote 43 ] Of
course, this will include an assessment under Page 441 U. S. 25 the rule of reason of the blanket license as employed in the
television industry, if that issue was preserved by CBS in the
Court of Appeals. [ Footnote
44 ]

															The judgment of the Court of Appeals is reversed, and the cases
are remanded to that court for further proceedings consistent with
this opinion. It is so ordered. * Together with No. 77-1583, American Society of Composers,
Authors and Publishers et al. v. Columbia Broadcasting System,
Inc., et al., also on certiorari to the same court.

															[ Footnote 1 ]

															The District Court certified the case as a defendant class
action. 400 F.
Supp. 737 , 741 n. 2 (SDNY 1975).

															[ Footnote 2 ] Id. at 771, quoting a CBS witness. CBS is also a
leading music publisher, with publishing subsidiaries affiliated
with both ASCAP and BMI, and is the world's largest manufacturer
and seller of records and tapes. Ibid. [ Footnote 3 ]

															Act of Jan. 6, 1897, 29 Stat. 481.

															[ Footnote 4 ]

															CBS was a leader of the broadcasters who formed BMI, but it
disposed of all of its interest in the corporation in 1959. 400 F.
Supp. at 742.

															[ Footnote 5 ]

															Unless the context indicates otherwise, references to ASCAP
alone in this opinion usually apply to BMI as well. See n 20, infra. [ Footnote 6 ]

															15 U.S.C. §§ 1 and 2.

															[ Footnote 7 ]

															CBS seeks injunctive relief for the antitrust violations and a
declaration of copyright misuse. 400 F. Supp. at 741.

															[ Footnote 8 ]

															The Court of Appeals affirmed the District Court's rejection of
CBS's monopolization and tying contentions, but did not rule on the
District Court's conclusion that the blanket license was not an
unreasonable restraint of trade. See 562 F.2d 130, 132,
135, 141 n. 29 (CA2 1977).

															[ Footnote 9 ]

															At CBS's suggestion, the Court of Appeals held that the
challenged conduct constituted misuse of copyrights solely on the
basis of its finding of unlawful price fixing. Id. at 141
n. 29.

															[ Footnote 10 ]

															The Court of Appeals went on to suggest some guidelines as to
remedy, indicating that, despite its conclusion on liability, the
blanket license was not totally forbidden. The Court of Appeals
said:

															"Normally, after a finding of price-fixing, the remedy is an
injunction against the price-fixing -- in this case, the blanket
license. We think, however, that if, on remand, a remedy can be
fashioned which will ensure that the blanket license will not
affect the price or negotiations for direct licenses, the blanket
license need not be prohibited in all circumstances. The blanket
license is not simply a 'naked restraint' ineluctably doomed to
extinction. There is not enough evidence in the present record to
compel a finding that the blanket license does not serve a market
need for those who wish full protection against infringement suits
or who, for some other business reason, deem the blanket license
desirable. The blanket license includes a practical covenant not to
sue for infringement of any ASCAP copyright, as well as an
indemnification against suits by others."

															"Our objection to the blanket license is that it reduces price
competition among the members, and provides a disinclination to
compete. We think that these objections may be removed if ASCAP
itself is required to provide some form of per use licensing which
will ensure competition among the individual members with respect
to those networks which wish to engage in per use licensing." Id. at 140 (footnotes omitted).

															[ Footnote 11 ]

															"This principle of per se unreasonableness not only
makes the type of restraints which are proscribed by the Sherman
Act more certain to the benefit of everyone concerned, but it also
avoids the necessity for an incredibly complicated and prolonged
economic investigation into the entire history of the industry
involved, as well as related industries, in an effort to determine
at large whether a particular restraint has been unreasonable -- an
inquiry so often wholly fruitless when undertaken." Northern Pac. R. Co. v. United States, 356 U. S.
1 , 356 U. S. 5 (1958). See Continental T.V., Inc. v. GTE Sylvania Inc., 433 U. S. 36 , 433 U. S. 50 n.
16 (1977); United States v. Topco Associates, Inc., 405 U. S. 596 , 405 U. S. 609 n. 10 (1972).

															[ Footnote 12 ] See cases discussed in n 14, infra. [ Footnote 13 ]

															CBS also complains that it pays a flat fee regardless of the
amount of use it makes of ASCAP compositions, and even though many
of its programs contain little or no music. We are unable to see
how that alone could make out an antitrust violation or misuse of
copyrights:

															"Sound business judgment could indicate that such payment
represents the most convenient method of fixing the business value
of the privileges granted by the licensing agreement. . . .
Petitioner cannot complain because it must pay royalties whether it
uses Hazeltine patents or not. What it acquired by the agreement
into which it entered was the privilege to use any or all of the
patents and developments as it desired to use them." Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U. S. 827 , 339 U. S. 834 (1950). See also Zenith Radio Corp. v. Hazeltine Research,
Inc., 395 U. S. 100 (1969).

															[ Footnote 14 ] Cf., e.g., United States v. McKesson & Robbins,
Inc., 351 U. S. 305 (1956) (manufacturer/wholesaler agreed with independent wholesalers
on prices to be charged on products it manufactured); United
States v. Socony-Vacuum Oil Co., 310 U.
S. 150 (1940) (firms controlling a substantial part of
an industry agreed to purchase "surplus" gasoline with the intent
and necessary effect of increasing the price); United States v.
Trenton Potteries Co., 273 U. S. 392 (1927) (manufacturers and distributors of 82% of certain vitreous
pottery fixtures agreed to sell at uniform prices).

															[ Footnote 15 ]

															Cohn, Music, Radio Broadcasters and the Sherman Act, 29 Geo.L.J.
407, 424 n. 91 (1941).

															[ Footnote 16 ] E.g., complaint in United States v. ASCAP, Civ. No. 13-95 (SDNY 1941), pp. 3-4.

															[ Footnote 17 ] United States v. ASCAP, 1940-1943 Trade Cases � 56,104
(SDNY 1941).

															[ Footnote 18 ] See Alden-Rochelle, Inc. v. ASCAP, 80 F. Supp.
888 (SDNY 1948); M. Witmark & Sons v.
Jenson, 80 F. Supp.
843 (Minn.1948), appeal dismissed sub nom. M. Witmark &
Sons v. Berger Amusement Co., 177 F.2d 515 (CA8 1949).

															[ Footnote 19 ] United States v. ASCAP, 1950-1951 Trade Cases � 62,595
(SDNY 1950).

															[ Footnote 20 ]

															BMI is in a similar situation. The original decree against BMI
is reported as United States v. BMI, 1940-1943 Trade Cases
56,096 (ED Wis.1941). A new consent judgment was entered in 1966
following a monopolization complaint filed in 1964. United
States v. BMI, 1966 Trade Cases � 71,941 (SDNY). The ASCAP and
BMI decrees do vary in some respects. The BMI decree does not
specify that BMI may only obtain nonexclusive rights from its
affiliates, or that the District Court may set the fee if the
parties are unable to agree. Nonetheless, the parties stipulated,
and the courts below accepted, that "CBS could secure direct
licenses from BMI affiliates with the same ease or difficulty, as
the case may be, as from ASCAP members." 400 F. Supp. at 745.

															[ Footnote 21 ] United States v. ASCAP (Application of Shenandoah Valley
Broadcasting, Inc.), 208 F.
Supp. 896 (SDNY 1962), aff'd, 331 F.2d 117 (CA2), cert. denied, 377 U.S. 997 (1964); United States v.
ASCAP (Application of National Broadcasting Co.), 1971 Trade
Cases � 73,491 (SDNY 1970). See also United States v. ASCAP
(Motion of Metromedia, Inc.), 341 F.2d 1003 (CA2 1965).

															[ Footnote 22 ]

															National Broadcasting Co. did, in 1971, request an annual
blanket license for 2,217 specific ASCAP compositions most
frequently used on its variety shows. It intended to acquire the
remaining rights to background and theme music through direct
transactions by it and its program packagers. See United States
v. ASCAP (Application of National Broadcasting Co.),
supra. [ Footnote 23 ]

															1950-1951 Trade Cases � 62,595, p. 63,756.

															[ Footnote 24 ] Cf. Continental T.V., Inc. v. GTE Sylvania Inc., 433
U.S. at 433 U. S. 50 n.
16. Moreover, unthinking application of the per se rule
might upset the balancing of economic power and of procompetitive
and anticompetitive effects presumably worked out in the
decree.

															[ Footnote 25 ] See cases cited in n 18, supra. Those cases involved licenses sold
to individual movie theaters to "perform" compositions already on
the motion pictures' soundtracts. ASCAP had barred its members from
assigning performing rights to movie producers at the same time
recording rights were licensed, and the theaters were effectively
unable to engage in direct transactions for performing rights with
individual copyright owners.

															[ Footnote 26 ]

															Certain individual television and radio stations, appearing here
as amici curiae, argue that the per se rule
should extend to ASCAP's blanket licenses with them as well. The
television stations have filed an antitrust suit to that effect. Buffalo Broadcasting Co. v. ASCAP, 78 Civ. 5670 (SDNY,
filed Nov. 27, 1978).

															[ Footnote 27 ] See n 10, supra. The Court of Appeals would apparently not outlaw
the blanket license across the board, but would permit it in
various circumstances where it is deemed necessary or sufficiently
desirable. It did not even enjoin blanket licensing with the
television networks, the relief it realized would normally follow a
finding of per se illegality of the license in that
context. Instead, as requested by CBS, it remanded to the District
Court to require ASCAP to offer, in addition to blanket licensing,
some competitive form of per-use licensing. But per-use licensing
by ASCAP, as recognized in the consent decrees, might be even more
susceptible to the per se rule than blanket licensing.

															The rationale for this unusual relief in a per se case
was that "[t]he blanket license is not simply a naked
restraint' ineluctably doomed to extinction." 562 F.2d at 140. To
the contrary, the Court of Appeals found that the blanket license
might well "serve a market need" for some. Ibid. This, it
seems to us, is not the per se approach, which does not
yield so readily to circumstances, but in effect is a rather
bobtailed application of the rule of reason, bobtailed in the sense
that it is unaccompanied by the necessary analysis demonstrating
why the particular licensing system is an undue competitive
restraint. [ Footnote 28 ]

															Surely, if ASCAP abandoned the issuance of all licenses and
confined its activities to policing the market and suing
infringers, it could hardly be said that member copyright owners
would be in violation of the antitrust laws by not having a common
agent issue per-use licenses. Under the copyright laws, those who
publicly perform copyrighted music have the burden of obtaining
prior consent. Cf. Zenith Radio Corp. v. Hazeltine Research,
Inc., 395 U.S. at 395 U. S.
139 -140.

															[ Footnote 29 ]

															In its complaint, CBS alleged that it would be "wholly
impracticable" for it to obtain individual licenses directly from
the composers and publishing houses, but it now says that it would
be willing to do exactly that if ASCAP were enjoined from granting
blanket licenses to CBS or its competitors in the network
television business.

															[ Footnote 30 ]

															17 U.S.C.App. § 506.

															[ Footnote 31 ] See Koenigsberg, The 1976 Copyright Act: Advances for
the Creator, 26 Cleve.St.L.Rev. 515, 524, 528 (1977).

															[ Footnote 32 ]

															Cf. Silver v. New York Stock Exchange, 373 U.
S. 341 (1963).

															Because a musical composition can be "consumed" by many
different people at the same time and without the creator's
knowledge, the "owner" has no real way to demand reimbursement for
the use of his property except through the copyright laws and an effective way to enforce those legal rights. See Twentieth Century Music Corp. v. Aiken, 422 U.
S. 151 , 422 U. S. 162 (1975). It takes an organization of rather large size to monitor
most or all uses and to deal with users on behalf of the composers.
Moreover, it is inefficient to have too many such organizations
duplicating each other's monitoring of use.

															[ Footnote 33 ]

															The scrutiny occasionally required must not merely subsume the
burdensome analysis required under the rule of reason, see
National Society of Professional Engineers v. United States, 435 U. S. 679 , 435 U. S.
690 -692 (1978), or else we should apply the rule of
reason from the start. That is why the per se rule is not
employed until after considerable experience with the type of
challenged restraint.

															[ Footnote 34 ]

															And, of course, changes brought about by new technology or new
marketing techniques might also undercut the justification for the
practice.

															[ Footnote 35 ]

															The District Court found that CBS would require between 4,000
and 8,000 individual license transactions per year. 400 F. Supp. at
762.

															[ Footnote 36 ]

															To operate its system for distributing the license revenues to
its members, ASCAP relies primarily on the networks' records of
which compositions are used.

															[ Footnote 37 ] See Timberg, The Antitrust Aspects of Merchandising
Modern Music: The ASCAP Consent Judgment of 1950, 19 Law &
Contemp.Prob. 294, 297 (1954) ("The disk-jockey's itchy fingers and
the bandleader's restive baton, it is said, cannot wait for
contracts to be drawn with ASCAP's individual publisher members,
much less for the formal acquiescence of a characteristically
unavailable composer or author"). Significantly, ASCAP deals only
with nondramatic performance rights. Because of their nature,
dramatic rights, such as for musicals, can be negotiated
individually and well in advance of the time of performance. The
same is true of various other rights, such as sheet music,
recording, and synchronization, which are licensed on an individual
basis.

															[ Footnote 38 ] Cf. United States v. Grinnell Corp., 384 U.
S. 563 , 384 U. S.
572 -573 (1966); United States v. Philadelphia Nat.
Bank, 374 U. S. 321 , 374 U. S.
356 -357 (1963).

															[ Footnote 39 ]

															Comment, Music Copyright Associations and the Antitrust Laws, 25
Ind.L.J. 168, 170 (1950). See also Garner, United
States v. ASCAP. The Licensing Provisions of the Amended Final
Judgment of 1950, 23 Bull.Copyright Soc. 119, 149 (1975) ("no
performing rights are licensed on other than a blanket basis in any
nation in the world").

															[ Footnote 40 ]

															Moreover, because of the nature of the product -- a composition
can be simultaneously "consumed" by many users -- composers have
numerous markets and numerous incentives to produce, so the blanket
license is unlikely to cause decreased output, one of the normal
undesirable effects of a cartel. And since popular songs get an
increased share of ASCAP's revenue distributions, composers compete
even within the blanket license in terms of productivity and
consumer satisfaction.

															[ Footnote 41 ] Cf. United States v. Socony-Vacuum Oil Co., 310 U.S. at 310 U. S. 217 (distinguishing Chicago Bd. of Trade v. United States, 246 U. S. 231 (1918), on the ground that, among the effects of the challenged
rule, there "was the creation of a public market"); United
States v. Trenton Potteries Co., 273 U.S. at 273 U. S. 401 (distinguishing Chicago Bd. of Trade on the ground that it
did not involve "a price agreement among competitors in an open
market").

															[ Footnote 42 ]

															"CBS does not claim that the individual members and affiliates
('sellers') of ASCAP and BMI have agreed among themselves as to the
prices to be charged for the particular 'products' (compositions)
offered by each of them."

															400 F. Supp. at 748.

															[ Footnote 43 ]

															It is argued that the judgment of the Court of Appeals should
nevertheless be affirmed on the ground that the blanket license is
a tying arrangement in violation of § 1 of the Sherman Act or on
the ground that ASCAP and BMI have monopolized the relevant market
contrary to § 2. The District Court and the Court of Appeals
rejected both submissions, and we do not disturb the latter's
judgment in these respects, particularly since CBS did not file its
own petition for certiorari challenging the Court of Appeals'
failure to sustain its tying and monopolization claims.

															[ Footnote 44 ]

															The Court of Appeals did not address the rule of reason issue,
and BMI insists that CBS did not preserve the question in that
court. In any event, if the issue is open in the Court of Appeals,
we prefer that that court first address the matter. Because of the
United States' interest in the enforcement of the consent decree,
we assume it will continue to play a role in this litigation on
remand.

															MR. JUSTICE STEVENS, dissenting.

															The Court holds that ASCAP's blanket license is not a species of
price-fixing categorically forbidden by the Sherman Act. I agree
with that holding. The Court remands the case to the Court of
Appeals, leaving open the question whether the blanket license, as
employed by ASCAP and BMI, is unlawful under a rule of reason
inquiry. I think that question is properly before us now, and
should be answered affirmatively.

															There is ample precedent for affirmance of the judgment of the
Court of Appeals on a ground that differs from its rationale,
provided of course that we do not modify its judgment. [ Footnote 2/1 ] In this litigation, the
judgment of the Court of Appeals was Page 441 U. S. 26 not that blanket licenses may never be offered by ASCAP and BMI.
Rather, its judgment directed the District Court to fashion relief
requiring them to offer additional forms of license as well.
[ Footnote 2/2 ] Even though that
judgment may not be consistent with its stated conclusion that the
blanket license is "illegal per se " as a kind of
price-fixing, it is entirely consistent with a conclusion that
petitioners' exclusive all-or-nothing blanket license policy
violates the rule of reason. [ Footnote
2/3 ]

															The Court of Appeals may well so decide on remand. In my
judgment, however, a remand is not necessary. [ Footnote 2/4 ] The record before this Court is a
full one, reflecting extensive discovery and eight weeks of trial.
The District Court's findings of fact are thorough and well
supported. They clearly reveal that the challenged policy does have
a significant adverse impact on competition. I would therefore
affirm the judgment of the Court of Appeals. I In December, 1969, the president of the CBS television network
wrote to ASCAP and BMI requesting that each

															"promptly . . . grant a new performance rights license which Page 441 U. S. 27 will provide, effective January 1, 1970, for payments measured
by the actual use of your music. [ Footnote 2/5 ]"

															ASCAP and BMI each responded by stating that it considered CBS's
request to be an application for a license in accordance with the
provisions of its consent decree, and would treat it as such,
[ Footnote 2/6 ] even though neither
decree provides for licensing on a per-composition or per-use
basis. [ Footnote 2/7 ] Rather than
pursuing further discussion, CBS instituted this suit.

															Whether or not the CBS letter is considered a proper demand for
per-use licensing is relevant, if at all, only on the question of
relief. For the fact is, and it cannot seriously be questioned,
that ASCAP and BMI have steadfastly adhered to the policy of only
offering overall blanket or per-program licenses, [ Footnote 2/8 ] notwithstanding requests for more
limited authorizations. Thus, ASCAP rejected a 1971 request by NBC
for licenses for 2,217 specific compositions, [ Footnote 2/9 ] as well as an earlier request by a
group of television stations for more limited authority than the
blanket licenses which they were then Page 441 U. S. 28 purchasing. [ Footnote 2/10 ]
Neither ASCAP nor BMI has ever offered to license anything less
than its entire portfolio, even on an experimental basis. Moreover,
if the response to the CBS letter were not sufficient to
characterize their consistent policy, the defense of this lawsuit
surely is. It is the refusal to license anything less than the
entire repertoire -- rather than the decision to offer blanket
licenses themselves -- that raises the serious antitrust questions
in this case. II Under our prior cases, there would be no question about the
illegality of the blanket-only licensing policy if ASAP and BMI
were the exclusive sources of all licenses. A copyright, like a
patent, is a statutory grant of monopoly privileges. The rules
which prohibit a patentee from enlarging his statutory monopoly by
conditioning a license on the purchase of unpatented goods,
[ Footnote 2/11 ] or by refusing to
grant a license under one patent unless the licensee also takes a
license under another, are equally applicable to copyrights.
[ Footnote 2/12 ]

															It is clear, however, that the mere fact that the holder of
several patents has granted a single package license covering them
all does not establish any illegality. This point was settled by Automatic Radio Mfg. Co. v. Hazeltine Research, Inc., 339 U. S. 827 , 339 U. S. 834 ,
and reconfirmed in Zenith Radio
Corp. Page 441 U. S. 29 v. Hazeltine Research, Inc., 395 U.
S. 100 , 395 U. S.
137 -138. The Court is therefore unquestionably correct
in its conclusion that ASCAP's issuance of blanket licenses
covering its entire inventory is not, standing alone, automatically
unlawful. But both of those cases identify an important limitation
on this rule. In the former, the Court was careful to point out
that the record did not present the question whether the package
license would have been unlawful if Hazeltine had refused to
license on any other basis. 339 U.S. at 339 U. S. 831 .
And in the latter case, the Court held that the package license was
illegal because of such a refusal. 395 U.S. at 385 U. S.
140 -141.

															Since ASCAP offers only blanket licenses, its licensing
practices fall on the illegal side of the line drawn by the two Hazeltine cases. But there is a significant distinction:
unlike Hazeltine, ASCAP does not have exclusive control of the
copyrights in its portfolio, and it is perfectly possible -- at
least as a legal matter -- for a user of music to negotiate
directly with composers and publishers for whatever rights he may
desire. The availability of a practical alternative alters the
competitive effect of a block-booking or blanket licensing policy.
ASCAP is therefore quite correct in its insistence that its blanket
license cannot be categorically condemned on the authority of the
block-booking and package licensing cases. While these cases are
instructive, they do not directly answer the question whether the
ASCAP practice is unlawful.

															The answer to that question depends on an evaluation of the
effect of the practice on competition in the relevant market. And,
of course, it is well settled that a sales practice that is
permissible for a small vendor, at least when no coercion is
present, may be unreasonable when employed by a company that
dominates the market. [ Footnote
2/13 ] We therefore must consider Page 441 U. S. 30 what the record tells us about the competitive character of this
market. III The market for music at issue here is wholly dominated by
ASCAP-issued blanket licenses. [ Footnote 2/14 ] Virtually every domestic copyrighted
composition is in the repertoire of either ASCAP or BMI. And again,
virtually without exception, the only means that has been used to
secure authority to perform such compositions is the blanket
license.

															The blanket all-or-nothing license is patently discriminatory.
[ Footnote 2/15 ] The user
purchases full access to ASCAP's entire Page 441 U. S. 31 repertoire, even though his needs could be satisfied by a far
more limited selection. The price he pays for this access is
unrelated either to the quantity or the quality of the music he
actually uses, or, indeed, to what he would probably use in a
competitive system. Rather, in this unique all-or-nothing system,
the price is based on a percentage of the user's advertising
revenues, [ Footnote 2/16 ] a
measure that reflects the customer's ability to pay [ Footnote 2/17 ] but is totally unrelated
to factors -- such as the cost, quality, or quantity of the product
-- that normally affect price in a competitive market. The ASCAP
system requires users to buy more music than they want at a price
which, while not beyond their ability to pay and perhaps not even
beyond what is "reasonable" for the access they are getting,
[ Footnote 2/18 ] may well be far
higher than what they would choose to spend for music in Page 441 U. S. 32 a competitive system. It is a classic example of economic
discrimination .

															The record plainly establishes that there is no price
competition between separate musical compositions. [ Footnote 2/19 ] Under a blanket license,
it is no more expensive for a network to play the most popular
current hit in prime time than it is to use an unknown composition
as background music in a soap opera. Because the cost to the user
is unaffected by the amount used on any program or on all programs,
the user has no incentive to economize by, for example,
substituting what would otherwise be less expensive songs for
established favorites or by reducing the quantity of music used on
a program. The blanket license thereby tends to encourage the use
of more music, and also of a larger share of what is really more
valuable music than would be expected in a competitive system
characterized by separate licenses. And since revenues are passed
on to composers on a basis reflecting the character and frequency
of the use of their music [ Footnote
2/20 ] the tendency is to increase the rewards of the
established composers at the expense of those less well known.
Perhaps the prospect is, in any event, unlikely, but the blanket
license does not present a new songwriter with any opportunity to
try to Page 441 U. S. 33 break into the market by offering his product for sale at an
unusually low price. The absence of that opportunity, however
unlikely it may be, is characteristic of a cartelized, rather than
a competitive, market. [ Footnote
2/21 ]

															The current state of the market cannot be explained on the
ground that it could not operate competitively, or that issuance of
more limited -- and thus less restrictive -- licenses by ASCAP is
not feasible. The District Court's findings disclose no reason why
music performing rights could not be negotiated on a
per-composition or per-use basis, either with the composer or
publisher directly or with an agent such as ASCAP. In fact, ASCAP
now compensates composers and publishers on precisely those bases.
[ Footnote 2/22 ] If distributions
of royalties can be calculated on a per-use and per-composition
basis, it is difficult to see why royalties could not also be
collected in the same way. Moreover, the record also shows that,
where ASCAP's blanket license scheme does not govern, competitive
markets do. A competitive market for "synch" rights exists,
[ Footnote 2/23 ] and after the use
of blanket licenses in the motion picture industry was
discontinued, [ Footnote 2/24 ]
such a market promptly developed in that industry. [ Footnote 2/25 ] In sum, the record
demonstrates that the market at issue here is one that could be
highly competitive, but is not competitive at all. Page 441 U. S. 34 IV Since the record describes a market that could be competitive
and is not, and since that market is dominated by two firms engaged
in a single, blanket method of dealing, it surely seems logical to
conclude that trade has been restrained unreasonably. ASCAP argues,
however, that at least as to CBS, there has been no restraint at
all, since the network is free to deal directly with copyright
holders.

															The District Court found that CBS had failed to establish that
it was compelled to take a blanket license from ASCAP. While CBS
introduced evidence suggesting that a significant number of
composers and publishers, satisfied as they are with the ASCAP
system, would be "disinclined" to deal directly with the network,
the court found such evidence unpersuasive in light of CBS's
substantial market power in the music industry and the importance
to copyright holders of network television exposure. [ Footnote 2/26 ] Moreover, it is arguable
that CBS could go further and, along with the other television
networks, use its economic resources to exploit destructive
competition among purveyors of music by driving the price of
performance rights down to a far lower level. But none of this
demonstrates that ASCAP's practices are lawful, or that ASCAP
cannot be held liable for injunctive relief at CBS's request.

															The fact that CBS has substantial market power does not deprive
it of the right to complain when trade is restrained. Large buyers,
as well as small, are protected by the antitrust laws. Indeed, even
if the victim of a conspiracy is himself a wrongdoer, he has not
forfeited the protection of the law. [ Footnote 2/27 ] Moreover, a conclusion that excessive
competition would cause one side of the market more harm than good
may justify a legislative exemption from the antitrust laws, but
does not Page 441 U. S. 35 constitute a defense to a violation of the Sherman Act.
[ Footnote 2/28 ] Even though
characterizing CBS as an oligopolist may be relevant to the
question of remedy, and even though free competition might
adversely affect the income of a good many composers and
publishers, these considerations do not affect the legality of
ASCAP's conduct.

															More basically, ASCAP's underlying argument that CBS must be
viewed as having acted with complete freedom in choosing the
blanket license is not supported by the District Court's findings.
The District Court did not find that CBS could cancel its blanket
license "tomorrow" and continue to use music in its programming and
compete with the other networks. Nor did the District Court find
that such a course was without any risk or expense. Rather, the
District Court's finding was that, within a year, during which it
would continue to pay some millions of dollars for its annual
blanket license, CBS would be able to develop the needed machinery
and enter into the necessary contracts. [ Footnote 2/29 ] In other words, although the barriers to
direct dealing by CBS as an alternative to paying for a blanket
license are real and significant, they are not insurmountable.

															Far from establishing ASCAP's immunity from liability, these
District Court findings, in my judgment, confirm the illegality of
its conduct. Neither CBS nor any other user has been willing to
assume the costs and risks associated with an attempt to purchase
music on a competitive basis. The fact that an attempt by CBS to
break down the ASCAP monopoly might well succeed does not preclude
the conclusion that smaller and less powerful buyers are totally
foreclosed from a competitive market. [ Footnote 2/30 ] Despite its size, CBS itself Page 441 U. S. 36 may not obtain music on a competitive basis without incurring
unprecedented costs and risks. The fear of unpredictable
consequences, coupled with the certain and predictable costs and
delays associated with a change in its method of purchasing music,
unquestionably inhibits any CBS management decision to embark on a
competitive crusade. Even if ASCAP offered CBS a special bargain to
forestall any such crusade, that special arrangement would not cure
the marketwide restraint.

															Whatever management decision CBS should or might have made, it
is perfectly clear that the question whether competition in the
market has been unduly restrained is not one that any single
company's management is authorized to answer. It is often the case
that an arrangement among competitors will not serve to eliminate
competition forever, but only to delay its appearance or to
increase the costs of new entry. That may well be the state of this
market. Even without judicial intervention, the ASCAP monopoly
might eventually be broken by CBS, if the benefits of doing so
outweigh the significant costs and risks involved in commencing
direct dealing. [ Footnote 2/31 ]
But that hardly means that the blanket licensing Page 441 U. S. 37 policy at issue here is lawful. An arrangement that produces
marketwide price discrimination and significant barriers to entry
unreasonably restrains trade even if the discrimination and the
barriers have only a limited life expectancy. History suggests,
however, that these restraints have an enduring character.

															Antitrust policy requires that great aggregations of economic
power be closely scrutinized. That duty is especially important
when the aggregation is composed of statutory monopoly privileges.
Our cases have repeatedly stressed the need to limit the privileges
conferred by patent and copyright strictly to the scope of the
statutory grant. The record in this case plainly discloses that the
limits have been exceeded, and that ASCAP and BMI exercise monopoly
powers that far exceed the sum of the privileges of the individual
copyright holders. Page 441 U. S. 38 Indeed, ASCAP itself argues that its blanket license constitutes
a product that is significantly different from the sum of its
component parts. I agree with that premise, but I conclude that the
aggregate is a monopolistic restraint of trade proscribed by the
Sherman Act.

															[ Footnote 2/1 ] See United States v. New York Telephone Co., 434 U. S. 159 , 434 U. S. 166 n. 8; Dayton Board of Education v. Brinkman, 433 U.
S. 406 , 433 U. S. 419 ; Massachusetts Mutual Life Ins. Co. v. Ludwig, 426 U.
S. 479 , 426 U. S.
480 -481; United States v. American Railway Express
Co., 265 U. S. 425 , 265 U. S.
435 .

															[ Footnote 2/2 ]

															562 F.2d 130, 140-141 (CA2 1977).

															[ Footnote 2/3 ] See ante at 441 U. S. 17 n.
27 (describing relief ordered by Court of Appeals as "unusual" for
a per se case, and suggesting that that court's decision
appears more consistent with a rule of reason approach).

															[ Footnote 2/4 ]

															That the rule of reason issues have been raised and preserved
throughout seems to me clear. See 562 F.2d at 134. ("CBS
contends that the blanket licensing method is not only an illegal
tie-in or block-booking which, in practical terms, is coercive in
effect, but is also an illegal price-fixing device, a per
se violation . . . "); id. at 141 n. 29 ("As noted,
CBS also claims violation of § 2 of the Sherman Act. We need not go
into the legal arguments on this point because they are grounded on
its factual claim that there are barriers to direct licensing and bypass' of the ASCAP blanket license. The District Court, as
noted, rejected this contention, and its findings are not clearly
erroneous. The § 2 claim must therefore fail at this time and on
this record"); Brief for Respondents 41. [ Footnote 2/5 ] 400 F.
Supp. 737 , 753 (SDNY 1975).

															[ Footnote 2/6 ]

															ASCAP responded in a letter from its general counsel stating
that it would consider the request at its next board of directors
meeting, and that it regarded it as an application for a license
consistent with the decree. The letter from BMI's president stated:
"The BMI Consent Decree provides for several alternative licenses,
and we are ready to explore any of these with you." Id. at
753-754.

															[ Footnote 2/7 ] See ante at 441 U. S. 12 , and
n. 21.

															[ Footnote 2/8 ]

															The 1941 decree requires ASCAP to offer per-program licenses as
an alternative to the blanket license. United States v.
ASCAP, 1940-1943 Trade Cases � 56,104, p. 404 (SDNY).
Analytically, however, there is little difference between the two.
A per-program license also covers the entire ASCAP repertoire; it
is therefore simply a miniblanket license. As is true of a
long-term blanket license, the fees set are in no way dependent on
the quantity or quality of the music used. See infra at 441 U. S.
30 -33.

															[ Footnote 2/9 ] See United States v. ASCAP (Application of National
Broadcasting Co.), 1971 Trade Cases � 73,491 (SDNY 1970).

															[ Footnote 2/10 ] See United States v. ASCAP (Application of Shenandoah Valley
Broadcasting, Inc.), 208 F.
Supp. 896 (SDNY 1962), aff'd, 331 F.2d 117 (CA2 1964), cert. denied, 377 U.S. 997.

															[ Footnote 2/11 ] Mercoid Corp. v. Mid-Continent Investment Co., 320 U. S. 661 ; Ethyl Gasoline Corp. v. United States, 309 U.
S. 436 ; International Business Machines Corp. v.
United States, 298 U. S. 131 ; United Shoe Machinery Corp. v. United States, 258 U.
S. 451 .

															[ Footnote 2/12 ]

															Indeed, the leading cases condemning the practice of
"block-booking" involved copyrighted motion pictures, rather than
patents. See United States v. Paramount Pictures, 334 U. S. 131 ; United States v. Loew's Inc., 371 U. S.
38 .

															[ Footnote 2/13 ] See Tampa Electric Co. v. Nashville Coal Co., 365 U. S. 320 , 365 U. S. 334 (upholding requirements contract on the ground that "[t]here is
here neither a seller with a dominant position in the market as in Standard Fashion \[Co. v.
Marane-Houston Co. , 258 U.
S. 346 ]; nor myriad outlets with substantial sales
volume, coupled with an industry-wide practice of relying upon
exclusive contracts, as in Standard Oil \[Co. v. United
States , 337 U. S. 293 ];
nor a plainly restrictive tying arrangement as in International Salt \[Co. v.
United States , 332 U. S. 392 ]"); Times-Picayune Publishing Co. v. United States, 345 U. S. 594 , 345 U.S. 610 -612 (upholding
challenged advertising practice because, while the volume of
commerce affected was not " insignificant or insubstantial,'"
seller was found not to occupy a "dominant position" in the
relevant market). While our cases make clear that a violation of
the Sherman Act requires both that the volume of commerce affected
be substantial and that the seller enjoy a dominant position, see id. at 345 U. S.
608 -609, proof of actual compulsion has not been
required, but cf. Royster Drive-In Theatres, Inc. v. American
Broadcasting-Paramount Theatres, Inc., 268 F.2d 246, 251 (CA2
1959), cert. denied, 361 U.S. 885; Milwaukee Towne
Corp. v. Loew's, Inc., 190 F.2d 561 (CA7 1951), cert.
denied, 342 U.S. 909. The critical question is one of the
likely practical effect of the arrangement: whether the "court believes it probable that performance of the contract
will foreclose competition in a substantial share of the line of
commerce affected." Tampa Electric Co. v. Nashville Coal Co., supra at 365 U. S.
327 .

															[ Footnote 2/14 ]

															As in the majority opinion, my references to ASCAP generally
encompass BMI as well.

															[ Footnote 2/15 ] See Cirace, CBS v. ASCAP: An Economic Analysis
of A Political Problem, 47 Ford.L.Rev. 277, 286 (1978) ("the
all-or-nothing bargain allows the monopolist to reap the benefits
of perfect price discrimination without confronting the problems
posed by dealing with different buyers on different terms").

															[ Footnote 2/16 ]

															For many years prior to the commencement of this action, the BMI
blanket license fee amounted to 1.09% of net receipts from sponsors
after certain specified deductions. 400 F. Supp. at 743. The fee
for access to ASCAP's larger repertoire was set at 2.5% of net
receipts; in recent years, however, CBS has paid a flat negotiated
fee, rather than a percentage, to ASCAP. 23 Jt.App. in CA2 No.
75-7600, pp. E1051-E1052, E1135.

															[ Footnote 2/17 ] See Cirace, supra at 288:

															"This history indicates that, from its inception, ASCAP
exhibited a tendency to discriminate in price. A license fee based
upon a percentage of gross revenue is discriminatory in that it
grants the same number of rights to different licensees for
different total dollar amounts, depending upon their ability to
pay. The effectiveness of price discrimination is significantly
enhanced by the all-or-nothing blanket license."

															[ Footnote 2/18 ]

															Under the ASCAP consent decree, on receipt of an application,
ASCAP is required to "advise the applicant in writing of the fee
which it deems reasonable for the license requested." If the
parties are unable to agree on the fee within 60 days of the
application, the applicant may apply to the United States District
Court for the Southern District of New York for the determination
of a "reasonable fee." United States v. ASCAP, 1950-1951
Trade Cases � 62,595, p. 63,754 (SDNY 1950). The BMI decree
contains no similar provision for judicial determination of a
reasonable fee.

															[ Footnote 2/19 ]

															ASCAP's economic expert, Robert Nathan, was unequivocal on this
point:

															"Q. Is there price competition under this system between
separate musical compositions?"

															"A. No sir."

															Tr. 3983.

															[ Footnote 2/20 ] See 562 F.2d at 136 n. 15. In determining royalties,
ASCAP distinguishes between feature, theme, and background uses of
music. The 1950 amended decree requires ASCAP to distribute
royalties on "a basis which gives primary consideration to the
performance of the compositions." The 1960 decree provided for the
additional option of receiving royalties under a deferred plan
which provides additional compensation based on length of
membership and the recognized status of the individual's works. See United States v. ASCAP, 1960 Trade Cases � 69,612, pp.
76,469-76-470 (SDNY 1960).

															[ Footnote 2/21 ] See generally 2 P. Areeda D. Turner, Antitrust Law 280
281, 342-345 (1978); Cirace, supra, 441 U.S.
1 fn2/15|>n. 15, at 286-292.

															[ Footnote 2/22 ] See 441 U.S.
1 fn2/20|>n. 20, supra. [ Footnote 2/23 ]

															The "synch" right is the right to record a copyrighted song in
synchronization with the film or videotape, and is obtained
separately from the right to perform the music. It is the latter
which is controlled by ASCAP and BMI. See CBS, Inc. v.
ASCAP, 400 F. Supp. at 743.

															[ Footnote 2/24 ] See Alden-Rochelle, Inc. v. ASCAP, 80 F. Supp.
888 (SDNY 1948).

															[ Footnote 2/25 ] See 400 F.Supp. at 759-763; 5 Jt.App. in CA2 No.
75-7600, pp. 775-777 (testimony of Albert Berman, managing director
of the Harry Fox Agency, Inc.). Television synch rights and movie
performance and synch rights arc handled by the Fox Agency, which
serves as the broker for thousands of music publishers.

															[ Footnote 2/26 ] See 400 F. Supp. at 767-771.

															[ Footnote 2/27 ] See Perma Life Mufflers, Inc. v. International Parts
Corp., 392 U. S. 134 , 392 U. S.
138 -140; Simpson v. Union Oil Co., 377 U. S.
13 , 377 U. S. 16 -17; Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U. S. 211 , 340 U. S.
214 .

															[ Footnote 2/28 ] See National Society of Professional Engineers v. United
States, 435 U. S. 679 , 435 U. S.
689 -690.

															[ Footnote 2/29 ] See 400 F. Supp. at 762-765.

															[ Footnote 2/30 ]

															For an individual user, the transaction costs involved in direct
dealing with individual copyright holders may well be prohibitively
high, at least in the absence of any broker or agency routinely
handling such requests. Moreover, the District Court found that
writers and publishers support and prefer the ASCAP system to
direct dealing. Id. at 767. While their apprehension at
direct dealing with CBS could be overcome, the District Court
found, by CBS's market power and the importance of television
exposure, a similar conclusion is far less likely with respect to
other users.

															[ Footnote 2/31 ]

															The risks involved in such a venture appear to be substantial.
One significant risk, which may be traced directly to ASCAP and its
members, relates to music "in the can" -- music which has been
performed on shows and movies already in the network's inventory,
but for which the network must still secure performing rights. The
networks accumulate substantial inventories of shows "in the can."
And, as the Government has pointed out as amicus
curiae: "If they [the networks and television stations] were to
discontinue the blanket license, they then would be required to
obtain performance rights for these already produced shows. This
attempt would create an opportunity for the copyright owners, as a
condition of granting performing rights, to attempt to obtain the
entire value of the shows 'in the can.' It would produce, in other
words, a case of bilateral monopoly. Because pricing is
indeterminate in a bilateral monopoly, television networks would
not terminate their blanket licenses until they had concluded an
agreement with every owner of copyrighted music 'in the can' to
allow future performance for an identified price; the networks then
would determine whether that price was sufficiently low that
termination of the blanket license would be profitable. But the
prospect of such negotiations offers the copyrights owners an
ability to misuse their rights in a way that ensures the
continuation of blanket licensing despite a change in market
conditions that may make other forms of licensing preferable."

															Brief for United States as Amicus Curiae 225. This
analysis is in no sense inconsistent with the findings of the
District Court. The District Court did reject CBS's coercion
argument as to music "in the can." But as the Government again
points out, the District Court's findings were addressed
essentially to a tie-in claim;

															"the court did not consider the possibility that the copyright
owners' self-interested, non-coercive demands for compensation
might nevertheless make the cost of CBS' dropping the blanket
license sufficiently high that ASCAP and BMI could take this
'termination penalty' into account in setting fees for the blanket
license." Id. at 25 n. 23.

Summary:
In U.S. Supreme Court Broadcast Music, Inc. v. CBS, Inc. (1979), the Court ruled that the issuance of blanket licenses by ASCAP and BMI to television networks for the performance of copyrighted music did not constitute illegal price-fixing per se under the Sherman Act.

The case focused on whether the effect of issuing these licenses, which give licensees the right to perform any and all compositions owned by members or affiliates for a set fee, restricted free trade and competition. The Court considered the unique characteristics of the music market, transaction costs, and the potential for copyright misuse.

While intensive antitrust scrutiny has been applied to ASCAP, BMI, and their practices, the Court, supported by the US government's position, chose not to outlaw blanket licensing as a per se restraint of trade. The Court emphasized that there was no universal view that these licenses were inherently anticompetitive and subject to automatic condemnation.

Instead, the Court suggested that a careful assessment under the rule of reason, which considers all relevant factors, was more appropriate for determining the legality of the practice under the Sherman Act. This decision highlights the complex interplay between intellectual property rights and antitrust law.