The Radio Music Licensing Committee ("RMLC") has announced that it has entered into agreements with both ASCAP and BMI for interim royalties to be paid by commercial radio stations until final royalties are set. These royalties will be set either through negotiation or through litigation in Federal Courts which act as a "rate court" to determine what reasonable rates will be under the antitrust decrees that govern these organizations. As we wrote here and here, the RMLC has been involved in negotiations seeking a significant reduction in the royalties paid by radio stations for the right to make a public performance of musical compositions (or "musical works"). Both organizations have agreed to a 7% reduction in the amount currently paid by radio broadcasters, to be reflected on the invoices sent by these organizations for 2010 royalties. According to the press release on the ASCAP agreement, the discounts are interim agreements only, and will be subject to retroactive adjustment to January 1, 2010 once final royalties are set.
This money goes to composers of music, as contrasted to the controversial SoundExchange royalties that pay the performers of music (currently only in the digital world, but proposed in legislation pending before Congress to be extended to over-the-air broadcasting). ASCAP and BMI are essentially collection agencies (called Performing Rights Organizations or PROs) for large groups of songwriters. By signing up and paying royalties to these organizations and to SESAC, a smaller but still significant PRO, broadcasters obtain a "blanket license" to play all the songs covered by songwriters who are members of these organizations – which are essentially all of the songwriters whose songs are likely to be played by radio. The existence of these organizations save radio stations from having to negotiate independently with the thousands of songwriters and publishing companies that own the copyrights to these compositions – an arduous task that might be almost impossible without the existence of the PROs.
The agreements for the interim rates are not currently available for public review, and there is no press release about either deal evident on the ASCAP or BMI websites. Thus, it is unclear if the agreements will be applied to all broadcasters, or only those that have elected to be part of the RMLC negotiating group. As we have written before, ASCAP and BMI have previously tried to get an indication from stations as to whether they are part of the RMLC negotiating group, or whether they will try to negotiate their own agreements. We have also heard that at least one other group, the National Religious Broadcasters Music Licensing Committee, has indicated that they would represent commercial broadcasters in negotiations over new royalties. However, it still seems to us that any other negotiating group will look first to the outcome of the RMLC process to set the royalties, and most likely will not be negotiating or litigating their own agreements, unless they have a business model that would make any RMLC deal unworkable. This is both because ASCAP and BMI are prohibited from negotiating different royalty rates for similarly situated music users, and as the royalty litigation is very expensive and time consuming, and it is unlikely that any group would try to re-litigate any decision that RMLC reached.
Does the decrease in rates, even if on a temporary basis, signal that there will be a permanent decrease in the rates? In short, it should not be viewed as a guarantee. While the fact that the Performing Rights Organizations agreed to these decreases might be seen as a sign that these companies recognize that there is a different radio economy that needs to be reflected in lower royalty rates, it could also be seen as a recognition that even a hearing on temporary rates is an expensive process. The PROs recognize that RMLC will be holding out for a decrease in rates, and that they would be arguing for that decreased rate even on an interim basis. Thus, to avoid the costs of litigation, and since any interim decrease in rates would be recaptured if a higher permanent rate is set, the PROs could have agreed to these rates simply to avoid the costs of litigation. So don’t start counting on these reductions being permanent – that will take significant litigation (or extensive negotiations) to accomplish.
So this is by no means the end of the story. Watch as these events develop over time.