Last week, a US District Court Judge adopted a new interim rate to be paid by commercial radio broadcasters to ASCAP for the use of ASCAP-licensed music by over-the-air radio stations, reducing the fees paid by the industry by about $40 million dollars, or about 20% of the total that had been paid by the industry under the rate deal that expired at the end of 2009. These rates replace interim fees that had been negotiated between ASCAP and radio representatives earlier this year. The rate just adopted by the Court is the rate that will apply until a permanent rate for ASCAP fees is set by the Court (or agreed to in a settlement). The permanent fees will be retroactive to January 1, 2010, so this apparent reduction in the ASCAP fees should not be taken to mean that the fees that will be paid by radio stations under this order will be the full extent of the ASCAP liability for any station. As we have written before,the Radio Music Licensing Committee (representing most commercial radio broadcasters), has been trying to renegotiate the rates charged by both ASCAP and BMI downward from their current levels. Both the ASCAP and the BMI agreements for over-the-air radio broadcasters expired at the end of 2009, and final rates for the future need to be set by rate court or by negotiations between the parties. As negotiations have yet to produce a deal, the RMLC has initiated rate court actions – which will involve long hearings, and may not be resolved fro quite some time (if there is no settlement prior to a final decision). Each action is heard by a different judge, so this decision is not necessarily indicative of the interim or final rates that will be set by the Judge hearing the BMI case.
Besides the rates, which are clearly the major issue, there are other matters to be decided in a rate court proceeding. In the past, the rates paid by broadcasters covered their over-the-air broadcasts, plus the streaming of their over-the-air signals. Other use of music on websites, including “side channels” of music streamed by broadcasters that was not heard over-the-air, plus other digital music uses (e.g. mobile media uses), required independent ASCAP and BMI agreements. There has been an attempt to include all uses of music under the single ASCAP and BMI license given to commercial radio stations.
Note that these proceedings only deal with ASCAP and BMI for commercial radio broadcasters. Pure Internet radio operations do not pay under these rates. Nor do television stations, which are in their own process of negotiation or litigation over the rates that they will pay to these organizations. Noncommercial radio also has its own process for determining rates paid to ASCAP, BMI and SESAC – through the Copyright Royalty Board. SESAC (the third of the so-called "performing rights organizations"), which by some estimates represents 10-15% of all composers, also is not covered by these proceedings. SESAC is not currently covered by any antitrust decree requiring that their rates be overseen by a court, as are BMI and SESAC. Thus SESAC is free, like any other business, to negotiate rates with each broadcaster, and to refuse to allow the use of their music by a broadcaster unwilling to pay their fees. While a group of TV broadcasters last year sued SESAC on anti-trust grounds, no decision has been reached in that case.
Also, these fees only represent the fees paid for the use of the musical compositions (or musical works) licensed by ASCAP and BMI (the words and music of the song), not the song as recorded by a particular artist. As we have written many times before, while radio does not currently pay for the use of sound recordings for their over-the-air broadcasts, the issue of whether broadcasters should pay for the use of these sound recordings is still very much alive, as the recording industry seeks to impose a “performance royalty” or “performance tax” on radio. Radio already pays a sound recording performance royalty for all music streamed on the Internet, as set forth in an agreement between The National Association of Broadcasters and SoundExchange.
Using music in any media enterprise is clearly expensive, and broadcasters need to watch carefully to make sure that they have the rights they need for the services that they provide. For information about the rights that you need, check out our memo outlining the various music rights that you may need to operate. And watch carefully as the rights and obligations are always changing!