The Radio Music Licensing Committee has announced a settlement with BMI over music royalties for the public performance of musical compositions for the period from 2010-2016. Terms have not been announced, so we can’t provide the details, yet. But as we wrote recently when the RMLC announced the terms of its agreement with ASCAP, we would assume that the terms would be somewhat similar to the ASCAP deal. If no settlement had been reached with BMI, the case would have gone to a "rate court" in Federal District Court to see what the fair market value of the performance right was. As analogous rates often form the basis for rate court determinations of fair market value, the settlement with ASCAP would no doubt have been an issue for BMI, as it would appear to set a benchmark rate for the public performance of musical compositions. But, we will have to wait to see what the filings say before we can determine if, for sure, the rates will decrease relative to prior rates to the same extent that they did for ASCAP.
It is worth reflecting on how RMLC came to reach deals with ASCAP and BMI, and to explain why there is no reference to a SESAC deal. I’ve already heard or seen several people suggesting that an agreement with SESAC may be next – when in fact that is not something that is imminent, as can be explained by the differences between ASCAP and BMI on one hand, and SESAC on the other. ASCAP and BMI are both governed by anti-trust consent decrees that have been in place for over 50 years. Under both decrees, these organizations have to enter into agreements to set royalties for all similarly-situated users of music in various categories of businesses – categories including radio, TV, websites, background music, restaurants, bars, hotels, performance venues and practically every other place where music is performed for the public. If no agreement can be reached on a voluntary license, a “rate court” decides on the royalties. Essentially, that means that a US District Court in New York has a trial to set the rates.
Both ASCAP and BMI had agreements in place with the radio industry that expired at the end of 2009. Negotiations with the RMLC have been ongoing since the last agreements expired (see our article here). The settlement just announced with BMI, and that announced a few months ago with ASCAP, were voluntary agreements to avoid the rate court proceeding. Those proceedings can be very expensive, take a long time and, as with any litigation, the outcome can be unpredictable
SESAC, on the other hand, has never been subject to any antitrust consent decrees. They were never thought to be large enough to merit antitrust scrutiny. While some TV stations have brought an antitrust action against SESAC, seeking to have some kind of relief from what the TV stations claim is prohibited collusive behavior, that case is still progressing, will likely take a long time and, like any litigation, the outcome is uncertain.
Unless and until some court rules otherwise, SESAC is not subject to any rate review. They are a for-profit company. And like any for-profit company, they can negotiate rates and charge essentially what they want for their product. Like any other commercial transaction, stations can decide not to play SESAC music, and not pay them. But if they play any SESAC music, and don’t have a direct license from the publisher for the rights to use the music, they need to get an agreement with SESAC. While SESAC has general licenses for broadcasters and most pay roughly the same amounts, as this is a commercial transaction, the deals can be negotiated by the user and by SESAC to fit particular circumstances. And SESAC tends to charge separately for streaming, HD and other music uses, so there may be some opportunity to negotiate blanket deals covering all of these services. But their rates are currently up to them, not subject to court review. See our article here for more information about SESAC.
But, for now and the foreseeable future, SESAC is not likely to be “next” for the radio industry. As for BMI and radio, we should see what the rates are there in a few weeks.