SESAC is the one major performing rights organization whose rates have not, until now, been subject to judicial review as part of an antitrust consent decree. Perhaps because of that fact, broadcast stations have often complained about the rates they charge for the music that they license, as there is currently no cap on what SESAC can charge, and there is no requirement that SESAC treat all similar licensees in the same way. In fact, because of this dissatisfaction, both the TV and Radio Music License Committees have filed antitrust suits against SESAC seeking relief from the rates they charge. In a settlement announced this past week, the Television Music Licensing Committee has entered into a settlement by which SESAC will pay the TVMLC $58.5 million and agree that, over the next 20 years, SESAC will negotiate license agreements with TVMLC. Under the agreement, if rates can’t be reached as a result of negotiations, SESAC and the TVMLC would submit to an arbitration process to arrive at the appropriate rates. The full settlement can be found on the TVMLC website, here.
Under the terms of the settlement, commercial TV stations (except for those owned by Univision, which appear to have opted out of the class of stations covered by the TVMLC settlement) will have their SESAC obligations covered for the rest of this year and next, including website SESAC music use and use in digital multichannel programming. In 2015, TVMLC will negotiate with SESAC over rates for the period from 2016-2019. If no rates are agreed to by the parties, an arbitration panel will set the rates. The same process will continue for 4 year periods through 2035, as long as ASCAP and BMI are also subject to either rate court or arbitration review of the rates charged by those organizations. While the Department of Justice is reviewing the ASCAP and BMI consent decrees that require rate court review of royalty rates charged by these groups (see our article here), it appears that they are not asking for an end to all rate review. Instead, they are asking that the review be done by an arbitration panel, not the US District Court that currently reviews such rates. So it would appear likely that the “out” in the deal would not give SESAC an escape from this agreement to be bound by arbitration any time soon.
The agreement also provides that SESAC must offer a per-program license, as well as a blanket license that covers everything broadcast on the station. That means that a station can “buy” SESAC’s music only for the programs in which they need it, not for every program on the station. In fact, the settlement also prohibits SESAC from entering into any deals with any of its composers or publishers that prohibit or penalize the copyright holders from directly licensing their music to TV broadcasters. So, if stations can get direct deals for music used in certain programming, they can reduce their liability by licensing from SESAC only for programs where they can’t get direct licenses.
The $58.5 million paid by SESAC will first go to reimburse TVMLC for its expenses in the litigation. The remainder, about $42.5 million, will be distributed to television stations in proportion to the amounts that they paid to SESAC from 2008-2013. While stations have the opportunity to opt out of this settlement and seek their own recovery by pursuing their own action against SESAC, presumably few if any will. If any do, there will be a refund to SESAC of the amounts that would otherwise be due to stations that opt out.
The settlement seems to bring significant relief, both immediately and in the long term, to TV broadcasters who have long complained that SESAC received far more than its appropriate share of the royalty pie. Radio broadcasters will look at this settlement and ask if they too can get a similar deal (see our article here about the RMLC antitrust suit against SESAC). The TV settlement seems to cover most of the complaints that radio has with SESAC licensing – but for a requirement that SESAC provide a comprehensive catalog of its music so that a station can try to avoid playing their music altogether, which I did not see in the settlement agreement. We will simply have to wait and see how the radio litigation by the RMLC progresses now that this settlement has been reached with the TV licensing committee.