RMLC, the organization that represents most commercial radio stations in the US in negotiating music license agreements for the public performance of musical compositions, has filed an antitrust lawsuit against GMR (Global Music Rights). GMR is a new performing rights organization (PRO), founded by music industry heavyweight Irving Azoff. As we wrote here and here, GMR has signed agreements to represent songs from the catalogs of many prominent songwriters, including Adele, Taylor Swift, some of the Beatles, Madonna, Jay Z and many other big names. RMLC (the Radio Music License Committee) is asking in its lawsuit that, initially, GMR be enjoined from licensing its catalog of songs for more than a rate that represents the pro rata share of its catalog to those of the other PROs while its broader antitrust action is litigated to establish an appropriate mechanism for determining those rates in the future.
Currently, the two largest PROs, ASCAP and BMI, are subject to antitrust consent decrees that govern their operations – decrees that the Department of Justice recently refused to substantially modify at the request of these groups (see our articles here and here.). SESAC recently entered into a settlement of with RMLC, following an antitrust action similar to the one filed Friday against GMR, imposing restraints on SESAC’s ability to unilaterally impose its rates on radio stations, requiring instead that such rates be set by arbitrators if they cannot be voluntarily negotiated (see our articles here and here). The songs in the GMR catalog are covered by ASCAP, BMI and SESAC licenses through the term of the current licenses with those organizations, but those licenses for radio all expire this year (see our article here). Thus, RMLC argues that, if there is no injunction, starting January 1, 2017, a radio station will either be forced to pay whatever rates GMR demands for songs that are being withdrawn from the catalogs of ASCAP, BMI and SESAC, or risk being sued for copyright infringement (and potential damages of up to $150,000 per infringement).
According to the RMLC complaint and memo supporting its injunction request, GMR has requested rates that are approximately three times the license fees paid to ASCAP and BMI that it would be owed if GMR was paid an amount equal to its pro rata share (based on the number of songs in its repertoire). Moreover, according to its complaint, the other PROs, in their current rate negotiations with RMLC, are all asking that they get upward rate adjustments in their rates to reflect the rates that GMR is able to negotiate with radio stations. So the other PROs are looking to use any high fees negotiated by GMR as a benchmark rate to increase their own rates. Obviously, if this occurred, radio stations would end up paying substantially more for the public performance of musical compositions than they do at the current time – potentially multiples of their current rates.
Also raised in the complaint is an allegation that GMR admits that it does not represent 100% of the rights to many of the songs in the catalog that it is offering radio stations. Instead, in many cases it represents songwriters who only hold some fractional right in these songs. Other fractional owners may be represented by one of the other PROs. Fractional licensing arises where there are several songwriters who collaborate on a song, for instance one who writes the words and another who comes up with the music to the song. In some cases, there can be many songwriters contributing to the final song.
As we have written before, the issue of fractional licensing is the one issue that the Department of Justice did address in its review of the ASCAP and BMI antitrust consent decrees (see our articles here and here ). It found that the decrees required that these PROs offer 100% licensing. 100% licensing means that, if any songwriter is part of the ASCAP and BMI catalog, a music user (like a radio station), when it receives a license from ASCAP or BMI, would have the right to play the song, even if another songwriter who contributed to the song was not represented by the PRO with whom the license is negotiated. The represented songwriter who receives the payment from the PRO would be required to remit the appropriate portion of its royalty to his or her co-writers. One of the reasons for the DOJ’s belief that 100% licensing is required is that there is no public database that completely lists the ownership of the rights to musical compositions, so a user could never know if it has all the necessary rights to any song or if it needed to get rights to some other part of that song elsewhere before it could play that composition.
The RMLC complaint against GMR suggests that the GMR, by not offering 100% licensing, may be requiring that radio stations to pay for songs already licensed by other PROs. While the DOJ’s interpretation of the 100% licensing requirement of the consent decree was rejected by the judge who oversees the BMI decree, DOJ has filed a notice of appeal of that decision preserving its rights to seek a review of that matter before an appellate court. But regardless of whether that appeal is pursued or successful, the point of the RMLC complaint seems to be that, in computing the number of songs that it allegedly represents, GMR’s inclusion of songs to which it represents less than 100% of the rights could effectively have a radio station paying twice (or potentially more times) for rights to the same song if that song is also included in the repertoire of other PROs who represent other fractional owners. As the license that is being offered by GMR is an all or nothing “blanket” license, even if some of its songs were covered by a license from another PRO, or if the radio station could obtain the rights to some songs directly from a rightsholder, the station would not be able to obtain any reduction in the fees that it would be required to pay to GMR.
The complaint and supporting memo go into detail on these and other issues – touching on a number of technical issues of copyright law. Clearly, this is an important proceeding for radio operators to watch as it may determine how much radio broadcasters will have to pay for their music next year, and in the years ahead. Clearly most radio stations will be paying GMR in addition to ASCAP, BMI and SESAC, but the litigation is important as it may establish how much any station will be paying to these organizations. Plus, it is important as it may set a precedent for other music users (including TV and digital music users) who themselves will no doubt face GMR royalty claims in the future. This is one more complicated music issue that music users must face in assessing the economics of their businesses in the coming years.