Broadcast Performance Royalty

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This week, many radio stations received a letter from SESAC, asking the stations to renew their last SESAC agreement for three years at a rate 5% lower than the rate at which they are currently paying. Sounds like a deal? But is there a catch? The SESAC letter makes clear that, by renewing the current agreement and accepting the discount, the station is agreeing that it will not be a part of any attempt by the Radio Music License Committee (“RMLC”) to negotiate a rate with SESAC. The SESAC letter has drawn a strong response from the RMLC in a letter dated today, signed by Ed Christian from Saga Communications, the Chairman of RMLC, suggesting that stations not sign the SESAC renewal requests. What is this all about?

As we wrote several months ago, SESAC and the RMLC recently settled antitrust litigation where the RMLC argued that SESAC violated the antitrust laws by charging monopoly pricing for the multiple musical compositions that it bundled together for licensing purposes, and making it virtually impossible for stations to avoid paying these royalties as SESAC did not reveal its entire catalog, and licensed music that was almost impossible to avoid playing (like the jingles in some McDonalds commercials). SESAC agreed to settle the litigation – agreeing to negotiate industry-wide deals with the RMLC, and, if such deals could not be reached through voluntary negotiations, to have its rates set by an arbitration panel. SESAC has never before had its rates subject to oversight as, unlike ASCAP and BMI, SESAC is a for-profit company and is not subject to an antitrust consent decree that includes rate review by a US District Court. Many thought that the RMLC agreement with SESAC would result in a moderation of the SESAC rates. Many broadcasters considered SESAC rates to be too high relative to the fees paid for the much larger ASCAP and BMI catalogs given the limited catalog of music that SESAC licenses. So if SESAC agreed to negotiate rates with the RMLC, why is it now writing letters suggesting that stations not participate in the RMLC negotiations?
Continue Reading Dueling Letters about SESAC Radio Station Royalties – What’s A Station to Do?

The legal issues surrounding the use of music in broadcast and digital media is one of those topics that is usually enough to make eyes glaze over.  The importance of understanding these issues is illustrated by this week’s request from the Department of Justice for more information about the rights of songwriters to authorize ASCAP and BMI (often referred to as Performing Rights Organizations or PROs) to license their works to services like radio stations and webcasters when there are multiple songwriters who may not all be members of the same rights organization.  While we try to provide some explanations of some of those issues on this Blog, I wanted to point to a couple of other resources available to address some of these issues and to, hopefully, help make some of those issues understandable.

First, I wanted to note that I’ll be moderating a panel on current music issues at the NAB Radio Show in Atlanta on Thursday afternoon (the panel is described here) featuring representatives of the NAB, RIAA, BMI, Pandora and the Copyright Office.  Hopefully, we’ll be able to unpack some of the motivations and directions of the music royalty debates that are going on in Washington DC.  For those of you not able to make that panel, and even those of you who are planning to attend, a new source of information that provides a very good summary of the many music licensing issues now being considered by Congress and the courts is a report prepared by the Congressional Research Service released last week, available here.  The report explains in relatively simple terms how music licensing works in the United States, and describes many of the current legislative and judicial issues that currently could affect that licensing.  While obviously not addressing all of the subtleties of the arguments of all of the parties to these proceedings, the report does at least give a relatively neutral summary of the arguments of the parties.
Continue Reading Understanding Music Royalties – Congressional Research Service Releases Summary of the Law, While DOJ Asks for More Comments on ASCAP and BMI Consent Decree Reform

The US House of Representatives has been looking at potential reform of the Copyright Act for some time, holding a number of hearings before the Committee here in Washington DC (see, for instance, our article here about one of those hearings). Yesterday, the Committee announced that it is taking its examination on the road, conducting a “listening tour” of the country, starting with a roundtable on music issues to be held in Nashville on September 22. The Committee’s announcement of the listening tour (available here), says that future dates and locations (and presumably topics) will be announced at a later date.   The announcement states:

America’s copyright industries – movies, television programming, music, books, video games and computer software – and technology sector are vitally important to our national economy.  The House Judiciary Committee’s copyright review is focused on determining whether our copyright laws are still working in the digital age to reward creativity and innovation in order to ensure these crucial industries can thrive.

So what are some of the issues that are likely to be considered? On the music side, there are many issues, including questions about the disparity between the payments from digital media companies made to songwriters as opposed to sound recording rights holders (see our article here), the amounts of the royalties themselves (with digital media companies finding many royalties to be too high to allow for a profitable operation while rights holders argue that they are too low to compensate creators for the decrease in the sale of music in a physical form – see our article on how the one-to-one nature of the digital performance complicates the discussion of the value of music when compared with analog performances), issues as to whether broadcasters should pay a performance royalty for sound recordings, and the question of pre-1972 sound recordings (see our last article on pre-1972 sound recordings, here). Many of these issues were addressed by the Copyright Office in its report on reform of the copyright laws as they relate to music (see our summary here). Some of the songwriter issues are also being considered by the Department of Justice in its review of the antitrust consent decrees governing ASCAP and BMI (see our article here).
Continue Reading House Judiciary Committee Begins Nationwide Listening Tour on Copyright Reform – First Roundtable on September 22 in Nashville Focusing on Music Issues

Yesterday, it was announced that the Radio Music License Committee (RMLC) settled its lawsuit with SESAC (see the press release here, and the full agreement here), where the RMLC had charged that SESAC’s practices in collecting its music royalties from the radio industry violated the antitrust laws (we wrote about the filing of the lawsuit here). While there was no admission of guilt by SESAC, it did agree that, between now and 2037, it will negotiate royalties with RMLC on an industry wide basis (up to now, SESAC could negotiate on a station-by-station basis). If RMLC and SESAC can’t agree to a royalty, the royalty rate will be set by an arbitrator – and past SESAC royalties would not have any precedential value in such proceedings (broadcasters have contended that past SESAC rates are far more, in comparison to those charged by ASCAP and BMI, then would be warranted based on the percentage of music from SESAC writers that is played on most radio stations). In subjecting SESAC to industry-wide negotiations and potential arbitration, the settlement is very similar to the deal reached in antitrust litigation between SESAC and the TV Music License Committee (about which we wrote here).

The settlement also tracks the structure of RMLC agreements with ASCAP and BMI (see our articles here and here) in that future SESAC licenses will cover broadcasters not only for their over-the-air programming, but also for their Internet streams and their HD channels (which were charged separately by SESAC for many stations). However, the agreement provides that the unitary license should not diminish the total royalties that would have been paid by the industry to SESAC if these rates were negotiated separately.   In other words, the effect of the unitary license is simply administrative convenience – everything is covered by a single license, so each station does not need multiple licenses from SESAC for its normal broadcast activities. However, unlike the ASCAP and BMI agreements, this agreement puts limits on this unified coverage for a broadcaster’s business that is outside the retransmission of the broadcaster’s over-the-air signals, excluding on-demand subscription services (presumably ruling out Rdio, in which Cumulus has an interest, from being covered by the radio license), and also excluding music-intensive custom radio, specifically ruling out Pandora and iHeartRadio from relying on this license for their online services. The agreement also says that other music users that are not primarily radio operators cannot get coverage for these other non-broadcast businesses simply by buying a radio station. What else does the agreement provide?
Continue Reading Radio Music License Committee Settles Antitrust Suit Against SESAC – What Does it Mean for the Radio Industry?

Twice this morning, I was faced with the question of whether a business needs a license to play a radio or TV station on their premises, once in a story in one of the broadcast trade publications (see the article here, in the You Can’t Make This Up column toward the bottom of the article) about a gas station that thought that they got around paying ASCAP, BMI and SESAC fees by using “6 or 7” consumer radios around the station. After I saw that article, I thought that it was worth writing this article, as the difference between 6 and 7 radios could make a real difference as to whether the business needs to pay music royalties.

Broadcasters need to be careful about urging their clients to play their stations at their business locations. There are very specific rules, and if the rules are not followed, liability can result. But, as detailed below, there are some exceptions to the obligation of commercial establishments to pay ASCAP, BMI and SESAC that apply specifically to establishments that play only FCC-licensed radio or TV stations. But the details of the exceptions must be observed or there can be issues. All of the performing rights organizations have contractors who travel the country, checking out retailers, bars, restaurants, and other commercial establishments to make sure that they are following the rules. There are periodically press reports about these rights organizations seeking royalties (sometimes through legal actions) from coffee shops, nightclubs, and even farmers markets that publically perform music without signing license deals. So these commercial establishments need to know the rules about music use to avoid becoming a target. As set forth below, the rules are very specific, and broadcasters can actually benefit from the exceptions as, in the limited circumstances set out in the Copyright Act, businesses can play music from FCC licensed outlets without a license, but music from other sources could present an issue. But be careful, as there are very specific rules – and the difference between 6 and 7 radios could be a real issue.
Continue Reading Does a Local Business Need Licenses from ASCAP, BMI and SESAC to Play My Radio or TV Station on Their Premises?

It’s another summer with music copyright issues hitting the press almost every day. Over the next week or two, we will try to catch up on some of the legal issues raised by all the music news. First, let’s look at the significant actions in the last ten days in the battle over whether there is a public performance right in pre-1972 sound recordings. Just a few days after there was a court decision (available here) finding that there was no common law public performance right in pre-1972 sound recordings under Florida law, Sirius XM last week announced that it had settled the case brought against it by the major record labels by agreeing to pay $210 million for nationwide public performance rights to the catalog of recordings that these labels own, said by Sirius’ SEC 8-K filing to comprise about 80% of those sound recordings. Obviously, that settlement does not appear to resolve the issues with independent sound recording owners (like Flo & Eddie who brought the actions that have resulted in NY and California decisions finding a performance right in pre-1972 recordings in those two states). But what do the settlement and Florida decision mean for other users of these recordings?

First, a review of the issue with pre-1972 sound recordings. With all of the copyright issues that have been in the news in the last few weeks, that review is necessary so that readers really understand the issues involved in this case – beyond just the headlines. Pre-1972 sound recordings (sound recordings being a song or other audio material, as recorded by a particular artist) first released in the United States are different than other sound recordings, as they do not have protections under Federal copyright law. Prior to 1972, Federal copyright law did not protect sound recordings at all, only protecting what is referred to as the “musical work” or “musical composition” (the underlying words and music of a song). The actual recording of the song was protected only under state laws, and most state laws addressed only unauthorized reproductions of those recordings (e.g. bootlegged copies), not performance rights. When copyright protections over sound recordings were federalized in 1972, states were left with the right to determine how to deal with pre-1972 recordings.
Continue Reading Understanding the Murky State of the Performance Right in Pre-1972 Sound Recordings – Florida Court Rejects the Right yet Sirius XM Settles With the Record Labels

The Copyright Office this past week released its Report following its study of music licensing in the US; a comprehensive report addressing a number of very controversial issues concerning music rights and royalties.  Whether its release during the week of the Grammy Awards was a coincidence or not, the report itself, which takes positions on many issues, is sure to initiate lots of discussion and controversy of its own.  The report was issued after two rounds of comments (the questions that were asked in each request for comments are detailed in our stories here and here) and three roundtables held in three different cities where representatives of music companies provided ideas on the questions asked (I participated in the Nashville session).  As detailed below, the report addresses some of the hot button issues in the music royalty space including the broadcast performance royalty, publisher withdrawals from ASCAP and BMI (see our article here), and pre-1972 sound recordings.

Before getting into the details of the proposals, it is important to note that the Copyright Office, unlike many other government agencies, does not itself make substantive rules.  Instead, it merely makes recommendations.  For any of the substantive proposals that it suggests in the Report to become law, Congress must act – which is never easy.  In the Copyright world, it is particularly difficult, as the rules and industry practices are so complex and often obscure, and where any change can have a very dramatic effect on some industry player or another.  Often, a simple change in the rules can take money from someone’s pocket and deposit into someone else’s.  Moreover, copyright is not an area where there are clear partisan divides.  Oftentimes, it matters more where a Congressman’s home district is than his or her party affiliation in their leanings on copyright matters.
Continue Reading Copyright Office Issues its Report on Music Licensing – Issues Include Broadcast Performance Royalties, Publisher Withdrawals from ASCAP and BMI, and Pre-1972 Sound Recordings

Last month, we wrote about the FCC issues facing broadcasters in 2015.  Today, we’ll look at decisions that may come in other venues that could affect broadcasters and media companies in the remaining 11 months of 2015.  There are many actions in courts, at government agencies and in Congress that could change law or policy and affect operations of media companies in some way.  These include not just changes in communications policies directly, but also changes in copyright and other laws that could have a significant impact on the operations of all sorts of companies operating in the media world.

Starting with FCC issues in the courts, there are two significant proceedings that could affect FCC issues. First, there is the appeal of the FCC’s order setting the rules for the incentive auction.  Both Sinclair and the NAB have filed appeals that have been consolidated into a single proceeding, and briefing on the appeals has been completed, with oral arguments to follow in March.  The appeals challenge both the computation of allowable interference after the auction and more fundamental issues as to whether an auction is even permissible when there is only one station in a market looking to give up their channel.     The Court has agreed to expedite the appeal so as to not unduly delay the auction, so we should see a decision by mid-year that could tell us whether or not the incentive auction will take place on time in early 2016.
Continue Reading What Washington Has in Store for Broadcasters and Digital Media Companies in 2015 – Part 2 – Court Cases, Congressional Communications and Copyright Reform, and Other Issues

Today is Elvis Presley’s 80th birthday, so it seems appropriate to revisit the issue of pre-1972 sound recordings, and to take a deeper look at the recent decisions by courts in New York and California finding that there is a public performance right in these recordings.  The NY decision in a case brought by Flo & Eddie of the band the Turtles, coming after the California cases, is in many ways the more interesting of the cases.  In the California case, the Court interpreted a California statute on copyright ownership as signaling that the California legislature intended to provide the entire bundle of ownership rights that would be accorded to any other piece of property, which the California Courts found would include the right to publically perform the recording.  While that may be debatable (as one does not usually think of a public performance right in connection with the ownership of tangible property – you don’t perform a house or a car), the decision at least is based on statute.  But the NY court did not find any such specific statute to which it could point to find a public performance right, instead concluding that the performance right was somehow inherent in the common law and therefore existed unless there was a specific carve-out of that right by statute.  This reasoning, to me, simply does not stand up to review.

The NY Court itself spends an entire footnote chronicling the history of the public performance right in the United States.  It notes that there was initially no public performance right at all recognized by the Copyright Act, until Congress provided one for dramatic works (e.g. plays) in 1856.  No such right was accorded to musical works (the musical composition – the words and music of a song) until 1897 when Congress specifically provided such a right by law.  For sound recordings, the public performance right did not exist in the US until 1995, when it was first extended to a limited class of digital recordings.  From these facts, the Court goes on to conclude “It was thus an accepted part of the background law that public performance rights would, absent a deliberate effort to exclude them, extend to sound recordings.”  Presumably, the Court is talking about the background law in 1972, when Congress first accorded any protection at all to sound recordings by granting a Federal right to control reproduction and distribution of such works – but Congress specifically excluded any performance right for another 23 years.
Continue Reading On Elvis’ Birthday – Looking at the Issues with Pre-1972 Sound Recordings

On Friday, the US District Court in the Southern District of NY found that there is a public performance right in pre-1972 sound recordings in that state, following two decisions from California finding a similar right under California law (though on different grounds).  Like the first decision in California (about which we wrote here), this decision was the result of a law suit by Flo and Eddie of the Turtles against Sirius XM, arguing that Sirius XM was infringing on their rights by playing old Turtles songs without paying the duo (who now own the Turtles’ copyrights) any compensation.  Unlike the California decision which looked to specific language in the California statute about ownership of pre-1972 sound recordings, the NY Court reaches a decision in some ways broader than the California decision, but potentially also in some ways narrower.  What does it mean for the many businesses that play such recordings?

There is no public performance right in sound recordings generally in the United States, with the limited exception of the public performance of such recordings in a digital medium.  Sound recordings had not been covered by Federal copyright law at all until 1972, when they were covered for purposes of protecting reproductions and distributions and other general rights, but Federal law specifically did not include this public performance right in sound recordings until the 1990s.  When sound recordings were added to Federal law in 1972, the regulation of pre-1972 sound recordings was specifically left to state regulation (where it had been prior to Federalization).  The limited digital performance right was adopted in a series of laws enacted in the late 1990s, as fears of digital piracy based on Internet and other digital transmissions grew.  So webcasters, satellite radio, digital cable radio and other digital users of sound recordings have paid a royalty for the performance of such recordings.  That royalty is set by the Copyright Royalty Board (see our article here about the most recent CRB proceeding to set rates), paid by noninteractive services to SoundExchange, and distributed by SoundExchange to copyright holders and artists. For interactive services (like Spotify or iTunes or Rhapsody), the performance rights have to be directly negotiated with the copyright holder, leading to disputes like the recent decision of Taylor Swift to pull her new album from Spotify (see our article here about the difference between interactive and noninteractive services).  As the 1990s adoption of the limited public performance right in sound recordings was a Federal act, most observers believed that there was no public performance right in sound recordings for pre-1972 recordings, as there never had been one prior to Federalization (despite many attempts by artists and labels to have one included in the law)(see our article here when the Flo and Eddie suit was first filed). 
Continue Reading New York Court Finds Public Performance Right in Pre-1972 Sound Recordings – How Will This Affect Businesses that Use Music?