The “performing rights organizations” – ASCAP, BMI and SESAC – don’t get as much attention in these pages as do the royalties paid to SoundExchange for the use of “sound recordings.” The PROs collect for the public performance of the “musical work” or the musical composition – the words and music of a
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.
In one more indication that the Broadcast Performance Royalty (or "performance tax" as opponents of the legislation call it) is not dead yet is an article in yesterday’s New York Times reviewing the issues at stake in the proceeding. What was perhaps most interesting about that article was the fact that it appeared only one page away from an article about Internet Radio service Pandora, and a discussion of how that hugely popular service was almost driven out of business by music royalties set by the Copyright Royalty Board in their 2007 royalty decision. The article about the broadcast performance royalty mentions that one of the difficulties in assessing the impact of the proposed royalty is that no one knows how much it will be, as it would be set by the Copyright Royalty Judges on the CRB. Yet the Times makes no mention of the controversy over the previous decisions of the Board in the context of the Internet radio royalties, and how such royalties almost impacted services such as Pandora.
How much would the proposed royalties on broadcasters be? We have written before on that subject,here. Under previous decisions using the "willing buyer, willing seller" royalty standard which is set out in the legislation that has passed House and Senate Judiciary committees dealing with this issue, the lowest royalty for the use of music in any case before the CRB has been 15% of gross revenues. Even using a standard seemingly more favorable to the copyright user (the 801(b) standard that assesses more than the economic value of the music but also looks at the impact that the royalty would have on the stability of the industry on which it is imposed), the royalties have been in the vicinity of 7% of gross revenues for both satellite radio and digital cable radio, the two services that are subject to royalties set using the 801(b) standard. This is more than broadcasters currently pay to ASCAP, BMI and SESAC – rates which are also currently the subject of proceedings to determine if these rates should be changed (see our posts here and here).