radio music license committee

The Department of Justice’s Antitrust Division yesterday announced that it was starting a review of the ASCAP and BMI antitrust consent decrees that govern the United States’ two largest performing rights organizations for musical compositions (referred to as the “musical work”). The DOJ’s announcement of the initiation of the examination of the consent decrees poses a series of questions to which it invites interested parties – including users, songwriters, publishers and other interested parties – to file comments on the decrees, detailing which provisions are good and bad and, more broadly, whether there is a continuing need for the decrees at all. Comments are due on July 10.

This re-examination of the decrees has been rumored for many months. Back in March, we wrote about those rumors and the role that Congress may play in adopting replacement rules should the DOJ decide to fundamentally change the current provisions of the consent decrees. The DOJ itself just recently looked at the consent decrees, starting a review only 5 years ago with questions very similar to those it posed yesterday (see our post here on the initiation of the last review 5 years ago). That review ended with the DOJ deciding that only one issue needed attention, whether the decrees permitted “fractional licensing” of a song. We wrote about that complex issue here. That issue deals with whether, when a PRO gives a user a license to play a song, that user can perform the song without permission from other PROs when the song was co-written by songwriters who are members of different PROs. The DOJ suggested that permission from one PRO gave the user rights to the entire song, an interpretation of the decrees that was ultimately rejected by the rate courts reviewing the decrees (see our article here).   So, effectively, the multi-year review of the consent decrees that was just concluded led nowhere. But apparently the DOJ feels that it is time to do it all again. To fully understand the questions being asked, let’s look at what the consent decrees are, and why they are in place.
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Recently, the Radio Music License Committee sent out a memo to broadcasters about a July 8, 2019 SoundExchange payment deadline for pre-1972 sound recordings.  As with everything in copyright law, the issues surrounding pre-1972 sound recordings are complicated, and the RMLC notice, while seemingly straightforward, still resulted in our receiving lots of questions.  These questions may have been compounded because of notices sent to broadcasters back in April about another filing deadline concerning these recordings which caused much consternation for what was, for most broadcasters, a matter of little concern.  For most broadcasters, neither of these dates are of particular concern unless the broadcaster has been identifying pre-1972 sound recordings and not paying SoundExchange royalties when those songs are streamed, and we understand that most broadcasters have in fact been paying SoundExchange for these recordings.  But let’s try to explain what is going on in a little more detail.

First, let’s look at the basics.  Sound recordings (the recording of a particular band or singer performing a song) were originally not covered by federal copyright law.  The law provided protections for “musical works” (i.e. the musical composition, the words and musical notes of the song), but the mere recording of that work was initially not seen as a creative work.  It was thought of more as a mechanical rendering of the real creative work – the underlying song.  So when recordings came to have real value in the first half of the last century, recording artists had to rely on state laws to prevent other people from making and distributing copies of their recordings. Laws against what we would refer to as bootlegging or pirating of recordings were passed in most states, and lawsuits against bootleggers would be brought under these state laws.  It was not until 1972 that Congress, through an amendment to the Copyright Act, recognized that the recordings were themselves creative works entitled to copyright protection.  But that amendment did not fully make all pre-existing recordings subject to the Copyright Act, instead leaving most sound recordings first recorded in the United States prior to the adoption of the amendment to the Act in February 1972 subject to state laws until 2067.
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Last week, the Radio Music License Committee (RMLC), the organization representing most commercial radio broadcasters in negotiating performance royalties for musical compositions, initiated a proceeding in US District Court in the Southern District of New York against BMI.  This action raises short-term issues as to what this particular lawsuit means for the radio industry, and it also highlights longer term issues that may arise through legislative and regulatory changes that may affect these cases like this one in the future.

As we have written many times (see e.g here and here), BMI is subject to antitrust consent decrees governing its activities – including the rates that it charges to companies wanting to use the music that it licenses.  When BMI and a user cannot agree on the terms of the license, either party can initiate a proceeding in court for the court to determine what reasonable rates are for the use proposed.  These actions are all brought in the Southern District of New York where a specific judge is assigned to hear BMI disputes.  This proceeding is referred to as a “rate court” proceeding where the parties will present evidence as to what each believes to be a reasonable rate – with the judge making the decision, subject to review by the Second Circuit Court of Appeals.  What issues brought BMI and RMLC to Court?
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On Friday, the Radio Music License Committee issued a press release that states that Global Music Rights (“GMR”), the new performing rights organization that collects royalties for the public performance of songs written by a number of popular songwriters (including Bruce Springsteen, members of the Eagles, Pharrell Williams and others) has agreed to extend their

It was announced this week that SESAC’s royalties for radio for the period starting at the beginning of 2016 through the end of 2018 have been slashed – being reduced to less than half what they were in 2015.  This decision came out of an arbitration process that resulted from the settlement of an antitrust lawsuit that the Radio Music License Committee (RMLC) brought against SESAC (see our article here for a summary of the settlement).  Yet, despite the significant reduction in the royalties for radio operators, both sides declared victory (see RMLC press release here and press reports on SESAC’s reaction here).  Can both be right?  While the decision of the arbitrators is not public so we can’t know for sure the reasoning behind the result, it might be that there is something to each of these claims.

For radio, the victory is clear.  For commercial radio broadcasters, the royalties were significantly decreased, retroactive back to the beginning of 2016 year for stations that had elected to have RMLC represent them in this lawsuit.  Some stations had been enticed by an offer made by SESAC at the beginning of 2016 offering stations a new SESAC license at rates 5% less than they were in 2015 (see our article here).  Those stations may not qualify for the much greater royalty reduction available to the majority of commercial stations that opted into RMLC representation and are covered by the arbitration result.  The new SESAC royalties will also cover the use of SESAC music on broadcaster’s streaming platforms and HD broadcasts, uses for which broadcasters had previously had to pay SESAC separately.  Of course, stations still need to pay public performance royalties for musical compositions to ASCAP, BMI and, in many cases, GMR and public performance royalties for sound recordings, when streaming recorded music, to SoundExchange.
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Commercial radio broadcasters have been seeing numerous communications over the last week about Global Music Rights (GMR) and its seemingly contentious music royalty negotiations with the Radio Music License Committee (RMLC). Many stations are confused about this controversy and what it is all about. The 5 questions below, and the links at the end of the questions, try to shed some light on the issues. Stations need to carefully consider their options, and seek advice where necessary, to determine what they will do by January 31 with respect to the interim license that GMR has offered to stations. The questions below hopefully provide some background on these issues.

 What is GMR and why isn’t the music they represent covered by the other organizations like BMI, ASCAP, and SESAC?

 GMR is a new performing rights organization. Like ASCAP, BMI and SESAC, they represent songwriters and collect royalties from music users for the public performance of these songwriter’s compositions. They will collect not just from radio, but from all music users – they have already reached out to business music services that provide the music played in retail stores, restaurants and other businesses and no doubt have or will license other companies that make music available to the public. Most songwriters represented by GMR used to be represented by ASCAP or BMI, but these songwriters have withdrawn from ASCAP and BMI and joined GMR, allegedly to attempt to increase the amounts that they are paid for the use of the songs that they have written. For radio, these withdrawals became effective on January 1 of this year, when the old license agreements between ASCAP and BMI and the commercial radio industry expired.

What does a station need to, in order to protect itself while negotiations are going on?

Because the penalties for playing a song without a license can be as much at $150,000 per song, stations either need to purge all GMR music from their stations or sign a license agreement with GMR. If you decide to purge their music from your stations, don’t forget about music that may appear in commercials or syndicated programming. Also remember that we are talking about the musical composition, not the recording of the song by any particular band or singer. Even the broadcast of a high school band playing a GMR song at half time of some football game, or the broadcast of a local middle school choral concert, could trigger the royalty obligation to GMR.
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On Saturday, RMLC announced that it has reached an “interim” agreement with the new performing rights organization Global Music Rights (GMR) for a license to perform musical compositions controlled by GMR.  This agreement (available on the RMLC website here) is an interim agreement for radio stations that elect to participate, and covers only the first 9 months of 2017.  To be covered by this license, a station must make an election by January 31, and pay the first month’s assessment to GMR by that date.  GMR has promised not to sue any stations in January while stations are deciding whether to opt into this agreement.  The amount to be paid by any individual station can be ascertained by communicating with GMR at an email address furnished by the RMLC in the notice distributed on Saturday.

This is an interim agreement as it removes the threat of a lawsuit for playing GMR music after January 1 that could potentially be faced by any radio station that does not have a license.  The rates paid by any station that opts in could be adjusted retroactively, up or down, based on the results of further negotiations between RMLC and GMR, or based on the results of the lawsuits currently being litigated between the two (see our article here on RMLC’s suit against GMR, and the article here about GMR’s follow-up lawsuit against RMLC, each accusing the other of violating the antitrust laws).  It would seem obvious that RMLC believes that the amounts being paid under this interim deal are higher than justified based on the percentage of music played by radio stations that is controlled by GMR.  If it was believed that the interim fee represented a fair price, then it would seem that RMLC would have entered into a permanent license at these rates – but instead the litigation continues.  What is a station to do?
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ASCAP and the Radio Music License Committee (RMLC) announced yesterday that they have reached an agreement for the period 2017-2021, setting the performance royalties that commercial broadcasters will pay for the use of music written by composers who are represented by ASCAP. The press release issued yesterday discloses little about the details of the agreement.

Just a few weeks ago, we wrote about the Radio Music License Committee (RMLC) filing a lawsuit against Global Music Rights (GMR) alleging that GMR was violating the antitrust laws by offering an all or nothing blanket license for rights to play the songs written by certain songwriters now represented by this new performing rights organization. RMLC was seeking to impose some oversight over the rates being charged for GMR royalties. This would be similar to the controls over the rates of ASCAP, BMI and SESAC, whose rates can only be imposed following an agreement with a copyright holder or, where there is no voluntary agreement, by a determination by a court (for ASCAP and BMI) or an arbitration panel (for SESAC) that the new rates are reasonable. Now, GMR has filed its own lawsuit against RMLC (though it claims that its suit is unrelated to the one that RMLC filed against it) alleging that it is RMLC that is violating the antitrust laws (and certain California statutes) by forming a “cartel” of buyers, i.e. commercial radio stations who are refusing to deal with GMR individually but instead are looking to RMLC for the negotiation of a license agreement that will cover the entire industry. What are the issues presented by this dueling litigation?

The RMLC suit is premised on the concept that any time multiple products from independent marketplace competitors (in this case the songs of multiple songwriters) are packaged together and sold at an all or nothing price, there is the potential for obtaining prices higher than would be obtained on the open market. For example, while a contemporary hits formatted radio station could potentially decide that the price of Adele songs are too high and pull those songs from its playlists, it is not able to do so if that song is bundled with songs written by Pharrell Williams, Bruno Mars, Beyoncé, Kanye West, Brittany Spears and Katie Perry (all of whom are listed on the GMR website as being part of its repertoire) so that the radio station either takes all the songs from all of those writers or none at all. While it might be able to get away with not playing one or two of these artists, if it has to pull them all, listeners will notice. If the station wants to keep playing in the format that it has selected, it has to pay the bundled rights fee asked by the representative performing rights organization.
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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). 
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