At the end of 2009, we wrote about the interim royalties agreed to by both ASCAP and BMI, agreeing to reduce the amount of royalties paid by commercial radio stations by 7% until final royalties were agreed to by these Performing Rights Organizations and broadcast groups (principally the Radio Music Licensing Committee), either
The Radio Music Licensing Committee ("RMLC") has announced that it has entered into agreements with both ASCAP and BMI for interim royalties to be paid by commercial radio stations until final royalties are set. These royalties will be set either through negotiation or through litigation in Federal Courts which act as a "rate court" to determine what reasonable rates will be under the antitrust decrees that govern these organizations. As we wrote here and here, the RMLC has been involved in negotiations seeking a significant reduction in the royalties paid by radio stations for the right to make a public performance of musical compositions (or "musical works"). Both organizations have agreed to a 7% reduction in the amount currently paid by radio broadcasters, to be reflected on the invoices sent by these organizations for 2010 royalties. According to the press release on the ASCAP agreement, the discounts are interim agreements only, and will be subject to retroactive adjustment to January 1, 2010 once final royalties are set.
This money goes to composers of music, as contrasted to the controversial SoundExchange royalties that pay the performers of music (currently only in the digital world, but proposed in legislation pending before Congress to be extended to over-the-air broadcasting). ASCAP and BMI are essentially collection agencies (called Performing Rights Organizations or PROs) for large groups of songwriters. By signing up and paying royalties to these organizations and to SESAC, a smaller but still significant PRO, broadcasters obtain a "blanket license" to play all the songs covered by songwriters who are members of these organizations – which are essentially all of the songwriters whose songs are likely to be played by radio. The existence of these organizations save radio stations from having to negotiate independently with the thousands of songwriters and publishing companies that own the copyrights to these compositions – an arduous task that might be almost impossible without the existence of the PROs.
Radio broadcasters all over the country have been receiving letters about music royalties – from ASCAP, BMI and the Radio Music Licensing Committee (RMLC). The ASCAP and BMI letters are asking for the broadcaster to sign a letter committing themselves to some royalty obligation for 2010. They pose three options to the broadcaster – sign up to pay royalties for 2010, join the RMLC negotiating group, or notify ASCAP and BMI that they will be negotiating their own royalties. The RMLC letter suggests that the broadcaster join in their negotiating group to help to establish a new royalty structure with these entities. What does it all mean, and what should a broadcaster do?
These letters are all triggered because the rates for royalties that commercial radio broadcasters pay to ASCAP and BMI for the musical compositions that they play on the air expire at the end of 2009. (Noncommercial broadcasters have a special rate set under the review of the Copyright Royalty Board, and thus are not subject to these deals) RMLC represents most radio broadcasters in their dealings with the performing rights organizations (or "PROs" as ASCAP and BMI, and SESAC, are called). We wrote about the many issues that have held up an extension of the current agreements between radio broadcasters and ASCAP and BMI here. If there is no new deal covering these royalties in place by the end of the year, broadcasters who continue to play these compositions (which will be virtually all commercial radio operators) will need to determine how to pay royalties when the current royalty agreements expire. The current agreements do not have any automatic extensions in them, as the antitrust consent decrees that bind these companies call for royalty deals of no more than 5 years in duration. Thus, as the old agreements are about to expire, and no new agreements are in place, the flurry of letters has followed to put broadcasters on notice of the current situation. Of course, none of these letters is entirely clear in spelling out all the issues involved. So we’ll try to explain some of those issues below.
This week, six Congressional supporters of the broadcast performance royalty wrote a letter calling upon the NAB to sit down with music industry representatives to reach a "negotiated resolution" of the "longstanding disagreement" in a session to last from November 17 through December 1. The letter suggests that the negotiations will be supervised by Members of Congress and the staff of the Judiciary Committees of Congress, with a report to be made by the Committee staff at the end of the negotiation period which will be considered by Congress in further actions on this issue. The parties are instructed to bring individuals who have decision-making power to reach an agreement. Could this call for negotiations really result in a deal that would lead to a law requiring that radio broadcasters pay a fee for the use of sound recordings on their over-the-air stations?
First, we must ask whether there will even be any negotiations. The NAB’s only statement issued thus far says that they are willing to "talk to Congress" about the matter, but that they hoped that the discussion would include some of the almost 300 members of Congress who oppose the royalty. As we’ve written before, the NAB has over 250 Congressmen and over 20 Senators signed on to resolutions opposing the performance royalty. With the initial letter being signed by 6 supporters of the royalty, and the Judiciary Committees of both the House and Senate being filled with its supporters, why would the NAB be willing to jump into what could be seen as the lion’s den – engaging in a high stakes competition where the referees are on the record as favoring one side? Note that the NAB statement says nothing about participating in "negotiations", which the former President of the NAB had said that he would never do. We will have to see whether the change at the top of the NAB will bring a change in the attitude of the NAB. New NAB President Gordon Smith, who has been in his job less than two weeks, is said to be more of a consensus-builder than his predecessor, but he has had a very short time to come up to speed on the issue or to build any sort of consensus among those he now represents on where to go on this issue.