Radio industry group tries to block licensing rate increase

Thursday, October 10, 2013 - 11:00am

The cost of content is a shared issue in terrestrial, webcast, and pureplay balance sheets. Music licensing costs come as a patchwork of statutory and negotiated agreements. Stakeholders on the music content side include composers, performers, and labels.

Three organizations represent licensing rights and costs for composers and songwriters: ASCAP, BMI, and SESAC. SESAC is different from the others: It is smaller, and accepts creators through an application process rather than open admission to its portfolio. SESAC competes with ASCAP and BMI for clients, and negotiates licensing rates on behalf of its composers and songwriters independently.

Now meet the Radio Music License Committee. The RMLC sits at the other end of the bargaining table, representing radio stations’ right to use music in their terrestrial broadcasts and digital streams. The RMLS negotiates content costs with all three so-called PROs (Performing Rights Organizations). Radio stations may step outside of the RMLC’s purview and negotiate separately with the PROs, but most do not.

Here is one more difference between SESAC and ASCAP or BMI, which relates to a legal action happening this week -- action which could determine whether certain licensing costs rise for all radio, broadcast and Internet. ASCAP and BMI rate-setting processes are governed by a “consent decree,” an antitrust mechanism put in place over 50 years ago. The consent decree enables the U.S. government to arbiter licensing rates when negotiations fail, through an adjudicating committee called the Rate Court.

SESAC, because of its relatively small size, was not (and is not) included in the antitrust consent decree. This independence gives SESAC unique potential leverage in making money for its clients by levying high licensing rates on the radio industry. The most recent multi-year agreements between radio and ASCAP/BMI effected a reduction in licensing costs through 2016, according to David Oxenford’s Broadcast Law Blog. SESAC does not receive downward pressure from any outside arbitrating power.

The Radio Music License Committee filed suit against SESAC one year ago, seeking antitrust remedies applied to SESAC. The case has neither been dismissed nor thrown out, and has not progressed. Now, SESAC is due to deliver a new five-year licensing rate plan to the radio industry. RMLC has filed an injunction to delay the (presumed) rate increase, and negotiations of it, until the lawsuit is resolved. Inside Radio quotes the RMLC’s hyperbolic appeal to the court: “SESAC’s planned five-year rate hike would devastate the industry.” 

BMI reports record revenue as streaming's share grows

Monday, September 23, 2013 - 12:20pm

The New York Times writes today that one area of a troubled music industry that's seen consistent revenue growth, and may be poised for more, is songwriter and publisher royalties, collected by groups like BMI and ASCAP.

Webcasters and radio pay these groups when performing music on-air and online. These royalties are not the same as those paid to copyright owners of sound recordings.

Today BMI announced $944 million in revenue for its fiscal year ending in June, a 5% year-over-year increase, and a new all-time high.

Digital services paid BMI $57 million (which includes not only Pandora and Spotify but Hulu, Netflix, and others). While digital was just 2% of BMI domestic revenue in 2009, it's up to 9% now.

Last week (see RAIN here) a federal judge ruled publishers may not withhold certain rights from the ASCAP collective in order to wring more money out of services like Pandora. The decision does not directly affect BMI, says the paper.

BMI announced it's paid $814 million to rights holders in its recent fiscal year, also a new high. Since 2003, the paper repots, BMI's revenue has gone up about 50%.

ASCAP said in March its 2012 revenue was $942 million, down more than 4%.

Read more in The New York Times here.

In judgement for Pandora, court rules ASCAP can't limit webcaster's access to its stock of music

Wednesday, September 18, 2013 - 12:40pm

Pandora scored a clear, and sharply worded, summary judgment from U.S. District Judge Denise Cote, enabling the Internet radio service to continue "performing" (streaming) works included in ASCAP’s entire inventory.

The ruling refutes ASCAP’s attempt to narrow Pandora’s right to perform portions of the ASCAP-represented publishers catalog, when the publishers choose to withhold certain rights. In this case, the publishing arms of EMI Music, Sony/ATV, and Universal Music tried to pull their new-media rights representation from ASCAP, in order to negotiate directly with digital platforms such as Pandora.

Cote's decision spells it out like this: "So whether ASCAP purports to categorize Pandora as an 'applicant' or a 'licensee,' Pandora's right to perform the compositions in the ASCAP repertory extends to all of ASCAP's repertory and ASCAP may not narrow that right by denying Pandora the right to play the songs of publishers who have withdrawn new media licensing rights from certain songs while keeping the songs in ASCAP's repertory to be licensed for performance by other music users."

Pandora’s response to the decision noted "the attempt by certain ASCAP-member publishers to unfairly and selectively withhold their catalogs from Pandora." ASCAP’s response noted "the true value of songwriters' and composers' performance rights, a value that Pandora’s music streaming competitors have recognized by negotiating rather than litigating with creators of music." Both notes noted.

Yesterday’s ruling is a stepping stone to the Pandora/ASCAP rate trial before the ASCAP federal rate board, in a process that arbiters the terms of a blanket license when negotiations fail. That trial starts on December 4.

ASCAP petitions FCC to block Pandora purchase of FM station

Monday, July 29, 2013 - 1:10pm

Performance rights organization ASCAP has filed a petition with the FCC in opposition to webcaster Pandora's purchase of broadcast radio station KXMZ in Radid City, SD.

The webcaster is currently suing ASCAP in rate court (our coverage here) following unsuccessful licensing negotiations between the two. ASCAP (along with BMI and SESAC) administers music composition/publishing rights in the U.S.

Pandora announced the purchase of the station (coverage here) in June. The webcaster wants its service to qualify for the Radio Music Licensing Committee (RMLC) license for the use of copyright song compositions, which affords more favorable licensing tems than those offered by ASCAP for online-only use.

ASCAP argues to the FCC "there can be no doubt Pandora's interests do not lie in providing service to... the greater Rapid City area... Pandora's interests and priorities lie only in its millions of internet music listeners." ASCAP also claims Pandora failed to properly disclose its ownership structure and prove that it meets foreign ownership limits.

Music publishers want to strike more lucrative direct deals with Pandora, which files to stop them

Friday, June 21, 2013 - 12:50pm

The latest in the "Pandora vs. copyright owners" has the webcaster filing a rate court motion insisting publishers are prohibited from withdrawing digital rights from ASCAP for the webcaster's current licensing term.

Music publishers (which control copyright song compositions) BMG Chrysalis, Universal, and Warner/Chappell have all notified ASCAP they intend to withdraw "new media" rights from the collective. Their intent is to license services like Pandora directly, with the aim of charging steeper fees than they'd get as part of an ASCAP blanket license. Pandora is asking the ASCAP rate court judge to rule whether these publishers are not, in fact, obligated to keep those as part of the collective.

The question, apparently, is whether the parties to the deal are held to its terms beginning (a) when Pandora applied for its license (covering 2011 through 2015), or (b) when the rate court actually sets a license rate (which hasn't happened yet).

Read more in Billboard here.

Pandora buys Rapid City FM to qualify for broadcaster ASCAP license

Wednesday, June 12, 2013 - 1:50pm

Whether it will actually gain the cost-saving advantages it says it hopes to, or it's really just about making a (legal) point: Pandora has purchased an FM radio station.

According to a filing late yesterday, leading webcaster Pandora announced yesterday its acquisition of KXMZ-FM/Radid City, SD (market #255). The reason: Pandora hopes to qualify for the Radio Music Licensing Committee (RMLC) license for the use of copyright song compositions as to broadcasters.

Pandora is currently in a legal battle with ASCAP, the performance rights organization (PRO) that licenses copyright song compositions. (Usually in this newsletter we discuss sound recording copyrights -- administered by SoundExchange and nearly always owned by record labels. This is different.) Pandora accuses (and has filed a motion to this effect) ASCAP and music publishers of discriminating against it (and other webcasters) by withdrawing from the ASCAP license digital performance rights, for the purpose of "holding out" for higher fees.

ASCAP operates under an "antitrust consent decree" -- since it represents such a large segment of the music industry's publishing holdings, it needs to adhere to government guidelines in the way it operates. Pandora says ASCAP is violating the terms of that consent decree.

Pandora alleges the licensing deal made in January 2012 between the RMLC and ASCAP (as well as BMI, another PRO) discriminates against pureplay webcasters, because the deal gives AM/FM radio (including their Internet properties, e.g. Clear Channel and iHeartRadio) preferential licensing terms.

So, by buying a radio station in South Dakota (for $600k), Pandora wants to qualify for that same RMLC license. Is Pandora serious -- or is it about making a (snarky) point (which, given Pandora's economics, it could afford to do for $600k)? This likely tongue-in-cheek comment from a Pandora op-ed may be telling: 

"We look forward to broadcasting our personalized experience to the community in Rapid City, an area where over 42,000 residents already use Pandora," wrote Pandora assistant general counsel Christopher Harrison in The Hill's Congress Blog yesterday (here). Billboard also covers this story here.

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