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.” 

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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