CommLawBlog : Broadcast & Communications Lawyers & Attorneys : Fletcher Heald & Hildreth Law Firm : Telecommunications, FCC Regulation, Communications Act

The CRB got the ball rolling back in January, 2011, when it opened the proceeding and invited all interested parties to join in.  As the Copyright Act provides, copyright owners and NCE broadcasters and entities (e.g., NPR, PBS) can negotiate deals among themselves and the CRB can then rubberstamp those deals (subject to various procedural niceties designed to protect folks who might object to some or all of the deals’ terms).

Sure enough, essentially all of the relevant parties were able to get together and hammer out mutually agreeable arrangements, as I reported back in April (with respect to Non-PBS and Non-NPR stations) and June (with respect to PBS and NPR stations).  The CRB has now formally accepted those deals, rejecting minimal objections from a few parties who were technically not even eligible to participate before the CRB.

As an overall matter, rates for the next five years will increase over those currently in effect – there’s a surprise – but not by much.  The increase in every category tends to be no more than 2% over the corresponding rate from the previous five-year period.  The precise dollar figures that will apply are set out in a number of tables and rule sections in the Federal Register.  Since there are close to 200 separate data points, I’m not going to lay them all out here.   I will, however, briefly summarize the factors that come into play in determining which of those figures applies to which types of NCE broadcaster. 

Type of Station.  First, as has historically been the case, royalty rate calculations will vary depending on the type of station in question.  For these purposes there are three types of station: (a) NPR/PBS affiliates; (b) non-NPR radio stations affiliated with educational institutions; and (c) other NCE radio stations that are neither NPR affiliates nor licensed to an educational institution. 

NPR/PBS stations.  For NPR and PBS affiliates (including radio stations licensed to educational institutions), royalties will be based on how each individual piece of music is used.  In particular, they will vary depending on whether the broadcast is (a) a network program or (b) the work of an individual affiliated station (with the latter costing less than the former), and also on whether the musical work in question appears (i) in a “featured presentation” or (ii) merely as background or theme music (again, with the latter costing less than the former).  Rates for PBS and its affiliates will be greater than those for NPR and its affiliates.  The same rates will apply regardless of whether the piece of music is licensed by ASCAP, BMI or SESAC.

Non-NPR radio stations affiliated with educational institutions.  The most obvious change for this universe of stations is the elimination of the one-size-fits-all flat fee approach which has historically been used.  Instead, 2013-2017 rates payable to ASCAP and BMI will involve a tiered system that takes into account the size of the educational institution’s student body.  Different rates will apply to schools with (a) fewer than 1,000 full-time students; (b) 1,000-4,999; (c) 5,000-9,999; (d) 10,000-19,999; and (e) 20,000 or more.  Stations with ERP of 100 watts or less will be entitled to the lowest rate (i.e., the rate for schools with fewer than 1,000 full-time students), regardless of the actual size of the school’s student body. 

No such tiering will apply for SESAC music, however.  Instead, this class of station will pay a flat annual fee of $140, with increases each year thereafter based on a cost of living coefficient equivalent to the greater of: (a) the change in the Department of Labor’s Consumer Price Index in the prior year or (b) 2%.

Other NCE radio stations.   NCE stations not fitting into either of the two classes described above will, as expected, pay flat annual rates, but the rates will vary based on: (a) the size of the population within each station’s 60 dBu contour (along with any additional population provided by translators or boosters); (b) the nature of the station’s programming; and (c) whether the music is licensed by ASCAP/BMI, on the one hand, or SESAC, on the other.  

With respect to the first variable, there are eight separate population tiers, the lowest being fewer than 250,000 and the highest topping off at 3,000,000 or more.  

As to the second, there will now be separate grids of royalty rates for (a) music stations and (b) “talk format” stations.  The former category includes all stations which devote at least 20% of their programming to content in which music is the “principal focus of audience attention”.   The latter includes stations whose program content “primarily consists of talk shows, news programs, sports, community affairs or religious sermons (or other non-music-oriented programming)” and who don’t devote at least 20% of their programming to music annually.

And finally, the royalty grids for music and talk NCE stations will be the same for ASCAP and BMI songs.  SESAC content will be subject to a separate set of rates which will be lower than the ASCAP/BMI rates.  The rates will all rise in gradual increments annually over the five-year term.

Recording Rights

Finally, the cost of the recording rates and terms will increase very slightly (by only a few dollars) for every type of noncommercial broadcast station.

The grids laying out all the various rates are set out in the Federal Register notice.  You can use them to find the rates that will apply to your particular station.  And you can always contact me if you have questions finding the rate applicable to you.  That may not be necessary, though, because you can rest assured that ASCAP, BMI and/or SESAC will be contacting broadcasters sooner rather than later, asking them to put pen to paper on their new agreements, with these new rates, for 2013.

The RMLC, on the other hand, seems to suffer from a lack of familiarity about its work among those it seeks to help. The RMLC represents radio broadcasters’ interests time and again in major copyright fights in court and before the Copyright Royalty Board, and they do it in the face of some confusion and even criticism as to its activities. But I am still the recipient of not-infrequent calls from clients asking why they are being billed for RMLC services when they’re not even an RMLC member. (Answer: it’s required by law that RMLC gets a cut of the royalties the entire broadcasting industry ultimately pays after it negotiates on the industry’s behalf.) 

{Blogger aside: As far as general perceptions of both SESAC and RMLC go, stick with the basic principle that you should not believe everything you hear – as well as the journalistic corollary that, if your mother says she loves you, check it out. A healthy dose of skepticism is always a good thing, even (especially) when the general consensus runs one way.  For example, I’ve had several good experiences with individuals at SESAC, especially when working with me on new media issues. And as for RMLC, I’ve spoken favorably about Bill Velez and his crew on several occasions and I still can’t say enough good things about them.   And you can’t argue with the RMLC’s results, which – at least in their recent negotiations with ASCAP and BMI – garners radio stations savings far in excess of the miniscule amount they’re required to pay to RMLC. And any of you who have met Bill Velez know that he is one of the nicest people you’ll ever meet in broadcasting or any other industry, always quick to return a call or help you out when you’re in a jam.)

Whatever the public impression of the players, we’re now looking at RMLC v. SESAC, a court fight initiated by RMLC earlier this month in the U.S. District Court for the Eastern District of Pennsylvania (located in Philadelphia).

The lawsuit alleges multiple violations by SESAC of Sections 1 and 2 of the Sherman Antitrust Act , including horizontal price fixing, a group boycott/refusal to deal, and monopolization. RMLC is asking for a judicial declaration that SESAC’s activities violate the Sherman Act. RMLC is also looking for the court to impose on SESAC the same court-overseen-and-approved ratemaking process that has applied to ASCAP and BMI for more than 70 years. (Historical background: ASCAP and BMI were hauled into court in 1941 by the Department of Justice, which claimed that their operations violated the Sherman Act. ASCAP and BMI both entered into consent decrees subjecting them to significant restrictions in their activities and ongoing oversight by the courts. Those consent decrees remain in effect today. SESAC, which was rather small potatoes at the time and thus not considered much of an antitrust threat, was not sued, and has operated free of those restrictions – that’s what RMLC is looking to change.) 

RMLC is also asking that (a) SESAC be enjoined from entering de facto exclusive contracts with copyright owners; (b) SESAC be required to make available economically viable alternatives to its license; and (c) the RMLC be awarded legal and other fees. 

The RMLC alleges the following:

SESAC has handpicked the composers it will represent so that radio stations must obtain a SESAC license. One relatively unknown aspect of the licensing process is that any individual copyright owner can license use of that work. So, if multiple songwriters own the copyright to a particular composition and one decides to be represented by ASCAP, another by BMI and another by SESAC, a radio station would need only a license from ASCAP, or BMI, or SESAC to play that song. According to the RMLC, SESAC goes out of its way to represent copyright owners whose works don’t run across multiple PROs – thereby forcing a radio station to get a SESAC license to play that particular song. 

SESAC intentionally obfuscates ownership information on its own site to create a sense of paranoia among radio broadcasters who, absent clear confirmation that a song they are playing is not part of the SESAC repertoire, feel compelled to get a SESAC license just to be safe.  [Pop quiz: who holds the rights to “Silent Night”? “Joy to the World”? “Grandma Got Run Over By a Reindeer”? You may be surprised to learn that, in a 2002 lawsuit, a couple of radio stations were held liable to SESAC for more than $1 million for the unlicensed broadcast of those and a number of other, non-seasonal songs controlled by SESAC.]

SESAC ups the pressure on radio stations by actively and aggressively threatening stations with hefty copyright infringement fines for broadcasting SESAC-represented works without a SESAC license.

SESAC limits the types of licenses it offers. For instance, ASCAP and BMI offer stations that play only a minimal amount of music a more accurate, and economically advantageous, “per program” license as an alternative to the “blanket” license.  By contrast, SESAC doesn’t offer that choice. To the contrary, SESAC requires an entirely separate license for webcasting (and for every separate HD side channel).   This problem becomes even more significant when one notices that SESAC has, on several occasions, raised the price of each of these licenses by between 5 and 10 percent.

The RMLC complaint helpfully summarizes its take on SESAC’s strategy:

SESAC ensures that it has exclusive rights to a critical mass of ‘must have’ works so that entitles like RMLC’s members cannot avoid taking a SESAC license, but SESAC carefully restricts its choices to those affiliates who will generate the highest profits for the company.

As the RMLC sees it, the fact that SESAC has raised its rates significantly works to reinforce the illegal activities: with increased revenues squeezed out of broadcasters, SESAC can entice more copyright owners to switch from ASCAP or BMI to SESAC (or at least not leave SESAC for ASCAP or BMI) by offering those copyright owners more royalty revenue.

In the RMLC’s words:

SESAC is a cartel that has illegally monopolized an essential repertory of copyrighted music, that has quashed all competition with and among its 23,000 copyright holding affiliates, and that uses its monopoly to coerce the U.S. radio industry and other consumers into paying SESAC supracompetitive prices.

That’s a pretty strong and inflammatory accusation. But some numbers seem to support the RMLC’s claims. In just ten years prior to March 31, 2012 the number of composers represented by SESAC has increased from 8,000 to 23,000, and SESAC’s adjusted revenue has almost tripled, from $49 million to $144 million. 

Is this growth down to simple good business practices or illegal business practices? Remember that the complaint puts forth the plaintiff’s absolutely best case argument. We will continue to follow this and will report back as developments warrant.

The amount in question varies depending on a number of factors. Rates for PBS and its affiliates would be greater than those for NPR and its affiliates. They would also vary depending on whether the broadcast is a network program or the work of an individual affiliated station (with the latter costing less than the former). Context would also come into play: does the musical work in question appear in a “featured presentation”, or is it background or theme music (the former would be more expensive than the latter)?

The across-the-board increase is relatively small.   Regardless of PBS vs. NPR, network vs. individual affiliate station, feature vs. background/theme, the increase in every category tends to be no more than 2% over the corresponding rate from the previous five-year period. 

The CRB has invited comments on the NPR/PBS proposals. Those comments are due by July 26, 2012. Whether or not CRB receives any comments on this part of the puzzle, we expect it to include these PBS/NPR rates along with the proposed rates for other, non-PBS/non-NPR categories of stations that it announced last April.  

Those earlier proposed rates were not, of course, etched in stone and may be modified somewhat based on the few other comments filed in response to CRB’s April notice, although no major changes are expected. The other comments focused on the possible creation of a separate tier for very, very small noncommercial broadcasters.

We will, of course, keep you posted about any developments. Again, if you are a PBS or NPR affiliate, you’ll want to start figuring out how these rates will affect you and perhaps look closely at the actual proposed royalty rates now that we know what they are.

There were seven such agreements. In its latest notice, the CRB sets forth those proposals in a collection of proposed rules (actually, proposed changes to the rules found in 37 C.F.R. Part 381). They include eight separate grids of rates covering licensees of various types and sizes, in various markets, providing various types of programming. To say that there’s a lot of information to consider and digest here is a gross understatement.

Since the CRB’s notice (with all of its proposed rules, tables, rates and terms) has just been released, we can’t pretend that we’ve studied it carefully. But we will. In the meantime, here's a very early, very quick and dirty review of what we see as the high points: 

It’s unclear what is happening with regard to NPR and PBS stations. The rule that previously applied to this subset of noncommercial broadcasters has been removed and the space held open for future use. No explicit reason was given. It could be that NPR and PBS reached specific licensing agreement; could also be that these stations are just going to be treated as equals to their fellow non-college and university noncomms.

Those general noncommercial broadcasters will pay slightly more for performance of musical works (as would be expected) during the upcoming five-year period, but the change is not drastic. Also as expected, they will pay the same amount to ASCAP that they pay to BMI, with each of those entities receiving more per station than SESAC.   While smaller stations (according to their predicted 60 dBU contours) will pay about the same whether they are playing large amounts of music or not, there are distinct differences among larger stations, depending on whether those stations are music- rather than talk-focused.

There is also a slight increase for noncommercial stations affiliated with a college or university. However, the bigger change on this end is the elimination of a one-size fits all flat fee in favor of a tiered system that takes into account the size of the student body when determining payments to ASCAP and BMI (no such tiering exists for SESAC). However, even within this tiered system, smaller stations (those with an ERP of 100 watts or less) get a break.

Anyone who might be affected by copyright rates to be charged NCE broadcasters until the end of 2017 would also be well advised to dig into the CRB’s notice. With a paltry 30-day comment period, the sooner you get started on figuring out how the proposals could affect you, the better off you’ll be.

The most recent royalty term expired on December 31, 2009 without any agreement or court order setting the rates for 2010 and beyond. Past practice teaches that it takes a while to set the permanent rates. So preliminary agreements were reached to cover the period until new rates can be established by the U.S. District Court for the Southern District of New York. (That’s the court that must approve all ASCAP/BMI rates, thanks to a consent decree imposed a few years back to end anticompetitive practices of ASCAP and BMI. SESAC isn’t subject to that consent decree).  As we reported last January, those preliminary agreements set the “old” interim rates, which amounted to a 7% reduction from 2009 rates. 

Those initial preliminary agreements were really just short-term “bridge” measures designed to assure the continued flow of at least some royalty payments in the absence of any other payment arrangement. Those measures weren’t meant to last, and they didn’t.

Meanwhile, the RMLC continued working with the Court, ASCAP and BMI on two separate fronts. 

First, looking toward the long haul, the parties negotiated – and continue to negotiate – final royalty rates for the next full five-year period running until December 31, 2014. 

Second, they were also working on determining an appropriate rate for the interim period lasting from December 31, 2009 (i.e., when the last five-year term ended) until the rates covering the next period are set (i.e., when the negotiation mentioned in the preceding paragraph are concluded). As noted above, the initial 7% reduction announced last January was understood to be a bridge rate to keep money flowing into the ASCAP and BMI coffers until the parties had had a chance to come up with interim rates. (Got it? If not, check our blog from last January where we introduced this topic.)

As we reported back in May, the District Court established the interim rate to be paid by broadcasters to ASCAP. While broadcasters had initially agreed to pay $217 million industry-wide for short-term “bridge” purposes, the District Court decreed that the interim number should actually be $192 million. 

Lo and behold, BMI reached an agreement in late June that will reduce the interim royalties paid by the broadcast industry to BMI from $217 million (the initial “bridge” rate as of January) to . . . $192 million (the now-operative interim rate which will remain in effect at least through 2010).  Where they got this number isn’t too hard to figure out; we're not entirely sure why it took six weeks to get there.  

Here’s a joint statement issued by RMLC and BMI:

The Radio Music License Committee and BMI have reached an interim fee agreement in the radio industry’s rate making proceeding which began earlier this year. The interim fee agreement takes effect August 1, 2010, and calls for an industry fee reduction from $217 million to $192 million. (This follows BMI’s voluntarily agreeing to provisionally lower fees paid by the industry from $233 million to $217 million as of January 1, 2010).

The parties agreed to these terms in order to expedite court determination of an appropriate final fee retroactive to January 1, 2010. The agreement was reached by the parties without prejudice as to final fee consideration.

We’re also happy to provide you with a potential timetable for implementation. Broadcasters should have begun seeing a 10.8% average decrease in monthly billings in June, 2010 (over and above the prior 7% decrease instituted at the beginning of the year). The agreement with BMI is effective August 1; the exact decrease has not been set, but it is expected to begin with the August 2010 billing and be about 10% (again, over and above the prior 7% decrease).

ASCAP and BMI appear to be digging into their positions that they should be getting more money in the long haul – a position which is likely to prolong the negotiations relative to establishment of final rates for the 2010-2014 term. As a result, broadcasters may want to get acquainted with these current interim rates because, “interim” or not, those rates could be with us for some time to come.

The actual details – including when the reduction will be implemented and how it will be allocated on a per-station basis – should be announced in the near future. Check back regularly for our update. But here’s what we know now (thanks mainly to an update on the Radio Music License Committee website):

• Individual stations will pay less to ASCAP during this interim period than they paid in 2009;
• Though the now-discarded interim rate was imposed as of January 1, 2010, stations won’t get any money back for any “overpayment” so far in 2010 – that is, even though Judge Cote’s bottomline number is less than the previously-announced/now-superseded interim rate, and RMLC members will thus have technically overpaid some since January, anyone who overpaid should NOT expect a rebate check in the mail; instead the interim fee adjustments will be worked into your bill starting in June or July bill – so keep an eye out for that;
• This is temporary, applicable only until the permanent rate-making decision is issued by the District Court – and it’s subject to retroactive adjustment once that permanent rate is set.

Here’s what we don’t know:

• Just how much of a reduction any individual broadcaster will see in its individual bill from ASCAP and when it’ll first see that reduction;
• Whether broadcasters will see a similar reduction – or any reduction at all – from BMI (similar court proceedings are pending relative to BMI, so we may expect some decision on that point shortly);
• How long the interim rate will be in effect (it could be years before the permanent rate is set).

As we said, we’ll tell you more when we know more.

As we’ve discussed in the past, primarily in relation to webcasting, there exist two copyrights in any publicly-performed song.  One is the copyright in the underlying “musical work”, i.e., the song itself (consisting of the music and lyrics). That copyright is generally owned by the songwriter (although it may be transferred to, e.g., a publishing company).  The other – which is not at issue here – is the copyright in the “sound recording”, i.e., the particular version, or performance, being transmitted at any particular time. That copyright, which is sometimes referred to as the “performance right”, is generally owned by the recording artist performing that particular version (although, again, ownership of the copyright may be transferred to, e.g., the record company). 

Songwriters – the folks who own the rights in the underlying “musical work” – are for the most part represented by agencies which collect and distribute royalties for the broadcast (or webcast) of their works. These agencies include ASCAP, BMI and SESAC (the Society of European Stage Authors & Composers).

Because of prior antitrust actions taken against them, ASCAP and BMI are covered by a “consent decree” administered by a United States District Court. Every few years, RMLC – a voluntary organization of individuals representing a broad range of the radio industry – renegotiates a new rate structure for payment of royalties by radio broadcasters to ASCAP and BMI.  (SESAC was not a part of the earlier antitrust action and, therefore, has separate negotiations with RMLC). The current rate structure applicable to the ASCAP- and BMI-administered copyrights expires on December 31, 2009. It is not certain that a new rate agreement will be reached and approved by the federal court prior to that expiration date.

Stations that have already given authorization to RMLC to negotiate on their behalf are automatically covered by any rate agreement that is reached for January 1, 2010 and beyond, as well as the rate agreed upon to “bridge” the period between December 31, 2009 and the commencement of that new term. 

Any radio broadcaster that has not yet given such authorization to the RMLC can still do so, in which case any agreements will automatically apply to that broadcaster as well. Broadcasters who, for whatever reason, would prefer not to authorize RMLC to negotiate on their behalf may also sign a direct agreement with ASCAP and/or BMI in which the broadcasters agree to be bound by any new, post-January 1, 2010 terms and the terms of the “bridge period”. 

The letters which many broadcasters have been receiving in recent weeks are intended to make it easy for anyone still interested in signing up (whether with RMLC or ASCAP or BMI) to do so.  

We cannot provide general advice via this blog, but radio broadcasters who receive such a letter from RMLC, ASCAP or BMI should feel free to contact us if you have any questions.