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

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.