Show Me the Money!

Broadcast Music, Inc. (BMI) is at odds with the Radio Music Licensing Committee (RMLC) over royalty rates for the songwriters and composers it represents. For those of you who don’t know, BMI is one of the Performance Rights Organizations (PRO) that collects public performance royalties for the rights holders of musical compositions – songwriters, composers and publishers. BMI is subject to a consent decree entered into back in the 1940’s. The decree provides for compulsory licenses of musical compositions and judicial regulation of royalty rates for songwriters to license their music, so that if an entity who wishes to license music from BMI is unable to come to an agreement as to the royalty rates payable to BMI for the licenses, the rates are then determined by a federal court judge in the Southern District Court of New York.

The RMLC represents around 10,000 radio stations nationwide, and everyone knows how important radio play is to an artist’s career. RMLC wants to license BMI’s catalog, BMI definitely wants to grant it the license, but on terms that are more favorable to its artists.

Now, Global Music Rights (GMR) is a fairly new PRO as it has only been in existence for about 5 years. It was founded by Irving Azoff, former Live Nation chairman. Since its inception, GMR’s goal has been to secure higher royalty rates for its songwriters. Some artists that GMR represents are Jay-Z, Bruno Mars, and Smokey Robinson, while also administering over 33,000 works, including those of Adele, Madonna, and the Beatles. Unlike BMI, GMR is not subject to the judicially monitored consent decree, so if RMLC wants to license songs from its catalog, it has to negotiate and deal with GMR solely and directly.

So, BMI, in its dispute with RMLC has subpoenaed GMR’s negotiated license agreements, internal market analysis, detailed revenue and compensation data, among other things. GMR is not a party to this action and seemingly has nothing to do with the dispute. However, BMI’s position is that the royalty rates agreed upon by RMLC in transacting with GMR provides important evidence in establishing the market rate for royalty rates for licenses of this nature. GMR responded with a motion to quash the subpoena, taking the position that BMI is its competitor and is essentially requesting access to the “heart and soul” of GMR’s business. Of course, BMI subsequently opposed the motion citing that GMR’s reason for withholding the information is to suppress the rates that BMI is able to charge to its licensees.

ASCAP and RMLC recently came to an agreement with regard to royalty rates and BMI firmly believes that GMR’s market share has grown disproportionately at ASCAP’s expense, so it doesn’t even want the court to consider the ASCAP settled upon royalty rate as it is unreliable. BMI believes that the free market negotiations that take place between GMC and RMLC are better indicators for determining royalty rates.

I tend to agree. How else can one determine the fair market price of something without consulting the actual fair market price of something? ASCAP and BMI are bound to these consent degrees, so their rates, when no agreement is met, are determined by the courts who then have to use market analysis to determine a fair royalty rate. I don’t think a prior royalty rate that was judicially decided suffices as market analysis, even if the market rate was considered in making the decision, because other factors could have very well been at play in coming to a decision. At a first glance, it seemed very odd for BMI to subpoena its competitors documents when they were not a party to the dispute, but it was actually very smart on their part. I mean, here you have a PRO who is unregulated and able to freely negotiate the same types of licenses as negotiated by ASCAP and BMI. It’s a no brainer. Their negotiations and license royalty rates adequately represent the going rate for licensing musical compositions.

There does need to be some sort of limitation on the information subpoenaed though, so not to give BMI or RMLC an unfair advantage moving forward. But I’m sure the judges are more than capable of determining via Ex Parte hearings and motions which information should be divulged to the parties and which information is immaterial to the issue at hand.

This is all very interesting to say the least, and another indication that the Music Modernization Act needs to hurry up, tighten up and become law.

Stay tuned…