RMLC and TMLC on collective rights management rules review

The producers and syndicators of programming obtain and license to the stations with which they contract all of the copyright and other rights necessary to broadcast the programming (including those for creative inputs such as a script, choreography, acting and directing), with the sole exception of the non-dramatic public performance rights to the copyrighted music therein.

Because of this historic practice, the local stations are themselves required to procure the necessary non-dramatic musical works public performance rights as a condition of broadcasting the programming they have licensed. Insofar as this imposition takes place after the music has already been irrevocably embedded in the programming, there is no meaningful opportunity for the stations to negotiate with the composers or publishers of that music over its value.

In addition, even in the cases where the radio station does have complete control over the music content it airs, as a result of the PRO’s longstanding refusal to provide complete and up-to-date repertory information in any usable form, the stations have no ability to definitively determine the right holders of the necessary performance rights.

Historically, local television stations were required by ASCAP and BMI to accept traditional blanket licenses conveying the rights, en masse, to their entire repertories of music, and to pay those PROs a percentage of their revenue, despite the fact that “there can be little doubt that the stations’ revenues are not a direct function of the ASCAP music that they utilize in their programming.” Moreover, the pricing structure of these blanket licenses was not related to either the extent of a television station’s actual use of a given PRO’s music or a licensee’s success in obtaining non-dramatic performance rights to a portion of the music it used through other licensing mechanisms.

More than 450 local television stations (out of approximately 1200) have availed themselves for the per program license from either of ASCAP and BMI (or both), and have at least partially controlled their music expense by, for example, entering into direct licensing transactions for the non-dramatic public performance rights to the musical works used in their locally-produced programming. In a more limited number of instances, viable per program licenses have enabled stations to secure licenses from third-party program producers that have secured performance rights from the right holders on the station’s behalf.

All told, these direct and source license transactions have resulted in stations and program producers paying millions of dollars directly to composers and publishers, all outside of the blanket license process. When stations and producers pay composers and publishers directly, they ensure that the public performance fees go to the creators of the music that is actually broadcast, as opposed to creators of other music. The PROs, on the other hand, are “black boxes” through which it is difficult, if not impossible, to trace the money they receive from broadcasters directly to the money they pay to any particular member.

Since the PROs are dominated by the publishers of popular songs, they have the incentive to bias their complicated allocation formulae in favor of popular songs, at the expense of television score. Owners of television score might prefer to license the performance rights to their works directly to broadcaster, but they will have no opportunity to do so if the broadcaster must double-pay for the direct license and the blanket license, i.e., as long as the broadcaster do not get full credit on their blanket fees for the cost of their direct licenses.

Prior to the outset of any rate-setting proceeding, the PROs have a dramatic informational advantage over any licensee insofar as the PROs have access to all of their agreements with myriad licensees along with the fees paid pursuant to those agreements. Licensees, on the other hand, have access to only those agreements to which they are a party. Access to such information is of critical importance as these license agreements oftentimes serve as the “benchmarks” on which the parties’ competing fee proposal are based.

Without this information, licensees would be extremely limited in their ability to provide the court with comprehensive analyses of market dynamics in aid of offering optimal benchmarks for the court’s consideration. Relatedly, prior rate court records demonstrate the importance of securing full information as to the circumstances of the user or user group involved in a rate dispute.