Business News Labels & Publishers Legal

BMI files legal arguments against a combined radio royalty rate court hearing with ASCAP

By | Published on Tuesday 12 July 2022


US collecting society BMI has filed court papers seeking a ruling that confirms that the American radio industry cannot force a single rate court hearing to consider what royalty rates should be paid to both it and rival society ASCAP.

The Radio Music License Committee – which reps the US commercial radio sector in music licensing matters – last month filed a motion with a court in New York seeking an unprecedented combined rate court hearing that would involve both BMI and ASCAP.

To have access to the full songs repertoire, radio stations in the US need to secure licences from at least four collecting societies which all represent the performing rights of their respective members, those being BMI and ASCAP – the big two – and smaller societies SESAC and GMR.

The big two are regulated via so called consent decrees, which are basically agreements with the US Department Of Justice to overcome the competition law concerns created by collective licensing. Each of those consent decrees sets out a process for when users of music can’t agree a royalty rate with the society, that process resulting in rate court proceedings.

Until recently, one judge always oversaw BMI rate court proceedings, and another judge always oversaw ASCAP rate court proceedings. However, the 2018 Music Modernization Act – which made a number of reforms to US copyright law – introduced a new system under with one of a team of judges is randomly assigned to each new rate court dispute.

The RMLC is now trying to use that change to the system to get a single hearing to consider what royalty rates it should pay to both BMI and ASCAP. However, the music community fears that such a combined hearing would simply pit BMI against ASCAP, ultimately pushing the overall rates paid into the music industry down.

For example, because there are multiple collecting societies representing the performing rights of songwriters in the US, one element of the negotiations between the societies and licensees is market share. Basically, where a licensee has a revenue share arrangement with the music industry, what percentage of revenue is allocated to each society is usually influenced by the society’s share of the market.

Quite how market share should be calculated often proves to be controversial. And with a combined rate court hearing, rather than the argument over market share being between a licensee and a society, that argument could end up being between BMI and ASCAP.

Both societies quickly criticised the RMLC’s bid for a combined hearing. And now BMI has presented the legal arguments for why such a combined hearing is not allowed under the rules of its consent decree.

In its legal filing from last week, BMI reviews how the current rate-setting provisions in its consent decree were introduced in the 1990s. When those provisions were agreed, it says, a key condition on BMI’s side was that “the decree require that all BMI rate proceedings be entirely separate from any rate proceedings for ASCAP, and that any judges, magistrates and special masters overseeing ASCAP’s rate proceedings would be different than judges, magistrates and special masters overseeing BMI’s rate proceedings”.

Neither the US government nor users of music objected to that condition, the society adds, and as such it was “incorporated in article thirteen of the consent decree”. Not only that, but “contemporaneous filings show that every commenting party, including the RMLC, understood BMI’s condition for submitting itself to rate court to be the separation of rate courts for BMI and ASCAP”.

BMI’s filing then anticipates arguments from the RMLC to the effect that the MMA changed that system. But not so, reckons BMI. “The MMA did not change the terms of the decree”, the society counters. “It simply modified the administrative assignment procedures for rate cases by randomising the selection of separate judges for BMI and ASCAP rate proceedings”.

“Nothing in the MMA suggests that it overrides the consent decree’s requirement that rate court proceedings for BMI and ASCAP be separate”, it goes on. “To the contrary, in setting out the new process for the assignment of judges to preside over rate determination proceedings, the MMA expressly prohibits proceedings from being assigned to a judge who is already overseeing a rate court case, or who has jurisdiction over either the BMI or ASCAP consent decrees, thus preserving, rather than eliminating, the separateness of the BMI and ASCAP rate proceedings”.

With all that in mind, “BMI seeks a ruling that the consent decree should be interpreted consistent with its language, as plainly written and as understood by the parties and the court at the time of the rate court provision’s adoption. BMI and ASCAP rate-setting proceedings must be separate; they cannot be before the same judge in separate proceedings; and they certainly cannot be consolidated in a single proceeding before the same judge”.

We await to see how the court now responds.