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SESAC settles anti-trust dispute with US radio industry

By | Published on Friday 24 July 2015


As the regulation of the US music publishing sector’s main two performing rights organisations – BMI and ASCAP – continues to be reviewed by the country’s Department Of Justice, the smaller commercially-owned PRO – SESAC – has reached a settlement with the Radio Music Licensing Committee which includes agreeing to allow a third-party arbitration panel to settle future royalty disputes.

Under their so called consent decrees, BMI and ASCAP’s licensing deals with broadcasters, concert promoters, club and bar owners, and so on, are all subject to the intervention of the rate courts, which have the power to set royalty rates when the societies and licensees cannot agree.

The consent decrees are designed to overcome the competition law concerns of collective licensing, ie when large numbers of rights owners license as one. Collective licensing is similarly regulated elsewhere in the world, though the consent decrees in America have been particularly criticised as being inflexible in the rapidly evolving digital music industry.

But SESAC, as a much smaller PRO in the US, has never been subject to a consent decree, though has nevertheless been accused by some licensees of anti-competitive practices. Even though if radio stations had to negotiate directly with the music publishers, the majors would have a much bigger market share than SESAC, so could make similar if not bigger deal demands without any of the anti-trust controversy that surrounds PRO licensing.

But nevertheless, SESAC is always nervous when faced with anti-trust litigation, given the precedent any ruling against it could set, which provides an incentive to settle. And last year it did indeed settle with the Television Music Licensing Committee, while a deal was finalised with the Radio Music Licensing Committee this week.

Both see SESAC agree to third party arbitration on royalties, though the rights body stresses any arbitrator will be very much focused on what is a fair commercial value for the song catalogue SESAC represents; the BMI and ASCAP rate courts having been often accused of ignoring market rates when ruling on what licensees should pay.

Under the deal with the RMLC, SESAC will cover the radio industry group’s legal costs in the dispute to date, though it says that that bill, $3.6 million, is less than what it would have cost to fight the litigation in court. No damages will be paid, so the settlement is more about the two parties agreeing a framework for future licensing negotiations. The RMLC, meanwhile, will kill its lawsuit.

RMLC’s Vice Chairman John VerStandig hailed the settlement as a victory, telling the New York Times: “This settlement effectively bars SESAC from arbitrarily seeking unreasonably high rates from a radio operator at the risk of copyright infringement exposure”.

But SESAC spun the deal as a win too, noting that it “secured commercial arbitration for the next 22 years as the basis for setting SESAC’s license fees for commercial radio stations represented by the RMLC”. CEO John Josephson added: “This guarantees a level playing field in establishing the fair market value of our creators’ musical works for the broadcast radio industry”.

SESAC, of course, is busy getting involved in the mechanical as well as performing rights of the US music publishing and songwriter community by acquiring the Harry Fox Agency. Which will likely make it even more prone to allegations of anti-competitive behaviour, especially if the US publishing sector manages to persuade Congress to reform the various compulsory licenses that cover mechanicals Stateside.