This week it was announced that the Radio Music License Committee, the organization that represents the commercial radio industry in its negotiations with performing rights organizations over the public performance rights in musical works (the musical compositions – the words and music to any song), had entered into settlement agreements with both ASCAP and BMI to settle rate court litigation over the amount of royalties to be paid by the industry for the period from 2022 through 2029. Rate courts, pursuant to the antitrust consent decrees under which both ASCAP and BMI operate, determine reasonable rates for music licensed by ASCAP and BMI if parties cannot voluntarily negotiate deals for the use of that music. Agreements between RMLC and both ASCAP and BMI expired at the end of 2021, so the commercial radio industry has been paying interim rates at the level of the prior agreements since January 1, 2022. Now both organizations have reached deals with RMLC for the rates for the next three years, and those deals include a “true up” for the difference between the old rates and the new rates for the period from 2022 through the end of 2024.
The rates for BMI are increasing from approximately 1.7% of a station’s revenue to the following levels:
- 2.14% for 2022 and 2023,
- 2.26% for 2024,
- 2.19% for 2025
- 2.20% for 2026, 2027, 2028, and 2029
The agreements also contain details about lower rates for stations that have significant talk or other non-music programming, and definitions of what constitutes “revenue” that is subject to royalties. Under the BMI agreement, the difference between the rates from 2022 to the end of 2024 under the prior agreement (2024 being the last full year for which station revenues have been reported) and that specified in the new settlement must be made up by monthly payments over the next 18 months, starting with payments in October 2025.
While the ASCAP rates have not been made public, we can assume that the increase is not as large as that for BMI, as BMI announced their rate increase as being one of “historic” size. But the ASCAP announcement does reference an increase. Stations should learn the details of that increase from private correspondence from ASCAP or the RMLC in the near term. Why would RMLC agree to these rate increases?
One of the likely reasons is the impact of the GMR rates. As many worried when those rates were adopted and broadcasters complained about their size, the amount of those royalties was important not just in terms of what would be paid to GMR, but also because the size of those payments for a catalog of music substantially smaller than that of either BMI or ASCAP (or SESAC for that matter) would likely be used by other PROs in arguments about increasing their rates. As rate court proceedings look to establish a reasonable market rate, they typically look to comparable deals to establish a “benchmark” as to what others are paying for the same rights. As GMR is receiving significant royalties for a small catalog of music, BMI and ASCAP were arguing that their much larger catalog should be valued at proportionally more – a position which, if adopted by the rate court, could have resulted in significantly higher royalties than even those agreed to in these settlements. We highlighted this effect when RMLC announced its recent settlement with SESAC, although the increase in rates paid to SESAC was apparently not of the same magnitude as those that will be paid to ASCAP and BMI under these new agreements. GMR’s success in achieving the royalty rates for artists that it represents has negatively affected the broadcast industry not just because of the amount of the royalties they are now receiving, but also because they have pushed other PRO rates higher – even though some of those PRO catalogs have shrunk because of the artists that have defected to GMR. In effect, broadcasters are paying more to ASCAP and BMI for less music.
Is there a solution to this problem of ever-increasing royalty rates? As we wrote earlier this year, the Copyright Office has commenced a review of performing rights organizations – particularly as the number of those organizations has increased. There are at least two other music royalty collectives that have been announced (though, so far, their catalogs have been limited), as well as collectives claiming performing rights to the underlying “composition” for spoken word recordings (see our article here on the spoken word collectives). What will happen with that report, given the uncertainty at the Copyright Office after the President’s firing of the Register of Copyrights, is unclear.
We have long suggested that, as royalty rates keep increasing for the same amount of music used by broadcasters, perhaps the solution is to establish a single unitary rate (see, for instance, our article here). Broadcasters would pay a set amount into a pot, and the rightsholders would argue over how much each of those organizations would get from that pot. That way, you don’t have multiple rightsholders, each controlling some limited but important copyright holders, holding up the broadcasters for ever-higher royalties for the same pool of music. As we noted in our article here, RMLC tried that approach in its proceedings with ASCAP and BMI, asking that these proceedings be consolidated so that ASCAP and BMI could each bear the burden of establishing what percentage of a fixed fee they should receive (see our article here). But that approach was rejected by the judge hearing the royalty case, as the Copyright Act and the consent decrees do not specifically contemplate a single proceeding with multiple PROs. Congress is likely the answer, though Congress does not like to get involved in copyright issues, and there would be powerful opposition to any such proposal. A unitary royalty would upend many companies established businesses (and BMI, SESAC, and GMR are now all privately owned for-profit companies – with ASCAP being the only non-profit remaining – so these owners are unlikely to favor any model that upends their business expectations), so this dream is not easily achievable.
In the interim, broadcasters need to start planning now for the higher royalties and the true-up payments that come with these deals. Broadcasters also need to carefully review these agreements to determine what revenue is subject to the royalites, and what is not. Also, we note that there are extensive provisions as to how these deals cover a broadcaster’s digital media performances – including podcasts. While these deals purport to cover podcasts, as we explained in our article here in connection with the last BMI agreement, the public performance rights granted by these licenses are not the only rights needed to use music in podcasts. We will try to cover that issue in greater depth in an article at a later date. But get your checkbooks ready to pay more under these new royalty deals.
