GMR Sues RMLC – Claims Antitrust Violations for Negotiating Royalties on Behalf of the Radio Industry – What Are the Implications?

Just a few weeks ago, we wrote about the Radio Music License Committee (RMLC) filing a lawsuit against Global Music Rights (GMR) alleging that GMR was violating the antitrust laws by offering an all or nothing blanket license for rights to play the songs written by certain songwriters now represented by this new performing rights organization. RMLC was seeking to impose some oversight over the rates being charged for GMR royalties. This would be similar to the controls over the rates of ASCAP, BMI and SESAC, whose rates can only be imposed following an agreement with a copyright holder or, where there is no voluntary agreement, by a determination by a court (for ASCAP and BMI) or an arbitration panel (for SESAC) that the new rates are reasonable. Now, GMR has filed its own lawsuit against RMLC (though it claims that its suit is unrelated to the one that RMLC filed against it) alleging that it is RMLC that is violating the antitrust laws (and certain California statutes) by forming a “cartel” of buyers, i.e. commercial radio stations who are refusing to deal with GMR individually but instead are looking to RMLC for the negotiation of a license agreement that will cover the entire industry. What are the issues presented by this dueling litigation?

The RMLC suit is premised on the concept that any time multiple products from independent marketplace competitors (in this case the songs of multiple songwriters) are packaged together and sold at an all or nothing price, there is the potential for obtaining prices higher than would be obtained on the open market. For example, while a contemporary hits formatted radio station could potentially decide that the price of Adele songs are too high and pull those songs from its playlists, it is not able to do so if that song is bundled with songs written by Pharrell Williams, Bruno Mars, Beyoncé, Kanye West, Brittany Spears and Katie Perry (all of whom are listed on the GMR website as being part of its repertoire) so that the radio station either takes all the songs from all of those writers or none at all. While it might be able to get away with not playing one or two of these artists, if it has to pull them all, listeners will notice. If the station wants to keep playing in the format that it has selected, it has to pay the bundled rights fee asked by the representative performing rights organization.

In the GMR complaint (thanks to Radio Ink for posting it here), it takes the other side of the argument – alleging that it can’t negotiate independently with individual radio stations, as all of the radio stations are looking to RMLC to negotiate on their behalf. The GMR complaint alleges that this is a “buyer’s cartel” that has the effect of forcing down the rates that will be paid by radio stations for GMR music, seemingly suggesting that, if it could negotiate one on one with radio stations, it could get higher rates. In some senses, this may be true, as many smaller stations unfamiliar with the music licensing world and threatened with statutory damages of up to $150,000 for each song that it plays without a license might well cave into demands for payments by an organization that represents big name songwriters. But is this really an indication that licensing prices are being depressed by the negotiations with RMLC, or is it merely a reflection of the market power that can be exerted against these stations by a company jointly negotiating on behalf of a group of big-name songwriters, as alleged in the RMLC complaint?

In reality, it is in everyone’s interest in the music community that there is this kind of joint negotiation between associations representing music users and rights organizations representing copyright holders. As most radio stations don’t have individuals at their stations familiar with music licensing practices, it is difficult to imagine the small station in Ottumwa, Iowa or Elko, Nevada, or Dothan, Alabama each negotiating with all of the songwriter representatives. With almost 16,000 radio stations in the country, without industry-wide negotiations, it would be an almost impossible job to negotiate licenses with every station individually. Similarly, stations benefit from having performing rights organizations that offer the works of many songwriters, as negotiating with individual songwriters and their publishing companies for each and every song that is played on the a broadcast station would similarly be an almost impossible task. Having industry associations negotiating on behalf of users and copyright holders provides incredible efficiencies – and works well, especially when the reasonableness of rates is determined by some outside body, putting checks on the bargaining power of both sides in the negotiations.

Other factors play into all of these issues. One concern that we have expressed in other articles is that of the fragmentation of the music licensing business. As set out in the GMR complaint, ASCAP and BMI each represent hundreds of thousands of songwriters and tens of millions of songs. GMR, on the other hand, represents less than 100 songwriters and only about 20,000 songs. If the GMR songwriters can withdraw from the big PROs and license at super-competitive rates, what is to stop other similar organizations from following the same model, or individual publishers to withdraw and to demand dramatically higher prices for their music (as has been threatened – see our articles here and here)? With the fact there are no comprehensive databases of who owns the copyright in what music, complicated by the issue of fractional licensing where there may be multiple songwriters each owning a part of a song which, if the Department of Justice’s position about 100% licensing is not adopted, it could effectively give holders of a small interest in a song the veto right over whether a song is played by a particular user (see our article here). It becomes very difficult for any music user to decide whether they can forego payment to any claimed rightsholder. The music licensing world becomes very complicated if others follow the path that is being blazed by GMR, and music licensing becomes further fragmented.

These are all broad issues that will no doubt lead to endless discussions on blogs and panels and in scholarly journals in the near future. And they are issues that may well be considered by Congress in the coming session in its promised review of the Copyright Act (see yesterday’s notice from the House Judiciary committee on its interest in reviewing the Act this year). But for the broadcaster who is trying to figure all this out, with the potential demands for licensing from GMR on January 1, 2017 when the withdrawal from ASCAP and BMI of much of the music that it represents becomes effective, what are stations to do? Unfortunately, I can’t give blanket advice to stations as to what to do, other than to urge them to educate themselves on these issues, and to consult their legal advisors as to the meaning of what seems to be a music licensing mess that lies before us (and perhaps say a little prayer that there is a last-minute settlement to these controversies that will allow everyone to go back to their normal business operations).