Broadcast Music Inc. (BMI) has asked a federal court in New York to hike what radio stations pay for licensing music in its repertoire. Not only does the performance rights organization call its proposed rate hike “reasonable” but it said during the past six years there has been “erosion” in the promotional value of broadcast radio, which it blames for a decline in overall music sales. “Radio broadcasts no longer drive music sales, once a critical revenue source for BMI’s affiliates and a factor long considered a justification for lower rates payable to BMI,” it said in a filing in a New York federal court. It notes album sales declined 18% in 2017 while on-demand audio streams of single songs grew 59% over the same period. “In light of these changes, publishers can no longer rely on royalties from album sales to capture the full value of their copyrighted works,” BMI told the court.
BMI’s contention flies in the face of research from Nielsen, whose Music 360 report found the top source for music discovery is AM/FM “Over-the-Air” radio, with 49% of listeners saying this is where they turn for new music.
At the same time, BMI also said there has been “explosive growth” in digital streaming and HD Radio multicasts using its catalog of music. By BMI’s count more than 3,200 stations are streaming—a 48% increase during the past five years. “As a result of streaming and multicasting, overall music use by radio stations, including of music in the BMI repertoire, has increased dramatically,” it said, adding, “it is expected to continue to increase going forward.”
The frontal attack on radio’s promotional role comes in a filing in response to the Radio Music License Committee’s petition last week asking Judge Louis Stanton to begin the formal rate court proceeding after the two sides were unable to reach a new licensing deal for radio stations after more than a year of negotiations. BMI has proposed hiking the revenue rate to 2% for the new term, from the 1.7% revenue rate that stations had been paying under the industry’s previous deal—and raising it to 2.5% for online music use.
But citing what it contends is BMI’s reduced market share, the RMLC has counteroffered a lower 1.4% rate. The RMLC set the table in that debate in December 2016 when it struck a new deal with ASCAP that paid more to composers, authors and publishers in its repertoire based on the conclusion that as BMI’s rival, it had a growing share of what’s heard on the radio. “Put simply, BMI wants more for less,” the RMLC said in a petition filed with the U.S. District Court in New York.
BMI accuses the RMLC of using its “unchecked aggregation of buying power” to “distort” the music licensing marketplace. And while it has rejected the argument that its market share has shrunk – arguing its own analysis shows it has the biggest share of any performance rights group – BMI does acknowledge that radio stations have over the past few years also signed deals with SESAC and Global Music Rights. It tells the court that those deals include rates that are “significantly above” what BMI and ASCAP have historically been paid—and that’s how it calculated its proposed rate for the license term that will retroactively begin Jan. 1, 2017.
BMI Takes A Shot At ASCAP
Traditionally ASCAP and BMI rates have been nearly identical. Now the BMI court filing reveals a split between the two performance rights organizations when it comes to negotiating with the radio industry. BMI points out the Dec. 2016 agreement between ASCAP and the RMLC was “unprecedented” for never publicly releasing just how much radio stations were paying. It goes on to say that the ASCAP deal “remains tethered to historical assumptions about broadcast radio that are no longer true” and suggests whatever radio is paying ASCAP is no more useful a benchmark for a BMI license than the price of a rotary phone is an indicator of the value of an iPhone. “ASCAP has repeatedly sought to avoid litigation and instead has agreed to bargain basement deals that stand as outliers in an increasingly robust marketplace,” it said in the filing. “BMI is not bound by ASCAP’s perceptions of the marketplace, its outdated assertion of competitive market share, or the impact that its perceived litigation risks plays in its negotiations—nor is this court.”
With the BMI rate-setting decision now in the hands of a federal judge, RMLC member stations will continue to pay an interim 1.7% rate agreed to in February 2017.
Another wild card for the radio industry is what happens at the Dept. of Justice. The Antitrust Division is looking closely at the 1,300 consent decrees currently on the books for possible elimination, including the 77-year old agreements that dictate how ASCAP and BMI rates are set. Makan Delrahim, the assistant Attorney General who oversees the division, has called the current state of music copyright law “a mess” and put the blame on the consent decrees that were enacted in 1941 to prevent ASCAP and BMI from gaining too much market power.