MusicFirst

It seems like every few months there’s a new copyright-related issue popping up on radio’s radar. Here’s a rundown of radio’s royalty puzzle pieces currently in play.

The Performance Royalty: The radio industry has successfully beaten back efforts to abolish the decades-old exemption that keeps AM/FM airplay free of any required royalty payments. But the music industry hasn’t given up its fight. Legislation is expected to be filed in the coming months that would, among other things, change that reality. The radio industry’s lobbying efforts have prevented such bills in the past and a similar strategy is already underway in Congress. So far, 129 House members—more than half the number needed to block a bill—and 15 Senators have gone on record opposing a performance royalty. The music industry is urging other lawmakers to hold off from announcing their support for radio until they’ve heard the other side’s argument.

Pre-1972 Recordings: AM/FM radio doesn’t pay any royalties on over-the-air broadcasts but it does pay royalties for any programming it streams. That, however, only covers music recordings after Feb. 15, 1972. Songs recorded prior to that date are royalty-free. Several classic hits artists, most notably Mark Volman and Howard Kaylan—a.k.a. Flo & Eddie, frontmen of the Turtles—have led the legal battle to change that based on state copyright laws. The jury is still out on their effort, so to speak. Flo & Eddie reached a $99 million settlement with SiriusXM Radio in California after a judge greenlighted their case to go forward. But an attempt to win a royalty in New York was unsuccessful when the court said the state’s common-law copyright has never recognized a right of public performance for pre-1972 sound recordings. Legal experts say a discrepancy between the California and New York courts, as well as a pending suit in Florida, increases the odds of the case landing in front of the U.S. Supreme Court.

Court Reviews Department of Justice Consent Decree Decision. The Department of Justice’s decision to leave in place the consent decrees that govern how ASCAP and BMI negotiate rates with radio was praised by most broadcasters. But a new 100% “full-work” licensing requirement was slammed by the music industry, which is fighting the new mandate in court. If the rule goes into effect it would allow a rights holder to license a song even though not all the songwriters on the track are represented by the same performance rights organization—as long as they all split the revenue. If the courts block that rule, however, it could upend broadcasting’s royalty model since companies would be forced to strike narrowly tailored deals with each PRO.

GMR Starts Collecting From Radio. Global Music Rights remains locked in a pair of antitrust lawsuits with the Radio Music Licensing Committee (RMLC) over how rates are set by the upstart performance royalty organization. In the meantime, hundreds of stations have started paying this fourth PRO, which now sits alongside ASCAP, BMI and SESAC. The GMR rate is said to be about one-third what stations pay to ASCAP and BMI. Under the terms of a court-sanctioned agreement the interim deal remains in place through Sept. 30. Depending on how GMR’s case works out it could encourage other new entrants to jump into the scene, further complicating radio’s music licensing framework.

Radio Reaches an ASCAP Deal. A rare bright spot for the radio industry: RMLC and ASCAP struck a voluntary agreement without needing a federal judge to get them across the finish line. No terms have been disclosed but the deal is said to have modestly increased station fees from the previous 1.7% of revenue rate to a fee structure that charges 1.73% in the early years of the new deal and escalates to 1.75% by the end of the five-year term. The previous deal signed in 2012 lowered what broadcasters paid to ASCAP members by $500 million.

BMI and RMLC Agree to Interim Rate Terms. After months of negotiations resulted in a stalemate, BMI petitioned a federal court in New York to step in and work out a deal between the performance rights organization and the radio industry. A step toward that resolution occurred Friday when the RMLC agreed to an interim 1.7% rate—the same as BMI has been charging stations under the industry’s now-expired agreement with the performance rights organization.

SESAC Standoff Goes to Arbitration. While SESAC isn’t covered by the consent decrees that oversee ASCAP and BMI negotiations, it settled an antitrust lawsuit brought by RMLC, allowing for rate setting to go before an arbitrator if the two sides can’t work out an arrangement on their own between now and 2037. That’s where things currently stand as the two sides are now in a binding arbitration process working toward a three-year royalty deal retroactive to Jan. 1, 2016. Complicating matters was the recent sale of SESAC to the private equity firm Blackstone Group—the second sale of SESAC in less than four years. Most stations are paying an interim rate that’s on par with the previous agreement.

Congress Considers Copyright Reform. As if broadcasters didn’t have enough on their royalty plate, there’s a move afoot in Congress to potentially change the rules of the road. House Judiciary Committee chair Bob Goodlatte (R-VA) is pressing forward with his multiyear effort to update U.S. copyright law. But in a speech this month, Goodlatte said they plan to begin these efforts with reforming the Copyright Office itself, rather than delving into specific thornier issues—such as music licensing.