|The History of Television Music Performance Rights
There are a number of separate copyrights in music, but the history of ASCAP, BMI, SESAC and the Television Music License Committee involves only one, the “small” or “non-dramatic” public performance right. For further information on music copyrights, click on “copyright basics.”
The Creation of ASCAP
The right of copyright owners to control the public performance of their music was first established by Congress in the late nineteenth century. In 1914, a group of composers and publishers formed ASCAP (American Society of Composers, Authors and Publishers) to enforce their small performance rights, and to create a joint pool of musical compositions that could be sold in bulk to music users. Soon thereafter, ASCAP created the so-called “blanket” license that gave the user the ability to utilize any musical composition within its entire repertory by paying a single license fee to ASCAP. ASCAP was then responsible for distributing these payments to its members. Since most performances were “live” at the time (which made it difficult for composers and publishers to keep track of performances of their works and for music users to obtain music performance rights directly in a timely manner), this blanket license made sense for both users and composers.
In ASCAP’s early days, composers had to “qualify” for membership in ASCAP by establishing themselves as songwriters or by being represented by a publisher member. Since ASCAP was the only performing rights organization (“PRO”), its member publishers and composers had significant control over who could profit by writing music for public performance, and since ASCAP was the only significant source of music, ASCAP had tremendous leverage in licensing negotiations with users. ASCAP’s aggressive use of this leverage led the United States Department of Justice (“DOJ”) to commence antitrust actions against ASCAP beginning in the 1930s.
In 1939, radio broadcasters decided that ASCAP’s demands for compensation were too high and its limitations on membership were too restrictive. As a result, the radio broadcasters formed their own PRO, Broadcast Music, Inc. (“BMI”). BMI provided radio broadcasters and other music users with an alternative source to ASCAP for music performance rights, and offered composers open enrollment.
The 1941 ASCAP and BMI Consent Decrees
In 1941, the Department of Justice sued ASCAP again for violations of the Sherman Antitrust Act. The result of this suit was a voluntary Consent Decree in which ASCAP restricted its operations and agreed to government oversight of its relationships with composers and publishers and music users. The Consent Decree provided that ASCAP could not obtain from composers and publishers of music the exclusive right to license performances of their works; it could not seek payments for programs that did not contain ASCAP music; it was required to offer radio broadcasters meaningful per program licenses and network licenses; it could not discriminate between users who were “similarly situated”; and it was required to distribute royalties to its members in a “fair and non-discriminatory manner.”In the same year, BMI signed a similar Consent Decree. The provisions of the 1941 BMI Consent Decree were almost identical to those of ASCAP’s 1941 decree.
The 1950 ASCAP Amended Final Judgment
A number of things happened during the 1940s that caused the Department of Justice to amend the ASCAP Consent Decree in 1950.
First, television developed as a commercial medium, and ASCAP began licensing radio broadcasters, who were the owners of the first television stations, to perform music in their television programming.
Second, ASCAP’s licensing practices concerning motion picture theater exhibitors were declared unlawful. ASCAP had begun licensing motion picture theater exhibitors in the 1920s during the “silent movie” era, when the only music performed in a theater was played live (such as by a piano player). Because theaters did not know in advance what music was going to be played, it made sense to cover these performances under a blanket license in order to avoid any question of copyright liability. Even after the creation of “talking pictures,” in which music was pre-recorded with the motion picture, ASCAP continued to license performance rights to the motion picture theater exhibitors. Thus, when a motion picture theater exhibitor received a movie from a producer, all of the rights needed for that exhibitor to display the film came “in the can” of film, except for the music performing rights.
In the 1948 Alden-Rochelle case, the court found that ASCAP was in violation of the Sherman Antitrust Act in its dealings with motion picture theater exhibitors. The Court decided that the practice of withholding performance rights from movie producers in order to require licenses from movie theater exhibitors (who had no control over the music in the films they displayed) was unlawful. ASCAP was enjoined from licensing motion picture theater owners, and ultimately, ASCAP’s members were forced to negotiate directly with movie producers for payment of music performance rights in films shown in movie theaters.
Third, although the 1941 ASCAP Consent Decree prohibited ASCAP from entering into “exclusive” arrangements with composers and publishers, ASCAP had created a series of rules and restrictions on its members that had the effect of granting to ASCAP exclusive rights to license performances of its members’ music.
Among the 1950 revisions to the ASCAP Consent Decree were provisions that strengthened composers’ and broadcasters’ rights. Most notably, the Amended Decree established a “rate court” affording users the protection of automatic licenses and freedom from copyright infringement concerns, as well as the right to ask a court to set “reasonable” fees for ASCAP licenses in the event that ASCAP and such users were unable to reach an agreement.
Interestingly, although the 1950 amended ASCAP Consent Decree (referred to as the “Amended Final Judgment” or “AFJ.”) carried forward the Alden-Rochelle injunction preventing ASCAP from licensing motion picture theater exhibitors, this limitation did not apply to films or other pre-recorded programs broadcast on television. ASCAP was able to convince the government that these limitations should not apply to the new television industry at least in part because television was still a live medium.
Television-ASCAP License Agreements
The first ASCAP television licenses were negotiated in the 1940s. ASCAP initially offered free licenses to television broadcasters. In 1948, ASCAP notified the broadcasters that it was terminating the free licenses and the National Association of Broadcasters (NAB) formed a separate committee to negotiate music licenses for television stations. In 1949, the parties reached agreement on an ASCAP blanket fee of “radio plus 10.” This license fee mirrored the radio percentage of revenue license at 2.25% and also included a 10% surcharge. This was the beginning of a long, contentious and litigious relationship between television stations and the music licensing organizations.
The Voice of Alabama Proceeding
In 1949, the NAB appointed a subcommittee (the “All-Industry Television Station Music License Committee” or the “Television Committee”) to negotiate with ASCAP over the terms of a new form of license — a per program license — for local television stations. The Committee was unable to reach an agreement with ASCAP and, in 1951, commenced a rate court proceeding under the provisions of the recently amended ASCAP Consent Decree (known as the Voice of Alabama proceeding).
While the Voice of Alabama proceeding was pending, ASCAP and the Television Committee reached agreement on ASCAP blanket and per program licenses for the local television industry running from 1954 to 1961. Both blanket and per program license fees under the Voice of Alabama agreement were based on a percentage of revenue, with the per program rate set at more than four times the blanket rate. Since ASCAP music was included in most programs and the per program rate was so high in comparison to the blanket license, virtually no television station used the Voice of Alabama per program license.
Throughout this early period of television, BMI’s share of music was smaller than ASCAP’s share. BMI’s licenses were similar to ASCAP’s but at a lower percentage of revenue rate.
The Shenandoah Proceeding
In 1961, the Television Committee requested a license from ASCAP that excluded all pre-recorded syndicated programming from the scope of ASCAP’s local television licenses. That would have put the burden of obtaining the rights to perform music in these programs on the programs’ producers (as had previously been required in the motion picture theater exhibitor industry in the Alden-Rochelle case). ASCAP declined to offer such a license, and the rate court refused to require ASCAP to issue this type of license to television broadcasters. In 1964, the broadcasters filed a “reasonable fee” proceeding in the ASCAP rate court (known as the Shenandoah proceeding). Once again, the broadcasters settled with ASCAP before trial. The 1969 Shenandoah settlement resulted in an agreement with extensions that lasted from 1968 through 1977. The Shenandoah agreement had the same per program fee as the Voice of Alabama agreement and continued to set blanket fees as a percent of station revenues (albeit at a somewhat lower rate than the prior agreement).
The CBS Antitrust Suit
Also in 1969, CBS filed a suit against ASCAP claiming that the blanket license was a price fixing scheme that constituted a “per se” violation of the antitrust laws. The district court, finding that CBS had realistic alternatives to the blanket license (because CBS was “the giant of the world in the use of music rights,” and”copyright owners would line up at CBS’ door if CBS were to seek music performing rights licenses directly from composers and publishers”), concluded that the network television license did not constitute an unlawful restraint of trade.
The Second Circuit Court of Appeals reversed this decision, but the United States Supreme Court ruled in 1979, in BMI v. CBS, that the blanket license was not a “per se” antitrust violation and sent the case back to the lower courts. The appeals court this time determined that CBS had failed to prove an antitrust violation.
The Buffalo Broadcasting Antitrust Proceeding
In 1978, the year prior to the CBS Supreme Court decision, the Television Committee brought its own antitrust lawsuit, arguing that ASCAP’s and BMI’s blanket licensing in the local television industry was an unreasonable restraint of trade. The stations argued that, like the motion picture theater owners in the Alden-Rochelle case, they had no control over the music contained in the syndicated programs they received from third parties and were forced to take blanket licenses with ASCAP and BMI to obtain the rights to perform the music in these programs. Following trial, the district court entered a decision declaring that ASCAP’s licensing conduct in the local television industry had violated the antitrust laws and enjoining ASCAP from offering blanket licenses covering the stations’ syndicated programming. This decision was subsequently overturned on appeal. Adhering to the reasoning adopted in the CBS litigation discussed above, the court of appeals found that the stations had failed to show that they lacked “realistic alternatives” to the blanket license, including “source,” “direct” and “per program” licensing.
The Buffalo Broadcasting Rate Proceeding
After the reversal of the District Court’s decision in the Buffalo Broadcasting antitrust proceeding, the Television Committee commenced a proceeding in 1985 before the ASCAP rate court to establish reasonable ASCAP blanket and per program license fees for the local television industry. Specifically, the Committee sought fees for a local television blanket license priced at a fixed dollar amount (rather than under the percentage of station revenues structure of prior ASCAP-local television station blanket licenses); a sizeable reduction in overall industry license fees; and a “meaningful” per program license.
In 1993, Magistrate Judge Dolinger ruled in the Buffalo Broadcasting rate proceeding that stations were entitled to a blanket license that was not based on revenue. He set a fixed, annual industry-wide fee that established fees at a level significantly below that of the Shenandoah license and established a per program rate structure that allowed broadcasters, for the first time in history, to subscribe to an alternative form of license. While appeal of this matter was pending, ASCAP and the Television Committee negotiated the terms of blanket and per program license agreements that were based largely on Magistrate Judge Dolinger’s decision. These licenses covered the period 1985 through 1997.
In 1994, the All-Industry Committee changed it’s name to the Television Music License Committee.
BMI Shareholder Actions
After BMI and the Television Committee reached an impasse in their licensing negotiations in 1985, BMI threatened to bring copyright infringement suits against television stations for performing BMI music. Unlike ASCAP’s Consent Decree, BMI’s Consent Decree at the time did not contain provisions calling for automatic licensing/copyright infringement protection, or a rate court. Concerned shareholders (all BMI shareholders are broadcasters), assisted by the Committee, asked for a special shareholders’ meeting at which shareholder resolutions were to be offered urging BMI to continue licenses on an interim basis and to press the Department of Justice for the creation of a BMI rate court to determine fees. In an effort to thwart such initiatives, BMI sued the Committee for alleged violations of the antitrust laws. The court dismissed all of BMI’s claims in an opinion confirming the shareholders’ rights to have a voice in the future direction of BMI. BMI and the Committee ultimately reached agreement on license fees for the local television industry as a percentage of ASCAP rates.
Cable Television Rate Decisions
Two important cable television cases were decided in 1989 and 1991. In the Showtime rate proceeding, Magistrate Judge Dolinger set ASCAP fees for the Showtime and The Movie Channel television networks, using as a benchmark a prior BMI-Showtime blanket license agreement. In the Turner proceeding, the ASCAP rate court held that the AFJ required ASCAP to offer cable networks “through to the viewer” licenses (covering transmissions from the networks to the cable operators and from the cable operators through to viewers of the cable network programming). The rate court also ruled that ASCAP was required to offer cable networks per program licenses. Both of these decisions were upheld on appeal.
The Amended BMI Consent Decree
In 1994, BMI reached an agreement with the US Department of Justice modifying the BMI Consent Decree to provide for an automatic licensing mechanism and a rate court, modeled after the comparable provisions of the ASCAP Amended Final Judgment. The BMI Consent Decree amendments expressly stated that the judge with jurisdiction over the BMI rate court must be different from the ASCAP rate court judge.
The Fox Proceeding
In 1994, ASCAP sought to license the Fox Broadcast Television Network for performances of ASCAP music contained in the Fox network programming. Finding that the licenses of Fox’s local television station affiliates (those negotiated by this Committee) already covered performances of the music contained in the Fox network programming, the rate court ruled that ASCAP could not seek additional fees from Fox for these performances. The Court held that if ASCAP chose to license the Fox network programming at the network level, the local stations would be entitled to an appropriate reduction in their ASCAP license fees. While ASCAP was required to offer Fox a “network” license, Fox was not required to take such a network license and could place the burden of obtaining the rights to perform ASCAP music in Fox network programs on the Fox affiliates. None of the Fox, CW, MY Network or Ion networks have elected network licenses with either ASCAP, BMI or SESAC, and affiliates of these networks remain responsible for obtaining performing rights to the music in all of their programming, including their network programming. ABC, CBS, NBC and Univision have separate network licenses for their network programs.
The SESAC-Local Television Agreement
In 1996, SESAC and the Committee reached agreement for the first time on blanket licenses covering the entire local television industry. Prior to that time, SESAC had entered into license agreements through negotiations with individual television stations and groups. This agreement set industry-wide fees at flat-dollar amounts covering the period 1995 through 2000, and provided for arbitration between SESAC and the Committee in the event the parties were unable to reach agreement on blanket and per program license fees for future periods.
The Second Amended Final Judgment (“AFJ2”)
The ASCAP Consent Decree was revised again in 2001. This Second Amended Final Judgment (also known as “AFJ2”) expanded somewhat ASCAP’s obligations concerning licenses for the local television industry and extended these licensing obligations to ASCAP’s relationships with other users of its repertory. The AFJ2 also removed provisions of the ASCAP Consent Decree requiring ASCAP to get court approval for its royalty distribution system.
The BMI-Background Music Decision
In 2000, a group of users in the background music industry sought a ruling from the BMI rate court that BMI was required to issue to users a blanket license with a fee that would be reduced for any source or direct licenses obtained by the users (a so-called “blanket carve-out” license), What has since become known as the Adjustable Fee Blanket License (AFBL). These users also sought to require BMI to offer them quotations for “per piece” (i.e., individual) licenses, as the BMI decree requires with respect to non-broadcast users. The district court denied the relief sought as to the blanket carve-out license, but ordered BMI to offer per piece licenses. The court of appeals ruled in 2001 that, in addition to per piece licenses, the BMI rate court had the authority to set terms for a blanket carve-out license.
Current Status of Local Television Industry Licenses
ASCAP LICENSE FEES for 1998-2010
In April 1998, the local television industry’s ASCAP blanket and per program licenses expired, and after failed negotiations, stations commenced a rate court proceeding. In November 2004, just prior to the commencement of trial, ASCAP and the TMLC reached a negotiated settlement for local television station licenses for the years from 1998 through 2009. Under that agreement, the ASCAP blanket fees remained at the industry interim annual license rate of $98 million for the period from January 1, 1998 through November 30, 2004 and were reduced to an annual fee of $85 million beginning in December of 2004 through December 2005. The agreement provided that blanket fees for 2006 through 2009 were to be adjusted at the rate of inflation capped at 3% per year. The settlement also provided for modifications in the per program licenses beginning in December 2004, including a change in the formula used to determine per program fees. These new licenses included copyright coverage for television station digital signals as well as limited copyright clearance for music used on a station’s website. Under this agreement, final blanket fees for 2010 were set at $94.3 million.
FINAL ASCAP LICENSE FEES FOR 2010-1016.
In October 2009 ASCAP and the TMLC began negotiations on license fees and terms for a final license effective for a period beginning January 1, 2010. In December, 2011, TMLC filed for an ASCAP rate court proceeding to determine ASCAP license fees for the period beginning in January of 2010 through December of 2016. In June of 2012, ASCAP and TMLC reached agreement on licenses and fees for the period from 2010-2016. Blanket fees for 2010 and 2011 were set at the interim rate of $94.3 million and per program fees were also finalized at the interim level for those two years.
Beginning in 2012, ASCAP industry wide blanket fees were reduce to $91.5 million (a 3% reduction from 2011) for 2012-2014 and at $92 million for 2015 and 2016. Per program fees for those years were also revised downward based on a reduction in the per program multiplier factor, a key ingredient in the formula used to determine per program fees.
Two other critical elements were included in these licenses. The first broadened the coverage of the licenses by including all public performances broadcast on local television station channels (including multicast), streamed on station-affiliated websites or delivered as part of programming supplied by stations via mobile, wireless or any other digital platform on a through-to-the-audience basis. The second was an agreement to provide for an Adjusted Fee Blanket License for local television beginning in June of 2015. This license, the formula for which is currently being negotiated, will provide stations with the opportunity to reduce ASCAP blanket fees by direct or source licensing individual performances rather than having to clear all of the performances in a program in order to get any credit against the ASCAP license.
BMI STATUS: 2002-2010
In 2002, the TMLC reached a negotiated agreement with BMI on final blanket and per program license fees covering the period April 1999 though December 2004. In November of 2009, after several years of failed negotiations, TMLC filed for a rate court proceeding against BMI. In January of 2013, prior to the beginning of the rate court proceeding, BMI and TMLC reached a settlement for license fees for the 2005-2017 period.
Interim blanket fees of $85.6 million and per program fees for the interim period from 2005-2012 became final. Beginning in 2013, industry wide blanket fees were reduced to $78.7 million and will remain at that level through 2017.
Per program fees were also significantly reduced beginning in 2013. First, the per program base fee which had been set at the ASCAP blanket fee level ($91.5 million for 2012) would be set at the BMI blanket fee level of $78.7 million. In addition, the formula was changed to further reduce BMI per program fees and could result in a 20% reduction in these per program fees.
The broadened performance coverage included in the ASCAP licenses was also added to the BMI licenses and an Adjustable Fee Blanket License will become effective on July 1, 2014, six months prior to the ASCAP AFBL. As with ASCAP, the formula for the credit under this AFBL is still being negotiated.
SESAC STATUS: 2002-2009
In 2002, while an arbitration between SESAC and the Television Music License Committee was pending, the parties reached agreement on final SESAC blanket license fees for the local television industry covering the period 2001 through 2004. After expiration of this industry license on December 31, 2004, SESAC exercised its right to arbitrate reasonable industry-wide fees for 2005-2007. After a lengthy hearing, the arbitrators set industry fees for those years and also provided for the first SESAC per program license. Another first was the arbitrators’ decision that the industry fee would be allocated among stations based primarily on the amount of SESAC music used by individual stations. Both parties favored such a music use based allocation proposal, although they disagreed on how the formula should be applied.
At the end of 2007, the SESAC industry licenses expired. SESAC and the TMLC were unable to reach an agreement on terms for a new license, and SESAC elected to negotiate licenses with individual stations and groups rather than continue to negotiate with the TMLC. Unlike ASCAP and BMI, SESAC does not currently operate under a consent decree with the government so stations do not have the right to automatic licenses upon request, interim licenses, or a rate court proceeding to determine reasonable fees.
In November 2009, a group of broadcasters commenced an antitrust class action lawsuit against SESAC in federal court in New York, charging that local television stations are being overcharged for SESAC music in their programming as a result of anticompetitive practices by SESAC. Please see this website at https://tvmlc.com/sesac/update/ for a copy of the Complaint.
This class action suit is ongoing. For updates, please see https://tvmlc.com/sesac/update/.