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By Gregg P. Skall
Womble Carlyle Sandridge & Rice, LLP
No one in the radio industry could have missed the recent news that Global Music Rights (“GMR”) the new music rights organization, has now offered an interim license to broadcasters while it continues to work out a deal with the Radio Music License Committee (“RMLC”). The news came to broadcasters on Christmas Eve, December 24, in the form of a letter to broadcasters emailed from RMLC Chairman Ed Christian. The questions have been pouring in:
· Should I sign?
· What happens if I don’t?
· I thought I was covered by ASCAP, BMI and SESAC? I’m paying way too much now; so who are these guys?
This has been amply covered by the trade press, but just for review, here it is. Historically, broadcasters and most all music owners had been covered between ASCAP, BMI and SESAC. Then in 2013, Irving Azoff, Chairman of Azoff MSG Entertainment and manager for some of the biggest acts in music, signed a group of major-name music rights holders to GMR, making it a must-have license for most radio stations. Except for some large radio groups, broadcasters have avoided signing with GMR, and the RMLC Committee has been working to reach an agreement with them.
In November the RMLC sued GMR claiming it is an unlawful monopolist “deploying a calculated scheme to extort the U.S. commercial radio industry. GMR had implicitly threatened to start suing radio stations for copyright infringement beginning January 1, 2017 unless they agree to pay supra competitive rates for a license to play the copyrighted songs in GMR’s repertoire.” A few weeks later, GMR filed an antitrust case against RMLC, calling it an illegal cartel where powerful radio broadcasters and the RMLC agreed to artificially depress license fees, quoting the RMLC’s objective “to keep licenses for the commercial radio industry as low as [it] can possibly keep them.”
GMR had been stonewalling the RMLC, but the cross-filing of anti-trust complaints seems to have incented GMR to reengage with RMLC. With the January 1 deadline looming over all parties’ heads, GMR offered an interim nine-month license and the RMLC announced its availability on Christmas Eve. The interim license takes the immediate pressure off to allow negotiations to proceed, but broadcasters must sign-up for it by January 31 and pay the applicable license fee.
What to do?
So broadcasters across the country are asking what to do? The notice does not provide a fee structure for the interim period. To find out what it will be stations must contact, and therefore engage with, the GMR. If a station decides to just wait and see what comes of the RMLC negotiation, there is the risk of being sued. According to the RMLC notice, under the interim license, a station will not be subject to copyright infringement claims by GMR for the term of the interim license. Is that insurance?
The Crystal Ball
There is no way to know what GMR will do if a station does not obtain an interim agreement. It probably does not know itself. Given the careful wording of the RMLC notice, GMR may not want to start a lawsuit with any specific broadcaster during further negotiations with the RMLC. With two anti-trust suits already filed, it would seem to behoove negotiations to keep things calm while it seeks to firm up its permanent agreement. Moreover, assuming a permanent agreement is reached, GMR can then reach back and claim licensing fees for the period since January 31; so stations would be left in about the same position as if they had signed an agreement anyway.
Also, in the modern ownership world we now live in, the real money in music licensing lies with the largest 20 or 30 station groups. So it’s unlikely that GMR would go after one of the smaller community-based broadcasters and subject itself to the claim of bullying while incurring the expense and the distraction of the lawsuit. Anyway, given the speed of litigation, any such lawsuit would not be tried until after the conclusion of the interim extension period.
If you’re curious about the artists who have signed up with GMR, and it would help to make a decision, many of them are listed on the GMR website under the FAQ section. www.globalmusicrights.com/faqs. Scroll down to “What songs are in the Global Music Rights repertoire?” and you’ll find a list of over 200 of the most popular artists and performers of contemporary and past music. Songs can also be searched by title. It is pretty clear, though, that GMR has signed up the top music sources being played on the radio. But BE CAREFUL. Note that the section title is misleading! This is not a list of songwriters and authors who hold the copyright, but of “performers who have performed songs written by Global Music Rights’ clients.” Those performers may have never written a song, or may have recorded music that GMR does not represent. Still, many familiar with the issues have concluded that there is no effective way to screen out GMR music.
Even with a GMR license, beware. Another problem is that GMR does not guarantee full licensing of the music they represent. This problem, called “fractional licensing,” is presented when some but not all of the authors or copyright holders of a piece of music have agreed to be represented by the music rights organization. Thus, even if you obtain a license from GMR, it has been reported that they do not have representation rights to all of the partial copyright owners of some of their music. Performing that music, even with a GMR license, could still subject a station to a lawsuit.
So, let’s be clear. There really is no real legal advice to offer here. It boils down to each broadcaster making its own individual assessment of its tolerance for risk. The bottom line, is, that there is no bottom line! The ultimate decision as to whether or not to sign up for the interim license is governed by your tolerance for risk and the probability you assign to the likelihood that GMR might choose you to sue, or, for that matter, whether they will sue at all. Assuming that they reach an agreement with the RMLC it is likely to include the right to collect performance fees in arrears and, assuming that they do not achieve an agreement with the RMLC, GMR would pursue each station separately for arrearages as well.
The good news is that the stalling may be over and GMR is ready to sit down for a serious negotiating session with RMLC to reach a viable agreement. Perhaps we will learn more between now and the January 31 deadline.
This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.
If you missed Fletcher Heald & Hildreth's December webinar discussing the Radio Music Licensing Committee’s (RMLC) lawsuit against Global Music Rights (GMR), you can get to an audio recording of the entire webinar here.
You can also download a set of the presentation slides by clicking here.
If you have any questions on the music licensing front, don’t hesitate to call on the FHH copyright team. We are here to help!
The webinar answers questions such as:
• What is GMR?
• Why did the RMLC sue GMR?
• What might happen with that lawsuit?
• What should I do now and be prepared to do in the future?
The webinar is presented by FHH attorneys Kevin Goldberg and Karyn Ablin, who between them have over 40 years of experience in copyright and music licensing.
FHH presents the webinar in cooperation with our friends at a number of state broadcasters’ associations, including those in Alabama, Alaska, Arizona, Arkansas, Colorado, Louisiana, Maryland/DC/Delaware, Mississippi, Nebraska, New Jersey, New Mexico, New York, Oregon, Minnesota, South Carolina, Puerto Rico, Tennessee, Texas and Washington.
By December 1, every commercial and noncommercial educational digital television (DTV) broadcast station licensee must file an Annual DTV Ancillary/Supplementary Services Report Schedule 317. The report was previously filed in CDBS on Form 317. Since the launch of the FCC Licensing and Management System, the form is now filed in that system. Each station must report whether it provided ancillary or supplementary services at any time during the twelve-month period ending on the preceding September 30th.
Under Section 73.624(g), of the commission’s rules, ancillary or supplementary services are all services provided on that portion of the station's digital spectrum capacity or bitstream not needed to provide the required one free, over-the-air video broadcast signal to viewers, except for any video broadcast signal provided at no direct charge to viewers. Examples of such services include, but are not limited to, computer software distribution, data transmissions, teletext, interactive materials, aural messages, paging services, audio signals and subscription video.
If ancillary or supplementary services are provided, then each commercial DTV licensee must pay an amount equal to 5% of the gross revenues derived by the licensee. The fee is calculated on any subscription fee or charge required to receive the service or any payment or compensation received from a third party in exchange for the transmission of material provided by that third party. Excluded are revenues received for commercial advertisements used to support broadcasting for which a subscription fee is not required.
For those stations that have provided Ancillary/Supplementary Services and received consideration, the form requires reporting the amount of consideration received and the bitstream used. The form will then automatically calculate the fee due to the FCC.
Mid-term FCC EEO Reports on Form 397 will be due on December 1, 2016 for Minnesota radio stations with more than ten full-time employees and licensed to communities that are outside smaller markets. The Report covers full-time recruitment activities for the previous two years.
Under the smaller marketing exemption, a station is exempt from filing the mid-term report if it is licensed to a metropolitan area with a population of fewer than 250,000 persons or areas outside of all metropolitan areas as defined by the Office of Management and Budget.
Remember that EEO Reports are filed for Employment Units. An Employment Unit is comprised of commonly owned stations in the same market that share even a single employee, and includes time brokered stations.
The FCC Form 397 is a relatively simple report to complete, but requires that the local public file EEO report for each of the previous two years be included. Accordingly, reporting stations will have to attach in PDF format a copy of their local public file EEO reports for 2015-2016 and for 2014-2015. The mid-term report is required to be filed by radio stations with more than ten full-time employees. With fewer employees, a mid-term report is not required.