Tag Archives: AFBL

Brilliant Article DMX’s Rate Cases against ASCAP and BMI

I ran across the below article by Carly Olson, a 3L at Northwestern, about DMX’s rate proceedings against ASCAP and BMI.  Ms. Olson wisely (and prophetically) concludes that the Second Circuit should affirm the district court opinions in DMX’s favor.  I couldn’t agree more.  And, thankfully, neither could the Second Circuit!

Check out the article here.

Winning! Second Circuit Affirms DMX’s Rate Court Victories

It’s been a bad few weeks for ASCAP.  First, the Second Circuit affirmed Judge Cote’s decision in the MobiTV rate case.  Now, the Second Circuit has affirmed Judge Cote again, this time in the long-running rate dispute with DMX.  Adding insult to injury, the Second Circuit affirmed Judge Stanton’s decision in DMX’s rate dispute with BMI in the same opinion, which is provided below.

The BMI appeal was relatively straightforward–it argued that the direct licenses into which DMX had entered with music publishers for the right to publicly perform works in the publisher’s repertory wasn’t a reasonable benchmark for fee-setting.  BMI argued Judge Stanton should have used BMI’s agreement with Muzak, which was at a much higher rate, as the benchmark.  The Second Circuit disagreed with BMI (and agreed with Judge Stanton) that

The [direct licenses were ] not an unreasonable benchmark for DMX’s per-location licensing fees with ASCAP and BMI. It reflected the competitive market, was an appropriate valuation of the right to publicly perform the licensed musical works, and was consistent with the four factors that guide the selection of a benchmark (a comparable right, similar parties, similar economic circumstances, and whether the rate would be set in a sufficiently competitive market). … The right in question — the right to public performance — was comparable. The parties were also similarly situated.  Hundreds of music publishers and administrators agreed to the annual $25 per location royalty pool, and thus, the ASCAP rate court did not err in finding that the “collective decisions [of hundreds of publishers and administrators] to execute direct licenses [were] comparable to the decision [a PRO] makes in entering a license.” … While the economic circumstances of direct licensors differ from those of ASCAP and BMI, these differences were balanced by the additional compensation that PROs received under the district court’s rate formulas and “the degree of competition that the direct licenses inject into th[e] marketplace.” … Accordingly, in both cases, the district court did not err in finding that, for rights to publicly perform licensed musical works, direct licenses were more reflective of rates that would be set in a competitive market than blanket fees imposed by PROs on BG/FG music providers. (Internal citations omitted)

This holding, that direct licenses are more reflective of rates that would be set in a competitive market than blanket fees imposed by PROs, will have far-reaching implications for licensors and licensees beyond DMX and the background music industry.

The Second Circuit quickly dispensed with ASCAP’s contention that it was not required under its consent decree to offer an adjustable fee blanket license, holding that ASCAP’s consent decree (“AFJ2”) “permits blanket licenses subject to carve-outs to account for direct licensing, and we reject ASCAP’s claim that a blanket license with an adjustable carve-out conflicts with the AJF2.”

In affirming Judge Cote’s rejection of ASCAP’s fee proposal, the Second Circuit noted that “based on the testimony of ASCAP’s Chief Economist, it was not clearly erroneous for the district court to find that a static carve-out structure was anti-competitive and “inequitable” because it would effectively require DMX to pay more in total licensing fees and create incentives for DMX to abandon its direct licensing campaign.”

While some have declared Clear Channel’s deal with Big Machine as “groundbreaking” and “unprecedented,” the truth is that DMX and its rate court proceedings against ASCAP and BMI laid the foundation for Clear Channel’s deal.  All Clear Channel did was apply DMX’s model to terrestrial radio and webcasting.

The Second Circuit’s opinion is below
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Local Television Wins: BMI Must Offer AFBL

As I predicted here, Judge Stanton of the Southern District of New York has denied BMI’s motion that its consent decree does not require it to offer television broadcasters a blanket license the fee for which adjusts to reflect the degree to which a television broadcaster publicly performs musical works that it licenses directly from BMI-affiliated music publishers.  As is typical of his opinions, Judge Stanton quickly cut to the crux of the issue–is an adjustable fee blanket license a different kind of license or a traditional blanket license with a different fee structure?  Following the Second Circuit’s opinion in U.S. v. Broadcast Music, Inc. (In re AEI Music Network, Inc., 275 F.3d 168 (2d Cir. 2001), Judge Stanton concluded that an AFBL for broadcasters is still just a blanket license with a carve-out fee structure.

Judge Stanton’s opinion is below
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Local TV Responds to BMI’s Motion: “We’re Entitled to AFBL”

The TV Licensing Committee, through the named plaintiff in this case, WPIX, Inc., has filed its response to BMI’s motion arguing that it is not required to offer local television stations an adjustable-fee blanket license (“AFBL”) like the one DMX secured this past year.  The argument is decidedly straightforward.

(1) BMI is required to offer any user–including local television stations–a blanket license.

(2) Under United States v. Broadcast Music, Inc. (In re Application of AEI Music Network, Inc.), 275 F.3d 168 (2d Cir. 2001) (“AEI“), an AFBL is simply a blanket license with a fee structure that adjusts to reflect the degree to which a licensee has licensed the public performance rights to works within the BMI repertory directly from BMI-member publishers.

(3) Therefore, BMI is required to offer local television stations an AFBL.

As I noted before, BMI’s argument that its consent decree presents a local television station with a Hobson’s choice between a per-program license (that local TV claims does not work for them) and a traditional blanket license, the fee for which does not vary depending on the direct licensing activities of the licensee, is a difficult one.  As WPIX argues, the per-program alternative was inserted in BMI’s consent decree at the demand of the US government as a means of curtailing BMI’s market power, not as a shield behind which BMI can hide when a licensee requests an AFBL.

The brief is below:
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BMI Requests Ruling It Is Not Required to Offer an Adjustable-Fee Blanket License to Local Television

In the “saw this coming” category, BMI has filed a motion in the SDNY requesting a ruling that its Consent Decree does not require it to offer an adjustable-fee blanket license (“AFBL”) to local television broadcasters.  In late 2009, the Television Music License Committee (“TMLC”), which represents approximately 1,200 local television broadcasters in their negotiations with BMI, ASCAP and SESAC over the licensing of public performance rights for the music contained in all programming that isn’t supplied to the local broadcasters by ABC, CBS, NBC and Univision, filed a rate case against BMI seeking an AFBL like the one DMX has secured.  See WPIX, Inc. v. Broadcast Music, Inc., 09-civ-10366-LLS (S.D.N.Y.)

In its February 16 filing, which is provided below, BMI argues that its Consent Decree requires it to provide a per-program license to broadcasters but not to non-broadcasters and to provide an AFBL to non-broadcasters, but not to broadcasters.  According to BMI, because Sec. VIII(B) of its Consent Decree deals specifically with granting a per-program license to broadcasters, the operative language in Sec. XIV(A) regarding providing a license to “any, some, or all” of BMI’s repertory–the basis on which the Second Circuit concluded that BMI was obligated to provide an AFBL to the non-broadcaster applicant in United States v. Broadcast Music, Inc. (In re AEI Music Network, Inc.), 275 F.3d 168 (2d Cir. 2001)–does not apply to broadcasters.  According to BMI, when it agreed to modify its Consent Decree to add Sec. XIV in 1994, it did not intend to modify its obligations under Sec. VIII, which was part of the original 1966 version.

The significant hurdle over which BMI must leap, however, appears to be the logic underlying the AEI decision.  There, the Second Circuit reversed Judge Stanton’s ruling at the SDNY and found that an AFBL was a blanket license that differed only in way its fee is calculated.  BMI acknowledges that it still provides a blanket license to local television broadcasters, in addition to the per-program license it also offers.  BMI is apparently arguing that because it offers this per-program license, under which local television broadcasters can reduce fees to BMI by directly licensing some or all of its music needs, the fact that the Second Circuit concluded that an AFBL is exactly like a traditional blanket license but for its fee structure is irrelevant.  In other words, BMI only has to offer ONE form of license under which fees can be reduced through direct or source licensing.  For non-broadcasters, which aren’t entitled to a per-program license, BMI has to offer the AFBL.  For broadcasters, which are entitled to the per-program license, BMI doesn’t have to offer the AFBL–the per-program license is enough.

Unfortunately for BMI, Judge Stanton is still the presiding judge in the BMI rate court, so he will hear this motion.  Since Judge Stanton ruled in BMI’s favor in 2000 when this issue was litigated by a non-broadcaster only to be overruled by the Second Circuit in 2001, I’ll bet he will follow the safe route and cite the AEI decision as the applicable precedent and let the Second Circuit distinguish if they want.  I’ll also bet the Second Circuit won’t distinguish because the rationale of the AEI decision is the same here: the TMLC is requesting a blanket license–which BMI acknowledges it has to provide–that differs only in the manner in which fees are calculated.

BMI’s motion is here:
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