Federal Court Approves Radio Industry Settlement with BMI
August 28, 2012. New York, New York. Judge Louis L. Stanton, of the Federal District Court for the Southern District of New York, today approved a settlement that ends two years of litigation between the Radio Music License Committee (“RMLC”) and Broadcast Music, Inc. (“BMI”) concerning the fees payable by the U.S. commercial radio industry to publicly perform the more than 7.5 million plus musical works in the BMI repertoire through 2016. The RMLC represents the vast majority of the nation’s radio stations (some 10,000 radio stations).
The radio industry had faced a serious challenge in terms of restoring reasonable license fee levels during difficult economic times. License fees had ballooned to some 3% of industry revenues for each of BMI and ASCAP in the post-2008 environment. The settlement approved by the court today effectively rolls back annual industry fees payable to BMI by more than $80 million for 2012 (as against where they stood at the end of the prior license in 2009) and provides for a return to a revenue-based fee structure at a level of 1.7% of gross revenue. In addition, the new agreement covers (at the same 1.7% rate) the range of new media platforms in which the radio industry is increasingly engaged.
The new BMI license covers the period January 1, 2010 through December 31, 2016 and includes the following highlights:
· A $70.5 million industry fee credit against 2010-2011 industry payments that is immediately available to the industry (this, in addition to the industry’s retention of $40 million in fee reductions that had been voluntarily agreed to by BMI at the interim fee stage of litigation in calendar year 2010);
· A 1.7% of gross revenue fee structure for stations on the blanket music license format, less a standard deduction of 12% for revenue derived from terrestrial/analog and HD multicasting broadcasts and a 25% standard deduction for revenue attributable to new media uses;
· Retention of the program-period license that benefits many “news-talk” format stations, with a base fee of 0.2958% of gross revenue, less the same standard deductions; and
· Expanded rights coverage to accommodate the industry’s developing new media platforms related to Internet websites, smart phones, and other wireless devices.
The impact of this settlement was reflected in BMI’s June 2012 billing statements that reflected substantial fee decreases. For many stations, the resulting credit balance will carry through to the end of 2012 before it is exhausted. New BMI license forms will be made available to the industry shortly.
BMI License “FAQ’s”
1. What differentiates the Radio Station Blanket/Per Program and the Radio Group Transmisions License Agreement?
The Radio Group Transmissions License applies where new media transmissions are initiated by an entity that owns one or more commercial radio stations and where such transmissions would not otherwise be licensed under the Radio Station Blanket/Per Program License. For instance, the Radio Group Transmissions License is applicable to Clear Channel’s iHeartRadio transmissions that do not originate with a terrestrial radio station. The Radio Group Transmissions License is not to be used by radio station owners for the purpose of aggregating revenue reporting to BMI for multiple terrestrial radio stations.
2. What is BMI’s policy on Local Management Agreements (“LMA’s”)?
The BMI license agreements provide that, within thirty (30) days of entering into an LMA agreement, the station Licensee must provide a copy of the applicable LMA agreement to BMI and the Local Manager must complete and sign the form located at the bottom of the Radio Station Blanket/Per Program License Agreement (thereby, also making the Local Manager a legal party to the BMI license for the full period that the LMA is in effect). If the Licensee and/or Local Manager fail to meet this notice obligation on a timely basis, then BMI has the right to terminate the station’s license upon ten (10) days’ written notice to the parties. In the event that the LMA terminates prematurely, the Licensee and Local Manager must immediately notify BMI of the termination.
3. In the event of a change of station ownership, which party shall be issued credits due under the terms of the license?
The terms of the agreement reached between the RMLC and BMI provide for the radio industry to be credited $70.5 million (as against overpayments to BMI in 2010-2011). Each station’s share of the $70.5 million industry credit was reflected in BMI’s June, 2012 monthly statement. In accordance with past custom and practice, BMI issued these fee credits to the current Licensee of a station. In the event that a station is sold on/after June 1, 2012, and the seller has a credit balance through the date of sale, BMI shall pay the remaining credit balance in cash to the selling party, provided that the selling party provides written notice to BMI within a reasonable period of time following the date of sale.
In the event that payment to the selling party is not possible (including because the selling party no longer exists), the outstanding credit balance shall be credited to the account of the purchasing party, provided that (a) the purchasing party executes a license with BMI and (b) either the selling party or, if the selling party no longer exists, the purchasing party provides written notice to BMI within a reasonable period of time following the date of sale. The purchasing party must then indemnify BMI for any claims to the credit by the selling party.
4. When may my station elect to switch from a blanket to a program period license, or vice-versa?
Under the new BMI license, stations may make quarterly “license switch” elections. In other words, these elections may be effective January 1, April 1, July 1, or October 1 of any given year, upon forty-five (45) days’ prior written notice to BMI. The license election form is available at the “Forms” tab on this website (see BMI forms).
5. What is the BMI “standard deduction” policy with respect to stations that report revenue on a cash (as opposed to accrual/billings) basis?
Terrestrial & HD Revenue: Stations that report their revenues to BMI on a cash basis are not eligible to take the 12% standard deduction applicable to terrestrial/HD revenue reporting because, by virtue of maintaining records on a cash basis, these stations have effectively excluded items such as agency commissions that otherwise form the basis of the standard deduction (i.e., these stations are effectively limiting their reported revenue to only revenue collected).
New Media Revenue: As to new media revenue reported, the BMI license permits cash filers to take a standard deduction of 12.5% of revenue reported (or one-half of the otherwise applicable 25% standard deduction for stations that report on an accrual/billings basis).
6. Does the aforementioned “standard deduction” of 12% (applicable to the reporting of terrestrial and HD revenue) include a deduction for agency commissions?
The “standard deduction” replaces all of the “historic” itemized deductions that station operators were accustomed to under prior BMI licenses. As such, under the new BMI license, “Gross Revenue” is defined so as to include all revenue, inclusive of agency commissions.
7. Does the BMI license authorize stations to make a lyric change to a song for use in a commercial advertisement or station promotional piece?
No. To do that, you must have a separate mechanical and/or synchronization license that needs to be secured through the copyright owner (usually the music publisher). A particular song’s ownership information can be accessed via the repertory search functions on the BMI, ASCAP and SESAC websites.
8. How will my station report annual revenue to BMI in the future?
Effective April, 2013, stations will be required to file an annual revenue report to BMI. BMI is developing a simplified electronic format for this report.
9. My station did not elect to be directly represented by the RMLC. Do I still have to pay the annual RMLC assessment?Yes. The Federal District Court that approved the RMLC/BMI settlement has mandated in its corresponding Final Order that all stations either directly represented by the RMLC or “bound” by the terms of the RMLC/BMI license (by virtue of having executed a license extension with BMI) are obligated to pay an annual fee to the RMLC in order to “fairly and equitably” share in the cost of the administration of the BMI license. The fees due the RMLC are set forth in the Court’s Final Order that can be downloaded at the “Forms” tab on this website (see BMI Forms).