By Rachel Stilwell and Lindsay Meisels

A new federal court filing by a trade organization representing AM/FM radio station owners would, if granted, alter the way royalty rates are determined for radio airplay, undermining the rights of songwriters and music publishers and ignoring the clear intent of Congress in ways that could result in a reduction of royalties paid.  In short, the radio industry that already pays nothing to the makers of sound recordings is looking for yet another way to stiff music creators.

The Radio Music License Committee, Inc. (“RMLC”), a trade organization that represents commercial AM/FM radio station owners, filed its petition in federal court in New York this week, asking to hold future royalty rate-setting proceedings before a single designated judge.  Royalty rate-setting proceedings determine what AM/FM stations must pay to songwriters and music publishers for the privilege of playing musical compositions.  Those royalties are collected by performance rights organizations (“PROs”) ASCAP and BMI who represent songwriters and publishers in rate-setting negotiations. The RMLC and each of the two PROs failed to agree on royalty rates in their latest separate rounds of negotiations, so rate-setting proceedings in court will be required for each to set applicable royalty rates. 

If the U.S. District Court for the Southern District of New York were to grant RMLC’s petition, it would appear to explicitly violate the terms of the statute created by the enactment of the Music Modernization Act (MMA) just 3 years ago.

Historically, each of the two PROs has argued before a particular judge who takes into consideration that PRO’s decades-old consent decree as well as other considerations including market share. The RMLC now argues that a single judge should listen to all arguments by both ASCAP and BMI in a single combined rate-setting proceeding.  In so doing, the RMLC misapplies a provision of the MMA that reads as follows: 

“in the case of any performing rights society subject to a consent decree (ASCAP and BMI), any application for the determination of a license fee for the public performance of music in accordance with the applicable consent decree shall be made in the district court with jurisdiction over that consent decree and randomly assigned to a judge of that district court according to the rules of that court for the division of business among district judges, provided that any such application shall not be assigned to (i) a judge to whom continuing jurisdiction over any performing rights society for any performing rights society consent decree is assigned or has previously been assigned; or (ii) a judge to whom another proceeding concerning an application for the determination of a reasonable license fee is assigned at the time of the filing of the application.”

28 U.S.C. § 137 (b)(1)(B) (2018). (Emphasis added). 

In the radio industry’s ongoing effort to minimize amounts paid to music creators who provide almost all of the content on their music-driven radio stations, the RMLC is asking the court to essentially pit ASCAP and BMI against one another.  

Prior to enactment of the MMA, Judge Louis Stanton heard all rate proceedings for BMI, and Judge Denise Cote heard all rate proceedings for ASCAP. Now that the MMA has become law, judges sitting in the Southern District of New York are assigned on a random basis to hear rate proceedings for BMI or ASCAP, but the proceedings are separate, as they always have been, since BMI and ASCAP are separate entities, and each has their own consent decree. By statute, Judge Stanton and Judge Cote are no longer allowed to hear rate proceedings involving ASCAP or BMI. Congress made this change in the longtime judicial assignment to alleviate any alleged or actual bias imputed to the two judges who have been hearing these cases for more than 30 years.

By asking the court to designate a single judge to hear arguments by ASCAP and BMI in a single proceeding, the RMLC argues for an outcome that is the exact opposite of what Congress intended in the MMA. The whole point of the provision was to give ASCAP and BMI each an opportunity to have various judges within the S.D.N.Y. weigh in on applicable rate-setting proceedings over time. 

If the two PROs were to be forced to argue before a single judge in a combined proceeding, the focus could be expected to shift from being an adversarial proceeding between just each PRO and its AM/FM licensees, to pitting ASCAP and BMI against each other when arguing about market share and other relevant matters.  We believe that if the RMLC’s petition were to be granted, it would violate the very terms and intent of the MMA, which allows “any performing rights society subject to a consent decree” to have its hearings in any rate setting proceeding about musical compositions “randomly assigned to a judge of that district court.”  Putting both PROs together in the same proceeding before the same judge is not exactly the random assignment Congress envisioned. 

If the RMLC’s petition is granted, subsequent proceedings would violate the terms of the MMA. Procedure matters, which is why advocates from the music creator community fought hard, successfully, for the provisions of the MMA that require random selection of S.D.N.Y. judges.  While AM/FM radio owners would love to pay as little as possible for licenses to play the musical compositions they rely for drawing audience and advertisers, the MMA requires that both ASCAP and BMI each have their own rate setting proceedings randomly assigned to a judge of S.D.N.Y. 

Furthermore, if the RMLC’s petition is granted, it would provide a tremendous incentive to the RMLC to refuse to come to terms in negotiations with ASCAP and BMI over royalty rates.  This is because if the proceedings with ASCAP and BMI were consolidated into a single joint proceeding, then in the absence of a negotiated and agreed upon royalty rate, each of the two PROs would still be required to spend tremendous resources to litigate their respective cases (while pitted against one another), while the RMLC would avoid an entire proceeding altogether, thereby cutting its own litigation costs in half. Under those circumstances, the RMLC would have a big incentive to not agree to a reasonable royalty in negotiations prior to litigation. Granting the RMLC’s petition would set the table with an enormous thumb on the scale against agreement and settlement. 

If the RMLC wants to reduce its litigation burdens, then it can agree with ASCAP and BMI on a negotiated royalty rate, thereby avoiding litigation altogether.  The court should deny the RMLC’s petition, which would violate both the terms of the MMA and the Congressional intent behind that law.