ESPN Seeks Determination of the Fair Rate for Music Licensing

Image courtesy of Wikimedia Commons

ESPN won’t be the first to take issue with BMI, Broadcast Music, Inc., over their music licensing and royalty collection terms for public performance of music in their artist catalogs.  BMI is one of two major professional organizations managing performance royalty rates for musicians and their works, the other being ASCAP, the American Society of Composers, Authors and Publishers with catalogs of thousands of artists and songs.  Think you can simply play your iTunes downloaded music in your workplace without a license?  Think again.  We have addressed this topic before as many a business owners has received the unpleasant demand letter for licensing fees under either BMI, ASCAP, or the smaller performance rights organization called SESAC, originally the “Society of European Stage Authors and Composers”.  Now, however, ESPN is forging a battle in the music industry competition referred to as rate-setting and contending that BMI’s rates are disproportionate to EPSN’s payments to performers and publishers and are, therefore, unreasonable.   In fact, ESPN has asked the Court to weigh in on this one.

Last week, ESPN filed suit against BMI stating in its petition in New York federal circuit court that “unlike typical television networks,” it, meaning EPSN, “acquires music rights through direct licenses, i.e., licenses obtained directly from songwriters, music publishers and music libraries that include all rights as may be required … or through ‘work made for hire’ agreements with songwriters.”  ESPN makes this statement in an effort to distinguish itself as being unique among other television networks due to the extent to which it is able to control its music usage.  All of this is in an effort to secure a an adjustable-fee blanket license.  In its petition, ESPN states “[p]ut simply, the reasonable value of the performance of BMI-licensed musical works by ESPN should bear some proportional relationship to ESPN’s direct payments to publishers and songwriters for the vast majority of its public performances of music,” and further argues that BMI is being patently unreasonable by refusing to quote a license fee for an identified period of time that is, in ESPN’s view, based at all upon this relationship indicating the value of public performance of music on the network.

Interestingly, BMI and ASCAP are both currently operating under consent decrees providing for a path to a rate court in the event that  reasonable licensing fees cannot be agreed upon.  This determination of appropriate rate-setting in the context of valuing song compositions used on network television will be a new application and follow closely on the heels of a recent rate-setting settlement reached with Pandora Media providing digital media and music streaming services.   Specifically, the Copyright Office supported Pandora Media stating that the Copyright Royalty Board “could use Pandora’s direct licensing deal last year with digital rights agency Merlin Network as a benchmark when it sets the company’s royalty rates for January 2016 through December 2020.”  Dave Grimaldi identified the Copyright Royalty Board’s direction as a “valid benchmark” for determining appropriate royalty rates, much as ESPN seeks to introduce evidence of its direct payments to publishers and songwriters to demonstrate appropriate proportional rates for its intended uses of musical performances.

ESPN supports its seeking of this valuation by contending that current BMI licensing does not fairly or adequately compensate the musicians it claims to protect.   ESPN states that “[i]t now seeks a valuation of the BMI license that is only a small fraction of what it has agreed to pay in the past, a valuation that does not properly compensate our music creators. BMI has steadfastly disagreed with that view and looks forward to the opportunity to represent our songwriters, composers and publishers in this rate court matter.”

Songwriters, musicians, composers, and business owners who broadcast or play music in their place of business should keep apprised of changes in licensing under organizations under ASCAP and BMI.  Given the recent guidance provided by The Copyright Royalty Board with respect to webcaster display of musical performance, we think, though contentious, the Board may very well, again, weigh in to provide more specific guidance in the context of television broadcasters such as ESPN.

Next week, we will be offering two Shark Bites about Entertainment Media Licensing in Blacksburg and Roanoke and an after-hours presentation in Richmond — sign up for any of these presentations at our Events page.