RMLC Seeks to Subject GMR to the Same Competitive Restraints Governing ASCAP’s, BMI’s, and SESAC’s Licensing Practices

We have previously written here, here, here, and here about the Radio Music License Committee's ("RMLC's") successful attempt to impose on SESAC some of the same competitive restrictions that limit ASCAP's and BMI's ability to demand inflated license prices for publicly performing the musical compositions of their members. It was only a matter of time before someone would challenge on antitrust grounds the aggressive tactics of the new kid on the music licensing block - Global Music Rights ("GMR").

On November 18, the Radio Music License Committee ("RMLC") did just that.

The RMLC is a trade association that represents the interests of thousands of commercial radio broadcasters in music licensing matters (other entities that are active in these matters on behalf of radio broadcasters are the National Association of Broadcasters and the National Religious Broadcasters Music License Committee). Over the years, the RMLC has been particularly active in negotiating licenses with ASCAP, BMI, and SESAC that allow radio stations to broadcast and webcast musical compositions.

GMR is the fourth - and newest - performing rights organization ("PRO") that negotiates licenses to perform the musical compositions owned by its members (it joins ASCAP, BMI, and SESAC in this function). GMR was founded in 2013 by Irving Azoff with an express goal of extracting much higher music license fees than those that have been negotiated with other PROs such as ASCAP and BMI. Its strategy has been to attract a small, but select, number of members representing high-value compositions that music users won't easily be able to avoid playing. It claims to represent the interests of members owning the copyrights to compositions performed by artists such as The Beatles, Pharrell, Blake Shelton, Bruno Mars, and Taylor Swift, among others.

The RMLC sued GMR in the same court where it had sued SESAC and achieved a favorable settlement following some interim court rulings in its favor. It claimed that GMR's licensing practices amounted to monopolization and attempted monopolization under the Sherman Act. The RMLC specifically called out GMR for:

• "demand[ing] outrageous fees that are grossly disproportional to the underlying share of works in its repertory," which the RMLC claims is "'take it or leave it' pricing fully divorced from market constraints";
• "demand[ing] additional rate increases for each of 2018 and 2019, regardless of whether GMR's repertory will contain fewer or less frequently played works, or a smaller percentage of fully-controlled works";
• offering no alternative other than a full blanket license with no fee reductions for directly licensed works, which means that radio stations can't save any money by negotiating separate deals with some of GMR's members;
• "offer[ing] only a fractional license," which means for works only partially owned by GMR's members, the license, standing alone, offers no protection from infringement claims; and
• failing to be "transparent about what its repertory contains," which makes it even harder for radio stations to know what rights they are purchasing and whether they even need those rights given their airplay patterns.

The RMLC also claims that the harm from GMR's actions "goes far beyond GMR and its repertory" because ASCAP, BMI, and SESAC are watching GMR's negotiations and attempting to obtain for their own members any fee increases that GMR is able to extract.

The RMLC seeks a preliminary injunction that would require GMR to:

• grant immediate licenses upon the request of a user while fees are being negotiated;
• "submit to a judicial rate-making procedure comparable to what the consent decrees regulating ASCAP's and BMI's behavior impose";
• submit to a judicial procedure requiring it to disgorge monies that a court determines exceed a reasonable license fee;
• refrain from entering into de facto exclusive licenses with its members;
• "make available economically viable alternatives to blanket licenses, such as per-program licenses, blanket carve-out fees, and commercial-only licenses.; and
• "offer only full-work licenses" rather than fractional licenses.

Why does GMR and this lawsuit matter to radio broadcasters and other music users?

Stations have been used to paying three PROs - ASCAP, BMI, and SESAC - for the right to broadcast and webcast musical compositions (they also pay SoundExchange for the right to webcast recordings of those compositions). They need to adjust to the new reality that there are now four PROs for them to consider as they secure licenses for this right. While GMR's catalog is still small (the RMLC estimates that it represents only 5-7.5% of all musical works), GMR has strategically courted copyright owners for big-name works that radio stations will find difficult to avoid in creating their programming - particularly in programming over which they have little to no control, such as syndicated programming and some commercials.

The RMLC has sued GMR because, among other reasons, GMR has demanded fees that the RMLC claims far exceed its share of musical works, amounting to some 15% of all royalties paid for publicly performing those works, and the RMLC has not been willing to agree to those fees. On November 22, the RMLC shared some useful tips with radio stations regarding the lawsuit and four possible approaches that radio stations could pursue as they consider how to respond to this new entrant to the music licensing world:

1. pay the fees demanded by GMR (which the RMLC discourages given how high those fees are);
2. attempt to avoid playing any GMR compositions (which could be hard given the prominent names that figure in GMR's catalog and the difficulty of clearing performances in commercials and third-party programming);
3. continue to play GMR music without attempting to negotiating license (a risky venture given how high infringement damages can run); and
4. challenge GMR's anticompetitive conduct in a lawsuit, as the RMLC did.

The RMLC's lawsuit is still in its infancy, and GMR has not yet filed its answer to provide a window into its response strategy. It is relatively safe to assume, though, that it will fight the RMLC's claims vigorously, as they strike at the heart of GMR's founding purpose to extract more license royalties for its members than the members of the other PROs receive. The case has been assigned to the Honorable Darnell Jones in the Eastern District of Pennsylvania - the same federal judge who presided over the RMLC's litigation against SESAC that settled on favorable terms for the RMLC last year. If that litigation is any indication, radio stations may soon see some of the same competitive restraints that limit other PROs' ability to demand supracompetitive license fees imposed on GMR as well.

If you have any questions about this lawsuit or would like advice about how to deal with GMR, we are here to help. In the meantime, stay tuned ".