SESAC Seeks to Sidestep Settlement

Dueling letters from SESAC and RMLC offer distinct alternatives for radio stations in their dealings with SESAC

As we reported several months ago, in July the Radio Music License Committee (RMLC) reached a settlement agreement with SESAC that resolved RMLC's antitrust lawsuit against SESAC and brought some measure of certainty and stability to the license fees charged by SESAC to radio stations. The RMLC recently started sending the paperwork to radio stations across the country inviting those so inclined to opt into the settlement agreement. It was a happy ending. We thought so, at least.

Until SESAC threw a wrench in the works by sending letters to radio stations offering them a "reduced fee schedule" for 2016-2018 if they sign onto the deal by November 15. We're hearing a lot of chatter from radio stations on the heels of this letter, with stations confused as to (1) whether signing on directly with SESAC binds them to the settlement agreement or not and, (2) what to do.

The answer to (1) is clear: a letter you receive from SESAC inviting you to sign an alternative to the RMLC-SESAC settlement agreement is NOT the same as the RMLC-SESAC settlement agreement itself.

The answer to (2) is a little less clear: we don't provide individual legal advice through the blog, so you have to consult with your own legal counsel. We will attempt some clarification of the options available so that, ideally, no station will sign an agreement that it didn't really meant to sign.

SESAC's big selling point is a discounted rate in the short term. The reduction being dangled is 5% for 2016, with 2017 and 2018 being subject only to cost-of-living increases based on the Consumer Price Index-All Urban Consumer. SESAC also points out that, by accepting this offer, stations will not have to sign up for the RMLC alternative. According to SESAC, that alternative has still not produced any solid fee rates for 2016-2018, since that's still a matter of negotiation and, possibly, arbitration. SESAC also points out that, by opting for doing a direct deal with SESAC (rather than being repped by RMLC), stations will not be tapped for the administrative fee being charged by RMLC.

In response, RMLC has brought a number of points to the attention of radio licensees who have not yet joined the RMLC team with respect to SESAC. Reduced to its basics, RMLC's answer is that the SESAC offer is little more than "an effort " to repudiate the terms of a carefully negotiated settlement, and to avoid the consequences of having SESAC's monopoly pricing subjected for the first time to careful scrutiny by an arbitration panel."

While it offers no guarantees, RMLC seems confident that the negotiation/arbitration system will result in license fees considerably below those now being offered by SESAC for 2016-2018. Moreover, RMLC points out that SESAC's offer doesn't promise any reduction beyond 2018; under the RMLC/SESAC settlement, fees would be governed by the negotiation/arbitration approach for another 20+ years. RMLC also notes various other favorable provisions of the settlement the benefits of which stations signing up individually with SESAC (as opposed to signing up with RMLC) would not enjoy.

So radio stations have a choice. They can sign up individually for SESAC licenses, in which case they will be on their own to negotiate future fees on a one-on-one basis. Or they can sign up with RMLC, thereby aligning themselves with a broad cross-section of the radio industry on one side of the negotiating table - with the added assurance of an arbitration process as a safety net if the negotiation fails.

The crucial bottom line to understand: the deal presented in the SESAC letter currently being circulated is separate and distinct from - and mutually exclusive with - the RMLC settlement arrangement. Stations need to recognize that and, to the extent they have questions or concerns about which way to go, they should consult with their counsel before making a decision. The deadline set by SESAC for accepting their latest offer is November 15. To sign up with RMLC, a station has until November 20 to get its Authorization form submitted. (RMLC had originally set October 31 as the deadline, but has recently extended it to November 20.)