Dear Broadcasters:                                                                  November 22, 2016

You may have read in the trades that the music licensing landscape is being complicated by the entry of a fourth performing rights organization (“PRO”), Global Music Rights (“GMR”), in addition to ASCAP, BMI and SESAC.  As was the case with SESAC prior to the RMLC achieving a legal settlement that resulted in SESAC’s license fees being subjected to rate arbitration for the first-time with the radio industry, GMR is also a non-regulated, for-profit entity that is attempting to impose supra-competitive license fees upon the radio industry.

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We have come to a critical decision point with respect to GMR. Our soon-to-expire licenses with ASCAP and BMI, which expire on December 31 of this year, currently give us the right to perform most if not all works in the GMR repertory.  As of January 1, 2017, however, any shares of musical work public performance rights that have moved to GMR since its founding in 2013 will no longer be paid by ASCAP and BMI.  GMR is asserting that a GMR license will be required for any works 100% controlled by GMR, as well as for any “co-owned” works partially controlled by GMR and not otherwise licensed to your stations.  Upon request, and your execution of a non-disclosure agreement, the RMLC may make available to you data provided to the RMLC by GMR that includes information about GMR’s repertory.  Additionally, the RMLC can make available GMR’s proposed license fees for 2017-2019 for each station or group, based on GMR’s last proposal to RMLC (which GMR separately has stated was “contingent on X% of members opting in”).  Note that the proposed payments referred to were developed by GMR without any input whatsoever from the RMLC and these payments include compensation for performances in 2015 and 2016 (e.g., for performances of works written by GMR songwriters after the writers moved to GMR).

Preliminary analysis of GMR’s market share shows that GMR has a “weighted” share of radio performances of, at most, 5-7.5%. As you can see, the license fees requested by GMR are substantially higher and, we believe, unjustifiable. GMR offers several reasons for its rate demand, but there are two key drivers: (i) GMR claims that its works are qualitatively more valuable than those of other PROs, and that each GMR performance deserves a bonus; and (ii) GMR, in formulating its proposal, seeks its claimed “value share” (of approximately 15%) of industrywide payments for music performing rights (covering all PROs) using an industrywide payment figure that includes SESAC fees at extremely anticompetitive levels before the RMLC brought and settled its antitrust suit against SESAC.

Given the circumstances, here are the choices we see that GMR has presented to our membership (in some cases in combination with one another):

1.        Pay GMR the fees it demands.  The RMLC does not recommend these fees as reasonable to its membership. Note that GMR’s calculation of market share does not mesh with the positions the RMLC has taken in litigation and negotiations with ASCAP, BMI, and SESAC.  Paying GMR’s demanded rates -- which would result in GMR fees that would constitute anywhere from 1/3 to over 1/2 of some stations’ current payments to ASCAP or BMI -- would likely result in industrywide PRO fees substantially in excess of what RMLC believes to be appropriate. We also expect that other PROs may seek to use any artificially inflated GMR agreements as benchmarks. While we disagree that this would be appropriate for a number of reasons, if PROs are successful in using GMR as a benchmark, the overall PRO fee increase for the radio industry could be dramatically amplified.

2.        Seek to avoid playing GMR compositions.  The RMLC has negotiated its members’ ability to use the aforementioned GMR repertory information to attempt to avoid playing GMR compositions that are not otherwise licensed. We note, however, that the GMR catalog is ever-changing and that it will be impossible, as a practical matter, to avoid with certainty playing GMR compositions, particularly given (i) how long it can take to determine publishing ownership and splits for newly-released recordings, and (ii) that advertising and certain other programming is often supplied by third parties over whom your stations do not exercise control.

3.        Continue playing GMR compositions and risk infringement claims.  We do not advise this course of action given the potential for GMR to sue and seek up to $150,000 per work infringed. Stations may have defenses to infringement based, for example, on GMR’s anticompetitive conduct, but the cost and uncertainty of litigation is substantial.

4.        Bring an antitrust lawsuit against GMR.  We believe that GMR presents many of the same antitrust concerns that led to the RMLC’s complaint against SESAC; and that it wields a more meaningful catalog for radio.  A copy of an RMLC antitrust complaint that was filed on November 18, 2016 and a corresponding press release can be accessed here http://www.radiomlc.org/pages/19704132.php.  We are seeking to require GMR to offer a reasonable license to the industry on an interim basis pending the determination of the merits of the antitrust lawsuit and, ultimately, to subject GMR to the same sorts of restrictions placed on ASCAP, BMI, and SESAC through the ASCAP and BMI consent decrees and industrywide antitrust settlement with SESAC.  We determined that it was necessary to file now in order to seek injunctive relief before the end of this year that would protect our members from infringement claims. There is no guarantee that such relief will be granted, in which case stations may decide they also need to pursue one of the options above.  We also want to stress that we remain open to, and hope to pursue, continued negotiations with GMR while the antitrust case is pending.

As you can see, the available options are all less than perfect. Nevertheless, the RMLC deemed that it was important to act quickly to protect the industry from the consequences of allowing the December 31 deadline to lapse.

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In deciding on a course of action for your company, you should have all of the facts in front of you.  Clearly, each broadcaster remains free to support the RMLC’s litigation approach on behalf of the industry or, alternatively, to individually pursue one or a combination of the options outlined above. 

It is the fervent belief of the RMLC that the legal recourse being pursued against GMR offers the best chance for a satisfactory outcome, and one that may enable the industry to minimize the harsh financial penalties associated with the risk of infringement.  

The RMLC will endeavor to maintain good communication throughout this trying time.  Please be sure to check our website, www.radiomlc.org, for informational updates.  Also, if you have not already done so, please click on the following link http://www.radiomlc.org/Station-Information/22555173 and provide us with your best email address for the purpose of future urgent advisories.

Should you have any questions concerning this matter, please feel free to contact the RMLC’s Executive Director, Bill Velez, at:  (615)844-6260, or bill@radiomlc.org.

Best regards,

Ed Christian
RMLC Chairman