Federal Court Approves Radio Industry Settlement with ASCAP
January 27, 2012. New York, New York. Judge Denise L. Cote, of the Federal District Court for the Southern District of New York, today approved a settlement that ends two years of litigation between the Radio Music License Committee (“RMLC”) and The American Society of Composers, Authors and Publishers (“ASCAP”) concerning the fees payable by the U.S. commercial radio industry to publicly perform ASCAP’s 8.5 million plus musical works through 2016.
The RMLC represents the vast majority of the nation’s radio stations (some 10,000 radio stations) and ASCAP represents some 425,000 songwriter, composer and music publisher members.
The radio industry had faced a serious challenge in terms of restoring reasonable license fee levels during difficult economic times. License fees had ballooned to some 3% of industry revenues for each of ASCAP and BMI in the post-2008 environment. The settlement approved by the court today effectively rolls back annual industry fees payable to ASCAP by more than $80 million for 2012 (as against where they stood at the end of the prior license in 2009) and provides for a return to a revenue-based fee structure at a level of 1.7% of revenue. In addition, the new agreement covers (at the same 1.7% rate) the range of new media platforms in which the radio industry is increasingly engaged.
The new ASCAP license covers the period January 1, 2010 through December 31, 2016 and includes the following highlights:
· A $75 million industry fee credit against 2010-2011 industry payments, to be credited in annual installments of $15 million each over 2012-2016 (this, in addition to the industry’s retention of $40 million in fee reductions that had been ordered by the same Court at the interim fee stage of litigation in calendar year 2010)
· Going forward, for blanket/music format license-reporting stations, a 1.7% of gross revenue fee structure (with simplified revenue reporting), less a standard deduction of 12% for revenue derived from terrestrial/analog and HD multicasting broadcasts and a 25% standard deduction for revenue attributable to new media uses
· Retention of the per program (or program period) license that benefits many talk-formatted stations, with a base fee of 0.2958% of gross revenue, less the same standard deductions
· Expanded rights coverage to accommodate the industry’s developing “new media” platforms related to Internet websites, smart phones, and other wireless devices.
The immediate impact of this settlement was reflected in ASCAP’s January 2012 billing statements that reflected a fee decrease of about 30% for the vast majority of radio stations across the country (at least those stations that were not in arrears to ASCAP). The new ASCAP license forms are expected to be made available to stations next month.
“This is a gratifying result for the radio industry. The new ASCAP license reflects the reality of our industry’s economy and puts the industry back on a sound footing insofar as its licensing relationship with ASCAP is concerned,” commented RMLC Chairman Ed Christian, CEO of Saga Communications. “We appreciate the good will which ASCAP has demonstrated in working with our industry to get this resolution.”
ASCAP License “FAQ’s”
1. What differentiates the Radio Station License Agreement and the Radio Group License Agreement?
The Radio Group License Agreement applies where new media transmissions are initiated by an entity that owns one or more commercial radio stations and where such transmissions would not otherwise be licensed under the Radio Station License Agreement. For instance, the Group License is applicable to Clear Channel’s iHeartRadio transmissions that do not originate with a terrestrial radio station. The Group License is not to be used by radio station owners for the purpose of aggregating revenue reporting to ASCAP for multiple terrestrial radio stations.
2. What is ASCAP’s policy on Local Management Agreements (“LMA’s”)?
The ASCAP license agreements provide that, within thirty (30) days of entering into an LMA agreement, the station Licensee must provide a copy of the applicable LMA agreement to ASCAP and the Local Manager must sign a “Local Manager Acknowledgment of ASCAP License Agreement” form made available by ASCAP (thereby, also becoming a legal party to the ASCAP license for the full period that the LMA is in effect). If the Licensee and/or Local Manager fail to meet this notice obligation within sixty (60) days of entering into the LMA, then ASCAP has the right to bill the station a license fee at a rate of 110% of the otherwise applicable fee until such time as the required documentation is made available to ASCAP and to terminate the station’s ASCAP license upon ten (10) days’ written notice to the parties. In the event that the LMA terminates prematurely, the Licensee and Local Manager must immediately notify ASCAP of the termination. The ASCAP LMA form is available for download at the “Forms” tab on this website (see ASCAP forms).
3. In the event of a change of station ownership, which party shall be issued credits due under the terms of the license?
The terms of the agreement reached between the RMLC and ASCAP provide for the radio industry to be credited $75 million (as against overpayments to ASCAP in 2010-2011). The $75 million is to be credited to the industry in annual installments of $15 million over 2012-2016. In accordance with past custom and practice, ASCAP will issue these fee credits to the current Licensee of a station. In a case where a seller may have a claim to these credits relating to 2010-2011 overpayments to ASCAP, it is important that the seller consult an attorney for the purpose of reserving a claim to these credits in the relevant contract of sale. The RMLC may not offer legal advice on this subject.
4. When may my station elect to switch from a blanket to a program period license, or vice-versa?
The new ASCAP license provides for stations to make quarterly license switch elections. In other words, these elections may be effective January 1, April 1, July 1, or October 1 of any given year, upon forty-five (45) days’ prior written notice to ASCAP. The license election form is available at the “Forms” tab on this website (see ASCAP forms).
5. What is the ASCAP “standard deduction” policy with respect to stations that report revenue on a cash (as opposed to accrual/billings) basis?
Terrestrial & HD Revenue: Stations that report their revenues to ASCAP on a cash basis are not eligible to take the 12% standard deduction applicable to terrestrial/HD revenue reporting because, by virtue of maintaining records on a cash basis, these stations have effectively excluded items such as agency commissions that otherwise form the basis of the standard deduction (i.e., these stations are effectively limiting their reported revenue to only revenue collected).
New Media Revenue: As to new media revenue reported, the ASCAP license permits cash filers to take a standard deduction of 12.5% of revenue reported (or one-half of the otherwise applicable 25% standard deduction for stations that report on an accrual/billings basis).
6. Does the aforementioned “standard deduction” of 12% (applicable to the reporting of terrestrial and HD revenue) include a deduction for agency commissions?
The “standard deduction” replaces all of the “historic” itemized deductions that station operators were accustomed to under prior ASCAP licenses. As such, under the new ASCAP license, “Gross Revenue” is defined so as to include all revenue, inclusive of agency commissions.
7. Does the ASCAP license authorize stations to make a lyric change to a song for use in a commercial advertisement or station promotional piece?
No. To do that, you must have a separate mechanical and/or synchronization license that needs to be secured through the copyright owner (usually the music publisher). A particular song’s ownership information can be accessed via the repertory search functions on the ASCAP, BMI and SESAC websites.
8. How will my station report annual revenue to ASCAP in the future?
Effective April, 2013, stations will be required to file an electronic revenue report to ASCAP annually. ASCAP is developing a simplified electronic format for this report.
9. My station did not elect to be directly represented by the RMLC. Do I still have to pay the annual RMLC assessment?
Yes. The Federal District Court that approved the RMLC/ASCAP settlement has mandated in its corresponding Final Order that all stations either directly represented by the RMLC or “bound” by the terms of the RMLC/ASCAP license (by virtue of having executed a license extension with ASCAP) are obligated to pay an annual fee to the RMLC in order to “fairly and equitably” share in the cost of the administration of the ASCAP license. The fees due the RMLC are set forth in the Court’s Final Order that can be downloaded at the “Forms” tab on this website (see ASCAP Forms).