Details of BMI and the Radio Music Licensing Committee (RMLC)’s rate court settlement first announced in January are now available and show that rates for the 2017-2021 period have increased to 1.78% of revenue, after standard deductions. That’s up from the 1.7% rate the organization was getting in the previous licensing period.
In 2016 the RMLC was trying to implement a payment scheme on BMI and the other performance rights organizations — ASCAP, SESAC and Global Music Rights — based on market share and holding rates for each PRO commensurate to a pro-rata share of the rate being paid to ASCAP, which sources say was being paid 1.73% of revenue based on its then-assigned estimated 50% market share.
When the RMLC couldn’t get BMI to agree to a rate of about 1.4% of revenue for the current licensing period, it filed for litigation. In response, BMI went to court and was granted a 1.7% of revenue interim fee from the RMLC, which represents some 10,000 U.S. radio stations.
Now the new rates are based on a station’s revenue, with a standard deduction allowance of 12% to cover any commissions that radio has to pay out to outside agencies for landing advertising. Meanwhile, the RLMC has agreed that digital broadcasting, such as webcast, will also pay 1.78% of revenue and that those types of transmissions will get a deduction to cover for commission. That deduction is higher, at 30%, but that higher allowance has also become a standard sized deduction discount for digital radio. Meanwhile, for those radio stations that don’t want a blanket license, the per-program license is 0.31% of revenue, with standard deductions.
The agreement also calls for the RLMC to pay BMI $5 million to compensate for legal expenses for the rate court litigation. That appears to be a considerable win for BMI, as it otherwise would have likely had to deduct that cost from payments to songwriters and publishers.
The agreement also includes a going-forward clause concerning ASCAP that says BMI license terms for the current period are conditioned on ASCAP not being entitled to any further payments beyond what it agreed to in its own license with the RMLC. So this appears to anticipate that if ASCAP had a favored nation clause in its licensing agreement with the RMLC that ensures ASCAP gets the same rate as one of its PRO competitors that negotiated a higher rate, BMI’s settlement gives it an option to convert its 1.78% of revenue rate as an interim fee. BMI could then return to court to seek an even higher rate—and still keep the $5 million in litigation costs the settlement awards it.
In other words, the BMI/RLMC settlement would be set aside while the two parties participate in a trial for a rate that would be determined by the BMI court, which would allow BMI to push for an even higher rate — but also risk a rate lower than 1.78%. On the other hand, if such a trial were to resume, the settlement allows BMI to offer the 1.78% of revenue rate as a benchmark.
Because the 1.78% rate agreement is retroactive to Jan. 1, 2017, radio stations that have been paying 1.7% have to ante up more money to pay for the license that runs through Dec. 31, 2021. But in recognition of tough economic times due to the coronavirus pandemic, radio stations will have until May 3, 2021 to make payments, with installments paid to BMI for the retroactive portion beginning Sept. 1 2020.