SESAC Settles Television Class-Action for $58.5 Million

SESAC has agreed to pay $58.5 million to TV stations as part of a settlement with the Television Music License Committee, which was part of a class-action suit filed against the privately-owned performance right organization in 2009 that alleged antitrust behavior by the PRO.

The suit was filed by Meredith Corp., E.W. Scripps Co. and Hoak Media LLC (now part of Gray Television Group Inc.) on behalf of local television broadcasters, with TMLC footing the legal bills. Weil, Gotshal & Manges LLP represented the plaintiffs in the suit.

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The settlement will reimburse stations for about $42.5 million in excess fees from 2008-2014; and reimburse the TMLC’s legal fees of $16 million. The settlement was filed today with Judge Paul A. Engelmayer of the U.S. District Court for the Southern District of New York, who must approve the agreement. The settlement will be funded from an escrow account created when 75% of SESAC was sold to Rizvi Traverse for $591 million. That means that the sellers — Allen & Co.; entertainment lawyer Freddie Gershon, CEO of Music Theatre International; Ira Smith, former CEO of Music Theatre International and SESAC chairman/CEO Stephen Swid — will see their payment for selling SESAC reduced to $533 million.

“Unlike ASCAP and BMI, the two largest music performing rights organizations, SESAC is not subject to an antitrust consent decree with the U.S. Department of Justice,” TMLC chairman Charles Sennet said in a statement. “We were compelled to file this suit to seek some limits on SESAC’s ability to charge whatever it wanted for its pool of music copyrights… We are pleased that SESAC and the Committee have agreed to a plan spanning more than two decades that we hope will establish a sound business relationship between SESAC and its television station customers.”

Going forward, SESAC has agreed to negotiate industrywide agreements with the TLMC for 20 years and, if it is unable to agree upon rates, will submit the dispute to binding arbitration. Moreover, the “per program” license will be restored in the 2016 agreement.

“Stations will once again be able to rely on the TMLC to provide industrywide licenses and will also have the opportunity to competitively purchase SESAC performance rights for local programming directly from composers and publishers under the per program license,” TMLC executive director Will Hoyt said in a statement. “In addition, stations will be able to appeal to a third party to establish reasonable rates if the TMLC and SESAC cannot reach agreement, a benefit not currently available.”

The settlement came about because Judge Engelmayer denied SESAC’s motion for summary judgement and ordered the parties to try and negotiate a settlement. After reviewing the evidence, the court held that it “would comfortably sustain a finding that SESAC… engaged in an overall anti-competitive course of conduct designed to eliminate meaningful competition to its blanket license.”

In agreeing to settle the case, SESAC denied any wrongdoing or violations of antitrust law. SESAC issued a statement on the settlement: “We are happy to announce that SESAC has reached a resolution with the Television Music Licensing Committee (TMLC), allowing us to create fair and equitable agreements on behalf of our songwriters, stakeholders and clients. With this settlement behind us, we look forward to achieving our strategic goals and continuing our focus on the expansion of SESAC’s technological innovation and music licensing initiatives allowing us to enhance monetary opportunities for our affiliated songwriters, composers and publishers.”

With the ending of the TMLC lawsuit, SESAC still has an antitrust lawsuit against it still pending. The Radio Music License Committee (RMLC) filedthe suit in October 2012 in U.S. Eastern District Court of Pennsylvania. On Dec. 23, 2013, a magistrate greenlighted that suit for a trial to be heard by Judge C. Darnell.