14 Music Licensing and Syndication Fees

Mary M. Collins¹

Introduction

Music is integral to media; it brands radio and television stations, networks, television programs, and news. This chapter discusses the payments for the use of this music. It is not a legal treatise on music copyrights. Instead, it is intended to raise the reader’s awareness of copyright requirements underlying music payments and how these payments are administered. Although specific questions should be directed to an attorney who specializes in music copyright law, the Radio Music License Committee (RMLC), the Television Music License Committee (TMLC), and the National Cable & Telecommunications Association (NCTA) can be helpful in providing some general guidance concerning the industry’s agreements with ASCAP (the American Society of Composers, Authors and Publishers), BMI (Broadcast Music, Inc.), and SESAC.

U.S. music license payments have their roots in U.S. copyright law. Simply stated, copyright law gives the creator of music the ability to control the use of his or her works, and thus to realize compensation for this usage. These intellectual property rights are similar to those granted to patent holders. Just as an inventor may transfer rights to a patent, a songwriter or musical artist may sell, assign, or license any of his or her intellectual property rights.

In the early 1900s, U.S. copyright laws were new and often ignored when it came to music. Songwriters and publishers in this country relied on income from the sale of sheet music. To change this, a group of about 100 members of the music industry, including a composer and conductor named Victor Herbert, formed the not-for-profit American Society of Composers, Authors and Publishers (ASCAP) in 1914 to enforce their rights under the U.S. Copyright Act of 1909. Soon afterward, Mr. Herbert sued Shanley’s Restaurant for performing rights. In a unanimous decision written by Justice Oliver Wendell Homes, Jr., the U.S. Supreme Court established the precedent for allowing songwriters to protect their performing rights in the music they created. Interestingly, ASCAP was not the first organization of its type. Decades earlier, in 1851 a similar lawsuit by the French composer Ernest Bourget against a café that performed his popular work Les Ambassadeurs was decided in his favor and led to the creation of the Société des Auteurs, Compositeurs et Éditeurs de Musique (SACEM)—the first performing rights society in the world.

From the beginning, there has been an uneasy relationship between the electronic media and performing rights organizations (PROs) such as ASCAP. In 1940, radio broadcasters formed a new not-for-profit society, Broadcast Music, Inc. (BMI), as a competitor to ASCAP because they believed ASCAP was significantly overcharging for performance rights fees and was severely limiting the composers who could join that organization. Prior to BMI’s founding, composers in genres including country, blues, rhythm and blues (R&B), and other staples of today’s popular music were not represented by ASCAP. With no central source for licensing, many radio stations opted not to play this music. SESAC, founded in 1930 as the Society of European Stage Authors and Composers, is the smallest of the PROs operating in the United States, and the only one that is a privately owned, for-profit enterprise. Originally an agent for European publishers whose works were not being represented in the United States, the society changed its name to SESAC, Inc. in 1940. (Today, ASCAP, BMI, and SESAC all have openmembership policies that allow most published composers from every genre to join their organizations.)

Overview of Music License and Syndication Rights

In general, broadcast and cable users of music must pay two separate fees: one for copying or using music as part of their commercial or program productions, and the second for transmitting their programming to the public. Thus, a media company that produces a program or commercial must pay for the right not only to use the music in its production activities, but also for the performance of the music as part of its programming. Using music in radio commercials requires permission to copy the music; the use of music in television or cable programs or commercials requires permission to synchronize the music. (It should be noted that, as of this writing, a group including representatives from record companies, recording artists, and bands is campaigning for a third “royalty” payment from radio stations. The industry refers to this as a new “tax” on their business.)

Performance Rights

The public performance right, or simply “performing right,” is the composer’s right to be compensated for the public performance of his or her musical composition. Whether the music is distributed in a broadcast, via cable television, or via a digital-communication platform, the distributor must pay for the right to play the composition. This performing right should not be confused with the audio digital performance right designed to award the recording artist, not the composer, of the music. Traditionally, composers transfer their copyright rights to publishers responsible for authorizing many uses of the music, and retain the right to be paid directly for half of the performing rights. Composers and publishers generally assign the right to collect their performing rights to one of three PROs: ASCAP, BMI, or SESAC. These performing rights organizations charge stations and cable systems a license fee for the broadcast, transmission, or other communication to the public. These industry-wide licenses have always allowed licensees to use any music within a respective PRO’s repertoire under a so-called blanket or per-program license. These licenses differ only in the method by which the fees are charged for the clearance of all of the music in the repertoire (see below).

Production Rights

Licensing the right to broadcast or cablecast music does not allow a station or cable system the right to use that music to record a commercial, jingle, logo, or locally produced program. That use requires a second copyright license, which has to be obtained from the copyright owners or their agents.

One particularly troublesome area is the use of music in commercials. A popular recorded song cannot be used in a recorded local commercial without obtaining the rights from the copyright holder in the composition and from the record label that owns the rights in the master recording. Nor can the song be rerecorded by a local group and used in a recorded local commercial without obtaining the rights from the owner of the copyright in the composition.

Even what might be thought of as a “parody” of a song—sung to the tune of a popular song, but promoting the products of a local merchant—can be a problem. Although parodies are protected by copyright law, the parody must meet several tests before it is protected, including the fact that it is making fun of the copyrighted work itself. A commercial for a product using the tune of a popular song, even if it is funny, may not be protected if it is not making fun of the underlying song, but is instead simply being used to promote a product.

Radio

The use of a prerecorded song as part of a radio commercial produced by the station requires the producer to obtain a license for the “sound recording,” which generally is licensed by a record company, as well as a separate license for the use of the musical work, the basis for the recording. In order to use a musical composition and not the specific recording of a song, the radio station must obtain the right to copy or record the song. Neither of these licenses is obtained through one of the PROs. Instead, they must be obtained, in the case of the musical work, from the composer or publisher—and, in the case of the sound recording, from the record company. It should be remembered that composers, publishers, or record companies are not required to issue a license, and may deny use or demand hefty fees in order to permit the use in a given circumstance. This is especially true when a composer or recording artist wants to protect the integrity of his or her song or recording, and thus may make it difficult to get permission for use in a local commercial spot production. It is a good practice to make initial contacts with the composer, publisher, or record company before committing to use a given song or recording in a commercial.

Television and Cable

In television and in cable, using music in locally produced programming and in commercials requires a synchronization right—that is, the right to use the music in synchronization with video. This right is normally controlled by the composer or the publisher, and is not licensed through the three PROs. Again, making the necessary contacts to get the right to use the music before making plans to include it in a commercial or a local program can save a lot of time and money.

Network Licenses

It should be noted here that the producer of programming, recordings, commercials, logos, and promos is generally responsible for clearing the rights to use the recording or synchronization, but the local station or operator is generally responsible for the performing rights. This is not always true where the programming is produced by a broadcast or cable network. The major broadcast and cable networks historically have licensed directly with ASCAP, BMI, and SESAC to cover the performing rights of the music in their network programming “through to the viewer.” Because these networks also produce the programming, or are responsible for producing it, a local station or operator doesn’t have to pay for performing rights for this programming. These network performing rights do not cover the music in commercials sold by a local station, whether those commercials are local or national spots. Therefore, if a local station or cable system also runs commercials inside the programming, it can be responsible for the performance of music within these commercials. Thus, a station has to be careful to make certain that all of the programming and the commercials, promotions, and logos are cleared for performing rights if these rights are not otherwise licensed.

In summary, public performance rights are generally granted by one of the three performing rights organizations: ASCAP, BMI, or SESAC. Musical rights required to produce local programming, commercials, promos, or other material broadcast or cablecast are in addition to performance rights, and different copyright clearances are required for different media and/or different uses. Music copyright law can be very complicated. It cannot be stressed enough that an attorney familiar with music copyright law is the best source to answer questions about the various copyright requirements for a specific use in a production. Moreover, the safest practice is to consult the attorney before committing to the use of the music.

Online and Other Rights

When webcasts—including advertisements and on-air promotions—contain licensed compositions or recordings, there are additional rights to be considered. These rights are continuing to evolve as new distribution methods are created. The following will provide a general overview of considerations. As is the case with other music rights, it is advisable to confirm the rights before using the composition.

Radio

Radio stations need to address three general guidelines for repurposing their overthe-air content for online use:

Over-the-Air Television and Cable Television

In addition to the synchronization rights for reproducing a musical composition and the master use license required for using a recording of a song when that song is used in conjunction with a recorded video production, cable and television companies will likely need to get additional rights from copyright holders before video productions containing music can be used on a web site.

It is important to make sure that the rights to use music in a video piece are broad enough to cover the repurposing of that content for online or other uses. There have been a number of issues raised in many contexts, not just music, in which rights to a copyrighted work have been obtained for one medium, and one medium only, and do not extend to the use of those works on the Internet. This has particularly been true in the case of older productions that were done before video in the Internet was even a gleam in producers’ eyes. The rights granted for the use of music in a video production may need to be extended before that production can be used on a web site or other medium.

User-generated content provides another area of potential concern. Web sites, including those for television and cable companies, may give viewers the opportunity to post their own video productions. While copyright law provides some protection to parties that host an online bulletin board-type of service from being subject to copyright liability for infringing uses posted by third parties, as of this writing, the law is still being tested in cases where users post their own video productions.

Moreover, the law imposes duties on the bulletin board provider before he or she can claim these protections. The requirements include that the provider act promptly to remove any infringing material once that provider is put on notice that the infringing material exists. In addition, the provider cannot encourage or promote the infringement.

With that in mind, terms of use for sites that allow viewers to post their own videos should be carefully drafted to warn users that they should not use copyrighted material without permission. Companies should also be careful about contests that might be seen as encouraging copyright infringement (e.g., a “make your own music video” contest, unless the company has the rights to use the song or songs that the videos will feature).

Putting content online, whether it is a simulcast of a radio station’s over-the-air broadcast or specific video programs from a television or cable company, also exposes the content to a far wider audience, often making it available to viewers who might notice a copyright infringement that local audiences would overlook. So companies should be extra careful about all uses of music that might show up online.

PROs’ Responsibilities to the Broadcast and Cable Industries

Both ASCAP and BMI currently operate under antitrust consent decrees. For broadcast and cable, the most important provisions of these decrees are:

SESAC, the third PRO operating in the United States, and the only privately owned, for-profit society, is not subject to a consent degree as of this writing.

Performing Rights Licensing and Fees

Overview

Negotiations with the PROs can be conducted by a committee set up to represent a specific group, by a parent company, or by the individual station or system. In the 1930s, the National Association of Broadcasters (NAB) organized a group of radio representatives to negotiate industry-wide fees. This ultimately led to the creation of the current Radio Music License Committee (RMLC), which negotiates with ASCAP and BMI—but not SESAC—on behalf of the majority of U.S. commercial radio stations. The Television Music License Committee (TVMLC) is also an NAB offspring. This committee negotiates with ASCAP, BMI, and SESAC on behalf of most commercial television stations.² These two committees are funded by participating stations or station groups—the radio committee receives court-ordered assessments, and the television committee relies on voluntary contributions for its funding.³

In the cable industry, the National Cable & Telecommunications Association (NCTA) represents cable operators in negotiations with ASCAP, BMI, and SESAC. And, as indicated below, the majority of cable programming companies have negotiated their own licenses with the PROs.

The following information is not intended to be an exhaustive discussion of fee-calculation methodology, but rather, to provide the reader with an overview of the process for determining fees. For specific information, contact the group, department, or individual responsible for negotiating the agreement in question.

Radio

Blanket License Fee

This is the most commonly used license in radio (it is also the most common license for television and cable). ASCAP, BMI, and SESAC all offer radio stations a blanket license fee under which any of the music in the individual society’s repertory can be played in exchange for license fees. The RMLC administers the fees for ASCAP and BMI, using a complicated formula designed to guarantee both societies a specific total amount of fee revenue based upon a schedule agreed to by both the individual PRO and the RMLC.

SESAC’s blanket fee is negotiated directly by the radio station or its parent company. In general, the SESAC blanket rate is determined by the individual station’s market—typically the population of its MSA (metro service area) or county—and its high one-minute spot rate.

Radio Per-Program Fees

Radio stations that do not perform much music—that is, stations with a news, talk, sports, business, or other format that broadcast feature music in less than approximately 30 percent of their day-part programming—may opt for a per-program license under the RMLC’s agreements with ASCAP and BMI. The fees paid by these stations are calculated annually by the RMLC as part of the overall industry license fee owed to ASCAP or BMI.

SESAC offers stations that feature programs consisting primarily of news, talk, sports, or other content devoid of feature musical presentations the opportunity to qualify for an all-talk amendment that reduces the license fee the station would otherwise owe.

Television

Blanket License Fee

As in radio, a blanket license fee allows the television broadcaster the right to publicly perform any of the music written by a composer who is a member of one of the PROs.

Once an industry-wide blanket license fee is determined for a particular license year, the TMLC determines, with approval from the PROs, how the industry fee is allocated to individual stations. Historically, the ASCAP and BMI allocations have been based on market size and station audience levels, with a prime-time audience credit to broadcast network affiliate stations, whose network programming is separately licensed by their respective networks. Like industry-fee negotiations, these allocation methodologies are partly a result of historical compromises within the television industry.

The SESAC blanket fee allocation, as of this writing, relies primarily on individual station music use as the basis for determining a station’s share of the blanket fee. The committee’s formula includes a “recurring use” performance unit to determine the value of the television programs that include at least one minute of SESAC music in 75 percent of their episodes. These program values are then used to allocate fees among stations by using audience levels and minutes of music in these programs. The remaining “occasional use” portion (20 to 30 percent) of the fee is allocated employing the same method used for ASCAP and BMI.

TV Per-Program License

Although the television per-program license, like the blanket license, grants the same full clearance of all of the music in a PRO’s repertory, the per-program fee is calculated differently. Under this license, a station has to pay fees only for programs that contain a specific PRO affiliate’s or member’s music, although the rate for each program is higher than the blanket fee rate. The per-program license is used mostly by broadcast network affiliate stations—partly because their networks separately license their network programming, and partly because they produce a lot of local news as part of their nonnetwork programming.

The reason that producing local programming is so important in terms of qualifying for per-program savings is that, unlike the music in network or syndicated programming, local stations can control the music used in these programs. A station may make a business decision to avoid paying a music license fee for a particular program. In this case, the station must make certain that there is absolutely no music composed by a member of the respective society in that program unless that music is “otherwise licensed.” Even one second of music in a program will make the entire program subject to a fee. This means that if a program contains one second of ASCAP music and 15 minutes of BMI music, a station pays the full fee related to that program to both ASCAP and BMI, rather than a pro rata share based on each society’s portion of music in the program.

In general, the calculations of all three of the PROs’ per-program license fees involve multiplying the station’s blanket license by a multiplier to set a new per-program base fee. Once that new higher base fee is set, revenues applicable to local programs that contain the society’s music are determined as a percentage of the local station’s total revenue applicable to all of that station’s local programs. That percentage is then multiplied by the per-program base fee to determine the net per-program fee. In addition, a portion of the per-program fee is apportioned to “incidental” uses of music. Additional information about per-program licenses is available from the TVMLC.

Direct Licensing/Ownership of Copyrights for Local Television Programming

Stations may opt to license theme and background music in local news programming directly with a composer, and thus benefit from savings under the per-program license. In this case, stations should be careful to make certain that both synchronization and performance rights are cleared at the time of the negotiations. A lawyer familiar with music copyrights should be consulted to make certain that the license is properly worded.

Stations may also want to consider the possibility of owning the copyright to music, rather than merely licensing that music. Licenses are typically related to a specific use on a specific communications platform, rather than the right to use the music on any platform communicated anywhere in the world. Given the dramatic changes in the television and cable businesses and the use of digital transmission from various platforms, it is difficult to determine what clearances will be required in the future.

Because direct licenses normally give exclusive rights to the music within the station’s DMA (designated market area), composers can be compensated for the same music in several different markets. That means they are typically more willing to license the music than to sell the copyright. However, it is possible under either a license or a sale to provide for unlimited use and performance by the station, while still providing an opportunity for the composer to use the same music in other markets. Again, a lawyer experienced in music copyrights should be consulted to provide guidance as to whether licensing or purchasing a copyright would be preferable.

Source Licensing

Source licenses are agreements with program owners to clear performance rights in a particular program. They can benefit users in the same way that direct licenses do in terms of the per-program license. These source licenses are generally made between program syndicators and an agent working with local television stations. Because the agent normally determines the fees and the provisions, stations generally need determine only whether or not the portion of the source license charged to the station is more or less than the per-program savings for the station.

Future Television Licenses

Television stations are converting from a single analog channel to a digital transmission that provides multiple digital-broadcast signals. Thus, the programming on these new signals requires performance licensing. The current industry blanket licenses with ASCAP and BMI provide coverage for these digital signals and for some programming on the Internet. The current SESAC industry license provides coverage only for one signal, and only if that signal simulcasts the analog signal. As of this writing, the TVMLC has reached an agreement with SESAC not to sue in conjunction with SESAC music transmitted via Digital Media on any station represented by TVMLC provided that the stations make the appropriate payments to SESAC (for more information go to www.televisionmusic.com).

The committee has also applied on behalf of stations for a video on demand (VOD) license with ASCAP and BMI, and has requested a VOD license from SESAC. The application for the ASCAP and BMI licenses requests protection from copyright infringement for local stations; final terms were not available as of this writing.

Cable

Cable Programmers

As in broadcasting, there are both programmers and distributors in the cable industry. The programmers are typically known as cable networks; they include such channels as CNN, ESPN, Discovery, MTV, and any of the other many, many channels available on a cable system. ASCAP, BMI, and SESAC have all negotiated blanket through-to-the-viewer licenses with the majority of premium and basic cable networks, as well as with many VOD program providers. To assure that similarly situated networks pay similar fees, the PROs’ license fees for cable networks are generally based on each network’s subscriber base, net advertising and subscriber revenues, Nielsen ratings, and type of programming provided.

Cable Operators

Cable operators operate the cable system that delivers programming to subscribers’ homes. The NCTA has negotiated licenses with ASCAP, BMI, and SESAC on behalf of NCTA members. The licenses authorize the performance of music in locally originated programming, including leased access and PEG (public, educational, and government) channels. Under the NCTA-negotiated agreements, cable operators pay a per-subscriber license fee to the PROs.

AFTRA

The American Federation of Television and Radio Artists (AFTRA) is a national labor union representing performers, journalists, and other artists working in the entertainment and news media. Although they are not strictly either music license or syndication fees, it is important to be aware of AFTRA’s contract terms because they can add significantly to program costs. AFTRA’s contract stipulates minimum compensation as well as terms including the number of weeks during which the spot can be run. Current AFTRA agreements cover: “Radio Recorded Commercials,” “Commercials Made Intentionally for the Internet,” “Internet Use of Commercials Made for Initial Use on Broadcast Radio,” and a variety of video applications.

In Conclusion

Music has been, and will continue to be, an important part of electronic media. U.S. copyright laws guarantee the right of the creator of the music, as well as that of the entity that performed the composition, to be compensated for their work. Performance rights are generally granted by one of the three performing rights organizations, ASCAP, BMI, or SESAC. Musical rights required to produce local programming, commercials, promos, or other material broadcast or cablecast are in addition to performance rights, and different copyright clearances are required for different media and for different uses.

With the continuing evolution of distribution technologies, companies must take special care to ensure that they have secured the necessary rights before using music on the radio, on television, in cable programming, on the Internet, or by means of any of the myriad of other technologies available to today’s consumers. Whenever there is the slightest doubt about the license required, contact an attorney familiar with music copyright law. To do otherwise means risking additional fees or even being the subject of a court decision quoted in future articles, chapters, or books about music licensing.

Notes