Facing the Music

These are big times for Irving Azoff, the veteran talent agent and all-around Hollywood mogul. In 2012 he topped Billboard Magazine’s “Power 100.” He’s in business with Madison Square Garden, owns TicketMaster, and sits on the boards of Starz, IMG and iHeartMedia. He represents scores of chart-topping artists (the likes of Christina Aguilera, Journey, the Eagles, Maroon 5, Bon Jovi), and has founded a number of record labels.

About three years ago, Mr. Azoff decided to cash in on his music-industry ties by starting Global Music Rights, or GMR, to compete with licensing giants BMI and ASCAP. He reportedly made quiet deals with large group owners (starting, perhaps, in his own back yard with iHeartMedia?); and he’s refusing to take seriously the Radio Music License Committee (RMLC), the industry group that has a pretty good track record in hammering out deals with the more traditional licensors.

This is, after all, the Era of Blowing Things Up, and Mr. Azoff didn’t get to the top of the Power 100 by being the nicest guy in the room. So he capped off 2016 by suing the RMLC.

We’ll let Variety pick up the story:

Global Music Rights, an upstart music licensing company founded by Irving Azoff, filed a federal anti-trust suit on Wednesday against the Radio Music License Committee, accusing the group of running an unlawful cartel on behalf of the nation’s radio stations.

The conflict dates to 2013, when Azoff formed GMR to compete with the established licensing companies, ASCAP and BMI, which together control approximately 95% of music copyrights. ASCAP and BMI have longstanding agreements with radio stations, which are represented by the trade group RMLC, that set rates for airplay.

Azoff’s firm holds the rights for a small handful of successful songwriters—about 70 in all. GMR has sought to collect rights that are essential to radio stations, and then license those rights for substantially more than the songwriters could get through ASCAP or BMI. This fall, GMR has been in negotiation with RMLC for an agreement that would allow radio stations to play GMR’s songs, which include tunes written or performed by Pharrell Williams, Adele, Drake, John Lennon, Smokey Robinson, Steve Miller, Taylor Swift, Tom Petty and the Heartbreakers, and U2.

But over Thanksgiving, those talks broke down. RMLC filed suit on Nov. 18, accusing GMR of exercising monopoly power over its copyrights, and seeking to force it into rate arbitration akin to the arrangements with ASCAP and BMI. RMLC contends that GMR is seeking extortionate rates for its songs.

On Wednesday, GMR fired back, filing its own suit accusing RMLC of running an illegal cartel comprising 90% of the nation’s radio stations—which prevents it from negotiating licensing agreements with individual stations.

“Unable to negotiate freely and fairly, and under threat of a group blockade from radio, the songwriters and the companies that represent them are forced to capitulate to the artificially depressed license fees the RMLC cartel demands,” the suit alleges.

According to the RMLC suit, GMR has indicated that without an agreement, the stations’ right to play its songs will expire on Dec. 31. As of Jan. 1, 2017, stations could be subject to $150,000 penalties for playing songs in GMR’s repertory, which account for about 5-7.5% of total radio plays. RMLC contends that GMR makes it nearly impossible for stations to know which rights GMR holds, meaning they would have difficulty avoiding playing GMR’s songs if they wanted to.

Daniel Petrocelli, GMR’s attorney, disputed that claim. He said RMLC’s lawsuit made it clear that the organization never intended to negotiate in good faith.

“The law does not allow companies who are supposed to be competing against one another to be colluding with one another to keep their costs down,” Petrocelli told Variety. “Business is conducted every single day in this world, and in every single industry, by consensual arrangements. This industry is no different. If they want to play these works they need to pay fair market value.”

The dispute bears similarities to an earlier conflict between RMLC and another licensing firm, the Society of European Stage Authors and Composers (SESAC). RMLC sued SESAC in 2012, won a favorable ruling and ultimately came to a settlement in 2015 that brought SESAC under a rate arbitration scheme similar to the arrangement with BMI and ASCAP.

When contacted for this story, the RMLC had this to say:

The RMLC will not roll over in the face of the baseless, bullying lawsuit filed yesterday by Global Music Rights. GMR’s lawsuit is an obvious ploy designed to pressure the RMLC in response to the antitrust suit the RMLC filed against GMR in federal court in Philadelphia last month. GMR now tries to hide from reality: the fight between the RMLC and GMR stems from GMR’s attempt to impose monopoly pricing on the radio industry, and the RMLC’s opposition to that plan. Courts have recognized, for many decades, that without regulation of their rates, performing rights organizations (PROs) like GMR are anticompetitive and violate the antitrust laws. That is why all the other PROs (ASCAP, BMI and SESAC) are subject to rate controls. GMR baselessly criticizes the rates agreed to between the RMLC and the other PROs as unreasonably low, but conveniently ignores that the courts have regularly found them to be reasonable and non-discriminatory. GMR’s claim that the RMLC is a cartel is frivolous and offensive; GMR apparently seeks to force all PROs to negotiate separately with more than 10,000 radio stations—a ridiculously inefficient proposal. The RMLC looks forward to defeating GMR’s claims in court.

In an interview, Azoff called the dispute with the RMLC “the most important fight I’ve had in my professional career.”

“They expressly say their goal is to reduce payments to songwriters,” Azoff said. “I’m on the right side of this fight. We were sued. We didn’t sue them. Somebody should have brought an anti-trust lawsuit long, long ago.”

—Variety, 12/7/2016

Later last month, it was announced that the RMLC had reached a interim agreement with GMR to give broadcasters a nine-month reprieve from potential copyright infringement lawsuits for playing music from GMR’s repertoire. In a letter to broadcasters, RMLC Chairman Ed Christian stated that stations have until January 31 of this year to accept the interim deal, which runs through September 30. “Any station that signs the interim license agreement by January 31, 2017 and pays the applicable interim license fees will not be subject to copyright infringement claims by GMR for the term of the interim license.”

But that hasn’t stopped Azoff & Company from issuing threatening letters to individual broadcasters in an apparent attempt to sidestep an industry-wide agreement. So this week, Christian had this to say to radio:

The RMLC is receiving troubling reports from a number of station operators who have received interim fee license quotes from Global Music Rights (GMR). In its message conveying this offering, GMR makes at least two important misstatements.

First, GMR incorrectly asserts that the interim license fee was “negotiated” with the RMLC. As many of you appreciate, the interim license situation with GMR is unlike negotiations we have undertaken involving ASCAP or BMI. GMR refused to negotiate the price it will charge stations under the interim license, and we have not undertaken at this point any negotiations that would bind any stations.

Because we believe that the availability of an interim license is an important option to our constituents who had legitimate concern as to infringement exposure related to GMR works, the RMLC ultimately did work with GMR to make an offer to the industry for an interim license for the period January 1 through September 30, 2017. GMR insisted that any industry-wide interim license would need to afford GMR the possibility of securing industry payments totaling $2.5 million per month during the interim fee period (exclusive of licensee payments from any operators who had executed separate licenses with GMR).

GMR mischaracterizes this arrangement as a negotiation with the RMLC. The RMLC characterizes it as a non-negotiable, take it or leave it proposition from GMR that entailed no negotiation whatsoever as to the level of interim fee.

Second, GMR incorrectly states that the quoted interim license fee was “calculated by the RMLC.” Again, we felt it was important to provide the option of an interim license option for our constituents while we litigate our antitrust claims against GMR. GMR insisted that it would not offer an interim license unless the RMLC provided GMR with an interim fee allocation model that would total the demanded $2.5 million per month. We elected to mirror the revenue-driven structures in place with BMI and ASCAP, on a pro-rata industrywide basis by station. The RMLC believed that operators would be better served with the RMLC’s input here than to leave the process entirely to the whim of an organization that lacked the necessary resources to drive the process to a rational conclusion. The RMLC did not dictate and, indeed, has never seen GMR’s final interim fee calculations, nor would the RMLC ever entertain any involvement whatsoever in GMR’s final fee calculations.

The RMLC believes that these GMR representations, as to the level of RMLC involvement with their interim license offering, border on bad faith at the very least and are intended to lend an RMLC stamp of approval to the process. To be clear, the RMLC does not recommend nor disparage GMR’s interim license offering. Whether or not to pursue the offering (or any other license terms) is an individual choice for each operator to make.

Editor’s Take

While Christian’s latest missive tries to defend the RMLC, I don’t see any real, take-it-to-the-bank evidence that radio stations that adopt the RMLC interim payment plan will be protected from further litigious action by GMR.

And sure enough, radio stations all over the country have received letters from GMR demanding license payments that aren’t even close to the RMLC numbers. Our readers tell us that GMR’s fees amount to about $2000-2500 per year, payable monthly.

What we hear from small market broadcasters is a variety of reactions, ranging from foolish (ignoring the situation or refusing to pay) to prudent.

In the “prudent” category, there are two ways to go:

DROP ALL GMR-LICENSED MUSIC AND OPT OUT. This is a good solution for solo operators and small groups that have solid systems in place to ensure that songs by GMR-represented composers will absolutely not air on their stations. As the Variety article says, you will reduce your playlist by 5-7% at most—probably less in your format. That seems a small price to pay to save $200 a month.

PAY THE MONEY. If you’re the owner of a far-flung radio group, you can bet that there’s at least a slim chance that a GMR song will get played somewhere. While the odds of detection are similarly slim, if you’re caught there are stiff statutory fines that make the tribute to GMR seem like pocket lint. And if I were Mr. Azoff, I would deploy the latest sound-scraping technology to target holdout facilities. So you might be well advised to “pay the two dollars” to buy some peace of mind.

Given the firebrand nature of Mr. Azoff, I would probably not pay only the RMLC-proposed fees and hope for the best. Rather, I’d either pay, or not, the GMR tab, and support the RMLC, whose ultimate agreement with GMR should include an adjustment for the fees you might (over-) pay in the meantime.