ESPN Asked to Pay More Than $15 Million Annually to License Ambient Stadium Music

ESPN has taken BMI to court to get a break from royalty payments.
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In response to ESPN's demand that a New York federal court determine a reasonable license fee for the performance of songs on its cable sports networks, licensing agency BMI is noting the "vast amounts of music played loudly and prominently in stadiums and arenas," ambient noise that is often picked up by the broadcaster's microphones and heard by its viewers.

Although some might assume that the airing of such background music constitutes "fair use" — see for example ABC's 1978 legal victory over a song played by a band at a televised parade — determining fair use is a case-by-case process that depends on the specific facts at issue. Thus, BMI says a blanket license that covers incidental and ambient uses is "particularly important."

According to a court filing made by BMI on Tuesday, "Advertisers place a premium on live sporting events ... and ambient stadium music is a critical component of the broadcast that allows ESPN to attract viewers by making them feel like they are sitting in the stadium cheering on their favorite team."

The argument aims to rebut ESPN's attempt to get a break on royalty payments that could amount to about $15 million per year.

Last month, ESPN kicked off this rate-setting proceeding by talking how it "unlike typical television networks ... acquires music rights through direct licenses."

ESPN still wanted a blanket license that would allow it to use BMI's catalog of approximately 10.5 million published songs, but thought the royalty rate should bear some proportional relationship to the amounts it directly paid songwriters and other publishers. "To date, BMI has refused to quote license fees to ESPN for the License Period that bear any such relationship and instead has insisted on license fees that completely ignore the best available evidence of the value of public performances of music on ESPN," states a petition.

BMI believes this is misleading.

The licensing agency tells the judge that when ESPN makes a direct license, it is interested in getting a specific composition for use in a particular program to be aired at a specific time and often for a limited period of time or number of performances.

BMI touts by contrast the benefit of having a blanket license as "insurance against copyright infringement, relief from the need to separately identify each and every composition inserted into its programming, greatly reduced transaction costs, streamlined collection and payment of royalties, and immediate access to the more than 10.5 million works in BMI’s repertoire."

What's more, BMI says there's no easy substitute for the value of the licenses it provides, and believes the direct deals that ESPN is making aren't the best benchmark for value.

Rather, the licensing agency thinks a court is better served by looking at the some 300 BMI blanket licenses made with cable networks since the mid-1990s when a court addressed a petition from Turner Broadcasting. Under those licenses, a "music intensive" network pays 0.9% of gross revenue, a "general entertainment" network forks over 0.375% of gross revenue, and a "news and sports" network pays just 0.1375% of gross revenue. BMI says ESPN generated approximately $11 billion in revenue in 2014, so that's how we arrive at the $15 million-per-year figure above.

Back in 2006, ESPN agreed to 0.1375%, according to the court documents, but requested and received an option where the formula would be adjusted to encompass a "program fee" and an "incidental and ambient uses" fee. The first fee was structured to allow ESPN to decrease its payments as it entered into direct licensing deals with publishers. Allegedly, this required ESPN to report such deals for verification. BMI says that ESPN "flouted its reporting obligations." Further, the program fee was pegged to ESPN's gross revenues for 2004. "Unexpectedly to BMI, ESPN’s actual revenue growth far outstripped that estimate, resulting in ESPN paying below market fees to BMI," writes its lawyer Scott A. Edelman.

As for the music playing loudly and prominently in stadiums and arenas, BMI says it doesn't matter that ESPN is making direct deals. Under its current arrangement, even if ESPN licenses every second of non-ambient music in its programming, it still has to pay the entire "incidental and ambient uses" fee. The parties are said to have recognized the difficulty and cost of directly licensing such music.

BMI might want full value for its catalog, but believes it is appropriate given that ESPN has "greatly increased" its use of ambient music "as the result of the distribution of its programming on its website and other mobile platforms."

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