BMI Demands Licensing Documents From Irving Azoff-Led Competitor

Irving Azoff - H Getty 2016
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Thanks in part to a more than 75-year-old judicially monitored consent decree that continues to govern the licensing of song compositions to broadcast outlets, Broadcast Music Inc. is now attempting to get a federal judge to enforce a subpoena on Global Music Rights, its upstart competitor.

GMR was founded by former Live Nation chairman Irving Azoff five years ago. With the promise of securing higher royalty rates for songwriters, GMR has a small but illustrious clientele, including Bruno Mars, Smokey Robinson and the Eagles. It administers some 33,000 works, including those written or performed by Adele, the Beatles, Jay-Z, Madonna, U2, Bruce Springsteen and Jon Bon Jovi. When radio stations and digital outlets wish to publicly perform songs in GMR's repertoire, they must negotiate a license.

The reason that GMR has become an attractive alternative for songwriters is that unlike BMI or ASCAP, this new performance rights organization isn't under the onus of a deal with the U.S. Department of Justice that was worked out in the 1940s. Under consent decrees, BMI and ASCAP must offer music users a compulsory license to songs upon request. When terms can't be worked out through negotiation, BMI and ASCAP go to a "rate court" in the Southern District of New York and fight over what's most fair.

At present, BMI is in the midst of a rate court battle with the Radio Music License Committee, which represents some 10,000 commercial radio stations throughout the nation. As part of BMI's latest efforts to win preferred licensing terms for its own clientele of songwriters and music publishers, BMI has served a subpoena on GMR.

That's unusual to say the least.

In late August, GMR submitted a bid to quash the subpoena. The Azoff firm spoke about how it "has fought tooth and nail to gain a foothold in the industry" and referenced its ongoing litigation with RMLC.

"BMI threatens to undo GMR’s hard-fought progress," wrote GMR's attorneys at O'Melveny & Myers. "The Subpoena demands that GMR reveal the most closely guarded aspects of its business to BMI, its largest competitor, and to RMLC, a litigation adversary and powerful counterparty in license negotiations. Among other things, BMI asks GMR to produce all radio license agreements, all documents relating to GMR’s radio license negotiations, detailed revenue and compensation data, internal market analyses, and documents underpinning GMR’s antitrust claims against RMLC. Put simply, the Subpoena asks GMR to give a dominant competitor and adversary near-comprehensive access to the heart and soul of GMR’s business. The Federal Rules do not require GMR to equip BMI and RMLC with the very tools they would need to unfairly disadvantage GMR in the marketplace."

On Tuesday, BMI submitted its opposition and moved to compel a document handover. The friction between a large market entity and a smaller one, a firm that is under the auspices of the consent decree and one that is not, is clearly evident.

"As a non-regulated Performing Rights Organization, GMR has been able to establish market rates that are higher than the rates achieved by BMI in the shadow of the Rate Court," writes BMI's attorney Scott A. Edelman at Milbank, Tweed. "The existence of those market-based agreements provides important evidence for this Court to evaluate in determining an appropriate rate for BMI. In contrast to BMI, which operates as a not-for-profit corporation, GMR has an economic motivation to avoid consideration of its license agreements in this proceeding and thereby seek to suppress the rates that BMI is able to charge to users. To the extent that GMR persists in being able to charge rates that are higher than BMI, GMR can either (1) pass on higher amounts to its affiliate songwriters, or (2) keep the additional amounts for its own investors."

According to BMI, the radio industry would like licensing rates to be comparable to what was achieved in a recent agreement with  ASCAP.

But BMI presents itself as being in a different boat than ASCAP. BMI says that GMR's market share has been growing disproportionately at the expense of ASCAP, and that's why according to BMI, the recent RMLC-ASCAP deal represents an "unreliable benchmark."

BMI prefers to use GMR's so-called free-market deals with iHeartRadio and Townsquare as establishing the fair rate. BMI also says allegations of how RMLC uses monopsony power also has "significant bearing on the ultimate issue" of what the rate should be. 

The Justice Department, under a Donald Trump administration that is leery of regulation, has been examining the continued worth of the ASCAP/BMI consent decrees. GMR's entrance and this very dispute may soon be pointed to as evidence that a new dynamic is necessary.

(Correction: The story originally stated that radio stations recently achieved a reduction in licensing rates in an agreement with ASCAP. According to the PRO, the deal struck with RMLC for 2017-2022 provides for increases in rates.)