As returns from album sales have fallen off the streaming music cliff over the past 15 years, musicians have increasingly had to hit the road to make a living. Tegan Quin of Tegan and Sara once told a reporter, “This has become a really blue-collar industry, which Sara and I aren’t afraid of, we love to work hard, but [on tour] you have moments where you’re just like, ugh…Because you can’t really take a break, or else how do you make money?”
It’s not just the rock stars and would-be rock stars that have taken a hit from careening record sales, but also the songwriters and composers who write the songs that keep the world singing. With comparatively small revenues going to songwriters from streaming sites in comparison to album sales and radio play, they too are looking to the booming live music industry for increased revenue.
Songwriters and composers do in fact receive a licensing fee for live performance of their works, which is generally set through an agreement between their respective performance rights organization (PRO) and the association representing the concert promoters who promote the live performances.
One of the two largest PROs, Broadcast Music Inc. (BMI), in late September went to federal court seeking a court-ordered increase in the royalties to be paid to songwriters and composers from the North American Concert Promoters Association (NACPA), which represents such concert promoter giants as the various AEG and Live Nation affiliates (who alone control 70% of the live concert box office in the U.S.).
BMI Seeks a Nearly-Quadrupled Licensing Rate and a Wider Revenue Stream
In its September 25, 2018 petition, BMI asks that the court mandate an increase in the royalties paid by NACPA-affiliated concert promoters from the current scale of .15% to .30% of ticket sales (or 15 to 30 cents of every $100 in ticket sales) to 1.15% of revenues from concerts. BMI is seeking not only an exponential rate increase, but also an expanded pool of what is included in the concert revenues from which the royalties are calculated, moving beyond just ticket sales to also include “ticket fee surcharges, secondary market sales, sponsorship and advertising, luxury box seat sales at arenas, VIP packages, and parking and concessions…”
Essentially, what BMI is saying is that, for example, a songwriter whose work is performed at Coachella (which grossed $114 million in 2017 alone for its six-day festival, and is promoted by AEG) should now receive nearly four times the rate of ticket sales royalties, in addition to getting a cut of all the VIP packages, food, alcohol sales, and much of the rest of the revenues that the music festival generates.
Why the Federal Courts May Have the Power to Set BMI’s Licensing Rates
BMI is seeking this rate change to be made retroactive to 2014 and to continue on through 2022. While it may seem unusual that BMI is seeking a court to set the rate in a contract between itself and NACPA, when the parties could just negotiate rates on their own, the federal courts do in fact have the right to set rates for BMI contracts in some instances due to a Consent Decree handed down by the federal courts in 1966. Somewhat ironically, the power of the federal government to intervene in BMI’s contracts via Consent Decrees came about as a result of the government taking on BMI and other music licensors for anti-competitive, monopolistic activities throughout the middle of the 20th century.
The current rate paid by NACPA has been in place since the 1990s, and while BMI sought to renegotiate the rate in 2009, NACPA failed to agree to their requests, and BMI and NACPA have operated on an interim agreement since the beginning of 2014 which, according to BMI, allows for the retroactive adjustment of terms.
BMI Argues That Declining Album Sales Justify the Rate Increase
In making its appeal for the higher rate to the Southern District of New York, BMI points out that the NACPA licensing rates are extremely low compared to other licensing agreements throughout the country and the world, with European concert promoters paying as much as 10% in licensing fees to songwriters and composers.
BMI also argues that, while the royalty rates from album sales in decades pasts may have justified the lower live performance rates, stating, “Although the overall use and consumption of music in the United States has grown exponentially over the last decade, the market for album sales is a small fraction of what it once was, resulting in a substantial decline in mechanical royalties paid to music songwriters and composers.”
NACPA appears hostile to the BMI rate adjustment request, with a representative for NACPA telling Billboard shortly after the filing of the petition that, “BMI’s rate proposal is patently unreasonable. NACPA members are committed to paying a reasonable and fair rate for the public performance of all copyrighted compositions and they will not be bullied by BMI’s demands or its commencement of a rate court proceeding.
Stay tuned to The Fried Firm’s blog for more updates on developments in the legal battle between BMI and NACPA.