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Focus on Broadcasting: ASCAP & BMI License Agreement Settlements

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The following are updates from recent agreements reached between the Radio Music License Committee (RMLC) and Television Music License Committee (TMLC) with American Society of Composers, Artists, and Producers (ASCAP) and Broadcast Music Industry (BMI).
July 2, 2012

The following are updates from recent agreements reached between the Radio Music License Committee (RMLC) and Television Music License Committee (TMLC) with American Society of Composers, Artists, and Producers (ASCAP) and Broadcast Music Industry (BMI).

ASCAP and BMI provide blanket performance rights. A performance right is the right to perform music on a broadcast channel. So every time music plays over TV, broadcast on air via the radio, or played over speakers in a restaurant, a performance right is needed. Synchronization rights are the right to synchronize music to video.

If a station is producing its own content such as news, broadcasters need both a performance right and a synchronization right. ASCAP and BMI do not cover synchronization rights.

ASCAP and Radio

Fee structures will return to a percentage of gross revenue at 1.7%. This change is being retroactively applied beginning January 1, 2010. As such, $75 million in industry credits are being allocated as credits over a 5 year period in $15 million increments.

A station’s credit will be determined by the percentage of ASCAP fees paid in 2010 and 2011 the station paid compared to fees paid by all stations for 2012 and 2013. For 2014-2016, credits will be calculated as the station’s overpayment in 2010 and 2011 as a percentage of total overpayments by all eligible stations.

The 1.7% is the blanket rate (less a standard deduction). Program Period licenses are also still available at a rate of 0.2958% of gross revenue (less a standard deduction). The standard deduction is also a change, simplifying the former itemized deductions to a 12% standard deduction on terrestrial and HD multicasting revenue and a 25% standard deduction on new media revenue. Media rights are also being expanded to include new media applications.

BMI and Radio

On June 11, 2012, BMI and the RMLC also reached a settlement agreement bringing to end the two-and-a-half years of litigation. Fee structure and standard deductions mirror the ASCAP settlement agreement at 1.7% of gross revenue less the standard deductions noted above.

Rights coverage was also expanded to new media such as internet websites, smart phones, and other wireless devices. This settlement will result in $70.5 million of industry credits to be applied towards future BMI invoices.

Ed Christian, Chairman of the RMLC stated “It is a vote of confidence towards our industry that BMI has agreed to return to the historic percentage-of-revenue fee structure. “

ASCAP and Television

The industry blanket fee is being reduced 3% as of January 1, 2011, and will remain at that level for 2013 and 2014. Fees will increase 0.5% in 2015 and 2016. Per program license fees will be reduced from 1.62 to 1.45 for 2012-2016.

The calculation for determining the blanket fee is based on ratings of the station and a weighting factor for the station's market. The calculations are performed in the fall for the following year. Ratings are determined based on ratings books for three years.

In the July bill, stations should expect to see six separate line items detailing the station's credits that will be applied to each month January through June. Stations that have the minimum blanket fee of $45 a month should not expect a credit.

The new licenses will cover all audio-visual content on station-affiliated websites as well as performances provided via mobile or wireless platforms and any other digital platforms. As such, secondary digital channels are included in the primary channel broadcast blanket fee and do not require additional license fees.
Still pending is the availability of an adjustable fee blanket license.

The start date for this would not be until January 1, 2015. Availability of the adjustable fee blanket license means that you will get a credit for each public performance for which you get a direct license; it does not require that you have a direct license for all of the music in a particular program, but for a specific piece of music. The credit is equal to approximately 50%.

BMI and Television

BMI and the TMLC have yet to reach a formal agreement. Look for future communications when a settlement is reached.

RubinBrown has a dedicated group focused on business issues related to media companies. The Broadcasting Segment of RubinBrown’s Media & Entertainment Industry Group provides assurance, tax, and business advisory services to radio and television broadcasters around the country.

Under U.S. Treasury Department guidelines, we hereby inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used by you for the purpose of avoiding penalties that may be imposed on you by the Internal Revenue Service, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed within this tax advice. Further, RubinBrown LLP imposes no limitation on any recipient of this tax advice on the disclosure of the tax treatment or tax strategies or tax structuring described herein.

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