The GMR Interim License - What To Do? Peering Inside The GMR Crystal Ball

No one in the radio industry could have missed the recent news that Global Music Rights ("GMR") the new music rights organization, has now offered an interim license to broadcasters while it continues to work out a deal with the Radio Music License Committee ("RMLC"). The news came to broadcasters on Christmas Eve, December 24th, in the form of a letter to broadcasters emailed from RMLC Chairman Ed Christian. The questions have been pouring in:

• Should I sign?
• What happens if I don't?
• I thought I was covered by ASCAP, BMI and SESAC? I'm paying way too much now; so who are these guys?

Some Background

This has been amply covered by the trade press, but just for review, here it is: Historically, broadcasters and most all music owners had been covered between ASCAP, BMI and SESAC. Then in 2013, Irving Azoff, Chairman of Azoff MSG Entertainment and manager for some of the biggest acts in music, signed a group of major-name music rights holders to GMR, making it a must-have license for most radio stations. Except for some large radio groups, broadcasters have avoided signing with GMR, and the RMLC Committee has been working to reach an agreement with them.

In November, the RMLC sued GMR claiming it is an unlawful monopolist "deploying a calculated scheme to extort the U.S. commercial radio industry. GMR had implicitly threatened to start suing radio stations for copyright infringement beginning January 1st, 2017 unless they agree to pay supra-competitive rates for a license to play the copyrighted songs in GMR's repertoire."

A few weeks later, GMR filed an antitrust case against RMLC, calling it an illegal cartel where powerful radio broadcasters and the RMLC agreed to artificially depress license fees, quoting the RMLC's objective "to keep licenses for the commercial radio industry as low as [it] can possibly keep them."

GMR had been stonewalling the RMLC, but the cross-filing of anti-trust complaints seems to have incented GMR to reengage with RMLC. With the January 1st deadline looming over all parties' heads, GMR offered an interim nine-month license and the RMLC announced its availability on Christmas Eve. The interim license takes the immediate pressure off to allow negotiations to proceed, but broadcasters must sign-up for it by January 31st and pay the applicable license fee.

What To Do?

So broadcasters across the country are asking what to do? The notice does not provide a fee structure for the interim period. To find out what it will be stations must contact, and therefore engage with, the GMR. If a station decides to just wait and see what comes of the RMLC negotiation, there is the risk of being sued. According to the RMLC notice, under the interim license, a station will not be subject to copyright infringement claims by GMR for the term of the interim license. Is that insurance?

The Crystal Ball

There is no way to know what GMR will do if a station does not obtain an interim agreement. It probably does not know itself. Given the careful wording of the RMLC notice, GMR may not want to start a lawsuit with any specific broadcaster during further negotiations with the RMLC. With two anti-trust suits already filed, it would seem to behoove negotiations to keep things calm while it seeks to firm up its permanent agreement. Moreover, assuming a permanent agreement is reached, GMR can then reach back and claim licensing fees for the period since January 31st; so stations would be left in about the same position as if they had signed an agreement anyway.

Also, in the modern ownership world we now live in, the real money in music licensing lies with the largest 20 or 30 station groups. So it's unlikely that GMR would go after one of the smaller community-based broadcasters and subject itself to the claim of bullying while incurring the expense and the distraction of the lawsuit. Anyway, given the speed of litigation, any such lawsuit would not be tried until after the conclusion of the interim extension period.

If you're curious about the artists who have signed up with GMR, and it would help to make a decision, many of them are listed on the GMR website under the FAQ section, www.globalmusicrights.com/faqs. Scroll down to "What songs are in the Global Music Rights repertoire?" and you'll find a list of over 200 of the most popular artists and performers of contemporary and past music. Songs can also be searched by title. It is pretty clear, though, that GMR has signed up the top music sources being played on the radio. But BE CAREFUL. Note that the section title is misleading! This is not a list of songwriters and authors who hold the copyright, but of "performers who have performed songs written by Global Music Rights' clients." Those performers may have never written a song, or may have recorded music that GMR does not represent. Still, many familiar with the issues have concluded that there is no effective way to screen out GMR music.

Fractional Licensing

Even with a GMR license, beware. Another problem is that GMR does not guarantee full licensing of the music they represent. This problem, called "fractional licensing," is presented when some but not all of the authors or copyright holders of a piece of music have agreed to be represented by the music rights organization. Thus, even if you obtain a license from GMR, it has been reported that they do not have representation rights to all of the partial copyright owners of some of their music. Performing that music, even with a GMR license, could still subject a station to a lawsuit.

Bottom Line

So, let's be clear: There really is no real legal advice to offer here. It boils down to each broadcaster making its own individual assessment of its tolerance for risk. The bottom line is that there is no bottom line! The ultimate decision as to whether or not to sign up for the interim license is governed by your tolerance for risk and the probability you assign to the likelihood that GMR might choose you to sue, or, for that matter, whether they will sue at all. Assuming that they reach an agreement with the RMLC it is likely to include the right to collect performance fees in arrears and, assuming that they do not achieve an agreement with the RMLC, GMR would pursue each station separately for arrearages as well.

The good news is that the stalling may be over and GMR is ready to sit down for a serious negotiating session with RMLC to reach a viable agreement. Perhaps we will learn more between now and the January 31st deadline.

This column is provided for general information purposes only and should not be relied upon as legal advice pertaining to any specific factual situation. Legal decisions should be made only after proper consultation with a legal professional of your choosing.