BMI WILL APPEAL CABLE, SATELLITE ROYALTY RATES FOR MUSIC CHOICE
Broadcast Music Inc. (BMI) said it would appeal federal court ruling that set license fees for distribution of BMI-affiliated songwriters’ works by music service company Music Choice via cable and satellite. BMI won right to collect license fee -- but nowhere near what it was seeking -- from music streaming company when U.S. Dist. Court, N.Y.C., ordered Music Choice to pay 1.75% of its revenue for use of BMI music. BMI had sought 4%, but Judge Louis Stanton ruled that figure didn’t reflect “normal competitive license terms” and set fee at 1.75% as proposed by Music Choice. BMI is seeking same 4% fee from other music streamers, but Stanton ruled: “BMI offers no reason why Music Choice’s Internet rate should differ from its cable and satellite rate except that its cable and satellite distribution involves 3rd party operators.” BMI said it wouldn’t challenge court’s rate for Internet music. Music Choice provides 55-channel, commercial-free service to homes via cable, satellite, Internet.
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Music Choice applied to BMI in 1997 for blanket license for its residential music services distributed by Internet, cable and satellite, Judge Stanton said in his order. When parties weren’t able to agree on rate, BMI asked court to set reasonable royalty. It said rate should be based on 1995 agreement between BMI and DMX, Inc. -- another company offering digital music to residential customers through cable and satellite -- because it was fairly negotiated, arms'-length transaction, DMX and Music Choice were engaged in the same business and they programmed and distributed music same way. However, judge said Music Choice had contended that DMX agreement was unreasonable because “its fees reflect BMI’s monopolizing and superior bargaining power,” were somewhat inflated by settlement of related hardware dispute and were derived from earlier fee structure negotiated before there was rate court.
In decision hailed by Music Choice attorneys as “a significant victory for fairness and competition in the use of music represented by performing rights organizations,” Stanton sided with Music Choice, saying DMX agreement shouldn’t be viewed as “reflecting normal competitive market terms” and setting rate at 1.75% of gross revenues for Music Choice’s cable, satellite and Internet music distribution for period Oct. 1 , 1994-Sept. 30 2004. Stanton said BMI had “disparage[d] the Internet license as ‘experimental,’ and thus not establishing a reasonable fee.” However, he said, BMI for years had been applying 1.75% rate to revenue-producing music programming at Web sites other than those owned by radio or TV stations and gave no good reason why Music Choice’s Internet rate should differ from its cable or satellite rates except that cable and satellite distribution involved 3rd party operators.
BMI said it “had been seeking higher fees for cable and satellite distribution and had asked court to take into account the full retail amount that listeners pay cable operators and satellite carriers that are covered by their license.” Instead, BMI said, court based its fee on “smaller wholesale share of fees” collected by Music Choice, refusing to consider any increase to reflect distributors’ markup to the public. “We are disappointed” court didn’t take that into account, BMI Gen. Counsel Marvin Berenson said.