wpix v bmi - resp. to motion

8/7/2019 WPIX v BMI - Resp. to Motion

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF NEW YORK

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WPIX, Inc., et al.,

Applicants,

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BROADCAST MUSIC, INC.,

Respondent.

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FILED ELECTRONICALLY

09 Civ. 10366 (LLS)

Related to United States v. Broadcast

Music, Inc., 64 Civ. 3787 (LLS)

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MEMORANDUM IN SUPPORT OF APPLICANTS ENTITLEMENT TO A

BLANKET LICENSE WITH A FEE STRUCTURE THAT REFLECTS DIRECT

AND SOURCE LICENSING AND IN OPPOSITION TO BMIS MOTION TO

PRECLUDE SAME

R. Bruce Rich (RR 0313)

Benjamin E. Marks (BM 0796)

Todd D. Larson (TL 1125)WEIL, GOTSHAL & MANGES LLP

767 Fifth AvenueNew York, New York 10153

(212) 310-8000

Attorneys for Applicants WPIX, Inc., et al.

Case 1:09-cv-10366-LLS Document 28 Filed 03/15/11 Page 1 of 26


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TABLE OF CONTENTS

Page

PRELIMINARY STATEMENT ....................................................................................... 1

STATEMENT OF FACTS ................................................................................................ 4

I. BMI and the BMI Consent Decree ............................................................ 4

II. Local Broadcast Television Stations Historic License

Arrangements with BMI, Including the Role of the Per ProgramLicense....................................................................................................... 6

III. The Role of Adjustable-Fee Blanket Licenses in Fostering Added

Competition in the Licensing of Music Performance Rights................... 10

ARGUMENT................................................................................................................... 12

I. The Law, Supported by BMIs Prior Conduct and Admissions, isSettled: BMI Must Offer Users, such as Applicants, a Blanket

License..................................................................................................... 12

II. The BMI Decree, as Interpreted by the Second Circuit, Requires

BMI to Offer the Fee Structure for the Blanket License Sought byApplicants ................................................................................................ 13

III. Article VIII(B) of the BMI Decree Does Not Insulate BMI Fromthe Legal Force of AEI, Nor Otherwise Entitle BMI To Deprive

Applicants of the License They Seek....................................................... 16

IV. BMIs Argument as to Burden is Entirely Speculative and

Immaterial to Applicants Right to Pursue an Adjustable-Fee

Blanket License........................................................................................ 19

V. The Antitrust Purposes of the Decree will be Furthered by the FeeStructure Sought by Applicants ............................................................... 20

CONCLUSION................................................................................................................ 22



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TABLE OF AUTHORITIES

Page(s)

ASCAP v. Showtime/The Movie Channel, Inc.,912 F.2d 563 (2d Cir. 1990) .......4-5

BMI v. All-Industry Television Station Music License Committee,611 F.Supp. 868 (S.D.N.Y. 1985) ..7

BMI v. DMX, Inc.,

726 F. Supp. 2d 355 (S.D.N.Y. 2010) ..20

BMI v. Weigel Broad. Co.,

488 F.Supp.2d 411 (S.D.N.Y. 2007) ..6-7

Buffalo Broad. Co. v. ASCAP,

546 F.Supp. 274 (S.D.N.Y. 1982) ......8

United States v. ASCAP,586 F.Supp. 727 (S.D.N.Y. 1984) ..5

United States v. ASCAP (In re Application of Buffalo Broad. Co.),

No. 13-65 (WCC), 1993 WL 60687 (S.D.N.Y. Mar. 1, 1993) ...7-8

United States v. ASCAP (In re Application of THP Capstar Acquisition Corp.),

09 Civ. 7069 (DLC), 2010 WL 4878878 (S.D.N.Y. Dec. 1, 2010)..............................16

United States v. BMI (In re Application of AEI Music Network, Inc.),275 F.3d 168 (2d Cir. 2001)...............................................................................passim



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Applicants submit this memorandum in support of their request from this

Court for reasonable terms for a blanket license with a fee structure that reflects direct

and source licensing and in opposition to BMIs motion opposing same (styled Motion of

Broadcast Music Inc. (BMI) for an Order that the BMI Consent Decree does not

Require BMI to Provide to Broadcasters Another Blanket License with an Adjustable

Credit, filed February 15, 2011) (BMI Mem.).

PRELIMINARY STATEMENT

BMIs opposition to what is by now a well-established proposition that,

no differently from AEI or DMX or any other BMI licensee, Applicants are entitled to

have this rate court consider reasonable fees and terms for a blanket license with a fee

structure that reflects alternative licensing arrangements entered into by individual

Applicants is legally groundless. Indeed, notwithstanding BMIs efforts to muddy the

waters, the analytic path to resolution of the instant motion is quite straightforward. The

conclusion that Applicants are in fact entitled to reasonable terms for an adjustable-fee

blanket license follows inexorably from the following simple, uncontroverted

propositions:

1. As everyone BMI, the Government, the Second Circuit in AEI,1 and

Applicants has recognized, BMI is required by the terms of its consent decree to offer

any user requesting one a blanket license.

1 United States v. BMI (In re Application of AEI Music Network, Inc.), 275 F.3d 168 (2d

Cir. 2001) (AEI).



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2. As BMI concedes, BMI Mem. at 2, [t]he license that Applicants now

seek. is simply a blanket license with [an] adjustable fee structure. That fee

structure would provide Applicants with credits on account of such alternative license

arrangements as they may make for their public performances of BMI music.

3. The Second Circuit in AEI, building on premises 1 and 2 above, held

that where, as here, an applicant requests a blanket license with a fee structure that

reflects such alternative licensing, BMI must advise the applicant of the fee it deems

reasonable for such a license, and that BMIs failure to do so will empower the district

court to set a reasonable fee for such a license. AEI at 177.

No amount of smoke-blowing on BMIs part can obscure these dispositive

points. As we address in greater detail in the body of this memorandum, contrary to

BMIs contention, the AEIdecision nowhere confines its reasoning to non-

broadcasters. BMI Mem. at 20-21. Quite to the contrary, the import of AEIs analysis

of the relevant provisions of the BMI Decree, together with BMIs own prior concessions

that it must offer all manner of users blanket licenses, makes plain Applicants

entitlement to an adjustable-fee blanket license.

BMIs effort to wriggle out of this requirement through a contorted

reading of the per program provisions of Article VIII(B) of its Decree also is unavailing.

See BMI Mem. at 11-13. The notion that Article VIII(B) somehow constrains BMIs

requirement to offer Applicants blanket licenses, in contradistinction to BMIs obligation

in that regard as to all manner of other users, reflects a fundamental misreading of Article

VIII(B) as well as the relevant history as to its role in the Decree. It also is laced with

irony. Article VIII(B) was inserted into the Decree at the Governments instance, not as



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a replacement for, but as a supplement to, BMIs required offer of a blanket license. Its

purpose was to spur competition in the licensing of music performance rights for those

television broadcasters able to avail themselves of that license alternative. BMIs effort

to use that provision instead as a shield against having to offer Applicants an adjustable-

fee blanket license would undermine the very competitive premise of Article VIII(B).

BMIs historic aversion to competitive inroads to the traditional blanket license is well

documented, but forms no basis for limiting Applicants to one bite at the competition

apple insofar as BMI licensing options are concerned.

Also without benefit of supporting evidence, BMI asserts that Applicants

have no need for an adjustable-fee blanket license in light of the availability of per

program licenses, as well as the claimed excessive administrative costs such a license

would impose upon BMI. BMI Mem. at 22, 24-25. Neither argument is meritorious,

but in any event these are matters for the Courts consideration in shaping the terms of an

adjustable-fee blanket license; they do not constitute threshold legal bars to Applicants

entitlement to request, BMIs obligation to quote a fee as to, or this Courts review for

reasonableness of, that license.

For these and the remaining reasons discussed in the balance of this

memorandum, the Court should deny BMIs motion and order (i) that BMI quote

Applicants a fee for the requested blanket license and (ii) in the event BMI fails to do so,

or if the parties are unable to agree upon the fees and terms for such license, that the

Court will set reasonable fees and terms for that license.



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STATEMENT OF FACTS

I. BMI and the BMI Consent DecreeBMI is a corporation which aggregates the licensing authority of some

475,000 composers and music publishers and issues licenses affording access to the

musical repertory so amassed some 6.5 million musical works. BMI Mem. at 4. To

maximize its license leverage, BMIs preference in its dealings both within and without

the particular industry setting presented here has always been to offer the so-called

traditional fixed-fee blanket license affording licensees access to its entire repertory for

a fee that neither reflects the users actual need for, or use of, that repertory, nor varies to

the extent the user (availing itself of the non-exclusive nature of BMIs licensing

authority) may be able to secure performance rights in the music it uses directly from the

copyright owners themselves. See Brief for the United States, dated June 26, 2000,

United States v. BMI (In re Application of AEI Music Network, Inc.), No. 00-6123 (2d

Cir.), at 8 (Declaration of R. Bruce Rich, dated March 15, 2011 ("Rich Decl."), Ex. A).

The government consent decree (Decree) under which BMI operates

was fashioned to limit the market power amassed by BMI through its collective licensing

practices. The Decree is the result of the Governments antitrust scrutiny of and legal

challenge to a number of BMIs practices, dating back to as early as 1941. While the

Decree has saved BMI from outright antitrust condemnation, there is no doubt that the

market for licensing music rights is not freely competitive, insofar as, under the historic

blanket licensing practices of BMI (and its fellow monopolist, the American Society of

Composers, Authors and Publishers (ASCAP)), songs do not compete against each

other on the basis of price. ASCAP v. Showtime/The Movie Channel, Inc., 912 F.2d



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563, 570 (2d Cir. 1990). This being the case, every increment of competition that can

be promoted within the confines of the BMI and ASCAP decrees, which operate to

regulate the market, is desirable from an antitrust standpoint.2

United States v. ASCAP,

586 F.Supp. 727, 730-31 (S.D.N.Y. 1984).

In recognition of these antitrust concerns, a core purpose of both the BMI

and ASCAP decrees is to minimize the anti-competitive potential of the principal license

techniques favored by these organizations: the offer of blanket licenses affording

unlimited access to their repertories at a pre-determined fee that does not vary based on

actual need for, or usage of, those repertories. Specifically in relation to the BMI

Decree, and with reference to that traditional conception of a blanket license, the

Department of Justice has noted that an important purpose of the BMI Decree is to

assure that music users have competitive alternatives to the blanket license, including

direct and per-program licensing , so as to provide such users with important

protections against supracompetitive pricing of the BMI blanket license.

Memorandum of the United States in Response To Motion of Broadcast Music, Inc. To

Modify the 1966 Final Judgment Entered In This Matter, dated June 20, 1994, United

States v. BMI, 64 Civ. 3787 (S.D.N.Y.), at 10-11, 12 (Rich Decl. Ex. B).

Numerous provisions of the BMI Decree, operating in combination, are

designed to rein in BMIs exercise of market power. These include: Article IV(A)

2A class of local television broadcasters is currently suing the third United States

performing rights organization, SESAC, LLC, on the basis of claimed violations of

Sections 1 and 2 of the Sherman Act arising out of SESAC's own licensing practices,

which are currently unregulated by any comparable government consent decree. SeeClass Action Complaint, dated Nov. 4, 2009, Meredith Corp. v. SESAC, LLC, 09 Civ.

9177 (Declaration of Scott A. Edelman, dated Feb. 15, 2011, Ex. B).



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(requiring BMI to acquire only non-exclusive license authority from its affiliated

composers and music publishers); Article VIII(B) (requiring BMI to afford radio and

television broadcasters, as an alternative to a blanket license, a per program (or per

programming period) license); and Article XIV (permitting any user to request a license

for any, some or all of the compositions in [BMIs] repertory, requiring BMI to advise

the user of the fee which [BMI] deems reasonable for the license requested, conferring

automatic license protection to such user, and affording the user (as well as BMI) access

to the rate-making provisions of this Court as necessary for a determination of a

reasonable fee for the requested license).

II. Local Broadcast Television Stations Historic License Arrangements with BMI,Including the Role of the Per Program License

Local broadcast television stations are longstanding licensees of BMI.

Over much of that period, the stations music performance rights licenses have been

negotiated, with BMIs consent and encouragement, through the Television Music

License Committee (TMLC or the Committee), an industry body that negotiates

music performance rights licenses with ASCAP and BMI on behalf of most full-power

local commercial broadcast television stations. This arrangement has served both BMIs

commercial and legal interests. Commercially, it is far more efficient for BMI to

negotiate with a single industry representative than with hundreds of broadcast station

owners individually. BMI not only has routinely sought out the Committee for this

purpose over decades; it additionally has required stations that have elected not to be

represented by the Committee nevertheless to agree to be bound by the outcome of BMI's

dealings with the TMLC either at the bargaining table or via rate court. See, e.g., BMI



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v. Weigel Broad. Co., 488 F.Supp.2d 411 (S.D.N.Y. 2007). Legally, this arrangement

also comports with the non-discrimination provisions of the BMI Decree, which require

BMI to treat similarly situated licensees in like manner.3

Of the approximately 1,200 stations owned by Applicants and represented

by the TMLC, roughly half are affiliates of the ABC Television Network, the CBS

Television Network, or the NBC Television Network (Network Affiliates) and

approximately ten hours of their typical broadcast day consist of programming provided

by these networks (Network Programming). See Declaration of Willard Hoyt (Hoyt

Decl.) at 2. These television networks separately license (on a through-to-the-

broadcast-viewer basis) their Network Programming with BMI and the music uses

contained in such Network Programming are not at issue in this rate proceeding. Id.

As noted, BMIs historic preference has been to license Applicants solely

pursuant to traditional blanket licenses. BMI began affording local television stations a

viable per program license as an alternative to its preferred traditional blanket license

form only following the local broadcast television industrys multi-year rate litigation

with ASCAP (prior to the advent of the ratemaking provisions of the BMI Decree), which

(among other results) established parameters for reasonable ASCAP per program licenses

for local television stations over ASCAPs staunch objections. See United States v.

3 In light of the foregoing, BMIs portrayal of the TMLC as an over-reaching, anti-

competitive monopsony rings hollow. BMI Mem. at 4-5. We note in this regard that in

the only instance in which BMI, as a negotiating ploy, did challenge the TMLC asengaging in conduct violative of the antitrust laws, Judge Weinfeld found that other than

the conjectures of BMIs counsel and President there is not the slightest evidential

support for [BMIs] charges and concern for resulting antitrust conduct. BMI v. All-Industry Television Station Music License Committee, 611 F.Supp. 868, 870 (S.D.N.Y.

1985).



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ASCAP (In re Application of Buffalo Broad. Co.), No. 13-95 (WCC), 1993 WL 60687,

*62-*63, *66-*68 (S.D.N.Y. Mar. 1, 1993) (Buffalo Broadcasting); Hoyt Decl. at 3.4

As noted in the Hoyt Declaration, for a station to be able to benefit from

the BMI per program license as it has been structured since Buffalo Broadcasting, the

station must clear more than 40% of the revenue-weighted programming subject to

license by BMI. Hoyt Decl. at 8. Such clearance as to a given program entails

assuring that there is no otherwise compensable BMI music within that program that is

not the subject of alternative (i.e., source or direct5) license arrangements.

For Network Affiliates, a substantial portion of the revenues generated by

the remaining, non-network programming that is covered by their licenses with BMI

comes from locally-produced programming, such as the local news. Because such

programming is produced by the broadcaster itself, the station has considerable control

over the music embedded in it, and the station is therefore often in a position to use a

combination of direct licenses acquired in competitive market conditions and reliance on

non-BMI music to clear that programming under the terms of the per program license.

Primarily this opportunity of accessing competitive market options for its uses of music

4 Prior to the Buffalo Broadcasting rate court opinion, only two of then 750 local

television stations were able to take advantage of the BMI per program license, because,

among other reasons, BMIs per program rates were seven times higher than those

payable under the blanket license. Buffalo Broad. Co. v. ASCAP, 546 F. Supp. 274, 289(S.D.N.Y. 1982), revd on other grounds, 744 F.2d 917 (2d Cir. 1984).

5 As used herein, source licensing refers to the circumstance in which the producer or

syndicator of a television program itself acquires the music performance rights to the

BMI music in its programming and passes those rights along to the broadcast stationscarrying its programming. Direct licensing involves the broadcaster itself securing

music performance rights in direct dealings with composers and/or music publishers.



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in its locally-produced programming enables many Network Affiliates to exceed the 40%

revenue threshold that generates license savings from the traditional blanket license under

the per program license. Hoyt Decl. at 10.

The situation is different for the remaining, so-called Independent

Stations, which include stations affiliated with the FOX and CW networks, a smaller

network, or no network at all. Independent Stations do not carry network programming

that comes to them with the music performance rights already licensed by the network.

Instead, they are responsible for securing music performance licenses across the entirety

of their programming day. For these stations, third-party-produced programming, the

music in which has been selected by third parties and which comes to the stations in the

can, i.e., already embedded in the programming, accounts for the majority of the

stations revenues. Standard production industry practice has resulted in music

performance rights rarely being obtained by these program suppliers at the source on

the stations behalf, requiring the stations instead to secure such rights. Longstanding

experience on the part of the broadcasters has shown that this in the can programming

by and large is not susceptible to economically feasible source and direct licensing

efforts, remitting the stations to securing licenses to most such programming from

ASCAP, BMI, and SESAC. The difficulty encountered in clearing such third-party

programming via alternative means has resulted in the typical Independent Station to date

being unable to clear sufficient programming to meet or exceed the 40% revenue

threshold of the per program license. Id. at 11.

As a result of the disparate circumstances of Independent Stations from

those of the Network Affiliates, approximately half of the Applicant stations have been



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remitted to one and only one license when it comes to using BMI-repertory music: the

traditional blanket license. Indeed, of the 450 stations that currently take the BMI per

program license, approximately 98% are Network Affiliates. Id. at 9. It is primarily

for the benefit of these still competition-starved Independent Stations that Applicants

have requested an adjustable-fee blanket license.

III. The Role of Adjustable-Fee Blanket Licenses in Fostering Added Competition inthe Licensing of Music Performance Rights

An adjustable-fee blanket license can generate fee credits from a full

blanket license fee in a different fashion than does the per program license. Unlike the

per program license, which requires as a condition of a credit that all uncleared uses of

BMI music within a program either be eliminated or licensed via alternative means, an

adjustable-fee license such as that recently determined by this Court to be reasonable as

to DMX would enable a local station to clear some but not all of the BMI music in given

programs and still earn credits from the full license fee it would pay to BMI in the

absence of any source or direct licensing. That is because the crediting mechanism

would be tied to the percentage of overall uses of BMI music by a given station that have

been otherwise cleared and not to the number of programs all of whose BMI music was

otherwise licensed.

By way of example, if a syndicated program broadcast by an Independent

Station utilizes a BMI theme and also has sporadic other uses of BMI music, unless that

station today were able to clear every BMI composition appearing in the program, it

could not benefit under the per program license. In contrast, a station operating under an

adjustable-fee blanket license would experience savings from its full blanket license fee



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were it successful in negotiating the performance rights solely to the theme music in that

program whether through direct negotiations with the composer of that theme or via a

source license with the programs producer or syndicator. Hoyt Decl. at 12.

Another means by which a station not able today to benefit from the per

program license could achieve savings under an adjustable-fee blanket license would be

to enter into catalog licenses with music publishing companies whose works appear in

local station programming. The stations blanket fee burden would in that circumstance

be reduced in relation to the cumulative percentage of all BMI works broadcast by the

station that were represented by such catalog licenses. Id. at 13.

Under either example, stations now lacking the economic incentive to

pursue alternative license arrangements because of the economic structure of the per

program license would find that incentive under an adjustable-fee blanket license. Its

availability would serve as a competitive lifeline to hundreds of stations today lacking

any practical ability to benefit from competitive music licensing transactions, thereby

fulfilling a core purpose of the BMI Decree.



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ARGUMENT

I. The Law, Supported by BMIs Prior Conduct and Admissions, is Settled: BMIMust Offer Users, such as Applicants, a Blanket License

BMIs motion in opposition to affording Applicants an adjustable-fee

blanket license rises or falls on its ability to demonstrate that BMI is notlegally obligated

to offer Applicants a blanket license. The essence of BMIs argument is that the sole

license to which Applicants are entitled under the BMI Decree is the per program license

as prescribed by Article VIII(B) of the Decree and that any other licenses which they may

desire are to be made available strictly at BMIs sufferance. See BMI Mem. at 13.

As we discuss in Point II below, if BMI is incorrect in this foundational

premise that the only license to which Applicants are entitled under the BMI Decree is

the per program license and that BMI is not obligated additionally to offer Applicants a

blanket license it necessarily follows that Applicants are entitled to reasonable terms for

the adjustable-fee blanket license they seek. This is the case since it is now firmly

established that an adjustable-fee blanket license would differ from the traditional

blanket license only in its fee structure. AEI at 177.

BMI is wrong in its premise. One need look no further than BMIs own

prior admissions on this score. In its briefing before the Second Circuit in AEI, BMI

noted that [w]hile the BMI Decree contains no in haec verba requirement that BMI must

offer blanket licenses, like every other music performing right organization throughout

the world BMI has always offered blanket licenses, and courts have concluded that the



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BMI decree requires BMI to do so.6 Brief for Defendant-Appellee-Cross-Appellant,

dated July 26, 2000, United States v. BMI (In re Application of AEI Music Network,

Inc.), No. 00-6123 (2d Cir.), at *10 (Rich Decl. Ex. C). The AEI Court readily agreed:

Although the decree does not mention the blanket license by name, the plain language of

Section XIV requires that BMI quote a fee for the blanket license. AEI at 175.

II. The BMI Decree, as Interpreted by the Second Circuit, Requires BMI to Offer theFee Structure for the Blanket License Sought by Applicants

As BMIs obligation to offer a blanket license to Applicants is settled law,

the only question that remains is whether the form and fee structure for the blanket

license that BMI has historically preferred (the so-called traditional fixed-fee blanket

license) is the only blanket license the BMI Decree requires BMI to offer and,

correspondingly, is the only blanket license form the rate court can consider. We note

that BMIs motion papers only glancingly advance this argument, given BMIs

undoubted recognition that its entire house of legal cards collapses once it concedes that

it must offer even a traditional blanket license (which, of course, it must).

AEI again readily supplies the answer to this sole remaining inquiry. In

AEI, a group of commercial background music providers sought a rate determination for

the very license at issue here a blanket license subject to carve outs, i.e., a license

that would enable a licensee to reduce its fee obligation to BMI to the extent it had

licensed works represented by BMI directly with BMIs composer and music publisher

6 It would have been difficult for BMI to assert otherwise in light of more than 70 years

of continuous offers of blanket licenses to all users, see BMI Mem. at 6 indeed, as

already noted, BMI has been persistent in its efforts over much of that period to preservethat favored form of license over efforts by broadcasters and others to secure meaningful

licensing alternatives.



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affiliates. Id. at 173. After determining that Article XIV(A) of the BMI Decree

empowers the rate court to set reasonable fees for a blanket license, Judge Parker, writing

for the Court, characterized applicants request as a license to all of the compositions in

BMIs repertory that would differ from the traditional blanket license only in its fee

structure. Id. at 177. The court construed Article XIV(A) to require that when an

applicant may obtain alternative licensing under the BMI Decree, and the applicant

requests a blanket license with a fee structure that reflects such alternative licensing, BMI

must advise the applicant of the fee it deems reasonable for such a license, and BMIs

[f]ailure to do so will empower the district court to set a reasonable fee for such a

license. Id.

Tacitly acknowledging the otherwise conclusive force of the Second

Circuits reasoning, BMI attempts several efforts at distinction. The first is the assertion

that AEI only applies to non-broadcasters. See BMI Mem. at 20. Notably, BMI is

unable to point to anything in the AEI decision that warrants such a reading. The

holding explicitly applies to any applicant that may obtain alternative licensing under

the BMI decree (e.g., direct or source licenses) and requests a blanket license with a fee

structure that reflects such alternative licensing. AEI at 177. Here, as in AEI, (1) the

Applicants have requested a license to all of the compositions in BMIs repertory and not

to a subset thereof; (2) the Applicants are entitled to obtain alternative licensing under the

Decree;7

and (3) the license requested by applicants differs from the traditional blanket

7There can be no disagreement as to Applicants entitlement under the Decree to secure

alternative licensing arrangements. Among other remedies, as BMI has acknowledged,Article IV(A) of the Decree guarantees that as an alternative to licensing with BMI, a



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license only in the requested fee structure one that includes a carve-out to reflect

alternative licensing transactions. The holding of AEI is squarely controlling of

Applicants license request.

BMI also professes that the holding in AEI somehow turned on the fact

that the non-broadcaster applicants there had no access to the per program license to

which only broadcasters have mandatory access under Section VIII(B), and, therefore,

had no effective means to take advantage of direct licensing. BMI Mem. at 22. As an

initial matter, it should be noted that non-broadcasters do have a Decree-mandated

alternative to the blanket license. Article IX(C) of the Decree requires that BMI may not

refuse to issue a license for the specific musical compositions requested by a non-

broadcast licensee (the so-called per-piece license). Indeed, the Court in AEI

specifically and separately addressed this additional Decree entitlement on the part of the

commercial music services industry without ever suggesting, let alone concluding, that

the availability of this avenue to secure direct licensing thereby foreclosed those entities

entitlement to the benefits of an adjustable-fee blanket license. See AEI at 177. At

bottom, the availability of one or more other BMI licenses simply had nothing to do with

the central holding of AEI: that where an applicant has the right, under the BMI Decree,

to obtain alternative licensing, and where that applicant requests a blanket license with a

fee structure that reflects such alternative licensing, BMI is required to offer it, subject

music user can always negotiate a license directly with a copyright holder. BMI Mem.

at 5.



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only to this Courts potential review of that license for the reasonableness of its fees and

terms. BMI can point to nothing in AEI demonstrating the contrary.8

III. Article VIII(B) of the BMI Decree Does Not Insulate BMI From the Legal Force ofAEI, Nor Otherwise Entitle BMI To Deprive Applicants of the License They SeekIn an ironic effort to transform a provision of its Decree that is plainly

intended to foster competition in the licensing of music performance rights for broadcast

exhibition into an asserted safe harbor from that very incursion into its monopoly domain,

BMI contorts the language and plainly intended meaning of Article VIII(B) of its Decree

in arguing that the only licenses it is required to offer Applicants are per program licenses

pursuant to that decretal provision. BMI Mem. at 13. The BMI Decree contemplates

nothing of the kind.

First and foremost, BMIs argument runs headlong into BMIs prior

admission that it must offer broadcasters and other users blanket licenses. Anyone

familiar with the history of BMIs licensing activities knows and understands that

blanket license means something beyond merely a per program license. BMIs efforts

8 The ASCAP rate court recently rejected a similar argument by ASCAP that, because

ASCAP is required to offer a per segment license to commercial music services such as

DMX, ASCAP did not need to offer an adjustable-fee blanket license that took account ofDMXs direct licensing program. See United States v. ASCAP (In re Application of

THP Capstar Acquisition Corp.) 09 Civ. 7069 (DLC), 2010 WL 4878878, *20-*22

(S.D.N.Y. Dec. 1, 2010) (DMX). Just as BMI contends here that Applicants areforced to choose between a flat fee blanket license and a per program license, ASCAP

contended in DMX that DMX has an option: if it is unwilling to accept a flat fee blanket

license, DMX can apply for a per-segment license. ASCAPs flat fee proposal for the

DMX blanket license was swiftly rejected, in favor of DMXs proposal for a licensewith an adjustable-fee structure. Id. at *20. The court noted that ASCAPs attempt to

force DMX to utilize a per-segment license if it wished to benefit from direct license

activity failed to confront[] the reality that DMX is entitled to a blanket license when itrequests one, and that that blanket fee must accommodate the fact that DMX has a well-

developed direct licensing program. Id.



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to avoid this reality with the characterization of its Article VIII(B) licenses as per

program blanket licenses, BMI Mem. at 7 with the apparent intention of persuading

the Court that that somehow discharges its obligation to offer Applicants blanket licenses

is too cute by half. This use of semantics cannot trump (or impact in any way) the

requirements of Article XIV(A), as that decretal provision has been interpreted by the

courts and the Government, nor mask BMIs undeviating practice from the inception to

offer these very Applicants non-per program blanket licenses.

Nor can BMI succeed in trying to sandpaper this fundamental

inconsistency with settled law and past practice by suggesting that to the extent it must

offer a blanket license in addition to the per program license, it need do so in traditional

form only. BMI Mem. at 6. This argument has been foreclosed by AEI, which

conclusively reject[ed] the construction, urged by BMI, that Section XIV applies only to

those licenses specifically mentioned in the BMI Decree, and to the traditional blanket

license with its traditional fee structure. AEI at 176.

BMI fares no better in its efforts to parse the actual language of Article

VIII(B), an exercise that violates the most cardinal principle of contract interpretation by

failing to address, and give meaning to, the entirety of the provision. BMI thus glosses

over key language in Article VIII(B) that states its very purpose to afford broadcasters

alternative bases of license compensation (emphasis added). Indeed, rather than

broadcasters being remitted solely to per program licenses, as BMI suggests, it is only

upon request of any unlicensed broadcaster that BMI must offer the per program

license at all.



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18

Were this language not clear enough in its intention to provide the per

program license as an addition to, not replacement for, the blanket license, the history of

its enactment resolves any scintilla of doubt.

Under the terms of its original 1941 consent decree, BMI was obligated to

offer the per program license to radio broadcasters the only music users for whom a per

program license was a realistic and beneficial option at that time. See Memorandum in

Aid of Construction of the Final Judgment, dated June 4, 1999, United States v. BMI, 64

Civ. 3787 (LLS) (S.D.N.Y.), at 9-10 (Rich Decl. Ex. D). Article VIII(B) was amended

in 1966 to expand the benefits of the per program license to television broadcasters. Id.

at 10. The avowed purpose of Article VIII(B) (as is the case with the parallel provisions

in ASCAPs own consent decree) was and is to promote direct and source licensing of

BMI music so as to reduce broadcaster dependency on BMI for their license needs. Id.

at 8. The requirement that BMI must offer television broadcasters a per program license

was included in the Decree neither as some form of concession to BMI nor as part of a

compromise whereby BMI was granted sole discretion to determine whether or not to

offer any blanket or other form of licenses other than the per program license. BMIs

conclusory assertions to the contrary, BMI Mem. at 13, are bereft of any supporting

evidence.

Department of Justice briefing discussing the purpose of Article VIII(B)

could not be clearer in establishing the notion that the per program license is to serve as a

supplementto the blanket license, not a substitute for it. In its memorandum in response

to BMIs motion to modify the 1966 Decree, the Government thus observed that the

Decree requires BMI to offer to radio, television and cable broadcasters, a per program



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19

license as an alternative to its blanket license. Rich Decl. Ex. B at 11 (emphasis

added).9

For its part, BMI noted that the revised Decree ensure[d], inter alia, that

composers retain the right to license their works directly to music users, and that

broadcasters can receive per program licenses from BMI. Memorandum of Defendant

Broadcast Music, Inc. In Support of Motion to Modify Consent Decree, dated June 27,

1994, United States v. BMI, 64 Civ. 3787 (S.D.N.Y.), at 10-11 (Rich Decl. Ex. E)

(emphasis added). At the time of the modification, BMI nowhere articulated the

cramped reading of Article VIII(B) that it now presses.

In sum, BMIs opportunistic, 45-years-later construction of Article

VIII(B) fails to square with either the language or the history of that provision. To adopt

it would transform the BMI Decree from one that places constraints on BMIs market

power into a tool to be used by BMI to perpetuate its monopoly status.

IV. BMIs Argument as to Burden is Entirely Speculative and Immaterial toApplicants Right to Pursue an Adjustable-Fee Blanket License

In a last effort to persuade the Court that BMI should not be required to

offer a blanket license with the fee structure requested by Applicants, BMI makes

speculative claims regarding the burdens that would be associated with offering such a

fee structure. While Applicants certainly dispute the claimed burden that such a fee

9

In connection with the decree construction briefing before this Court in AEI, theGovernment reiterated: [I]fonly the blanket license is available, competition from

[alternative licensing] sources does not constrain BMIs ability to charge high fees for itslicenses. For this reason, the BMI decree contains an express requirement that so-called

per-program licenses be offered to music users that are broadcasters. Rich Decl. Ex.

D at 8 (emphasis added).



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structure would impose on BMI,10 the issue is entirely beside the point. As the Court is

well aware, the particular formula used to implement the fee structure sought by

Applicants an issue to be decided another day can be constructed such that Applicants

would shoulder their fair share of any additional burden created by the adjustable license

fee structure they now seek. See BMI v. DMX, Inc., 726 F. Supp. 2d 355, 362-63

(S.D.N.Y. 2010). Put simply, this issue has absolutely no bearing on the legal

entitlement of Applicants to the particular license sought.

V. The Antitrust Purposes of the Decree will be Furthered by the Fee StructureSought by Applicants

The antitrust purposes of the Decree will be furthered by the rate courts

ability to fashion a blanket fee structure of the type that Applicants seek. As earlier

discussed, a core purpose of the Decree is to foster competitive license alternatives to the

traditional fixed-fee blanket license. BMI so concedes. See BMI Mem. at 16-17. One

of the simplest and most effective means of achieving this objective is to create a blanket

license fee that adjusts to accommodate successful direct and source licensing initiatives.

As noted, this fee structure provides the incentive for a blanket licensee particularly one

with no realistic prospect to benefit under a per program license to enter into

negotiations with individual BMI affiliates or induce source licensing from producers for

at least certain of the music uses in their programming, as there would be an economic

benefit from securing performance rights in such fashion. See Hoyt Decl. at 12-14.

10 For example, BMI has likely already done some of the up-front work that would be

necessary to implement the requested fee structure. As this court has noted, the systems

that have already been developed to implement the DMX adjustable-fee blanket licenseare potentially applicable to other licensees. BMI v. DMX, Inc., 726 F.Supp.2d

355, 363 (S.D.N.Y. 2010).



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BMI makes much of the fact that some Applicants are already able to

benefit from direct and source licensing by taking advantage of the Decree mandated per

program license as if that should settle the question of legal entitlement to the

adjustable-fee blanket license.11

See BMI Mem. at 16-19. What BMI fails to address,

however, is that currently, for roughly half of Applicant stations, there is no viable

alternative to the traditional fixed-fee blanket license. See Hoyt Decl. at 11. The fee

structure that Applicants seek here will provide the incentive to all stations to seek out

alternative licensing transactions. While BMI bemoans such a prospect, it is the interests

of competition, including the potential benefits to be gained by individual BMI-affiliated

composers and music publishers from such competition, not monopoly preservation, that

should be served by affording Applicants the license they seek.

11 BMIs claim that the requested fee structure will render Article VIII(B) superfluous,

BMI Mem. at 16, is simply incorrect. There are a number of reasons that a station would

continue to avail itself of the per program license even if it can opt for an adjustable-feeblanket license. To give just one example, a station that uses only ASCAP-affiliated

music in its news programs would get a reduction in BMI fees for those news programs

under a per program license, but would get no credit under a BMI adjustable-fee blanketlicense. The credit in a BMI adjustable-fee blanket license would be earned in relation

only to BMI music directly or source licensed, not to music licensed by another PRO.



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CON(1.E1ONFor all of the foregoing reasons, Applicants respectfully request that (1)

the Court deny UMI's Motion for an Order that the BMI Consent Decree does notRequire N\ll to Provide to Broadcasters Another llluuket License with an AdjustableCredit; and (2) order lM1 to quote a fee for the requested blanket license with anadjustable-fee crediting mechanism.

New York, New YorkMarch 15, 2011

R. Bniee Rich (RR 0313)Benjamin E. Marks (BM 0796)Todd D. Larson L 1125)WElL, GOTSHAL & MANGES, LLP767 Fifth AvenueNew York, New York 10153(212) 310-8000Attorneys jr Applicants WPIX, Inc., et al.

22



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('I:I'JtI'I( F F, OF si:RvR};I, Todd D. I.arsoii. licich cciii IV that oon \Iareh 15, 2011, 1 caused a copy

of the foregoing \iemorauduni in Suipoit ()tAppllcants lulitlenicut to a l3huikciLiecc with a Fee Simetuc that ReElects Direct and Source I ..icensinn and in Oppositionto II's Motion to I'rccl tide Same to he served by electronic mail on:Scott A. l,delniaiiLinda I )ak i ii(i rimmAtara Miller1\'I ii hank, I weed, II ad Icy & M cCloy LL PI Chase Maiiliat tan PlazaNew York. NY 10005(212) 5()-5000sedelivani inilhank.comldakiri-i!jinhin(u inilbank,comamiller((i in ii ha nk.comANDMarvin L. Berensonllroadeast Music, Inc.7 World Trade Center250 Greenwich StreetNew York. NY 10007mberens [email protected] for Broadcast Music, Inc.

Todd D. Larson


wpix v bmi - resp. to motion

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