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UNITED STATES v. AMERICAN SOCY. OF COMPOSERS

September 22, 1995

UNITED STATES OF AMERICA, Plaintiff, - against - AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS, et al., Defendants. In the Matter of the Applications of SALEM MEDIA OF CALIFORNIA, INC., et al. and NEW ENGLAND CONTINENTAL MEDIA, INC., et al., Applicants. For Licenses for Their Radio Broadcasting Stations.


The opinion of the court was delivered by: WILLIAM C. CONNER

 (REDACTED PER REQUEST OF APPLICANTS)

 CONNER, Senior D.J.:

 BACKGROUND

 ASCAP is an unincorporated membership society of over 50,000 music composers, lyricists and publishers who own the copyrights to more than four million musical compositions. Each member has granted ASCAP a non-exclusive right to license the public performance rights to his or her compositions. ASCAP serves as licensing agent and as a collector and distributor of royalties. It licenses performances by a wide variety of music users, including television and radio networks and stations. ASCAP surveys tens of thousands of hours of television and radio broadcasts each year in an attempt to ensure that the public performances of its members' music are licensed, and that the royalties paid by its licensees are fairly allocated to its members in proportion to the extent of performance of their respective compositions.

 The applicants in this consolidated proceeding are Salem Media of California, Inc. ("Salem Media") and New England Continental Media, Inc. ("NECM"). NECM is a group of 361 local radio stations. Of those stations, 304 broadcast religious programming, with a mixed talk and music format, while 24 broadcast classical music and most of the remaining stations carry foreign language programming. Salem Media is a group of 68 local radio stations that have similar formats. See Declaration of Russell Hauth, dated Feb. 15, 1995, at P 4. The parties do not dispute that, compared to the majority of radio stations in the United States, the applicant stations broadcast relatively little music from the ASCAP repertory.

 Salem Media's application covers the period from 1982 to 1990, while NECM's application encompasses the years 1991 to 1995. From 1986 to 1990, most local radio stations operated under the WGN license, so called because it was negotiated in settlement of the rate-setting proceeding brought by the WGN applicants. From 1991 to 1995, most local radio stations operated under the Group W license, which was negotiated in settlement of the proceeding brought by the Group W applicants. Both of these licenses were negotiated on behalf of the respective applicant groups by the Radio Music Licensing Committee ("RMLC"), which represents several thousand local radio stations. Both licenses were available in blanket or per-program form. ASCAP has offered the Salem Media stations the same license terms as those set forth in the WGN license, while the NECM stations have been offered the same terms set forth in the Group W license. The provisions of the Group W and WGN licenses relevant to this application are substantially the same, with the exception of additional administrative requirements and penalties contained in the Group W license. We will therefore refer to the terms of both licenses collectively as the "proposed license terms" and will note differences between the two only when necessary.

 The NECM applicants are currently operating under an interim fee order entered on consent by this court on February 28, 1991. At that time, ASCAP and the NECM applicants agreed that the NECM applicants would pay interim fees on the same terms and at the same rates as those in effect on December 31, 1990. Effectively, the interim fee order extended the WGN license for the NECM applicants pending the outcome of this proceeding. See Interim Fee Order, dated Feb. 28, 1991, at P 1. The Salem Media applicants are apparently still operating under interim licenses from the 1982 period. *fn2" See Hauth Declaration, at P 4.

 DISCUSSION

 Applicants have brought this proceeding under Section IX(A) of the Consent Decree seeking a determination by this Court of a reasonable per-program license fee for their music use; they do not challenge the reasonableness of the blanket license ASCAP has proposed. Applicants have moved for summary judgment (i) declaring that ASCAP's proposed per-program license terms are in violation of the Consent Decree and are unreasonable as a matter of law and (ii) adopting applicants' proposed per-program license terms. In the event that we do not resolve all of the issues presented by this application at this time, the NECM applicants also seek modification of the interim fee arrangement currently in place.

 Under a per-program license, a music user is granted the right to perform any of ASCAP's compositions as many times as the user wishes, but the user pays license fees only for those programs in which it actually performs ASCAP music. See Consent Decree, ยง VII(B). *fn3" The per-program licenses that ASCAP and applicants have proposed share the basic fee structure common to other per-program licenses designed for radio stations. Typically, the per-program license fee rate is the sum of the fee for feature performances of ASCAP music and the fee that covers any incidental uses of ASCAP music. The feature performance fee is a percentage of the adjusted gross revenue that a radio station earns from those programs that contain feature performances of ASCAP music. The station must report to ASCAP on a monthly basis all musical compositions that received feature performances in programs broadcast by the station, unless the station concedes that a particular program contained a feature performance of ASCAP music. The station need not report incidental uses of ASCAP music, which include commercial jingles under sixty seconds long, background music, or ambient music picked up during the broadcast of a public event. Because it would be extremely difficult for either ASCAP or the radio station to keep track of all incidental uses of ASCAP's music, the per-program license often includes an incidental use fee, which is a small percentage of the station's adjusted gross revenue.

 Applicants' arguments in favor of granting summary judgment focus on three aspects of ASCAP's proposed per-program license: the proposed per-program license fee rate, the proposed definition of which programs are subject to the feature performance fee, and the proposed reporting requirements and penalties for noncompliance. For the reasons set forth below, applicants' motion for summary judgment is granted with respect to the proposed definition of which programs are subject to the feature performance fee, but is denied in all other respects. Applicants' request for modification of the interim fee order is denied.

 I. Summary Judgment Motion

 Although this application is a rate-setting proceeding under the Consent Decree, applicants' motion must satisfy the traditional standards for a grant of summary judgment. We may grant summary judgment only when "there is no genuine issue as to any material fact and . . . the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). The Supreme Court has explained that "only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In evaluating whether a genuine question of material fact exists, "the evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Id., at 255.

 A. Proposed Per-Program License Fee Rate

 ASCAP has proposed that applicants pay the per-program license fee rate set forth in the Group W per-program license. Applicants argue vehemently that this proposed rate violates the Consent Decree. In so doing, they rely heavily on the decisions in United States v. ASCAP/Application of Buffalo Broadcasting Co., Inc., et al., No. Civ. 13-95, 1993 U.S. Dist. LEXIS 2566, 1993 W.L. 60687 (S.D.N.Y. Mar. 1, 1993) (Dolinger, Mag. J.) ("Buffalo Broadcasting I"), and United States v. ASCAP/Applications of Capital Cities/ABC, Inc., CBS Inc., and National Broadcasting Co., Inc., 157 F.R.D. 173 (S.D.N.Y. 1994) (Conner, J.) ("Buffalo Broadcasting II"). A brief explanation of those decisions will therefore be helpful.

 
1. Buffalo Broadcasting Proceeding

 To summarize the relevant aspects of the Buffalo Broadcasting proceeding, ASCAP had proposed to the All-Industry Committee of Local Television Stations, which represented approximately 960 local television stations, and to twenty local television stations that were owned and operated by the three major networks a per-program license rate that was substantially higher than the proposed blanket license rate. *fn4" The applicants requested from this court a determination of reasonable blanket and per-program license fees. We referred the application to Magistrate Judge Dolinger. After extensive discovery and a lengthy trial, Magistrate Dolinger issued an opinion, referred to here as Buffalo Broadcasting I, setting blanket and per-program fees for applicants.

 Magistrate Dolinger found, as a matter of fact, that ASCAP intended to make the per-program license available, as required by the Section VII(B) of the Consent Decree, but wholly impractical for all but a handful of stations that used very little ASCAP music. Buffalo Broadcasting I, 1993 WL 60687, at *57 Magistrate Dolinger then held, as a matter of law, that ASCAP's proposed per-program license violated the "genuine choice" provision of the Consent Decree. *fn5" He interpreted the genuine choice provision to require that the per-program license fee "be set in such a way that, when compared to the blanket license fee, its use is economically feasible for a significant segment of the industry . . . ." Id., at *66. He then noted that several additional considerations must be considered in devising a fee formula, including the need to guarantee a fair return to ASCAP, to avoid market inefficiency caused by too many stations operating under administratively burdensome per-program licenses, and to avoid giving stations incentives not to use ASCAP music. See id. After stating that "these considerations yield no precise formula," id., Magistrate Dolinger ...


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