Broadcast Music Inc.'s petition seeks an order exercising the Court's rate-setting authority under article XIV of the BMI Consent Decree,*fn1 setting reasonable music license terms and fees for Weigel Broadcasting Company's two local commercial television stations for the time period of April 1, 1999 to December 31, 2004 and, on an interim basis, from January 1, 2005 on.
After a four day non-jury trial, the submission of post-trial briefs and subsequent letter briefs, the following constitutes the opinion and order of the court.
BMI is a non-profit music licensing organization that, on behalf of approximately 300,000 composers, songwriters and music publishers, licenses non-exclusive rights to publicly perform approximately 4.5 million musical works to a variety of music users, including local commercial television stations. BMI offers a blanket license and a per program license to local commercial television stations for monthly fees. Stations that choose the blanket license may, for a pre-determined flat fee, perform all of the music in BMI's repertoire as often as they like during the license period. Those that choose a per program license can also perform all of BMI's music as often as they like, but their fees are based on the percentage of their total revenues that derived from programs with performances of BMI music (other than music for which they held a license from another source, such as the composer).
Weigel is a television broadcasting company that operates two full-power television stations, WCIU-TV in Chicago, Illinois and WDJT-TV*fn2 in Milwaukee, Wisconsin. WCIU is not affiliated with a television network, such as NBC, ABC or CBS. It airs primarily syndicated programming, which it obtains from television producers, studios or other third parties. That programming, like most commercial television programming, contains copyrighted music in BMI's repertoire, for which WCIU obtains a blanket license from BMI.
BMI's ability to license the public performance rights in its music is governed by a consent decree that settled an antitrust suit brought by the United States ("BMI Consent Decree" or "Decree").*fn3 Under the Decree, BMI is required to make licenses available for public performances of its music and to provide applicants with proposed license fees upon request. BMI Consent Decree Arts. VIII(B), XIV(A). If BMI and an applicant cannot agree on a license fee, either party may apply to this court for the determination of reasonable or interim license terms and fees. Id. at Art. XIV(A).
The Television Music Licensing Committee
Because television programming often contains copyrighted music, the television industry formed a non-profit volunteer association to negotiate music license terms and fees with performing rights organizations such as BMI and its chief competitor, the American Society of Composers, Authors and Publishers ("ASCAP"). That association has existed in one form or another since before the BMI Consent Decree was entered, and is now known as the Television Music Licensing Committee ("TMLC"). The majority of the approximately 1,300 full-power local commercial television stations*fn4 in the United States now authorize the TMLC to negotiate on their behalf, and virtually all others agree to be bound by the outcome of the TMLC's negotiations with BMI or a rate-court proceeding between the TMLC and BMI.
Historically, local television stations represented by the TMLC or its predecessors paid music license fees to BMI and ASCAP equal to a percentage of each station's revenues. In 1993, however, the ASCAP rate court rejected the percentage of revenue fee and set a flat license fee for the entire local commercial television industry. United States v. ASCAP (Application of Buffalo Broadcasting Co., Inc.), Civ. No. 13-95 (WCC), 1993 U.S. Dist. LEXIS 2566, at *121-22, 290 (S.D.N.Y. Feb. 26, 1993). Following that decision, the TMLC told BMI that it would no longer negotiate music license fees on a percentage of revenue basis, and instead demanded a single, overall industry-wide fee, which the TMLC would then allocate among the individual stations.
In April 2002, BMI and the TMLC concluded three years of negotiations and reached an agreement for an annual industry-wide blanket-license fee of $85 million, which the industry would yield to BMI for its aggregate annual use of BMI-licensed music if all stations chose the blanket license. Under that agreement, in 2002 through 2004 a portion of that $85 million base fee would be allocated to every station in the industry.
The negotiation and agreement upon the industry-wide fee terminated BMI's contribution to the process: the allocation among the members of their respective contributions toward that amount was devised by, and carried out by, the Television Music License Committee.
The TMLC devised an allocation formula based primarily on television "ratings," which measure the size of a television audience. Taking ratings data compiled by Nielsen, each of the roughly 210 markets in the country as measured by Nielsen was placed in one of nine categories, each of which was arithmetically weighted "to reflect, within a broad parameter, that a household in the 150th market does not represent the same value as a household in the New York market." (Jt. Ex. 34, at WBC000024.) (The word "value," of course, refers to the desirability to advertisers, and the amount they will pay, for air time.) Within each market a series of computations apportioned the total blanket license fee assigned to that market among the stations in it, according to each station's share of the viewing audience at different times during the average day.
Oversimplifying the process, it resulted in allocating each market's portion of the total $85 million among the stations in that market, according to the portion they enjoyed of that market's television audience.
Negotiations Between BMI and Weigel
>From 1995 to April 1, 1999, Weigel agreed to be bound by the outcome of the TMLC's negotiations with BMI, and executed a blanket BMI license agreement for WCIU. The terms of the license and allocation formula for the 1995-1999 period were essentially the same as those for the 1999-2004 period, except for increases in BMI's industry-wide blanket base fee.
In May 1998, WCIU's monthly blanket fees under its 1995-1999 BMI license increased from $5,882 to $9,002. Weigel rejected the increase, writing to BMI that "the increases in the billing that you have sent us for May over these numbers are so substantial that we will await an explanation on how they were obtained." (Jt. Ex. 8.) In February 1999, BMI's Senior Vice President of Licensing, Michael O'Neill, met with Weigel's Chairman, Howard Shapiro, in Chicago to discuss the increase in WCIU's fees. With respect to the upcoming licensing period beginning April 1, 1999, O'Neill informed Shapiro that BMI was negotiating a license with the TMLC, which would take some time. O'Neill told Shapiro that BMI believed that WCIU was similarly situated to the stations represented by the TMLC, and that BMI was therefore obligated by its Decree to offer WCIU the same license as the TMLC. (O'Neill Tr. 87:24-88:6.) He suggested three options to Weigel: join the TMLC and attempt to change the allocation formula, extend its present license and make payments under it on an interim basis during BMI's negotiations with the TMLC, or send BMI a letter requesting a negotiation which, under the BMI Consent Decree, would automatically entitle Weigel to perform BMI music. (Id. at 85:7-17.) O'Neill testified that Shapiro agreed that the fees Weigel paid to BMI going forward would be interim fees, and that the parties would later negotiate final fees. (Id. at 86:20-23.)
I do not find that an agreement was made in that respect: it was more a consensual stand-off. When Shapiro was asked at trial whether he was satisfied with leaving it that way until the situation was resolved, he answered: "I was and I wasn't. It had some romance in that we weren't paying them but at the same time our instincts are to resolve it, which is why we kept trying to urge them to talk to us. We would have been happy to do it at any time." (Shapiro Tr. 748:6-25.)
On February 22, 1999, Shapiro wrote to BMI that Weigel did not want to be represented by the TMLC, and that it wanted "to negotiate a separate contract for ourselves and for our stations at the appropriate time." (Jt. Ex. 13.) Under the BMI Consent Decree, Weigel was thereupon considered an applicant for music license fees, entitled to petition the rate court for a reasonable fee, and to perform BMI music in the interim. Weigel continued to pay BMI WCIU's 1997 ...