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Broadcasters challenge songwriters' price-setting power

November 5, 2009 |  5:57 pm

Federal law gives copyright owners a legal monopoly over public performance of their works, among other uses. But their market power is supposed to be limited by the competition from other copyright owners. Consider the case of songwriters. Paul McCartney can make you pay for the privilege of including "Jet" in your movie, even if it's recorded by Shonen Knife instead of McCartney's Wings. But if you don't like what he charges, you can write your own material or go to another songwriter who demands less.

Unless you can't go to someone else. That's the problem TV broadcasters face when they air syndicated programming. They're contractually bound to air the programs they buy with the music that's already in the soundtrack. As a result, they have zero leverage with songwriters when it comes to negotiating for the rights to broadcast those songs. A group of broadcasters has now gone to federal court in New York for help, filing a class-action antitrust lawsuit against SESAC, one of the three performing rights organizations representing songwriters and music publishers. (You can download a copy here.)

The complaint was filed Wednesday afternoon by lawyers from Weil, Gotshal & Manges, and SESAC hasn't offered any comment yet. It singles out SESAC, the smallest of the performing rights groups (the others are ASCAP and BMI), for two reasons: SESAC's stable of composers includes many of the leading music writers for TV and commercials, and the other two rights groups' rates are already overseen by federal courts through longstanding consent decrees with the Justice Department.

Not being a lawyer, I won't try to guess how strong the broadcasters' case is. What's interesting to me about this case is that, unlike many of the lawsuits I write about, it doesn't challenge the breadth of the copyright owners' rights. Instead, it challenges how they're being used. According to the lawsuit, SESAC gives broadcasters the choice between buying a blanket license — the right to make unlimited use of all the music in SESAC's repertoire — or buying rights for songs on a per-program basis. But SESAC increased the cost of the per-program deal so much in recent years, it has become uneconomic, the lawsuit contends. As a result, broadcasters have been stuck buying ever-more-expensive blanket licenses, rendering moot their efforts to shop around for programs with less costly sources of music. In other words, SESAC is accused of eliminating the competition that mitigates the copyright holders' monopoly power. Meanwhile, the lawsuit claims, SESAC has used the higher fees it's been collecting to attract more soundtrack and commercial composers, tightening its grip on the market.

The broadcasters asked the court for a permanent injunction barring SESAC from fixing prices and other anticompetitive behavior. If they succeed, SESAC could find itself in the same court-supervised posture as ASCAP and BMI. But another way to restore the full benefits of competition among songwriters would be to have the producers of TV shows and commercials obtain the performance rights to the music they use, on top of the sync licenses and other clearances they routinely negotiate for. (Most networks obtain the performance rights for the new shows they produce for their stations and affiliates, but not for the same shows when they're sold into syndication.) As it is, the competition among songwriters ends as soon as a soundtrack is picked. That's why SESAC is allegedly in position to make take-it-or-leave-it offers to broadcasters, who have little choice but to take it.

-- Jon Healey

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