http://www.radio-info.com/news/bmi-radio-licensing-group-at-last-agree-to-new-royalty-terms
http://www.bmi.com/news/entry/557710
Unlike the so-called “performance tax”, Radio has always realized it has to pay the composers and lyric writers for using their music. ASCAP is the big clearing agency for those rights, founded by Victor Herbert in the early 20th century. ASCAP was involved when music was sold on early phonographs, but really only started to become important when radio started playing music.
After ASCAP got carried away with its success at getting money out of radio stations, the radio companies (represented by the NAB) founded BMI (Broadcast Music Incorporated) to challenge the ASCAP system, which had also been the subject of government antitrust actions in the 1930s. For an entire year, radio refused to play any ASCAP music, instead playing country music, R&B and local produced music that hadn’t been signed by ASCAP – those music genres are now the main focus of BMI.
SESAC is the third licensing organization – focused more on music from outside the United States and some Christian music.
So ASCAP and BMI have been in litigation with the radio industry over these royalty rates. ASCAP had recently settled the dispute and BMI has now agreed to a similar deal. Rather than setting a total number for the entire radio industry and cutting it up based on the size of the radio station, stations will pay 1.7% of their gross revenues.
http://www.broadcastlawblog.com/2012/01/articles/broadcast-performance-royalty/details-of-the-ascap-settlement-with-the-radio-industry-what-will-your-station-pay/
If you realize that license fees are based on gross revenues, you begin to understand the motivation for “barter” transactions that keep advertising revenue off the books of the radio stations.
The deal was negotiated by Ed Christian, Chairman of the Radio Music License Committee, who also happens to run Saga Radio [description here]. My impression is that Mr Christian is a very pragmatic honest and direct man. Saga did their IPO in 1992, long before the 1996 orgy of mergers, and mostly stayed out of that, and didn’t get greedy and sell out to one of the really big guys. When radio starting falling about about 10 years ago, he didn’t sugar coat the truth and is one of the few companies not to flirt with bankruptcy.
His company makes money and the stock price (Symbol SGA) has been fairly stable over the last 10 years, other than a few months of panic in 2009 after the world went nuts for a while. 90% of the stock is owned by institutional investors, there is no “Class A/Class B” stock structure where people think they own a part of the company but have no say in the management, the company has been taking the cash flow and using it to pay down debt, not viewing their credit line as a credit card you max out to the limit. In short – they’re “old school”.
The agreement will result in a retroactive refund going back to 2010, which will give radio quite a bit more breathing room for the next few years.