At the end of 2009, we wrote about the interim royalties agreed to by both ASCAP and BMI, agreeing to reduce the amount of royalties paid by commercial radio stations by 7% until final royalties were agreed to by these Performing Rights Organizations and broadcast groups (principally the Radio Music Licensing Committee), either through negotiations or by litigation. While many had assumed that these reduced rates would stay in place until the final royalties were set, we have now learned that, in fact, these are but "provisional rates" to be in place only until interim royalties are set by the Courts which supervise the royalty-setting process. Recently, the PROs and the RMLC filed motions with the courts that oversee the ASCAP and BMI antitrust decrees under which these organizations have operated for half a century, stating that they have not been able to agree to either final or interim royalties, and thus need the Court to set interim royalties until a final royalty is determined.
The interim royalty process does allow the presentation of evidence and argument by the parties to the Court as to what the appropriate royalty should be until the final royalty-setting process runs its course. There is a legal presumption that, in the absence of some compelling evidence otherwise, the rates that were previously in place would continue while final royalties are litigated. Whether the Courts will look back to the royalties paid by radio owners in 2009, or whether the provisional royalties that were set in these end-of-the-year agreements will have any effect on the interim royalties remains to be seen. But don't count on the interim 7% reductions being in place for long, as the Court should set the interim royalties relatively quickly, probably later this year. And once these interim royalties are set, the more difficult issue will face the PROs and RMLC - reaching a deal or litigating over the final royalties that will be paid by radio broadcasters for the public performance of musical compositions. Given the inability of the parties to reach any agreement on interim royalties after a year of discussions, it may well be quite some time before final royalties are set - at which time there will be a "true up" back to January 1 of this year. So broadcasters need to watch these developments carefully, and to not count any discounts as final until the final royalties are established.