Arbitration Sets SESAC Rate

The small, privately owned performing rights organization SESAC announced July 31 that the rate of payment for songs in its catalog to U.S. radio stations will be 50 percent higher than that of ASCAP, which still represents a reduction from their previous fee.

– SESAC

The decision came after a hearing from three private arbitrators and follows the 2015 settlement of a suit against SESAC by the Radio Music Licensing Committee, a nonprofit representing 10,000 commercial radio stations.

Terms of the settlement between the RMLC and SESAC included: freezing rates between the parties until 2018 or the end of arbitration; greater freedom of SESAC to license directly with radio stations; consolidation of the PRO’s over-the-air, HD radio, and streaming licenses into one license; and mutual participation in binding arbitration.

The arbitration decision for the period of Jan. 1, 2016 to Dec. 31, 2018 does now apply retroactively to the rates RMLC stations which participated in arbitration have paid. The RMLC says the rate set at arbitration represents a 60 percent reduction from what SESAC has been asking and the stations which participated in arbitration will receive a credit worth tens of millions of dollars.

SESAC said costs connected with arbitration and the adjustment in fees will be funded by shareholders and not songwriters or publishers.

“Binding rate arbitration for SESAC was a giant first step for the industry. The arbitration decision reported here constitutes a significant correction in the level of SESAC’s fees and many RMLC-represented stations will now experience substantial financial relief in the form of fee credits dating back to the beginning of 2016 (totaling tens of millions of dollars across the industry by our estimates),” RMLC co-chairmen Ed Christian and John VerStandig said in a joint statement.

While the rate is less than what SESAC had previously been charging, the PRO still says this represents a step forward, showing that songs have differing value and rates should vary accordingly.

“While we believe the value of our music substantially exceeds the amount of the award and the nature of the arbitration process made it inevitable that we would see a reduction in our fees for terrestrial radio, the panel’s decision is a resounding affirmation of the fact that ASCAP rates in radio do not reflect fair market value,” SESAC Chariman and CEO John Josephson said in a statement. “We are pleased to create a benchmark that we hope will benefit all songwriters and publishers.”

In recent years, GMR and SESAC – two small, privately owned PROs that are not subject to the same regulations as the larger nonprofits BMI and ASCAP – have been in the crosshairs of the RMLC, which claims they unfairly jack up rates for specific songs.

The ruling could have ramifications for the ongoing legal battle between the RMLC and GMR, which recently saw the RMLC file an emergency memorandum seeking a preliminary injunction to stop GMR from refusing to offer licenses to Pennsylvania stations.

SESAC’s catalog includes works by Adele, Neil Diamond, and Bob Dylan.

The next arbitration hearing in this matter will deal with the period of 2019 to 2022.