Broadcast Music, Inc. v. Weigel Broadcasting Co.
488 F. Supp. 2d 411 (2007)
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Rule of Law:
Under an antitrust consent decree that prohibits discriminatory pricing for similarly situated licensees, a widely accepted industry-wide license agreement serves as the controlling benchmark for a reasonable fee. A licensee seeking a different rate bears the burden of proving that 'differentials based upon applicable business factors' justify a deviation from that benchmark.
Facts:
- Broadcast Music Inc. (BMI) is a music licensing organization that provides performance rights to users, including local television stations.
- Weigel Broadcasting Company operates WCIU-TV, an independent television station in Chicago.
- The Television Music Licensing Committee (TMLC) is an association that negotiates music license fees with BMI on behalf of the vast majority of local commercial television stations in the United States.
- For the 1999-2004 period, BMI and the TMLC negotiated an industry-wide blanket license agreement, with the TMLC creating a formula to allocate the total fee among stations, primarily based on audience ratings.
- From 1995 to April 1, 1999, Weigel had agreed to be bound by the TMLC's negotiations with BMI.
- In 1998, Weigel disputed a fee increase under its existing TMLC-negotiated license.
- In February 1999, Weigel formally notified BMI that it would not be represented by the TMLC for the upcoming license period and wished to negotiate a separate contract directly with BMI.
- BMI offered Weigel a license based on the TMLC's industry-wide allocation formula, but the parties failed to reach an agreement, with Weigel continuing to pay its older, lower rate.
Procedural Posture:
- Broadcast Music Inc. (BMI) filed a petition in the U.S. District Court for the Southern District of New York, the court with jurisdiction over the BMI Consent Decree.
- The petition asked the court to exercise its rate-setting authority to determine reasonable music license fees for Weigel Broadcasting Company's stations from April 1, 1999, onward.
- A four-day non-jury trial was held before the district court.
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Issue:
Is a television station that opts out of an industry-wide music licensing negotiation entitled to a different fee if it cannot demonstrate unique business factors distinguishing it from the other stations that accepted the negotiated rate?
Opinions:
Majority - Stanton, District Judge
No. A television station is not entitled to a different fee from the industry benchmark where it fails to show applicable business factors that justify different rates or terms. The BMI Consent Decree requires the court to determine a 'reasonable fee,' which is typically the fair market value established through an arm's-length transaction, or 'benchmark.' The decree prohibits BMI from discriminating between 'licensees similarly situated' but allows for different rates if based on 'applicable business factors.' In this case, the only available benchmark is the TMLC agreement, which was accepted by nearly 1,300 stations. Weigel failed to prove its business is meaningfully different from others; its claims of uniqueness (e.g., being family-owned, having no local news) are characteristics shared by many other stations in the industry. Furthermore, a comparison of Weigel's proposed fees as a percentage of its revenues showed them to be comparable to, or even lower than, many other stations, including major network affiliates in its own Chicago market. Without proof of distinguishing business factors, BMI is prohibited by the consent decree from offering Weigel a different, more favorable rate than the benchmark applied to everyone else.
Analysis:
This decision solidifies the power of industry-wide agreements as benchmarks in rate-setting proceedings governed by antitrust consent decrees. It places a significant burden on any party opting out of such an agreement to empirically prove its dissimilarity from the group to justify a different rate. The court's focus on fees as a percentage of revenue establishes a key metric for evaluating 'comparability,' making it more difficult for individual licensees to obtain preferential terms based on qualitative or superficial business differences. This precedent strengthens the position of performing rights organizations in negotiations and discourages licensees from challenging widely-accepted rates without strong, data-backed evidence of unique circumstances.
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