Buffalo Broadcasting Company, Inc. v. American Society Of Composers, Authors And Publishers

U.S. Court of Appeals9/18/1984
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Full Opinion

744 F.2d 917

53 USLW 2170, 223 U.S.P.Q. 478, 1984-2
Trade Cases 66,204,
1984 Copr.L.Dec. P 25,710

BUFFALO BROADCASTING COMPANY, INC., Kid Broadcasting
Corporation, KWTX Broadcasting Company, Inc., Metromedia,
Inc., and Storer Broadcasting Company, on behalf of
themselves and All Persons or Entities Who Own Local
Television Stations Which Obtain Music License Agreements
With American Society of Composers, Authors and Publishers
and/or Broadcast Music, Inc., Plaintiffs- Appellees,
v.
AMERICAN SOCIETY OF COMPOSERS, AUTHORS AND PUBLISHERS,
Stanley Adams, as President of American Society of
Composers, Authors and Publishers, Cy Coleman, Hal David,
Famous Music Corp., MCA, Inc., Morton Gould, Shapiro,
Bernstein & Co., Inc., on behalf of themselves and all other
members of American Society of Composers, Authors and
Publishers, Broadcast Music, Inc., Al Gallico Music Corp.,
Paul Anka, Jerry Bock, Sheldon Harnick, Hollis Music, Inc.
and Unart Music Corp., on behalf of themselves and all other
affiliates of Broadcast Music, Inc., Defendants-Appellants.

Nos. 7, 235, 236, Dockets 83-7058, 83-7060, 83-7062.

United States Court of Appeals,
Second Circuit.

Argued Nov. 1, 1983.
Finally Submitted Jan. 18, 1984.
Decided Sept. 18, 1984.

Jay Topkis, New York City (Allan Blumstein, Andrew J. Peck, Fred D. Heather, Gerard E. Harper, Richard H. Reimer, Paul, Weiss, Rifkind, Wharton & Garrison, and Bernard Korman, Gen. Counsel, ASCAP, New York City, on the brief), for defendants-appellants American Soc. of Composers, Authors and Publishers, et al.

Robert J. Sisk, New York City (Norman C. Kleinberg, Edward W. Chapin, Michael E. Salzman, Naomi F. Sheiner, Jacqueline D. Gilbert, William H. Voth, Hughes, Hubbard & Reed, New York City, on the brief), for defendant-appellant Broadcast Music, Inc.

Barry H. Garfinkel, New York City (William Hughes Mulligan, Timothy A. Nelsen, Richard M. Schwartz, Skadden, Arps, Slate, Meagher & Flom, New York City, on the brief), for defendants-appellants Al Gallico Music Corp., Sheldon Harnick, Hollis Music, Inc., Unart Music Corp., and the class of affiliates of Broadcast Music, Inc.

Ira M. Millstein, New York City (James W. Quinn, R. Bruce Rich, Jay N. Fastow, Kenneth L. Steinthal, Lois Peel Eisenstein, David B. Stern, Weil, Gotshal & Manges, New York City, on the brief), for plaintiffs-appellees.

Frederick F. Greenman, Jr., Alvin Deutsch, Edward Klagsbrun, Bernard G. Schneider, Linden & Deutsch, New York City, submitted a brief for amicus curiae American Guild of Authors and Composers/The Songwriters Guild.

Stephen A. Kroft, Sondra E. Berchin, Karen Magid, Rosenfeld, Meyer & Susman, Beverly Hills, Cal., submitted a brief for amicus curiae Motion Picture and Television Producers and Syndicators.

Robert M. Lichtman, Daniel L. Koffsky, Wald, Harkrader & Ross, Philip Elman, Washington, D.C., Michael J. Freegard, Chief Exec. Officer, Performing Right Soc. Ltd., London, England, Jean-Loup Tournier, Le Directeur Gen., Societe des Auteurs, Compositeurs et Editeurs de Musique, Paris, France, submitted a brief for amici curiae The Performing Right Soc. Ltd. and Societe des Auteurs, Compositeurs et Editeurs de Musique.

Irwin Karp, Port Chester, N.Y., submitted a brief for amicus curiae Authors League of America, Inc.

Frank H. Easterbrook, Chicago, Ill., submitted a brief for amici curiae Chappell & Co., et al.

Marvin E. Frankel, Stuart J. Baskin, Kramer, Levin, Nessen, Kamin & Frankel, New York City, submitted a brief for amici curiae Aaron Copland, et al.

John H. Midlen, Jr., Washington, D.C., submitted a brief for amicus curiae Old-Time Gospel Hour.

Before NEWMAN, WINTER and PRATT,* Circuit Judges.

JON O. NEWMAN, Circuit Judge:

1

Once again we consider the lawfulness under section 1 of the Sherman Antitrust Act of the blanket license offered by the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI). The license permits the licensee to perform publicly any musical composition in the repertory of the licensor. In this litigation the blanket license is challenged by a class of licensees comprising all owners of "local" television stations in the United States, i.e., stations not owned by any of the three major television networks, ABC, CBS, and NBC. After a bench trial in the District Court for the Southern District of New York (Lee P. Gagliardi, Judge), the blanket license was held to be an unreasonable restraint of trade. Buffalo Broadcasting Co. v. ASCAP, 546 F.Supp. 274 (S.D.N.Y.1982). ASCAP and BMI were enjoined from licensing to local television stations non-dramatic music performing rights for any "syndicated" program. For reasons that follow, we conclude that the evidence was insufficient as a matter of law to show that the blanket license is an unlawful restraint of trade in the legal and factual context in which it currently exists. We therefore reverse the judgment of the District Court.

Background

I. The Parties

2

The five named plaintiffs own and operate one or more local television stations. They represent a class of all owners of local television stations in the United States who obtain music performing rights pursuant to license agreements with ASCAP and/or BMI. The class does not include the three major television networks, ABC, CBS, and NBC, each of which owns five television stations. The class includes approximately 450 owners who, because of multiple holdings, own approximately 750 local television stations. Only one owner has opted out of the class. The class includes some relatively small corporations that own a single station with relatively modest revenue and some major corporations with significant television revenue and profits, such as Metromedia, Inc., which owns seven stations including those in the major markets of New York City (WNEW-TV) and Los Angeles (WTTV). Since 1949 most stations have been represented in negotiations with ASCAP and BMI by the All-Industry Television Station Music License Committee ("the All-Industry Committee").

3

Defendant ASCAP is an unincorporated membership association of composers, authors, and publishers of music, formed in 1914. It has approximately 21,000 writer and 8,000 publisher members. It holds non-exclusive licenses for the non-dramatic performing rights to more than three million musical compositions. BMI is a non-profit corporation organized in 1939 by radio broadcasters. It has approximately 38,000 writer and 22,000 publisher affiliates. Its repertory, for which it holds non-exclusive licenses for non-dramatic performing rights, includes more than one million compositions. The eleven individual defendants represent two classes of defendants that include all persons from whom ASCAP and BMI have obtained the non-exclusive right to license non-dramatic music performing rights to others.

II. Music, Rights, and Licenses

4

The subject matter of this litigation is music transmitted by television stations to their viewer-listeners. Television music is classified as either theme, background, or feature. Theme music is played at the start or conclusion of a program and serves to enhance the identification of the program. Background music accompanies portions of the program to heighten interest, underscore the mood, change the pace, or otherwise contribute to the overall effect of the program. Feature music is a principal focus of audience attention, such as a popular song sung on a variety show.

5

More particularly, we are concerned with the licensing of non-dramatic performing rights to copyrighted music, that is, the right to "perform" the music publicly by transmitting it, whether live or on film or tape, to television audiences.1 This performance right is created by the Copyright Act as one of the exclusive rights enjoyed by the copyright owner. 17 U.S.C. Sec. 106(4) (1982). Also pertinent to this litigation is the so-called synchronization right, or "synch" right, that is, the right to reproduce the music onto the soundtrack of a film or a videotape in synchronization with the action. The "synch" right is a form of the reproduction right also created by statute as one of the exclusive rights enjoyed by the copyright owner. Id. Sec. 106(1). The Act specifically accords the copyright owner the right to authorize others to use the various rights recognized by the Act, including the performing right and the reproduction right, id. Sec. 106, and to convey these rights separately, id. Sec. 201(d)(2). The Act recognizes that conveyance of the various rights protected by copyright may be accomplished by either an exclusive or a non-exclusive license. Id. Sec. 101.

6

Music performed by local television stations is selected in one of three ways. It may be selected by the station itself, or by the producer of a program that is sold to the station, or by a performer spontaneously. The stations select music for the relatively small portion of the program day devoted to locally produced programs. The vast majority of music aired by television stations is selected by the producers of programs supplied to the stations. In some instances these producers are the major television networks, but this litigation is not concerned with performing rights to music on programs supplied to the local stations by the major networks because the networks have blanket licenses from ASCAP and BMI and convey performing rights to local stations when they supply network programs. Apart from network-produced programs, the producers of programs for local stations are "syndicators" supplying the stations with "syndicated" programs. Most syndicated programs are feature length movies or one-hour or half-hour films or videotapes produced especially for television viewing by motion picture studios, their television production affiliates, or independent television program producers. However, the definition of "syndicated program" that was stipulated to by the parties also includes live, non-network television programs offered for sale or license to local stations.2 These syndicated programs are the central focus of this litigation. The third category of selected music, songs chosen spontaneously by a performer, accounts for a very small percentage of the music aired by the stations. These spontaneous selections of music can occur on programs produced either locally or by the networks or by syndicators.

7

Syndicators wishing to include music in their programs may either select pre-existing music (sometimes called "outside" music) or hire a composer to compose original music (sometimes called "inside" music). Most music on syndicated programs, up to 90% by plaintiffs' estimate, is inside music commissioned through the use of composer-for-hire agreements between the producer and either the composer alone or the composer and a corporation entitled to contract for a loan of the composer's services. Composer-for-hire agreements are normally standard form contracts. The salary paid to the composer, sometimes called "up front money," varies considerably from a few hundred dollars to several thousand dollars. The producer for whom a "work made for hire" was composed is considered by the Act to be the author and, unless the producer and composer have otherwise agreed, owns "all of the rights comprised in the copyright." Id. Sec. 201(b). However, composer-for-hire agreements for syndicated television programs typically provide that the producer assigns to the composer and to a music publishing company the performing right to the music composed pursuant to the agreement.3

8

When the producer wishes to use outside music in a film or videotape program, it must obtain from the copyright proprietor the "synch" right in order to record the music on the soundtrack of the film or tape. "Synch" rights vary in price, usually within a range of $150 to $500. When the producer wishes to use inside music, as is normally the case, it need not obtain the "synch" right because it already owns this right by virtue of the "work made for hire" provision of the Act.

9

Whether the producer decides to use outside or inside music, it need not acquire the television performing right since neither the making of the program nor the selling of the program to a television station is a "performance" of the music that would require a performing right. The producer is therefore free either to sell the program without the performing right and leave it to the station to obtain that right, or to obtain the performing right from the copyright proprietor, usually the composer and a publishing company, and convey that music performing right to the station along with the performing rights to all other copyrighted components of the program. If the producer obtains the music performing right from the copyright proprietor and conveys it to the station, the transaction is known as "source licensing" or "clearance at the source." If the station obtains the music performing right directly from the copyright proprietor, the transaction is known as "direct licensing."

10

The typical arrangement whereby local television stations acquire music performing rights in syndicated and all other programs is neither source licensing nor direct licensing. Instead, the stations obtain from ASCAP and BMI a blanket license permitting television performance of all of the music in the repertories of these organizations. The license is conveyed for a fee normally set as a percentage of the station's revenue. That fee, after deduction of administrative expenses, is distributed to the copyright proprietors on a basis that roughly reflects the extent of use of the music and the size of the audience for which the station "performed" the music. The royalty distribution is normally divided equally between the composer and the music publishing company.

11

In addition to offering stations a blanket license, ASCAP and BMI also offer a modified form of the blanket license known as a "program" or "per program" license. The program license conveys to the station the music performing rights to all of the music in the ASCAP or BMI repertory for use on the particular program for which the license is issued. The fee for a program license is a percent of the revenue derived by the station from the particular program, i.e., the advertising dollars paid to sponsor the program.

12

The blanket license contains a "carve-out" provision exempting from the base on which the license fee is computed the revenue derived by the station from any program presented by motion picture or transcription for which music performing rights have been licensed at the source by the licensor, i.e., ASCAP or BMI. The program license contains a more generous version of this provision, extending the exemption to music performing rights licensed at the source either by ASCAP/BMI or by the composer and publisher. Thus, for film and videotaped syndicated programs, a station can either obtain a blanket license for all of its music performing rights and reduce its fee for those programs licensed at the source by ASCAP/BMI, or obtain program licenses for each of its programs that use copyrighted music and avoid the fee for those programs licensed at the source by either ASCAP/BMI or by the composers and publishers.

III. Prior Litigation

13

The merits of the current lawsuit cannot properly be assessed without consideration of the extensive history of litigation concerning the licensing of music performing rights. In 1941 an antitrust suit brought by the United States against ASCAP and BMI was settled by entry of consent decrees,4 imposing some limitations on the operations of ASCAP and BMI. Those decrees, however, permitted ASCAP and BMI to obtain exclusive licenses for music performing rights from their members and affiliates. The exclusive nature of these licenses prevented those requiring performing rights from negotiating directly with composers for rights to individual compositions. That limitation precipitated suit by operators of movie theaters, who successfully challenged the blanket license they were obliged to take from ASCAP in order to exhibit films with music from the ASCAP repertory. Alden-Rochelle, Inc. v. ASCAP, 80 F.Supp. 888 (S.D.N.Y.1948). See also M. Witmark & Sons v. Jensen, 80 F.Supp. 843 (D.Minn.1948), appeal dismissed, 177 F.2d 515 (8th Cir.1949).

14

The restraining nature of the ASCAP blanket license, as applied to movie theater operators, prompted the Government to reopen the 1941 ASCAP consent decree and secure in 1950 a significant amendment.5 The amended decree, known as the "Amended Final Judgment," prohibits ASCAP from acquiring exclusive music performing rights, limiting it solely to non-exclusive rights. ASCAP is also prohibited from limiting, restricting, or interfering with the right of any member to issue to any user a non-exclusive license for music performing rights.

15

The Amended Final Judgment requires ASCAP to grant a blanket license to anyone requesting it. The decree also requires ASCAP to offer to any television or radio broadcaster a program license. ASCAP is also required "to use its best efforts to avoid any discrimination among the respective fees fixed for the various types of licenses which would deprive the licensees or prospective licensees of a genuine choice from among such various types of licenses." Amended Final Judgment, p VIII, 546 F.Supp. at 278 n. 6. Finally, in the event license applicants believe they are being overcharged, the decree permits any applicant for a blanket or program license to apply to the District Court for the determination of a "reasonable" fee, and in such a proceeding, "the burden of proof shall be on ASCAP to establish the reasonableness of the fee requested by it." Id. p IX(A), 546 F.Supp. at 278-79 n. 6.

16

In 1951 local television stations instituted suit pursuant to the Amended Final Judgment to determine reasonable license fees and terms. United States v. ASCAP (Application of Voice of Alabama, Inc.), Civ. No. 13-95 (S.D.N.Y.1951). In 1954 the parties reached agreement to set the per program license rate at 9% of the revenue of programs using ASCAP music and to reduce the blanket license rate to 2.05% of total station revenue, less certain deductions. In light of this agreement the Voice of Alabama proceeding was discontinued.

17

In 1961 local television stations requested from ASCAP a modified blanket license that excluded syndicated programs. When ASCAP refused, the stations sued in the consent decree court to require ASCAP to issue such a license. The District Court declined to require such a license, United States v. ASCAP (Application of Shenandoah Valley Broadcasting, Inc.), 208 F.Supp. 896 (S.D.N.Y.1962), aff'd, 331 F.2d 117 (2d Cir.), cert. denied, 377 U.S. 997, 84 S.Ct. 1917, 12 L.Ed.2d 1048 (1964). In affirming, this Court observed that if the blanket license was serving to restrain trade unreasonably in violation of the antitrust laws, the stations' remedy was to urge the Department of Justice to seek modification of the consent decree or to initiate a private suit. 331 F.2d at 124.

18

Rather than press an antitrust challenge, the stations initiated another round of fee determination pursuant to the consent decree. That litigation, known as the Shenandoah proceeding, was settled upon the parties' agreement that the form of blanket and program licenses then in use "may be entered into lawfully by each party to this proceeding" and that the rate for the blanket license was reduced to 2% of 1964-65 revenue plus 1% of incremental revenue above that base. United States v. ASCAP (Application of Shenandoah Valley Broadcasting, Inc.), Civ. No. 13-95 (S.D.N.Y. July 28, 1969) (final order). The All-Industry Committee reported to the stations that this rate reduction would save them approximately $53 million through 1977, an estimate that was exceeded because of the rapid growth of station revenue.

19

Thereafter, while the local television stations took blanket licenses from ASCAP and BMI, the legality of the license was challenged by a network licensee, CBS. Its suit, filed in 1969, was dismissed by Judge Lasker after an eight-week trial. CBS, Inc. v. ASCAP, 400 F.Supp. 737 (S.D.N.Y.1975). Judge Lasker ruled that the evidence failed to show that the blanket license restrained CBS from obtaining music performing rights to individual compositions if it chose to seek and pay for them. On appeal, this Court reversed, ruling that the blanket license was an unlawful price-fixing device, a per se violation of section 1. CBS, Inc. v. ASCAP, 562 F.2d 130 (2d Cir.1977). That decision was reversed by the Supreme Court, which ruled that the blanket license was not a per se violation of section 1. BMI, Inc. v. CBS, Inc., 441 U.S. 1, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979). Upon remand from the Supreme Court, we affirmed Judge Lasker's decision, agreeing that the blanket license had not been proven to be a restraint of trade. CBS, Inc. v. ASCAP, 620 F.2d 930 (2d Cir.1980) ("CBS-remand"), cert. denied, 450 U.S. 970, 101 S.Ct. 1491, 67 L.Ed.2d 621 (1981).

20

Perhaps encouraged by our 1977 ruling in favor of CBS, the local stations began this litigation in 1978. A four-week bench trial occurred in 1981 before Judge Gagliardi, resulting in the decision now on appeal. That decision holds that the blanket licensing of music performing rights to local television stations unreasonably restrains trade in violation of section 1 and enjoins ASCAP and BMI from granting to local television stations music performing rights in any syndicated programs. With respect to syndicated programs, the injunction thus bars ASCAP and BMI from offering either blanket or program licenses and also prohibits them from conveying performing rights with respect to such programs on any basis at all.

Discussion

A. Estoppel

21

As a threshold issue, ASCAP contends that the local stations are estopped from challenging the lawfulness of the blanket license as applied to them by reason of the position they took in settlement of the Shenandoah rate determination proceeding. Specifically, ASCAP relies on the fact that the stations settling that litigation represented to the District Court that the ASCAP blanket license "may be entered into lawfully" and that ASCAP in effect bargained for that representation by giving up at least $53 million in license fees. There is undeniable force to the contention that those who secured benefits exchanged in part for a representation to the District Court that the blanket license is lawful ought not to be heard to assert the contrary. See Chance v. Board of Examiners, 561 F.2d 1079, 1092 (2d Cir.1977). But the argument is not necessarily a winning one for three reasons: It was not asserted in the trial court, it rests on a consent decree that applied to a term of years ending in 1977, and its force in the antitrust context is not free from doubt. Cf. Bernstein v. Universal Pictures, Inc., 517 F.2d 976, 981-82 (2d Cir.1975) (plaintiff who has previously asserted contrary legal position still deserving of antitrust relief).

22

We are persuaded to move past the estoppel argument, without determining its validity, and consider the merits of the lawsuit. In the first place, the argument is a matter of considerable dispute, and, if not forfeited by failure to raise it in the trial court, the argument comes to us on a record that inadequately develops the facts as to whom the estoppel binds and whom it benefits. Second, even if the estoppel argument bars the claims of those local television stations for whom the All-Industry Committee spoke when negotiating the Shenandoah settlement, it is not at all clear that it would bar the claims of the approximately 200 stations that have come into existence since the 1969 settlement. Finally, there is uncertainty whether the estoppel would inure to the benefit of ASCAP's co-defendant, BMI, which was not a party to the Shenandoah proceeding. Without resolving our doubts on these points, we proceed to consider the merits of the dispute.

23

B. Is There a Restraint?

24

We think the initial and, as it turns out, dispositive issue on the merits is whether the blanket licensing of performing rights to the local television stations has been proven to be a restraint of trade. See CBS-remand, supra, 620 F.2d at 934-35. Arguably the answer is a fortiori after the Supreme Court's decision and our decision on remand in the CBS litigation. The Supreme Court noted that "the necessity for and advantages of a blanket license for [television and radio networks] may be far less obvious than is the case when the potential users are individual television or radio stations ...." 441 U.S. at 21, 99 S.Ct. at 1563. And on remand we upheld the blanket license against the claim of a network. However, for several reasons, it does not follow that the local stations lose simply because the CBS network lost. First, the Supreme Court's observation concerned the relative pro-competitive effects of the blanket license for a network compared to local stations. Even though the pro-competitive effects may be greater when the licensees are local stations, those pro-competitive effects do not necessarily outweigh the anti-competitive effects. Second, the Supreme Court's comparative statement does not determine the threshold issue of whether the blanket licensing of performing rights to local television stations is a restraint at all. The fact that CBS did not prove that blanket licensing of networks restrained competition does not necessarily mean that blanket licensing of local stations may not be shown to be a restraint. Finally, in CBS-remand we reviewed a District Judge's ruling that no restraint had been proved; here, we review a ruling that the local stations proved the existence of a restraint.

25

In reaching his conclusions as to the existence of a restraint, Judge Gagliardi endeavored to apply the mode of analysis we had used in CBS-remand. We there noted that trade is restrained, sometimes unreasonably, when rights to use individual copyrights or patents may be obtained only by payment for a pool of such rights, but that the opportunity to acquire a pool of rights does not restrain trade if an alternative opportunity to acquire individual rights is realistically available. 620 F.2d at 935-36. We recognized, as CBS had urged, that a plaintiff will not be held to have an alternative "available" simply because some imaginable possibility exists. We agreed that CBS's "alternative" of hiring composers to fill its need for music was not the sort of realistic alternative that prevented the blanket license from being a restraint. "An antitrust plaintiff is not obliged to pursue any imaginable alternative, regardless of cost or efficiency, before it can complain that a practice has restrained competition." Id. at 936. What we examined in CBS-remand, as Judge Lasker had done in the District Court, was whether the plaintiff had proved that it lacked a realistic opportunity to obtain performance rights from individual copyright holders.

26

We continue to believe that this is the appropriate inquiry, especially in light of the Supreme Court's recent decision concerning the NCAA's attempt to regulate the televising of college football games. NCAA v. Board of Regents of the University of Oklahoma, --- U.S. ----, 104 S.Ct. 2948, 82 L.Ed.2d 70 (1984). Two aspects of that ruling are especially pertinent. First, the Court was there concerned, as we are here, with an agreement whereby a pool of rights was conveyed. In determining that the agreement constituted a restraint, the Court stated, "[S]ince as a practical matter all member institutions need NCAA approval, members have no real choice but to adhere to the NCAA's television controls." Id. at 2963 (emphasis added) (footnote omitted). Thus, the restraining effect of the challenged agreement arose not by virtue of its terms alone, but because as a "practical" matter no "real" alternative existed whereby individual negotiations could occur between member schools and television broadcasters. Second, the Court had occasion to characterize the blanket license for music performing rights that it had sustained against a per se challenge in CBS and stated that under the blanket license "each individual remained free to sell his own music without restraint." Id. at 2968 (emphasis added).6 NCAA thus reinforces our view that the first issue is whether the local television stations have proven that they lack, as a "practical" matter, a "real" alternative to the blanket license for obtaining music performing rights.

27

In reaching the conclusion that plaintiffs had proven the lack of realistically available alternatives to the blanket license, Judge Gagliardi gave separate consideration to three possibilities: the program license,7 direct licensing, and source licensing. We consider each in turn.

28

Program License. Judge Gagliardi based his conclusion that a program license is not realistically available to the plaintiffs essentially on two circumstances: the cost of a program license and the reporting requirements that such a license imposes on a licensee. "The court therefore concludes that the per program license is too costly and burdensome to be a realistic alternative to the blanket license." 546 F.Supp. at 289 (footnote omitted). Without rejecting any subsidiary factual finding concerning the availability of a program license, we reject the legal conclusion that it is not a realistic alternative to the blanket license.

29

The only fact found in support of the conclusion that the program license is "too costly" is that the rates for such licenses are seven times higher than the rates for blanket licenses. Id. The program license rate is 9%; the blanket license rate is between 1% and 2%. This difference in rates does not support the District Court's conclusion for several reasons. First, the rates are charged against different bases. The blanket license rate is applied to a station's total revenue; the program license rate is applied only to revenue from a particular program. Since the base for the blanket license fee includes revenue from network programs, for which the networks have already acquired performing rights by virtue of their blanket licenses, as well as some local programs that use no music, it is inevitable that the rate for a local station's blanket license will be less than the rate for a program license taken solely to permit use of music on a particular program.

30

Second, the degree of difference between the two rates is largely attributable to the stations themselves. In negotiating a revision of license rates in the Shenandoah proceeding in 1969, the All-Industry Committee elected not to press for reduction of the program license rate and instead concentrated on securing a reduction of the blanket license rate, believing, as it informed the broadcasters it represented, that "the critical matter at this time was to get the best possible blanket license." Having preferred to win a lower price for only the blanket license, the stations are in no position to point to the widened differential between rates to show that program licenses are not realistically available.

31

Third, the only valid test of whether the program license is "too costly" to be a realistic alternative is whether the price for such a license, in an objective sense, is higher than the value of the rights obtained. But plaintiffs presented no evidence that the price of the program license is "high" in terms of value received.8 Instead, they rely, as did the District Court, on a comparison between the program license rate and the blanket license rate. That comparison, defendants contend, leads to the anomalous result that the more the blanket license is a bargain, the more it is likely to be a restraint. The anomaly is more apparent than real. Within reasonable price ranges, the program license is not an unrealistic alternative to the blanket license simply because the rate for the latter is less. The differential in rates may reflect the inherent difference in the bundle of rights being conveyed. Even if the blanket license is objectively the "better buy" for most users, the program license would be a realistic alternative so long as it was fairly priced for those who might find it preferable for reasons other than price. But if the program license were available only at a price beyond any objectively reasonable range, the "bargain" nature of the blanket license would not immunize it from characterization as a restraint. Sellers of alternatives may not set absurdly high prices at which they have no real intention of making sales and then point to the cheaper price of the package under attack to argue that it is not a restraint but the object of customer preference.

32

Thus, while the relative cheapness of the blanket rate does not necessarily mean that it is not a restraint, the absence of evidence that the program license has been artificially priced higher than is reasonable for value received bars any conclusion that the program license is "too costly" to be a realistic alternative. The fact that very few stations have elected to take program licenses is not evidence that they are priced beyond an objectively reasonable price range. It may simply reflect, as defendants believe, that the blanket license has virtues of convenience that make it a legitimate object of customer preference.

33

Fourth, even if there were evidence that showed the program license rate to be too "high," that price is always subject to downward revision by Judge Conner, who currently supervises the administration of the Amended Final Judgment. Two aspects of that judgment are especially pertinent to any claim that the price of the program license is too "high." In a proceeding to redetermine rates, the burden is on ASCAP to prove the reasonableness of the rates charged, and the judgment expressly requires ASCAP "to use its best efforts to avoid any discrimination among the respective fees fixed for the various types of licenses which would deprive the licensees or prospective licensees of a genuine choice from among such various types of licenses," Amended Final Judgment, p VIII, 546 F.Supp. at 278 n. 6 (emphasis added). The availability of a judicially enforceable requirement of a "reasonable" fee precludes any claim that the program license rate is too high, especially in the context of television stations regularly represented by a vigorous committee with the demonstrated resources, skill, and willingness to invoke the rate-adjustment process.

34

In addition to cost, Judge Gagliardi considered the program license not realistically available because of the burdens of required record-keeping that accompany its use. This conclusion is similarly flawed by the lack of evidence that the record-keeping requirements have been unnecessarily imposed. Since the program license permits only selective use of copyrighted music, it is inevitable that some reporting requirements would be reasonable to assure proper use. The District Court made no finding that any aspect of the record-keeping is objectively unnecessary, and plaintiffs offered no evidence to this effect. As with price, the apparent benefit of the blanket license in sparing the user record-keeping may simply reflect inherent differences in the two products. In any event, the program license has been shown only to require more record-keeping than the blanket license; it has not been shown to require burdens objectively unreasonable, such as would support a conclusion that the program license is not realistically available. Finally, though we do not decide the point, it would appear that any aspect of the record-keeping requirement that prevents the stations from having a "genuine choice" between the program and the blanket license would be subject to revision under the Amended Final Judgment.

35

The lack of evidence that the program license is not realistically available has a two-fold significance in determining whether the blanket license has been shown to be a restraint. First, the program license itself remains as an alternative to the blanket license for the local stations to acquire performing rights to the music on all of their syndicated programs. That consequence is not necessarily determinative since the program license is in reality a limited form of the blanket license and, like the blanket license, is subject to the objection that its use by stations would continue the present practice whereby no price competition occurs among individual songs with respect to licensing of performing rights. However, the availability of the program license has a second and more significant consequence: The program license provides local stations with a fall-back position in the event that they forgo the blanket license and then encounter difficulty in obtaining performing rights to music on some syndicated programs either by direct licens

Additional Information

Buffalo Broadcasting Company, Inc. v. American Society Of Composers, Authors And Publishers | Law Study Group