ESPN Settles Dispute Over Music Licensing Fees

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By Anandashankar Mazumdar

ESPN Inc. has reached a deal with a music licensing organization over fees for music played in commercials and ambient music heard in game broadcasts, according to a letter filed Monday with a federal court in New York ( ESPN, Inc. v. Broadcast Music, Inc. , S.D.N.Y., No. 16-01067, settled 1/30/17 ).

ESPN objected to Broadcast Music Inc.’s insistence that the blanket licensing fee be calculated as a percentage of the sports network’s gross revenue. Instead, it wanted to use its directly negotiated licensing fees as a starting point. Details of the settlement have not been made public.

Performance rights organizations such as BMI and the American Society of Composers, Authors and Publishers, the two biggest ones in the U.S., collect royalties on behalf of music composers when recordings of their songs are played in public, such as at concerts, restaurants and bars, and on radio and television.

ESPN Directly Licenses Most Music

ESPN filed a petition in February 2016 with the U.S. District Court for the Southern District of New York, which oversees a consent decree governing blanket licenses issued by BMI.

The petition argued that ESPN differs from most broadcasters because it doesn’t rely on blanket licenses from BMI and ASCAP. Instead, before using music in its programming, it seeks out copyright holders directly to arrange licensing deals.

“We know what the cost is of all the music on air, pretty much, and it’s in the low hundreds of thousands of dollars for ESPN,” ESPN’s counsel said at a hearing before the court in April.

But when ESPN broadcasts a live event, it can’t know in advance what snippets of music being played at the event might be captured by its program. So for such ambient music, and for music used in commercials, ESPN fills in its licensing obligations with ASCAP and BMI blanket licenses.

Television broadcasts aren’t covered by the licensing arrangements that stadiums and arenas have with the PROs for music they play.

ESPN suggested to the court that it might be exempted from licensing obligations by the fair use doctrine when its broadcasts happened to capture some music. But BMI countered that the music has value to ESPN because it helps convey the feeling of being at the game to people in its TV audience.

When directly negotiating licenses for music, ESPN is in a strong bargaining position and free to choose to use—or not use—any particular kind of music, BMI said. That situation isn’t comparable to negotiating blanket licenses, it said.

ESPN confirmed that a settlement has been reached but declined to comment further. BMI declined to comment.

King & Spalding LLP represented ESPN. Milbank, Tweed, Hadley & McCloy LLP represented BMI.

To contact the reporter on this story: Anandashankar Mazumdar in Washington at AMazumdar@bna.com

To contact the editor responsible for this story: Mike Wilczek at mwilczek@bna.com

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