`l;:,DC SD:\\'
`DOCU'.\JE:\'T
`i ELECTRO\ICALL Y
`H 'I DOC#:
`I Dt\TE FILED:
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`- - - -x
`
`FILED
`
`BROADCAST MUSIC,
`
`INC.,
`
`Petitioner,
`
`2018 Civ. 8749
`
`(LLS)
`
`- against -
`
`OPINION
`
`NORTH AMERICAN CONCERT PROMOTERS
`ASSOCIATION, as licensing
`representative of the promoters
`listed on Exhibit A to the
`Petition,
`
`Respondent.
`
`-x
`Article XIV (A) of the Broadcast Music, Inc.
`
`( "BMI") Consent
`
`Decree entered in United States v. Broadcast Music, Inc., 1966
`
`Trade Cas.
`
`(CCH)
`
`gr 71, 941 (S.D.N.Y. Dec. 29, 1966), amended by,
`
`United States v. Broadcast Music, Inc., 1996-1 Trade Cas.
`
`gr 71,
`
`378 (S.D.N.Y. Nov. 18, 1994)
`
`("BMI Consent Decree") requires BMI
`
`to offer any prospective music user a license to publicly
`
`perform the songs in its repertoire. If BMI and the licensee are
`
`at an impasse over the licensing rate, either party can petition
`
`this Court to set a "reasonable" rate. Id. The Court must thus
`
`authorize a rate that will allow songwriters and publishers to
`
`obtain the benefits derived from the copyright protections
`
`afforded to their works, while simultaneously avoiding overly
`
`compensating them for the contributions made by others' live
`
`performance of the works and eliminating any price inflation
`
`derived from BMI's aggregated market power as a monopolist.
`
`1
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 2 of 37
`
`BMI petitioned this Court to determine the reasonable rate
`
`that the North American Concert Promoters 1 Association ("NACPA")
`
`owes for its members' right to perform BMI-affiliated music at
`
`live concerts. BMI seeks an order setting the final fee for two
`
`blanket licenses, one that covers the "Retroactive Period"
`
`stemming from January 1, 2014 through June 30, 2018 and the
`
`other that controls the "Current Period" running from July 1,
`
`2018 through December 31, 2022. The parties agree to structure
`
`the fee as a percentage of gross revenue but dispute the
`
`definition of gross revenue and the rate that applies to the
`
`revenue base.
`
`For the reasons that follow, the Court adopts BMI's
`
`proposed rate for the Retroactive Period. For the Current
`
`Period, the reasonable rate is set at 0.5% of Gross Ticket
`
`Revenues, as defined below.
`
`BACKGROUND
`
`a.
`
`BMI and Domestic PROS
`
`BMI is a performing rights licensing organization ("PRO")
`
`that represents approximately 1.3 million songwriters,
`
`composers, and music publishers ("BMI affiliates"). Tr. 129:10-
`
`19. BMI licenses the public use of its affiliates' musical
`
`1 The term "promoters" refers to concert organizers, who provide
`for the artist, venue, advertising, and general facilitating of
`a live concert event.
`
`2
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 3 of 37
`
`compositions to a broad range of businesses and music users
`
`including, radio and television broadcasters, satellite radio,
`
`cable television, streaming services, concert promoters, and
`
`restaurants. Tr. 130:16-24. BMI operates under the constraint of
`
`the Consent Decree, which prohibits it from refusing a license
`
`to any music user who is willing to pay a reasonable license
`
`fee. Consent Decree§ XIV.
`
`The BMI repertoire contains around twenty-one million
`
`musical works or approximately 45.4% of the total music market.
`
`Tr. 129:15-17; PX 980 at 24. The rest of the market is
`
`represented by three other PROs: the American Society of
`
`Composers, Authors, and Publishers ("ASCAP"), the Society of
`
`European Stage Authors and Composers ("SESAC"), and Global Music
`
`Rights ("GMR"). ASCAP's repertoire encompasses approximately
`
`46.5% of musical compositions on the market. PX 980 at 24. It
`
`operates under a Consent Decree identical in practice to BMI's.
`
`Stip. Facts~~ 21-22.
`
`SESAC and GMR are smaller domestic PROs that do not operate
`
`under Consent Decrees. Stip. Facts~~ 23-24. SESAC represents
`
`the licensing rights to approximately 3.6% of the market. PX 980
`
`at 24. GMR,
`
`the newest PRO, licenses approximately 4.5% of the
`
`market. Id.
`
`b. NACPA and its Members
`
`3
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 4 of 37
`
`NACPA is an association of concert industry promoters that
`
`was formed in 1988. Tr. 1420:12-18. NACPA licenses with BMI,
`
`ASCAP, and SESAC to cover the public performance of music at
`
`live concerts promoted by its members. 2 Stip. Facts~ 12; see JX
`
`24
`
`(1998 BMI-NACPA Agreement); JX 29 (2006 BMI-NACPA Agreement);
`
`JX 57
`
`(2018 ASCAP-NACPA Agreement); JX 62
`
`(2020 SESAC-NACPA
`
`Agreement). Although NACPA itself enters into these licenses on
`
`behalf of its collective membership, NACPA's members are the
`
`ones paying the rate. Tr. 496:10-17; see JX 29. NACPA and its
`
`members are thus aligned to keep the license fees low. Tr.
`
`1001:2-11, 1086:23-1087:3. NACPA administers the license by
`
`verifying the gross revenues reported from each concert,
`
`collecting payments from members, and remitting them to BMI.
`
`Stip. Facts~ 14.
`
`NACPA has forty-six concert-promoter members. 3 Tr. 141:4-6.
`
`Of those members, the most notable are Live Nation
`
`Entertainment, Inc.
`
`("Live Nation") and AEG Presents, LLC
`
`("AEG"). Live Nation is affiliated with approximately half of
`
`NACPA's other members, while another quarter of NACPA's members
`
`2 Unlike the other PROs that have entered into licensing
`agreements with NACPA itself, GMR has licenses with NACPA's
`individual members. See PX 83, 101.
`3 To become a NACPA member, a promoter must have staged at least
`sixty shows in the prior year, including at least five club
`shows, five theater shows, and five shows in venues with more
`than 10,000 seats. Stip. Facts~ 11.
`
`4
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 5 of 37
`
`are subsidiaries of AEG. Id. Live Nation, AEG, and their
`
`subsidiaries pay roughly 90% of the fees under NACPA's license
`
`with BMI. Tr. 141:8-11. NACPA members that are not associated
`
`with Live Nation and AEG include Another Planet Entertainment
`
`("APE"), Jam Productions ("JAM"), M:.isic and Event Management,
`
`Inc.
`
`("MEMI"), and Nederlander Concerts ("Nederlander"). Stip.
`
`Facts 'lI 17.
`
`Live Nation and AEG are conglomerates in the music
`
`industry. Their businesses include concert promotion, venue
`
`ownership, and ticket servicing. Tr. 628:25-629:1, 632:14-17,
`
`638:6-7, 696:1-2, 699:13-17; 700:13-19. Live Nation is the
`
`largest concert promoter in the United States generating more
`
`revenue from concerts than any other promoter. Tr. 696:13-14; PX
`
`748 at 2-3. It owns Ticketmaster, the largest ticketing
`
`servicing company in the nation. Tr. 638:6-7. Ticketmaster
`
`requires ticket buyers to pay service fees on virtually all
`
`tickets, which amount to an average of 20% of the face value of
`
`the ticket. See Tr. 642:12-24, 645:12-23.
`
`AEG is the second-largest concert promoter in the United
`
`States. Tr. 696:8-10. It also owns the ticket servicing company
`
`AXS, which charges service fees comparable to Ticketmaster. Tr.
`
`700:13-19, 720:10-723:16, 725:15-19.
`
`c. Music Industry
`
`5
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 6 of 37
`
`Concert promoters organize live music events by booking
`
`talent, securing venues, facilitating operations, and advancing
`
`costs, which often include a guarantee payment to the artist.
`
`Tr. 588:19-24, 589:16-590:4, 592:7-17. In the United States, the
`
`promoter's responsibilities include obtaining the license for
`
`the performance of the songs to be played at the concert. Tr.
`
`779:24-780:5.
`
`Historically, the concert promotion industry has been
`
`composed of small independent promoters operating in regional
`
`markets on slim margins. Tr. 110:13-24. In the early 1990s,
`
`"[p]romoters put on 90% of their shows at a loss in order to get
`
`10% of the shows that make money." JX 8; see also JX 26
`
`("concert costs .
`
`frequently exceed ticket sales"). In the
`
`late 1990s, regional promoters began consolidating until the
`
`modern landscape of being dominated by Live Nation and AEG
`
`emerged. See Tr. 110:13-111:8; Tr. 141:8-10.
`
`d. BMI's and NACPA's Licensing History
`
`In 1992, BMI approached NACPA to negotiate a blanket
`
`license for live concerts. Tr. 214:14-16; JX 6. BMI's initial
`
`proposal was a rate of 1% of gross ticket receipts. JX 26. NACPA
`
`protested that the concert industry was in economic distress and
`
`could not afford to pay BMI's requested rate. JX 6; JX 8; JX 26.
`
`Based on NACPA's representations and after years of negotiating,
`
`the parties finalized the 1998 BMI/NACPA license with a rate of
`
`6
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 7 of 37
`
`0.3% of "Gross Ticket Revenues" for concerts with under 10,000
`
`seats and a rate of 0.15% for those with over 10,000 seats. JX
`
`24. Gross Ticket Revenues were limited to monies received by
`
`concert promoters from ticket sales (i.e., the face price of the
`
`tickets). Id. The license also granted a 10% administrative
`
`discount for NACPA's assistance in consolidating its members'
`
`payments and reporting them to BMI. Id. NACPA's discount was
`
`contingent on at least 80% of NACPA members agreeing to the BMI
`
`license. Id. The 1998 BMI/NACPA License was set to run until
`
`2004, whereafter the parties extended it for another year. Stip.
`
`Fact~~ 52, 55.
`
`In 2005, the parties began negotiations for a new license.
`
`The negotiations focused exclusively on a rate for music
`
`festivals, which BMI contended were not licensed under the 1998
`
`BMI/NACPA License. The parties agreed to a separate festival
`
`rate 4 and entered into the 2006 BMI/NACPA License. JX 29.
`
`Throughout the negotiations, they did not discuss any other
`
`terms of the license, including the headline rate, and simply
`
`chose to continue the one set in 1998. See Tr. 982:6-983:2. The
`
`2006 BMI/NACPA license had an initial four-year term, through
`
`4 The festival rate is 0.4%, if there are less than 10,000
`attendees, or 0.3%, if there are more than 10,000, of the gross
`ticket revenue. JX 29.
`
`7
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 8 of 37
`
`December 31, 2009, with automatic annual renewals thereafter.
`
`Id.; Tr. 1471:24-1472:4.
`
`The 2006 BMI/NACPA license was renewed until BMI terminated
`
`it effective December 31, 2013. Tr. 152:14-25. Since then, the
`
`parties have been on an interim agreement and have engaged in
`
`protracted negotiations for a new license without success. Tr.
`
`153:1-6.
`
`e. Parties' Proposals
`
`BMI's Rate Quote contains a dual proposal, one for the
`
`Current Period (July 1, 2018 through December 31, 2022) and one
`
`for the Retroactive Period (January 1, 2014 through June 30,
`
`2 0 1 8 ) . JX 6 3 . The Rate Quote for the Current Period is 0.8% of
`
`"Gross Revenues," which is enlarged to include:
`
`1. Revenues from primary ticket sales paid or payable to the
`licensee or a contractually-related third party;
`(2)
`Revenues from service, administration, and/or handling
`charges paid or payable to the licensee in connection with
`primary ticket sales;
`(3) Revenues from the sale of VIP
`packages and box suites for concerts paid or payable to the
`licensee or a contractually-related third party;
`( 4)
`Revenues from sponsorships and other forms of advertising
`paid or payable to the licensee; and (5) Revenues from
`direct-to-secondary market ticket sales paid or payable to
`the licensee, meaning tickets whose initial distribution to
`the public is on the secondary market.
`Id. It also eliminates the discount previously included in
`
`former BMI-NACPA licenses that allowed NACPA,
`
`in exchange for
`
`helping BMI administer the license and collect royalties from
`
`promoters, to retain 10% of the fees. Tr. 190: 11-22. The
`
`8
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 9 of 37
`
`Current Period Rate Quote incorporates festivals into its
`
`definitions rather than having a separate festival rate.
`
`For the Retroactive Period, BMI proposes a tiered rate
`
`structure, where the percentage owed is based on the size of the
`
`venue where the concert is held. JX 24. The tiers are as
`
`follows:
`
`Venue Size
`
`"
`
`Rate
`
`0 to 2,500 seats
`
`0.8%
`
`2,501 to 3,500 seats 0.6%
`
`3,501 to 5,000 seats 0.4%
`
`5,001 to 9, 9 9 9 seats 0.3%
`
`10,000 seats or more 0.15%
`
`Id. The appropriate percentage rate is applied to the "Gross
`
`Revenue," defined to include only the face value of the ticket
`
`(exclusive of all fees and other charges). Id. The Rate Quote
`
`for the Retroactive Period also eliminates the 10%
`
`Administrative Discount. Id.
`
`NACPA proposes continuing the same terms found in the 2006-
`
`2013 BMI-NACPA agreements, including the same revenue base and
`
`administrative discount. Tr. 1473:4-9 (Jaffe). It advocates for
`
`converting from a tiered system to a unitary rate between 0.21%-
`
`0.275% of the present gross ticket revenues. See Tr. 1531:17-13,
`
`1546:9-14.
`
`DISCUSSION
`
`9
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 10 of 37
`
`I.General Standards
`
`In any fee-setting proceeding, BMI bears "the burden of
`
`proof to establish the reasonableness of the fee requested by
`
`it. Should [BMI] not establish that the fee requested by it is a
`
`reasonable one, then the Court shall determine a reasonable fee
`
`based upon all the evidence," including the proposal from the
`
`music user. BMI Consent Decree, art. XIV(A); Broad. Music, Inc.
`
`v. OMX Inc., 683 F.3d 32, 45 (2d Cir. 2012).
`
`The Consent Decree does not provide guidance on how to
`
`determine whether a fee is reasonable. Nonetheless, courts in
`
`this circuit recognize that "fundamental to the concept of
`
`reasonableness" is a determination of the license's fair market
`
`value, the range of prices "that a willing buyer and a willing
`
`seller would agree to in an arm's length transaction" made in a
`
`hypothetically competitive market. OMX Inc., 683 F.3d at 45;
`
`United States v. Broad. Music, Inc., 316 F.3d 189, 194
`
`(2d Cir.
`
`2003)
`
`("Music Choice II"). A truly competitive market for a
`
`music license is illusory. It cannot be perfectly competitive
`
`due to the Copyright Act's grant of exclusive rights to the
`
`copyright holder and the disproportionate market leverage
`
`wielded by BMI, as a monopolist. See Am. Soc. of Composers,
`
`Authors & Publishers v. Showtime/The Movie Channel, Inc., 912
`
`F.2d 563, 577 (2d Cir. 1990)
`
`("Showtime II"). The natural
`
`consequence of this means "the part~es and the Court lack any
`
`10
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 11 of 37
`
`economic data that may be readily translated into a measure of
`
`competitive pricing for the rights in question." Id.
`
`Out of necessity the Court's determination of the fair
`
`market value of the license in question is often facilitated by
`
`analogizing to benchmarks, agreements reached between similarly
`
`situated parties for the purchase of comparable rights. See
`
`Music Choice II, 316 F.3d at 194. Benchmarks are often imperfect
`
`and may need to be adjusted to produce a comparable fee. See
`
`Broad. Music, Inc. v. OMX, Inc., 726 F. Supp. 2d 355, 357
`
`(S.D.N.Y. 2010), aff'd, 683 F.3d 32 (2d Cir. 2012). In assessing
`
`whether an agreement provides a valid benchmark, the Court must
`
`(1) determine the degree of comparability of the
`negotiating parties to the parties contending in the rate
`proceeding,
`( 2) the comparability of the rights in
`question, and (3) the similari~y of the economic
`circumstances affecting the earlier negotiators and the
`current litigants, as well as (4) the degree to which the
`assertedly analogous market under examination reflects an
`adequate degree of competition to justify reliance on
`agreements that it has spawned.
`United States v. Broad. Music, Inc., 426 F.3d 91, 95
`
`(2d Cir.
`
`2005)
`
`("Music Choice IV") (citation omitted).
`
`The "fair market value of the license" may be determined
`
`"'by applying the appropriate percentage rate to the fair market
`
`value of the music.'" Am. Soc'y of Composers, Authors &
`
`Publishers v. MobiTV, Inc., 681 F.3d 76, 82
`
`(2d Cir. 2012)
`
`("MobiTV II") (quoting Music Choice II, 316 F.3d at 195)
`
`(emphasis in original). The Court thus determines the fair
`
`11
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 12 of 37
`
`market value of the music before turning to evaluate what
`
`percentage of it reflects the fair market value of the license.
`
`II. License for the Current Period
`
`The proposed licensing fee is structured as a percentage of
`
`the gross revenue from the live concert. The parties agree that
`
`the gross revenue reflects the fair market value of the music,
`
`but their agreement ends there. They disagree as to the
`
`components of the gross revenue base, the percentage rate to
`
`apply to it, and what benchmarks should be used to determine
`
`that percentage.
`
`A. BMI Proposal
`
`1. Gross Revenue Base
`
`BMI advocates for expanding the gross revenue base.
`
`Principally through the testimony of its expert Professor
`
`Tucker, BMI proposes that the fair market value of the music is:
`
`(1) the face value of the ticket; (2) revenues received by the
`
`promoter from any tickets sold in the first instance directly
`
`onto the secondary market (including any amounts above the face
`
`value of the ticket); (3) any ticket service, handling, or other
`
`fees above the face value of the ticket paid by the consumer if
`
`received by the promoter;
`
`(4) box suite and VIP package revenues
`
`attributable to live concerts and paid to the promoter or a
`
`venue or artist with which the promoter has a contractual
`
`relationship; and (5) sponsorship revenues attributable to live
`
`12
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 13 of 37
`
`concerts and paid to the promoter. JX 63. BMI argues that this
`
`gross revenue base is reasonable because it only accounts for
`
`revenues received by the concert promoters and excludes those
`
`received solely by the ticketing service company, venue, or
`
`artist.
`
`The Second Circuit is clear that "absent some valid reason
`
`for using a different measure, what retail customers pay to
`
`receive the product or service in question.
`
`seems to us to
`
`be an excellent indicator of its fair market value." Music
`
`Choice II, 316 F.3d at 95; see also In re Application of MobiTv,
`
`Inc., 712 F. Supp. 2d 206, 234 (S.D.N.Y. 2010), aff'd sub nom.
`
`MobiTV II, 681 F.3d 76 (2d Cir. 2012). What the consumer pays
`
`to attend the concert is the correct measure of the fair market
`
`value of the music.
`
`BMI does not fulfill its burden of showing that every
`
`category of revenue in its proposed base reflects the cost
`
`consumers pay to attend a concert. Specifically, sponsorship and
`
`advertising contributions must be excluded because they do not
`
`reflect the music or its performance. Rather they reflect the
`
`value of a large, captive audience and their revenues should
`
`accrue to the promoter.
`
`BMI argues that a consumer "pays" for sponsorships and
`
`advertisements by giving them his attention. The attempt to
`
`extend the definition of "pay" beyond a fiscal meaning to
`
`13
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 14 of 37
`
`encompass all burdens born by the consumer is fruitless. How
`
`consumers choose to disburse their attention is separate from
`
`any financial cost.
`
`Instead of coming from the consumer, revenues from
`
`sponsorships and advertising are derived from what third parties
`
`pay for the ability to associate themselves with the show, such
`
`as by including their names in programs or on signs throughout
`
`the venue. Even though promoters can generate revenue for live
`
`shows through two different methods, ticket sales/related costs
`
`and sponsorships/advertising, the revenue sources are distinct
`
`and cannot be conflated. Only the former is paid for by
`
`consumers.
`
`The amount of sponsorship or advertising revenues a concert
`
`generates does not affect the ultimate price the customer has to
`
`pay to attend the show. Contrary to Professor Tucker's
`
`assertions, no evidence was presented that showed promoters use
`
`sponsorship or advertising revenues to offset the price that
`
`consumers must pay. 5 Tr. 1221:21.
`
`5 BMI also argues sponsorships and advertising revenues should be
`included in the gross calculation because they are included in
`the revenue base for licenses in other industries, like in
`music-streaming via Spotify or Pandora. Tr. 182:22-183:9;
`1223:5-18. But unlike in music streaming, where the customer can
`pay a premium to avoid listening to the advertisements, there is
`no option to attend a live concert and have the advertisements
`posted throughout the arena blacked out.
`
`14
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 15 of 37
`
`BMI's suggestion that sponsorship and advertising revenues
`
`be included in the gross revenue base in which the BMI
`
`affiliates should share unreasonably inflates its fee request.
`
`2. Percentage Rate
`
`Nor can BMI carry its burden to establish that the fair
`
`market value of the license is 0.8% of the gross revenue base.
`
`BMI attempts to justify its proposed rate through the use
`
`of sixteen benchmarks which can be put into three groups:
`
`agreements between domestic, consent-decree governed PROs;
`
`agreements between domestic, non-consent-decree governed PROs;
`
`and foreign PROs. Because the agreements are ill-fitting,
`
`Professor Tucker made many adjustments to their headline rates
`
`to calculate implied rates that could be comparable to the
`
`proposed license rate. Tr. 1157:1-6; 1158:4-16.
`
`Professor Tucker first did "primary analysis adjustments"
`
`to the agreements' headline rates to account for differences in
`
`how the agreements structured the l~cense fee and variations in
`
`the value of the rights each license secured. Tr. 1169:2-4,
`
`1169:16-1170:18, 1171:1-13; see also PX 980 Figure 2. She
`
`adapted all the licenses' rates into unitary rates by weighing
`
`the revenue of each license and converting it into a percentage
`
`rate. Tr. 1169:22-1170:6. Then she adjusted the rates to account
`
`for BMI's market share in comparison to the market share of the
`
`signatory PRO. Tr. 1170:8-25. Finally, she adjusted the revenue
`
`15
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 16 of 37
`
`base of each license to include revenues from box suites in
`
`addition to revenue from ticket sales. Tr. 1171:3-10. After
`
`making these adjustments, the "implied rates" of each license
`
`ranged from 0.27% to 2.13%. PX 980 Sx. 2A.
`
`Primary Fee Base Adjustment Approach
`
`License
`
`Period
`
`Headline
`Rate
`
`Rate
`Structure
`
`Market
`Share
`
`Fee
`Base
`
`Implied
`Rate
`
`GMR-Live
`Nation
`
`GMR-AEG
`
`GMR-APE
`
`GMR-JAM
`
`GMR-MEMI
`
`GMR-
`Nederlander
`
`SESAC-NACPA
`
`SESAC-non-
`NACPA
`
`BMI-non-
`NACPA
`
`ASCAP-NACPA
`
`AS CAP-non-
`NACPA
`
`SOCAN
`
`2015-
`2016
`
`2015-
`2016
`
`2016-
`2018
`
`2015-
`2018
`
`2016-
`2018
`
`2015-
`2016
`
`2019-
`2024
`
`2021
`
`2017
`
`2020-
`2021
`
`2021
`
`2015-
`2017
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`0.06%
`
`0.64%
`
`0.63%
`
`0.63%
`
`0.06%
`
`0.64%
`
`0.63%
`
`0.63%
`
`0.06%
`
`0.64%
`
`0.63%
`
`0.63%
`
`0.06%
`
`0.64%
`
`0.63%
`
`0.63%
`
`0.06%
`
`0.64%
`
`0.63%
`
`0.63%
`
`0.06%
`
`0.64%
`
`0.63%
`
`0.63%
`
`.032%
`
`NA
`
`0.41%
`
`0.40%
`
`0.40%
`
`$0.0378/
`ticket
`
`0.15%-
`0.80%
`
`0.275%-
`0.40%
`
`0.10%-
`0.80%
`
`0.05%
`
`0.60%
`
`0.59%
`
`0.59%
`
`0.43%
`
`NA
`
`0.42%
`
`0.42%
`
`0.28%
`
`0.28%
`
`0.27%
`
`0.27%
`
`0.45%
`
`0.44%
`
`0.43%
`
`0.43%
`
`3.0%
`
`NA
`
`1.36%
`
`1.33%
`
`1.33%
`
`16
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 17 of 37
`
`PRS
`
`June
`2020-
`Present
`
`IMRO
`
`2021
`
`November
`2020
`
`APRA AU
`
`APRA NZ
`
`2.70%-
`4.20%
`
`3.00%-
`6.00%
`
`1.65%-
`2.20%
`
`4.00%
`
`1.81%
`
`NA
`
`1.81%
`
`4.80%
`
`2.18%
`
`2.13%
`
`2.13%
`
`2.13%
`
`0.96%
`
`0.94%
`
`0.94%
`
`December
`2021
`
`1.50%-
`2.00%
`
`1.93%
`
`0.88%
`
`0. 8 6%
`
`0.86%
`
`PX 980 Ex. 2A.
`
`Because BMI's proposal substantially expands the gross
`
`revenue base beyond revenues from the face value of tickets and
`
`box suites, Professor Tucker also performed a "secondary fee
`
`base adjustment" analysis, "trading off of the license rate with
`
`the definition of the revenue base." Tr. 1227:17-18. In the
`
`analysis, she expanded the licenses' revenue bases and made the
`
`adjustments outlined above to their headline rates to calculate
`
`"implied rates" that were lower than the ones calculated in the
`
`primary analysis. Tr. 1225:21-1228:16, 1229:2-12; PX 980.
`
`These adjustments reflect the reality that applying the
`
`same rate to a larger base produces a higher return. To mitigate
`
`this circumstance and ensure that the final amounts generated by
`
`the licenses are not overly inflated but remain a true
`
`reflection of the fees the parties negotiated for, their rates
`
`must be adjusted downwards when their revenue bases are expanded
`
`to account for BMI's proposal.
`
`17
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 18 of 37
`
`Secondary Fee Base Adjustment Approach
`
`Period Headline
`Rate
`
`Rate
`Market Fee
`Structure Share Base
`
`Implied
`Rate
`
`2015-
`2016
`
`2015-
`2016
`
`2016-
`2018
`
`2015-
`2018
`
`2016-
`2018
`
`2015-
`2016
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`.045%-
`0.15%
`
`0.06%
`
`0.64%
`
`0.54%
`
`0.54%
`
`0.06%
`
`0.64%
`
`0.54%
`
`0.54%
`
`0.06%
`
`0.64%
`
`0.54%
`
`0.54%
`
`0.06%
`
`0.64%
`
`0.54%
`
`0.54%
`
`0.06%
`
`0.64%
`
`0.54%
`
`0.54%
`
`C.06%
`
`0.64%
`
`0.54%
`
`0.54%
`
`0.03%
`
`0.41%
`
`0.34%
`
`0.34%
`
`License
`
`GMR-Live
`Nation
`
`GMR-AEG
`
`GMR-APE
`
`GMR-JAM
`
`GMR-MEMI
`
`GMR-
`Nederlander
`
`SESAC-NACPA
`
`SESAC-non-
`NACPA
`
`BMI-non-
`NACPA
`
`ASCAP-NACPA
`
`ASCAP-non-
`NACPA
`
`SOCAN
`
`PRS
`
`2019-
`2024
`
`2021
`
`2017
`
`2020-
`2021
`
`2021
`
`2015-
`2017
`
`June
`2020-
`Present
`
`IMRO
`
`2021
`
`.032%
`
`$0.0378/
`ticket
`
`0.15%-
`0.80%
`
`0.275%-
`0.40%
`
`0.10%-
`0.80%
`
`0.05%
`
`0.60%
`
`0.51%
`
`0.51%
`
`0.43%
`
`NA
`
`0.36%
`
`0.36%
`
`0.28%
`
`0.28%
`
`0.23%
`
`0.23%
`
`0.45%
`
`0.44%
`
`0.37%
`
`0.37%
`
`3.0%
`
`3.00%
`
`1.36%
`
`1.15%
`
`1.15%
`
`3.80%
`
`1.72%
`
`2.12%
`
`2.12%
`
`4.80%
`
`2.18%
`
`1.90%
`
`1.90%
`
`2.70%-
`4.20%
`
`3.00%-
`6.00%
`
`18
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 19 of 37
`
`APRA AU
`
`APRA NZ
`
`November
`2020
`
`1.65%-
`2.20%
`
`December
`2021
`
`1.50%-
`2.00%
`
`PX 980 Ex. 2B.
`
`2.13%
`
`0.96%
`
`0.81%
`
`0.81%
`
`1.93%
`
`0.88%
`
`0.74%
`
`0.74%
`
`When arguing that the benchmarks show that its proposed
`
`rate is reasonable, BMI relied on the higher primary analysis
`
`implied rates, ignoring the rates from the secondary analysis.
`
`BMI attempted to justify using the implied primary rates on the
`
`grounds that "the percentage that you get of the revenue pie,
`
`and then how you define that revenue pie" are two separate
`
`concepts such that expanding the base does not require a
`
`downward adjustment to the headline rate. Tr. 1225:8-20.
`
`That assessment of how the two parts interact disregards
`
`practical considerations. To adequately compare the benchmarks
`
`to a particular license with a much larger revenue base, the
`
`Court must adjust the benchmarks' rates downward to produce the
`
`dollar amount the parties to the licenses intended to capture.
`
`See Tr. 1227:9-1228:6, 1356:15-21, 1500:2-14. Relying on the
`
`implied rates from the primary analysis is thus unreasonable and
`
`the Court accordingly employs the implied rates from the
`
`secondary fee base adjustment analysis.
`
`When looking at the secondary implied rates, only the
`
`foreign licensing agreements have rates above or close to BMI's
`
`proposed one of 0.8%-SOCAN (1.15%), PRS
`
`(2.12%),
`
`IMRO (1.90%),
`
`19
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 20 of 37
`
`APRA AU
`
`(0.81%), and APRA NZ
`
`(0.74%). The domestic licensing
`
`agreements all have implied rates (.023% to 0.54%) that are well
`
`below 0.8% and accordingly on their face fail to support BMI's
`
`proposal. Thus, the reasonableness of BMI's proposed rate of
`
`0.8% rests on the foreign licensing agreements.
`
`But these foreign licenses cannot be relied upon as valid
`
`benchmarks because BMI failed to show that the foreign parties
`
`are similar to BMI and NACPA and that the agreements were
`
`negotiated in similar economic circumstances. There was no
`
`attempt to show any similarities with IMRO, APRA AU, and APRA
`
`NZ. As to PRS and SOCAN, BMI offers no affirmative evidence that
`
`the foreign sellers are like it, besides noting that all are
`
`PROs and that SOCAN and PRS are subject to oversight regimes
`
`that are similar to the rate court system in the United States
`
`and apply the same willing-buyer/willing-seller standard. The
`
`mere existence of a foreign rate-setting tribunal does not prove
`
`the comparability of BMI to PRS or SOCAN, especially when the
`
`tribunals have different standard-setting criteria in each
`
`jurisdiction. SOCAN's oversight tribunal looks at four factors
`
`when setting a fair and equitable rate, only one of which is the
`
`willing-buyer/ willing-seller paradigm. Canadian Copyright Act,
`
`R.S.C. 1985, s. 66.501. Further, SOCAN and PRS are government(cid:173)
`
`sanctioned monopolists with 100% of the market. Tr. 1170:8-15.
`
`Although BMI argues the difference between its and the
`
`20
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 21 of 37
`
`international counterparties' market shares can be adequately
`
`accounted for through Professor Tucker's market share
`
`adjustment, Professor Tucker admits she did not study how this
`
`structure may have impacted the rates that SOCAN and PRS can
`
`demand. Tr. 1396:8-21, 1397:6-1398:23.
`
`BMI argues that the foreign economic circumstances are
`
`similar to those in the US market. That argument is based on the
`
`underlying business structure of global touring-that tours
`
`bringing the same artists, singing the same songs, across North
`
`America and international borders, are cross-collateralized by
`
`AEG and Live Nation under a single contract. Tr. 1396:22-25,
`
`431:9-12, 447:5-448:1, 544:8-545:17, 760:20-761:17. That is some
`
`evidence of similarity at the micro level. Evidence at the macro
`
`level shows that the US live concert industry involves vastly
`
`different economics than live concerts in the UK or Canada.
`
`AEG's Chairman and CEO Mr. Marciano and Live Nation's President
`
`of US Concerts Mr. Roux both testified that the industry in the
`
`US is much larger and has higher revenues, ticket prices, and a
`
`completely different cost structure from those abroad. Tr.
`
`667:15-668:5, 766:21-767:6, 843:5-10, 845:15-846:2.
`
`Based on this analysis, BMI's proposed rate of 0.8% is
`
`unacceptable.
`
`B. Reasonable Rate
`
`21
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 22 of 37
`
`If the fee proposed by BMI is unreasonable, then the Court
`
`is required to set the fee for the requested license itself
`
`based on consideration of all the evidence. Consent Decree Art.
`
`XIV (A).
`
`1. Gross Revenue Base
`
`The components of the fair market value of the music are
`
`best defined as:
`
`( 1) the face value of the ticket; ( 2) revenues
`
`received by the promoter from any tickets sold in the first
`
`instance directly onto the secondary market (including for
`
`amounts above the face value of the ticket); ( 3) any ticket
`
`service, handling, or other fees above the face value of the
`
`ticket paid by the consumer if received by the promoter;
`
`(4) box
`
`suite and VIP package revenues attributable to live concerts and
`
`paid to the promoter or a venue or artist with which the
`
`promoter has a contractual relationship. JX 63.
`
`Each of those categories reflect payments to "receive the
`
`product or service in question," a live concert, which is "an
`
`excellent indicator of its fair market value," Music Choice II,
`
`316 F.3d at 95, while controlling for revenues that never flow
`
`to the promoters. The face value of the ticket is historically
`
`included in the gross revenue base. Defining the revenue base to
`
`include tickets sold for the first time in a secondary market is
`
`a natural clarification of what some promoters think the base
`
`already subsumes. Mr. Roux and Mr. Marciano confirmed in their
`
`22
`
`
`
`Case 1:18-cv-08749-LLS Document 212 Filed 03/28/23 Page 23 of 37
`
`testimony that if they sold tickets on the secondary market in
`
`the first instance, they included the sale proceeds in what they
`
`reported to NACPA. Tr. 683:2-15, 737:1-738:3.
`
`The same reasoning applies to box suites and VIP packages,
`
`which include tickets to premium seats. Revenues from both are
`
`in some instances already being reported in the base. Tr. 558:6-
`
`8 (Live Nation), 717: 20-24
`
`(AEG).
`
`NA