Second Circuit vacates BMI licensing rate hike for live performance rights

MANHATTAN (CN) ­— A federal appeals panel on Tuesday overturned a lower court's 138% increase of the song license fee rate charged to concert promoters, finding it “imposed unreasonable rates” on the blanket fees for public performance rights to songs from the vast BMI catalogue.

“In this case, the district court adopted a revenue base definition that had no precedent in the history of the industry without a compelling reason,” the Second Circuit panel wrote in its opinion vacating the increased blanket license rate and ordering the case back to the Southern District of New York to be reconsidered.

“It included revenue streams that do not reflect the fair market value of the music and that involve significant administrative costs without a corresponding benefit,” the panel wrote.

U.S. District Judge Louis Stanton, a Ronald Reagan appointee, ruled in favor of BMI in 2023 in a dispute with national concert promoters Live Nation and AEG over collections of songwriting revenue from live concerts, ordering an increase in rates to 0.5% of every event’s revenue, 138% higher than the historical rate.

At the time, BMI celebrated the rate increase as “a decision that ends decades of below-market rates for songwriters, composers and publishers in the live concert industry.”

North American Concert Promoters Association appealed Stanton’s ruling to the Second Circuit, arguing the lower court had failed to give consideration to legally relevant factors and “misapplied correct legal standards in the determining the rate setting."

The Second Circuit ruled Tuesday that Stanton had erred in setting the rate, by “unreasonably” expanding the gross revenue base used to calculate the licensing rate increase to include tickets sold on the secondary market, servicing fees received by the promoters and revenues from box suites and VIP packages.

“First, the district court adopted a definition of the revenue base that had no precedent in the history of the industry without a compelling reason,” the appeals panel wrote. “The definition included revenue streams that do not reflect the fair market value of the music and that involve significant administrative costs without a corresponding benefit.”

Citing Second Circuit precedent in a 2005 decision in United States v. BMI (In re: Application of Music Choice), the panel vacated the rate set by Stanton and remanded the case back to the lower court to calculate an appropriate rate with a clear justification for the determination of a reasonable increase.

“Accordingly, a well-supported rate for the new BMI/NACPA license would be significantly lower than the rate imposed by the district court, but it may be higher than the rate for the preexisting BMI/NACPA license,” the panel wrote. “To arrive at such a rate, the district court ‘must determine the degree of comparability’ of the benchmarks and ‘explain how it reached a particular rate sufficiently to permit our review of the rate for reasonableness.’”

BMI argued on appeal that failing to include all revenue streams that flow to national promotors Live Nation and AEG in the gross revenue base would allow those entities to play a “revenue shell game” to minimize payments to performing rights organizations.

The two-judge panel handling the appeal was composed of U.S. Circuit Judges Richard Wesley, a George W. Bush appointee, and Steven Menashi, a Donald Trump appointee.

U.S. Circuit Judge Beth Robinson, a Joe Biden appointee, was originally a member of the panel, but recused and took no part in the resolution of the appeal.

A spokesperson for BMI said the decision wasn't a total defeat.

"While we disagree with many aspects of the court’s opinion, we were pleased that it confirmed our position that free market rates can be considered when determining the compensation owed to music creators," BMI said in a statement. "Even the court suggested a range of potential reasonable rates that would still be 50–80% higher than our prior rate. That said, we are unwavering in our belief that our songwriters, composers and publishers deserve more, and we are evaluating all of our options moving forward, including seeking further appellate review."

Live Nation and its subsidiary Ticketmaster are scheduled to go to trial next week in Manhattan federal court, facing a separate civil antitrust enforcement from the U.S. Justice Department.

The Justice Department and a coalition of state attorneys general sued Live Nation and Ticketmaster in 2024, seeking to break up the companies' intertwined monopoly over concert venues, promotions and ticketing.

Live Nation controls at least 80% of primary ticketing at major concert venues and maintains a 70% market share in large amphitheater promotions. It has become the largest promoter of national amphitheater tours, reaping billions of dollars in additional fees forced onto ticket buyers, the feds argued in the complaint.

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