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Performing rights: are there realistic
alternatives to the blanket licence?
TONY MARTINO
1. Introduction
This article examines the legal and economic reali-
ties of performance right licensing. It is limited to
the 'minor' or 'non-dramatic' performing right to
copyright music as licensed to its chief users, the
broadcasters and to the challenges to its legitimacy
which in recent times have all arisen under the
antitrust laws. Nearly all these challenges have been
mounted in the United States against the American
Society of Composers Authors and Publishers
(ASCAP) and Broadcast Music Incorporated
(BMI). (The Society of European Stage Authors
and Composers (SESAC) is the smallest of the three
principal US organisations. Its size has 'permitted it
to work with a "low profile", and its character and
operations have been relatively unaffected by
ASCAP and BMI wars with government and users'.
Although there are statutory provisions in the
United Kingdom which control the way in which
collecting societies exercise the rights assigned to
them, the Competition Act 1980, s.30, has inserted a
provision into the Restrictive Trade Practices Act
1976, to the effect that the latter statute is not to
apply to certain licences granted by the owner or a
licensee of any copyright, assignments of copyright,
or agreements for such a licence or assignment.
The activities of performing rights organisations
have come under the scrutiny of the European
Commission.' However, these decisions did not
deal directly with the legality or otherwise of blanket
licensing. Nevertheless, the observations are per-
tinent to all performing rights organisations since all
are similarly constituted and all licence their
members' performing rights collectively and in
bulk.
First, how does broadcast music come to be
selected? This occurs in one of three ways. It may be
selected by the broadcaster himself, or by the pro-
ducer of a programme which is sold to the broad-
caster, or by a performer spontaneously. The
majority of music broadcast is selected by the pro-
ducer of programmes supplied to the companies. In
some instances these are the major television
companies and these programmes are known as
'network-produced' programmes. Apart from
these there are 'syndicators' supplying 'syndicated'
programmes. These are defined as a theatrical
motion picture, pre-recorded or live television pro-
gramme which is offered for sale or licence to
a television company to be broadcast as a 'non-
network programme'.
20
2. The nature of the blanket licence
ASCAP members and BMI affiliates - the com-
posers and publishers of music - grant to their
respective organisations the non-exclusive right to
licence non-dramatic public performances of their
copyright musical works. The UK Performing Right
Society (PRS), requires the grant from its members
of the exclusive right of public performance.
ASCAP, BMI and PRS offer users only blanket
licences covering their entire repertoire. They do
not licence either individual compositions, or indi-
vidual publisher's catalogues. Moreover, they do
not act as agents for composers and publisher who
wish to do so.
By means of a blanket licence, the user is able, in
one transaction, to obtain the right to perform pub-
licly any or all of the compositions in the repertoire
of the domestic society, as well as works of affiliated
foreign societies, most of which are linked by means
of reciprocal representation agreements.
In CBS Inc. v. ASCAP the blanket licensing
format was subjected to its most 'intensive antitrust
scrutiny'. The court concluded that the purchaser of
a blanket licence secures a package consisting of the
right to use the licensed compositions and the per-
forming right organisation's aggregating service.
What was licensed, therefore, was the pooled aggre-
gate of the property conglomerate assigned to
ASCAP by its members. The court emphasised
that: 'the whole is truly more than the sum of its
parts; it is, to some extent, a different product'.'
The court saw ASCAP not as 'a joint sales agency
offering the individual goods of many sellers' but
rather a 'separate seller' able to offer a new product
for the market, the raw material of that product
being the compositions of ASCAP's members.s
2 The blanket licence in its copyright-
antitrust setting
The licensor offering blanket licensing is vulnerable
to antitrust attack for four principal reasons:
First, the blanket licence approach has the effect
of precluding competition among its contributors.
The licensor is an organisation which, by its nature,
is directed towards concerted actions by parties who
would otherwise be direct competitors.
Secondly, through the agency of the licensor, the
competitors jointly determine the price for their
work.
MEDIA LAW & PRACTICE, MARCH 1988
 Thirdly, the blanket licence forces users to pur-
chase music which they neither want nor intend to
use; in effect, a crude tying arrangement.'
Fourthly, it could be used as a significant barrier
to entry into the market. The court in BMI v. Moor-
Law Inc.7 pointed out that the user himself had
a considerable incentive to resist the entry of
new performing rights organisations into the
market. When the European Commission decided
to investigate the position of the West German
national society, GEMA, it was none other than the
European Broadcasting Union, the organisation of
major music users, which leapt to its support. In a
letter of 4 June 1969 to the Commission it said 'if
competition were to be artificially created in this
sphere it would be to the detriment of broadcasting
organisations which, far from deriving benefit from
it, would suffer consequences economically harmful
to them'. The alternative to one all-or-nothing
licence might otherwise be the negotiation of
several blanket licences at a higher total cost. This
is in fact the position in, among other countries,
Brazil, which has multiple organisations.
4. The alternatives
4.1 'Source licensing' or 'Clearance at the source'
Source licensing is the process whereby the pro-
gramme producer obtains the music performing
right from the copyright owner in a one-time buy-
out before any performances occur and conveys
it to the television company which gives the per-
formances of the music when the programme is
broadcast.
Source licensing is probably the most disadvan-
tageous arrangement for composers and authors
seeking equitable remuneration. In general, no one
can be certain when a film, radio or television pro-
gramme is made, what the economic returns on the
whole or its parts will ultimately be. In this state of
uncertainty 'at the source', the typically weak bar-
gaining position of the composer is at its weakest.
He may be compelled as a practical matter to accept
a lump sum for his work that bears no relation to the
quality or success of the work. Unless the composer
has sufficient power to bargain successfully for fair
residual payments proportioned to actual uses, or
for a short, re-negotiable grant of rights, his pros-
pects of obtaining such terms are few.
The availability of source licensing is particularly
significant to companies whose programming con-
sists largely of syndicated programmes, since their
producer could, if he so desired, convey performing
rights together with the programme. In keeping
with the consistency of this approach, the producer
would have additionally to acquire the mechanical
or synchronisation right colloquially, 'synch right' in
the copyright musical work. These are rights to
record. The synch right is the right of a film producer
to record in timed relation with audiovisual works.
In the UK this would be granted either by the
publisher or the Mechanical Copyright Protection
MEDIA LAW & PRACTICE, MARCH 1988
Society (MCPS), this latter acting as agent. PRS
grants such licences in respect of music composed
especially for films. In the US the Harry Fox Agency
would act as broker.
The plaintiff local television broadcasters in
Buffalo Broadcasting Co. Inc. v. ASCAP sought
to prove that source licensing was not realistically
available and would remain so unless the court
declared blanket licensing unlawful. In the absence
of blanket licensing, argued the plaintiffs, source
licensing would evolve as the most efficient system.'
The plaintiffs sought to establish, by presenting
two types of evidence, that source licensing was not
a realistic alternative: first, that they had attempted
to obtain performing rights from syndicators with-
out success and secondly, by an analysis of the
market.
Evidence of unavailability was unconvincing
for two reasons. First, the plaintiffs had shown no
interest in source licensing until they began to col-
late evidence of alleged unavailability some 18
months after the institution of proceedings. This
was so even during the period from 1950 to 1972
when the 'carve-out' provision of the blanket licence
issued by BMI permitted companies to deduct from
the revenue base of the blanket licence fee
the revenue from programmes for which music per-
forming rights were cleared at the source, whether
or not clearance was accomplished by licensing from
BMI.
Secondly, the plaintiffs' so-called 'offers' to
syndicators asking these to undertake the clearance
of music performance rights, were made without
offer of additional payment. In one case, the plain-
tiffs simply inserted into the licensing agreement for
syndicated programmes a warranty specifying that
the producer had obtained music performing rights.
Whilst the syndicator, unsurprisingly, declined to
agree to the proposed addition, he did not reject the
concept but merely indicated that substantial new
obligations should be the subject of negotiation.
The District Court below found as a matter of
fact that the market was weighted heavily in favour
of the syndicator. Yet the court also found that
there were eight major syndicators distributing
approximately half the number of all syndicated
programmes and that the production of such pro-
grammes was a 'risky business'. o It is difficult on the
basis of these findings to concur with the District
Court's characterisation of the market as uncom-
petitive. Even assuming that the syndicator has the
upper hand, would he be as unresponsive as the
companies allege in the face of overwhelming
aggregate demand for clearance at the source
coupled with reasonable offers of payment for so
valuable a commodity?
4.2 'Direct licensing'
Direct licensing provides for direct negotiation
between television companies and individual com-
posers.
The District Court stated that direct licensing
could not occur without the intervention of some
21
agency to act as broker in the numerous transactions
that would be involved and that the local (i.e. small)
television companies lack the market power to
induce anyone to come forward and perform that
broking function." The Court of Appeals of the
Second Circuit agreed with the first proposition, but
was unable, on the evidence, to concur with the
second. The Court of Appeals believed that Judge
Gagliardi in the court below had reached the con-
clusion that no-one would perform the necessary
broking function, not on the basis of evidence of an
expressed reluctance on anyone's part to broker
direct licensing, but because local television com-
panies lacked the necessary market attracting force.
In CBS v. ASCAP, Judge Lasker had found that if
CBS were to seek direct licensing, 'copyright
proprietors would wait at CBS's door'. Judge
Gagliardi in Buffalo Broadcasting found that 'local
television stations acting individually and severally
would possess no such awesome power over copy-
right owners." 3 The Court of Appeals said that it is
to disregard the functioning of the market simply
to conclude that one is unable to secure direct licens-
ing because he is weaker than another; what is
important is the perception, either existing or cap-
able of stimulation, of aggregate demand.
Finally, some local television companies were
able to obtain direct licences for the bulk of their
locally produced programmes and at reasonable
pnces.
4.3 'Programme' or 'Per-Programme Licensing'
This is a modified form of the blanket licence. It
conveys to the television company the music per-
forming rights to all the music in the repertoire of the
licensor for use in the particularprogramme for
which the licence is issued. ASCAP and BMI are
required to offer per-programme licences pursuant
to the consent decrees under which they operate.
While 748 local companies operated under blanket
licences, only two held programme licences. 14
The plaintiffs contended that the programme
licence - expressed as a percentage of revenue - was
too costly. The programme licence rate was set at
9%; the blanket licence rate varied between 1%
and 2%. Also, objection was taken to the onerous
reporting obligations required by programme
licences.
The Court of Appeals demonstrated clearly the
falsity of these arguments. With regard to cost, the
rates are charged on different bases. The blanket
licence rate is applied to a company's total revenue;
the programme licence rate is applied to revenue
from a particular programme. Since the base for the
blanket licence fee includes revenue from network
programmes for which the 'networks' have already
acquired performing rights by virtue of their blanket
licences, as well as some local programmes that use
no music, it is inevitable that the rate for a local
company's blanket licence will be less than the rate
for a programme licence taken solely to permit use
of music on a particular programme.
Also, the blame for the degree of difference
22
between the two rates lay largely with the television
companies themselves. In US v. ASCAP - Appli-
cation of Shenandoah Valley Broadcasting Inc.,'s it
was the companies which decided not to press for a
reduction in the programme licence rate and instead
to concentrate on the blanket licence rate.
Finally, licence rates and reporting restrictions so
burdensome as to prevent a company from having a
genuine choice between the two licensing formats
would be subject to review by the District Judge for
the Southern District of New York who supervises
the operation of the consent decrees.
4.4 'Per-piece licensing'
Per-piece licensing represents the antithesis of
blanket licensing. It involves the separation and
selection of musical compositions, enabling users to
select desired compositions and discard undesired
ones.
In an objective sense, blanket licensing operates
as a tying mechanism. Performing rights organisa-
tions condition the sale of performance rights to
users, on the user's purchase of their entire (tied)
stock of performance rights. Per-piece licensing is
thus not only impractical, but may also serve to lay
the foundation for a charge of discrimination against
the performing rights organisation, vis-h-vis its
members.
5. Conclusions
The local television broadcasters set out to prove
that the blanket licence constituted a restraint on
competition. They attempted to do this by arguing
that no other alternative to the blanket licence was
realistically available to them. Instead, they demon-
strated merely that the lack of use of the alternatives
reflected the superiority of the blanket licence. It is
purchased because it is less costly than the next best
alternative.
Therefore, what are the precise advantages of the
blanket licence? They are as follows:
First, they reduce the costs of licensing copyright
musical compositions by eliminating multiple nego-
tiations of the various rights. Even if the Buffalo
broadcasters could have transferred contractually
the obligation of performing right clearance to pro-
ducers of syndicated programmes, not only is it
reasonable to assume that the necessary costs would
have been passed on to the broadcasters - albeit in
some other guise - but that the broadcasters would
at some stage have been compelled to revert to
direct or programme licensing in respect of their
locally produced programming. This alternative
strategy could only reasonably be contemplated by a
decision to forego the blanket licence lest double-
payment be incurred.
Secondly, the licensor obtains together with his
licence the practical assurance that he is not infring-
ing a musical copyright. This protection is qualified
by the limited extent to which any organisation is not
MEDIA LAW & PRACTICE, MARCH 1988
 a 100% monopoly and performing rights subsist
outside its repertoire.
Thirdly, broadcasters must have the immediate
right to use any number of compositions. They
cannot wait for contracts to be drawn up with indivi-
dual publishers or composers, let alone be forced to
locate their heirs or assigns.
'More recently, the local television broadcasters
have attempted to gain by legislation what they
could not gain by litigation. They have procured the
introduction of two bills in Congress which would
outlaw the blanket licence and limit the licensing
market-place to but one form of so-called "source"
licensing. One of the arguments the broadcasters
use in advocating this legislation is that the perform-
ing right societies do not negotiate but instead offer
terms on a "take-it-or-leave-it-basis." 6
Thus begins yet another chapter in the history of
antitrust attacks launched against the American
performing right societies. The prediction of a
quietus on this subject is perhaps after all best left to
the prophets."
Tony Martino, formerly ITV Association and PRS;
Gamlens, Solicitors in London, England
Ten years of 'neutral reportage' doctrine:
US approach to defamatory republication
KYU HO YOUM, PHD
The US Supreme Court, recognising the general
practices of news publication, observed in 1971:
'[A] vast amount of what is published in the daily and
periodical press purports to be descriptive of what
somebody said rather than what somebody did.
Indeed, perhaps the largest share of news concern-
ing the doings of government appears in the form of
accounts of reports, speeches, press conferences,
and the like.' 1 Media attorney Robert Sack, author
of the highly acclaimed Libel, Slander, and Related
Problems, echoed the Supreme Court in stating that
'[w]hat people say, rather than what they do, con-
stitutes much of the news ...
One obvious explanation for dissemination of
news information by republishing the statements of
others is that either the substance of the statements
is newsworthy or the act of making the statements
itself is newsworthy, or both.' The news media,
which are expected to strive for 'objectivity' in news
reporting, 4 are merely serving as conveyors of what
they perceive to be newsworthy in republishing such
statements.
When it comes to republication of newsworthy
but false, defamatory statements, however, news
media find that their objective reporting by repub-
lishing the statements is impractical in terms of
defamation law. The common law makes it a
MEDIA LAW & PRACTICE, MARCH 1988
NOTES
1. Kernochan, Music Performing Rights Organisations, 10
COLUM-VLA JL&Arts, 335, 340 [1986].
z. See: Re Gema [1971] CMLR D.35; BRT v. SABAM [1974]
2 CMLR 238; Greenwich Film Production v. SACEM
[1980] 1 CMLR 629.
3. (1979) 441 US.
4. CBS 111, 441 US at 21-2.
5. Ibid. at 22.
6. In a conversation with the author, Mr Skip Humphries,
Head of Music Services, LWT, to whom gratitude is expres-
sed, said that since the bulk of music is chosen by pro-
gramme producers, he could not say with certainty which
musical compositions his company would not require.
7. 527 F. Supp. 758 (D. Del. 1981).
8. 546 F. Supp. 274, (SDNY 1982).
9. Ibid. at 292.
10. Ibid. at 282.
11. Ibid. at 290.
12. 620 F. 2d 938.
13. 546 F. Supp. 274, at 290.
14. Ibid. at 288.
15. Civ. Action No. 13-95 (SDNY) Final Order entered
28.7.1969.
16. Korman & Koenigsberg. Performing Right Societies'
Journal, Copyright Society of the USA (1986) 332.
17. Rifkind, Music Copyrights and Antitrust: a Turbulent
Courtship, 1985 Cardozo Arts and Entertainment LJ 1.
separate tort to republish a defamatory statement of
another under its 'republication doctrine" unless
the publication is protected by the common law 'fair
report' privilege.6 The 'actual malice' rule estab-
lished by the US Supreme Court in New York Times
Co. v. Sullivan' requires that the media should not
knowingly publish defamatory falsehoods about
public officials or public figures, or should not reck-
lessly disregard the truth. Though the Sullivan rule
has substantially ameliorated the restrictive impact
of the common law doctrine upon freedom of the
press, the media still should be subject to liability for
defamation concerning public officials or public
figures upon a showing of actual malice.
The common law and constitutional restrictions
on the press in republishing newsworthy but
defamatory statements have been a continuing
concern for the media organisations in that they may
be deterred from disseminating some vital infor-
mation of public concern just because of their fear
that the media may assume liability for possible
defamation resulting from the publications. Thus,
it is understandable that the news media have
clamoured for some way to allow them to republish
false, defamatory statements of public interest with-
out being liable for failing to meet the actual malice
test.
23