Cable Industry Upset Over Music Fee Plan

The cable-TV industry is trying to block a leading performance rights organization from collecting music royalty fees from both cable networks and local cable operators for the same transmission.

The industry argues that the new plan by New York-based Broadcast Music Inc. would violate antitrust and copyright laws. BMI collects millions of dollars in royalty fees on behalf of songwriters, composers and publishers. It plans to extend its so-called blanket license royalty fees beyond such cable networks as the Disney Channel and Home Box Office to the local operators.

The Disney Channel and two trade groups--the National Cable Television Assn. and the Community Antenna Television Assn.--filed suit in U.S. District Court in Washington last Wednesday. Their action came two days after a similar suit was filed in Los Angeles by 17 cable systems owned primarily by Time Warner Inc.

BMI’s new policy, the Washington lawsuit contends, amounts to “unlawful price fixing” because it would double BMI’s revenue stream from cable television.

An official of BMI called the cable industry lawsuits “completely groundless.”

“It is ironic that an industry that extracts tens of billions of dollars in local system subscriber revenue from over 50% of American homes feels it has no obligation to pay America’s songwriters any portion of that revenue for the use of their property,” said Edward W. Chapin, a BMI vice president.

Although neither the cable industry nor BMI could estimate how much money is at stake in the dispute, Billboard magazine says BMI annually collects about $250 million in music royalties. BMI spokesman Robbin Ahrold said over-the-air TV and radio account for about 70% of those revenues, but that cable is the fastest-growing revenue source.

The other major performance rights society, the American Society of Composers, Authors & Publishers (ASCAP), is embroiled in a similar dispute with the cable industry, according to cable officials.

In recent years--with the expanded use of music in cable TV, shopping malls, even aerobics studios--collecting performance rights has become one of the most lucrative parts of the $6.2-billion recording industry, experts say.

Since 1895, a composer’s copyright has included “performance right” that entitles him to a fee when his work is performed. Organizations such as BMI and ASCAP were created to monitor establishments that play music, charging licensing fees for the use of members’ music.

Because it is impossible to know exactly how often a composer’s work is performed, the societies base their distributions to composers on survey data and formulas that estimate the audience, frequency of music play and other factors.

“We want to be licensed and pay a fair royalty, said Kenneth Steinthal, a New York lawyer who represents Disney, NCTA and CATA. “But they (BMI) want two bites of the same apple: BMI wants to charge two people (cable networks and cable operators) for the same transmission.”

But BMI spokesman Ahrold said: “There is ample precedent for the fact that two public performances of music exists” in cable transmissions. He said requiring dual payment from the cable industry was like BMI’s current practice of collecting royalties from both a radio station and a shopping mall that may rebroadcast the station’s programs to browsing shoppers.