A federal appeals court has overturned BMI’s recent price hike on Live Nation, AEG and other concert promoters, ruling that a 138% rate increase was “unreasonable” and that a new approach to concert revenue had “no precedent in the history of the industry.”
In a ruling issued Tuesday, the U.S. Court of Appeal for the Second Circuit says that a lower judge must rethink his 2023 ruling that dramatically increased the public performance royalties paid by members of the North American Concert Promoters Association (NACPA).
The appeals court criticizes not only the rate hike itself, but also the judge’s expansion of what concert revenue could be targeted by BMI – expanding that pool of money from only face-value tickets to also include some secondary sales, VIP packages, and service fees.
“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 court writes. “And it identified no change in economic circumstances that would justify a rate more than double what NACPA has historically paid.”
In a statement, NACPA says it’s “gratified” by the ruling on both the rate and the expanded revenue base: “This is a great result for performing artists—who bear the brunt of the royalty costs paid to BMI for live concerts—and for concertgoers and the live concert industry.”
In its own statement, BMI says it disagrees with “many aspects of the court’s opinion” and is weighing how to challenge it: “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.”
BMI and ASCAP, known as performance rights organizations (PROs), collect public performance royalties for millions of songs. Such licensing fees are more often associated with radio stations or public-facing businesses like retail stores and bars, but concert promoters must also pay them so that touring artists can perform musical compositions live for fans.
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Because of their enormous market-share, the two groups are subject to so-called consent decrees – legal settlements with the Department of Justice aimed at preventing them from abusing their power. Under that system, a federal judge sets prices when BMI and ASCAP cannot reach a negotiated rate with a licensee.
BMI has been locked in such litigation for years with NACPA, which represents major concert promoters, including units of live music giants like Live Nation and AEG. And in 2023, U.S. District Judge Louis Stanton ordered an increase in royalty rates to 0.5% of an event’s revenue, representing a 138% increase from the previous rate.
At the time, BMI praised the ruling as a “massive victory” that acknowledged music is the “backbone of the live concert industry and should be valued accordingly.” But in Tuesday’s decision, the Second Circuit says Judge Stanton perhaps overvalued it – both by jacking up the rate based on improper benchmarks, and then by applying it to “revenue streams that do not reflect the fair market value of the music.”
“There is no apparent justification for the district court to impose an unprecedented revenue base against a party’s will,” the appeals court writes. “The district court acted unreasonably by departing from the industry-standard revenue base definition without a compelling reason.”
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Rejecting the inclusion of VIP packages into that revenue pool, the appeals court says those elite concertgoers were specifically paying for something other than music: “The VIP customer pays more than other customers to listen to the same music because the price of a VIP ticket involves a payment not only to attend the concert but also to receive these additional benefits.”
On the rate itself, the appeals court says the judge failed to offer any major changes that would support them: “The district court gestured toward changes in the live concert industry because of the emergence of Live Nation and AEG, but it did not explain why those changes justified a higher rate.”
Despite the overturned rate increase, Tuesday’s decision was not all bad for BMI. Before sending the case back to Judge Stanton for recalculation, the appeals court suggested that BMI would still potentially be owed an increase – just not the drastic one it got back in 2023.
“A well-supported rate for the new BMI/NACPA license would be significantly lower … but it may be higher than the [old] rate,” the court writes, adding that the judge must, in essence, explain his decision better: “We remand for the district court to do so.”
