400 F.Supp. 737 (S.D.N.Y. 1975), 69 Civ. 5740, Columbia Broadcasting System, Inc. v. American Soc. of Composers

Docket Nº:69 Civ. 5740.
Citation:400 F.Supp. 737
Party Name:187 U.S.P.Q. 431 COLUMBIA BROADCASTING SYSTEM, INC., Plaintiff, v. AMERICAN SOCIETY OF COMPOSERS et al., Defendants.
Case Date:September 22, 1975
Court:United States District Courts, 2nd Circuit, Southern District of New York
 
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Page 737

400 F.Supp. 737 (S.D.N.Y. 1975)

187 U.S.P.Q. 431

COLUMBIA BROADCASTING SYSTEM, INC., Plaintiff,

v.

AMERICAN SOCIETY OF COMPOSERS et al., Defendants.

No. 69 Civ. 5740.

United States District Court, S.D. New York.

Sept. 22, 1975

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[Copyrighted Material Omitted]

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[Copyrighted Material Omitted]

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Cravath, Swaine & Moore, New York City, for plaintiff; Alan J. Hruska, Robert K. Baker, J. Barclay Collins, II, Robert M. Sondak, Kenneth M. Kramer, New York City, of counsel.

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Paul, Weiss, Rifkind, Wharton & Garrison, New York City and Bernard Korman, New York City, for ASCAP; Herman Finkelstein, Jay H. Topkis, Allan Blumstein, Max Gitter, Richard Reimer, New York City, of counsel.

Hughes, Hubbard & Reed, New York City, for Broadcast Music, Inc.; Amalya L. Kearse, George A. Davidson, New York City, of counsel.

Stroock & Stroock & Lavan, New York City, for Warner Bros. Inc.

Simpson, Thacher & Bartlett, New York City, for MCA, Inc. and Duchess Music Corp.

Linden & Deutsch, New York City, for G. Schirmer, Inc. and Associated Music Publishers, Inc.

Hofheimer, Gartlir, Gottlieb & Gross, New York City, for Essex Music, Inc. and Hollis Music, Inc.

LASKER, District Judge.

In this age of change the quality of life has been fundamentally altered and influenced by the development of the automobile, the computer and television.

Millions of viewers spend untold hours weekly viewing television. During the larger part of that time the viewer is a listener to programs which utilize music, whether as background, as theme or as a feature. This case relates to the method by which networks are licensed to use copyrighted music on television.

The Columbia Broadcasting System (CBS) 1 brings this antitrust action against the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music, Inc. (BMI) and their members and affiliates. 2 It complains that the present system by which ASCAP and BMI issue blanket licenses for the right to perform any or all of the compositions in their repertories over the CBS network in exchange for a flat annual fee violates the Sherman Act, 15 U.S.C. §§ 1 and 2. The complaint seeks an injunction under § 16 of the Clayton Act, 15 U.S.C. § 26, directing ASCAP and BMI to offer CBS performance right licenses on terms which reflect the nature and amount of CBS' actual use of music, or in the alternative, enjoining them from offering blanket licenses to any television network. CBS also seeks a declaration of copyright misuse under the Declaratory Judgment Act, 28 U.S.C. §§ 2201, 2202.

I.

Introduction

A. The Parties

Prior to ASCAP's formation in 1914 there was no effective method by which composers and publishers of music could secure payment for the performance for profit of their copyrighted works. The users of music, such as theaters, dance halls and bars, were so numerous and widespread, and each performance so fleeting an occurrence, that no individual copyright owner could negotiate licenses with users of his music, or detect unauthorized uses. On the other side of the coin, those who wished to perform compositions without infringing the copyright were, as a practical matter, unable to obtain licenses from the owners of the works they wished to perform. ASCAP was organized as a 'clearing-house' for copyright owners and users to solve these problems. The world of music has changed radically since 1914. Radio and television broadcasters are the largest users of music today; they 'perform' copyrighted music before audiences of millions. In 1975 ASCAP

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and BMI licensed these large users, including CBS and the other networks as well as smaller ones such as concert halls and background music services.

Because of the multitude of performances of music they generate each year, virtually all radio stations and television networks secure the rights to perform the music they use by a 'blanket' license. An ASCAP blanket license gives the user the right to perform all of the compositions owned by its members as often as the user desires for a stated term, usually a year. Convenience is the prime virtue of the blanket license: it provides comprehensive protection against infringement, that is, access to a large pool of music without the need for the thousands of individual licenses which otherwise would be necessary to perform the copyrighted music used in radio stations and television networks in the course of a year. Moreover, it gives the user unlimited flexibility in planning programs, because any music it chooses is 'automatically' covered by the blanket license.

ASCAP's current membership includes some 6,000 music publishing companies and 16,000 composers. Its members have granted ASCAP, as their licensing agent, the nonexclusive right to license users to perform the compositions owned by them. ASCAP provides its members with a wide range of services. It maintains a surveillance system of radio and television broadcasts to detect unlicensed uses, institutes infringement actions, collects revenues from licensees and distributes royalties to copyright owners in accordance with a schedule which reflects the nature and amount of the use of their music and other factors.

BMI, a non-profit corporation, was organized in 1939 by members of the radio broadcasting industry, including CBS. It is affiliated with approximately 10,000 publishing companies and 20,000 writers and functions in essentially the same manner as ASCAP. Although CBS sold back its BMI stock to the corporation in 1959, BMI is still owned entirely by broadcasters.

As a practical matter virtually every domestic copyrighted composition is in the repertory of either ASCAP, which has over three million compositions in its pool, or BMI, which has over one million. Like ASCAP, BMI offers blanket licenses to broadcasters for unlimited use of the music owned by its 'affiliates.' Almost all broadcasters hold blanket licenses from both ASCAP and BMI.

As is generally known, CBS operates one of three national television networks, as well as AM and FM radio stations in seven major cities. It has held blanket licenses from ASCAP for its radio broadcast operations since 1928, and from BMI since soon after that organization was founded in 1939. It has held ASCAP and BMI blanket licenses for its television network on a continuous basis since the late 1940's.

CBS supplies television programs to approximately two hundred affiliated television stations throughout the country, and telecasts about 7,500 programs per year. Many of these programs make use of copyrighted music which is recorded on the soundtrack. However, CBS does not produce most of the programs seen on its network. Instead it purchases the right to broadcast programs produced by independent television production companies, known as 'program packagers.' Most of the popular prime-time serials fall into this category. In addition CBS itself produces a television serial ('Gunsmoke'), two day-time serials, a number of 'specials,' usually variety shows, as well as news, public affairs and sports programs.

Agreements between program packagers and CBS normally stipulate the price at which the packager will produce a program in a series and furnish it to CBS for broadcast. Pursuant to the agreements, packagers are responsible for obtaining and furnishing to CBS most rights necessary for the use of

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copyrighted music by the network, such as the right to record a copyrighted song in synchronization with the film or video tape ('synch' rights). However, program packagers do not, in the present scheme of things, furnish to CBS the right to perform the copyrighted music for profit as part of a television broadcast. Ever since television became commercially practicable in the late 1940's, CBS has obtained such 'performance' rights for packaged programs, as well as for the programs it produces itself, from ASCAP and BMI by purchasing blanket licenses. From time to time it has renewed its licenses after negotiations with ASCAP and BMI. In the history of the parties the fee for the blanket license has been expressed in terms of a percentage of CBS's advertising revenues. For example, for many years prior to the institution of suit, the BMI blanket license fee remained at 1.09% Of net receipts from sponsors after certain deductions. This resulted in payment to BMI of about.$1.6 million in 1969. For access to ASCAP's considerably larger repertory, CBS paid about $5.7 million in 1969. Averaging the total of $7.3 million paid by CBS in that year over 7,500 programs, its cost for ASCAP or BMI music runs about $1,000. per program. Of course, as detailed later, many of CBS' programs, such as news and public affairs shows, use no music at all; while others, such as variety shows, use a great deal. $1,000. is a small fraction of the total cost of the program. CBS pays about $200,000. for each episode of a one hour variety show or dramatic serial, and as much as $750,000. for a made-for-TV movie. Since the commencement of this action, CBS has held interim blanket licenses from ASCAP and BMI at a total annual cost of some $6 million.

B. The Consent Decrees

Neither ASCAP nor BMI is a stranger to antitrust litigation. In 1941 the government sued ASCAP for antitrust violations. The action resulted in a consent decree which largely governs ASCAP's relationships with licensees such as CBS and other users. As amended in 1950, the decree requires ASCAP to offer a 'per program' license to broadcasters in addition to the blanket license it has traditionally offered. Both forms of license grant the right to use any or all of the works in ASCAP's repertory. However, the blanket license allows use of the entire inventory for a designated period of time, usually a year, for which the user pays a flat fee, while the per program license permits use of the entire repertory but requires payment only with...

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