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Songwriters Accuse Radio Stations of ‘Illegal Cartel’

New Year's Day could be a lot quieter this year.

Radio stations might be forced to pull dozens of top artists starting January 1st — or pay a $150,000 penalty per song, thanks to a contract spat now playing itself out in public.

The artists are represented by a new boutique licensing company, Global Music Rights, and the repertoire at stake includes songs written or performed by stars such as Pharrell Williams, Adele, Drake, John Lennon, Smokey Robinson, Steve Miller, Taylor Swift, Tom Petty & the Heartbreakers, U2, and more.

The group of over 70 songwriters accounts for around 7.5 percent of all songs on the radio. They include artists on labels owned by Universal Music Group.

Spotify shares the top songs of the season 1:50

The dispute is between GMR and RMLC, the Radio Music License Committee, an industry trade group that sets airplay rates on behalf of 10,000-plus radio stations across the country. Rather than each station having their own in-house expert who tries to make deals with every artist, most stations pay fees to RMLC to negotiate for them.

After contract talks between the two broke down over Thanksgiving, RMLC sued GMR, accusing it of exerting "monopoly power" over its copyrights and seeking higher-than-market rates.

In an escalating war of words, GMR this week shot back with its own lawsuit, calling RMLC an "illegal cartel" and accusing its members of colluding to keep artist rates low.

"Owners of terrestrial radio stations pay only about 4 percent of their revenue, a tiny fraction of their revenue, to the songwriters who create that music," said Daniel Petrocelli, a lawyer for GMR, in a statement. Meanwhile, streaming music services pay more, he said.

For instance, digital streaming service Spotify, which costs less to run than a traditional terrestrial radio station, says it pays artists on average between $0.006 and $0.0084 each time one of their songs is played.

Radio stations pay an estimated $0.000186 to $0.000372 per listener, according to estimates by David Touve, director of the i.Lab incubator at the Darden School of Business, University of Virginia, who studies the music industry

The suit contends that its songwriters aren't being compensated fairly and composers aren't financially encouraged to write new songs.

Music publishers cheered GMR's move.

"For decades the archaic RMLC has operated as a monopoly that holds songwriters hostage to its below-market and artificially fixed rates," said National Music Publishers' Association President & CEO David Israelite in a statement.

He commended GMR "for holding the RMLC accountable for being a broadcasting bully."

Charged words also appeared in RMLC's rebuttal, which called the suit "bullying," "baseless," and "an obvious ploy designed to pressure RMLC."

"Courts have recognized, for many decades, that without regulation of their rates, performing rights organizations (PROs) like GMR are anticompetitive and violate the antitrust laws," said RMLC Executive Director Bill Velez in a statement. "That is why all the other PROs (ASCAP, BMI and SESAC) are subject to rate controls."

Broadcast lawyer David Oxenford said that rights groups like GMR need to have some kind of oversight otherwise radio stations lose the power to fully negotiate in "all or nothing" arrangements of artists packaged together.

A similar 2012 suit by RMLC against the also relatively smaller and newer rights firm, SESAC, went RMLC's way and got SESAC under a rate agreement like BMI and ASCAP.

But if this discord isn't resolved, "radio stations could try to pull music by well-known artists," said Oxenford.

Your favorite radio station could even turn from tunes to talk.

"Ultimately, we could see some radio stations changing from music to non-music formats as royalties get higher," he said.