## Facts

- Broadcast Music, Inc. (BMI) is a performing-rights organization subject to a federal antitrust consent decree requiring it to offer licenses and, if negotiations fail, permitting either side to seek a judicially determined “reasonable fee.”
- Music Choice, a multichannel music programming service distributed via cable, satellite, and the internet, sought a BMI blanket performance license covering October 1, 1994 through September 30, 2004.
- The parties could not agree on price, so Music Choice invoked the consent decree’s “rate court” procedure in the Southern District of New York.
- In an earlier rate-court decision, the district court rejected BMI’s proposed benchmark based on a BMI–DMX agreement setting a 3.75% fee, and instead set a 1.75% fee tied to Music Choice’s wholesale revenues.
- The Second Circuit previously vacated that initial rate and directed the district court to reassess fair market value and consider retail value as well as wholesale value.
- On remand, the district court adopted the 3.75% DMX rate for Music Choice, without a detailed explanation reconciling this change from its prior analysis.
- Music Choice appealed the post-remand rate determination.

## Issues

1. Whether the rate court properly determined a “reasonable fee” (fair market value) under the BMI consent decree by adopting the 3.75% BMI–DMX benchmark for Music Choice.
2. Whether the district court adequately explained its reasoning and complied with the prior appellate mandate to consider both wholesale and retail indicia of value.

## Decision

- The Second Circuit vacated the district court’s post-remand rate order and remanded for further proceedings.
- The court held that the district court did not sufficiently justify adopting the 3.75% DMX benchmark after previously rejecting it.
- The court required a clearer explanation of how the chosen benchmark reflected fair market value for Music Choice, including an analysis of comparability and the role of wholesale and retail measures.

## Legal Principles

- Under the BMI consent decree, the rate court must set a “reasonable fee,” generally understood as the fair market value of the license in a competitive market.
- Comparable licenses may be used as benchmarks, but their probative value depends on economic comparability and must be supported by reasoned analysis rather than mechanical adoption.
- When a rate court changes course on a key valuation approach or benchmark, it must explain the change adequately to permit meaningful appellate review.
- Fair market valuation in this setting must address both wholesale and retail evidence where relevant and explain how those inputs inform the final rate.

## Conclusion

The Second Circuit vacated the 3.75% rate derived from the DMX agreement because the rate court did not provide a sufficiently reasoned explanation tying that benchmark to fair market value for Music Choice or showing compliance with the prior mandate to account for both wholesale and retail value indicators.


United States v. Broad. Music, Inc., 426 F.3d 91 (2d Cir. 2005)