Peloton acknowledges this problem in its countersuit, noting that only 2% of the works named in the original lawsuit belonged to a single publisher. Considering the sheer number of songs Peloton has in its music catalog, it’s easy to see how keeping track of so-called “fractional licenses” could be a significant administrative challenge.
Why Are Sync Rights Difficult to Obtain?
If you’re a club operator, paying music licensing fees to performing rights organizations (PROs) such as BMI and ASCAP is probably not new to you. Even still, you may be wondering why the process for obtaining sync rights is different—and more complicated—than getting a public performance license.
For one, PROs consolidate the works of publishers and songwriters so that businesses only need to negotiate with the PRO to obtain a public performance license. There are currently only four PROs operating in the United States:
BMI and ASCAP control approximately 90% of the market share. Now, if we look at sync rights, there are dozens of different music publishers controlling sync rights for artists.
Additionally, because BMI and ASCAP are subject to federal regulations, they must provide transparent pricing structures that music publishers do not. For instance, BMI and ASCAP must provide consumers with blanket licenses that allow consumers to access all the music in the PROs’ repertoire for a standard fee. Also, BMI and ASCAP must grant licenses to all businesses that are willing to pay.
In other words, if your club pays for ASCAP’s fitness facilities’ license, you are entitled to play all of the music in ASCAP’s repertoire publicly.
Publishers, on the other hand, have complete control over how they choose to distribute sync rights. A publisher does not have to issue blanket licenses and does not have to allow a business access to the songs under its control. In its countersuit, Peloton notes that it had a blanket license agreement with one of the publishers mentioned in the original lawsuit—it expired—and limited license agreements with others.
While this system may make sense when considering negotiations between a publisher and a filmmaker, it is a considerable roadblock for fitness companies looking to include popular songs in streaming fitness classes.
If you want to learn more about public performance licenses, download IHRSA’s Music Licensing in the United States briefing paper.
The Road Ahead
In the aftermath of the publishers’ lawsuit, Peloton customers supposedly noticed that the music playlists selected for fitness classes had changed—and not for the better.
Without knowing the outcomes of the publishers’ lawsuit against Peloton and Peloton’s countersuit, it’s too early to tell what ramifications these cases will have on businesses that create streaming fitness content.
What is clear, however, is that the current licensing structure to obtain sync rights was not developed with companies like Peloton in mind. Fitness companies must recognize the complicated and burdensome legal and administrative obligations that developing streaming content entails.
IHRSA will keep monitoring this case as it continues and we will inform you on how this could impact the fitness industry at large.
Matt O’Malley contributed research to this article.