Author: Brian Penick

Brian is a musician-turned-entrepreneur who has spent most of his life in the music industry. With experiences ranging from artist development to marketing and music tech, his primary focus is in on creating a more sustainable music business. @BrianPenick
30 Jun 2016
Performing Rights, Simplified P2: The Money

PERFORMING RIGHTS, SIMPLIFIED P2: THE MONEY

Continuing our series on Performing Rights, Simplified, let’s dive into the topic that everyone wants to know about – money.

Let’s start with a quick review. Performing rights are the right to perform music in a public setting. This can be via radio broadcast (terrestrial), television, in a business or venue. Any performance (“use”) of a song (“work”) requires the user to pay the songwriter and publisher. A songwriter is a composer and lyricist (often the same person, although these can be different parties). The publisher is the individual or organization that controls the payment of the song. The distribution of the payment to the respective party is a royalty.

We know that Performing Rights Organizations (“PROs”) are big companies. ASCAP and BMI manage 10.5 million songs each, with SESAC managing 400,000. (Global Music Rights is not publicly stated.) These groups license TV Stations, Radio Stations, Digital Services and over 100,000 real-world business establishments. This is a multi-billion dollar industry.

So the big question is, where does this money go?

Following the dollar starts with how PROs collect fees from music users. There are four main categories: radio stations, TV networks, digital services and businesses/venues. There are distinct qualities that make these mediums different.

 

1. Radio & TV

In general, radio and TV focus on pre-recorded material. (This is aside from any live performances on these mediums.) Music broadcast over these mediums requires licensees to submit playlist information. This comes in the form of playlists from radio and manually submitted playlists “cue sheets” from TV stations and video content producers. In some regards, these mediums are ahead of others, but still leave room for error from lack of verification.

 

2. Song Weight/Value

There are a variety of factors that determine the “value” of a song performance. Christiane Kinney, a music attorney at LeClairRyan, LLP explored how “not all performances of music are weighed equally.” Here is the post from DIY Musician (via CD Baby):

  • the type of usage (e.g., “featured” or “on camera” performances, theme, background, jingle/promo, infomercial, etc.);
  • where the music is performed (e.g., commercial, college, or satellite radio, NPR, network or local TV, cable networks, etc.)
  • the negotiated rate each licensee pays (with commercial radio and network TV stations paying the highest rates); and
  • for TV and cable performances, the time and length of the performances (with longer clips receiving higher royalties, and prime time paying more than late-night  or midday programming).

The unfortunate side of having so many variables is that the PROs do not offer much transparency. BMI lists several breakdowns surrounding creator royalty collection, without any hard numbers. ASCAP’s website offers their royalty calculator. But without key variables for the formula, it doesn’t offer much help.

 ASCAP-Royalty-Calclator_Web

(source: ASCAP Payment System)

 

3. Businesses & Venues (General Licensing)*

Until recently, limitations in technology have prevented music recognition in real-world commercial settings. This means that PROs charge music users based on the ability to use all music from their catalog. This “general blanket license” gives businesses and venues the ability to play any music from a PRO’s catalog. This fee structure is different from radio and TV, who are only charged for the music they use. Imagine paying for everything on the menu at a restaurant, allowing you to eat anything, as opposed to the only item you want to eat.

*Promoters

Concert promoter licenses are a special use case within the area of General Licensing. Rather than pay blanket licenses, large concert promoters deduct PRO fees from touring artists on a per ticket basis. A deduction is made for all PROs, without consideration of the performing songwriter’s PRO affiliation or the PRO affiliation of the music broadcast between bands. This means performing artists pay the fees for music they don’t perform.

 

4. Radio Proxy

Song weight/value play a major role in determining what songwriters are compensated for live performances. In the absence of artist submitted setlist data, PROs rely on radio chart data to make assumptions on the music used by real world businesses. They assume the music played on the radio is the same as the music played in a business. Less than 2,000 radio stations are monitored by digital technology and there are over 10,000 radio stations in the United States. Many songwriters never stand a chance of being paid. A recent proof-of-concept study uncovered only 20% of the music used in those businesses was also broadcast on the radio. This mean 80% of the songs heard in businesses were not receiving general performance royalties and worse, that money was being paid out to the wrong individuals!

 

5. Temporary Solution

The PROs have made an attempt to start compensating songwriters for live performances. ASCAP OnStage, BMI Live, and SESAC’s Live Performance pay songwriters for submitting setlists. But this process relies on an action from the songwriters. There are movements like #IRespect Music and #MusicTransparency are trying to change this. They encourage PROs to adapt technology for more transparency and a fee structure based on actual music use, like radio and TV. Technology could improve accuracy across all mediums. Verification would help songwriters and publishers receive compensation for commercial music use.

We’ve identified the problem: lack of transparency. Royalty collection and distribution are not utilizing proper technology solutions. This is an outdated and inefficient system. So, how do we fix the problem? That’s exactly what Soundstr is working to do, and what we’ll discuss in Performing Rights, Simplified P3: The Problem & Solution.

 

PERFORMING RIGHTS, SIMPLIFIED P2: THE MONEY

30 Jun 2016
Performing Rights, Simplified P1: The Basics

PERFORMING RIGHTS, SIMPLIFIED P1: THE BASICS

Calling all songwriters: we need to have an important discussion about performing rights. We’ll try to keep it simple, but this is important – so listen up.

There are a LOT of misconceptions about this part of the music industry. “What are performing rights fees? Aren’t performing rights just for cover bands? You have to be popular to make money from them, right? Where does this check in my mailbox come from and why am I receiving it?” These are all common questions from songwriters.

We’re here to set the record straight, once and for all. What you might not know could be holding back your career and keeping you from collecting royalties you have earned.

 

1. What Are Performing Rights?

Let’s start with the basics:

Performing Rights – are the right to perform music in a public setting. This can be via radio broadcast (terrestrial), television, digitally or in a real-world business or venue.

Performance – the use of a song (“work”) requires the user to pay the songwriter or publisher.

Songwriter – is a composer and lyricist (sometimes the same person, although these can be different parties).

Publisher – is the individual or company that controls the payment of the song. The distribution of the payment to the respective party is a royalty.

 

2. Who Is Responsible?

Performing Rights Organizations (“PROs”) collect performing rights fees from music users. In the US the PROs are ASCAP, BMI, SESAC and Global Music Rights. There are ~50 PROs worldwide. In order for a songwriter or publisher to collect royalties from a PRO, they have to register with one of these organizations. ASCAP and BMI are open to the public; SESAC and GMR require a private invitation. You must choose one based on your country of origin and the available PRO’s open registration.

 

3. Why Are They Necessary?

Copyright law governs performing rights and these organizations. The law protects the creator of the song and lays the framework for the songwriter to be paid for the use of their hard work. So if a radio station, TV network, business or venue wants to publicly broadcast music, they must pay for that right (pay the songwriter) according to copyright law. If you do a job, you should get paid for that job. Songwriters are no different. PROs issue licenses for the right to use music and collect fees for all music used, regardless of whether the work is a cover or original song. The PROs then distribute royalties to songwriters and publishers. (More on this in the next installment: Performing Rights, Simplified P2: The Money.)

It is important to note that these laws are old (100 years!) and in the midst of big changes. (Hint: check out Performing Rights, Simplified P3: The Problem & Solution.) Performing rights are a major part of the music industry’s revenue stream.

 

4. How Does A Songwriter Access Them?

A composer of a song registers with a PRO (only one) as the songwriter. Registering as a songwriter with a PRO is free. If the songwriter and the lyricist are separate people, they would need to register their own accounts. After registering as a songwriter, an artist needs to define who their publisher will be. A songwriter can either register as their own publisher or work with a third-party publishing company, which is typically through invitation. Registering as a publishing company will most likely have an associated fee, but is necessary to collect publishing fees. PROs split most royalties 50/50 to songwriters and publishers (unless parties agree otherwise). A songwriter that does not have an associated publisher – even if it is themselves – is leaving money on the table.

 

5. When To Register

Any songwriter that has released music or plans to should register with a PRO. With so many distribution channels, it is impossible for a songwriter to track all performances of their music. A TV network on the other side of the country (or world) could already feature one of your songs in a show. You could be a fan favorite on a jukebox at a bar in your own backyard. Any unregistered songwriter could be leaving money on the table.

 

All songwriters should register with a PRO. Songwriters should educate themselves on how this industry works. Basic information could be the difference in collecting the royalties you’ve earned.

Stop leaving money on the table, and start learning how you can get the most out of your music. Find out more in our next article, Performing Rights, Simplified P2: The Money.

PERFORMING RIGHTS, SIMPLIFIED P1: THE BASICS

24 Jun 2016
5 Secrets About Performing Rights Fees

5 SECRETS ABOUT PERFORMING RIGHTS FEES

If you had the opportunity to save money on performing rights fees for your business, would you take it? How about guaranteeing your payments went to the actual songwriters who deserve them?

It’s time to have a serious talk about the performing rights industry. What can we do to make it a more fair and transparent for businesses and songwriters? Let’s start the conversation that should have begun a long time ago.

Yes, paying performing rights fees is the right and legal thing to do. And yes, that money does go to songwriters. But the basic lack of transparency is the issue. If a business knew exactly what they are paying for and where that money goes, this conversation might not be necessary.

Most venue owners cringe when performing rights organizations (“PROs”) come up in conversation. But companies like ASCAP, BMI, SESAC and Global Music Rights (GMR) play an important role in our industry. They collect money from businesses for music use and distribute royalties to songwriters. Any business should realize the value music plays in their establishment. The focus of the conversation should not be about paying PROs. Instead, we need to talk about the fee structure and royalty distribution process. In other words, how is the money collected and where does it go?

 

1. General Blanket Licenses/Venue Reporting

Starting at the top, it is important to know how performing rights fees are currently structured. Regardless of your fee agreement, which is different for many businesses, you pay for a “general blanket license.” This gives you the ability to play any song within a PRO’s catalog. ASCAP and BMI’s catalogs are each over 10 million songs, with SESAC’s at around 500,000. (Global Music Rights does not disclose this info to the public, but it is smaller than SESAC’s.) Since it is impossible to play millions of songs each year in a business, you are essentially paying for something you do not use.

In the case of large concert promoters, PRO fees are deducted from touring artist ticket sales as a percentage of every ticket sold. Promoters must make deductions for each of the four US PROs, regardless of the PRO affiliation of the music performed or broadcast at a given concert. This means, artists are generally paying for music they aren’t performing.

 

2. Songwriter Royal Distribution

One of the main contentions raised by businesses and venue owners when licensing music is the inability of the PROs to prove the money paid goes back to the songwriters featured. This stems from the basic adage: when you do a job, you should receive compensation. The problem is that the money collected by the PROs does not always make it back to the correct songwriters and publishers. The real reason, regardless of what the PROs publish on the issue, is the lack of identification and verification. The PROs still use radio as their main proxy for determining who receives royalty distributions. Most touring songwriters never receive radio airplay. Despite paying performing rights fees at show settlement, these songwriters do not receive royalties. Based on a recent case study, only 20% of the songs on the radio were also played in a business. This means upwards of 80% of the royalties distributed went to the wrong songwriters. How is this fair?

 

3. Radio & TV – The Other Mediums

It is clear that there are inefficiencies when it comes to performing rights fees for businesses and venues. But what drives the knife in even further is the structure of similar mediums like radio and TV. By federal law, these mediums can obtain a “Per Segment” license, which states they only pay for actual music usage. This is due to both mediums having the ability to track and submit playlist data. Does that seem fair? Well keep reading, because I have a feeling you will like where this is going.  

 

4. Technology is the Answer

It’s clear that the main issue is transparency, especially when comparing different mediums. But what if technology could offer a solution that could level the playing field? Well, we are happy to tell you that time has come. New technology has the ability to identify real world music use, which allows for song identification and verification. This means that a business can now generate a report to show all music performed and broadcast in their establishment. These reports show with which PRO(s) the music used is registered. This offers a business paying a blanket license the ability to negotiate license fees based on actual music use or a promoter to ensure their hosted artists aren’t being over-charged for PRO fees.

 

5. The Future

The performing rights industry is in the midst of serious change. The laws that structure this 100 year old industry are currently under review. This is due to both the ability of recognition technology and lobbyist groups fighting for fairness. There is an overwhelming sense of pressure to modernize the music industry altogether. Transparency would allow for more money to flow through the system. Businesses would have the ability to negotiate fairer (and potentially lower) fees. Songwriters would receive more compensation for their work. The PROs could license more businesses and would have a more positive position in the industry. It’s a win-win-win for those interested in the sustainability in this fractured business. And that’s exactly what we’re hoping for.

Click below for a FREE webinar that shows how your business or venue can start identifying your music use today.

5 Secrets About Performing Rights Fees

20 Jun 2016
5 THINGS TO KNOW: MY BUSINESS GOT A LETTER FROM ASCAP/BMI/SESAC

5 THINGS TO KNOW: MY BUSINESS GOT A LETTER FROM ASCAP/BMI/SESAC

The last thing any business owner wants is another bill.

It seems like the cost of operating a brick and mortar business gets more expensive by the day. But what if you receive an invoice in the mail for something you have been using (without payment) for years? That’s exactly what can happen if you see a letter from a performing rights organization.

Performing rights organizations (“PROs”) collect for the commercial use of music in businesses. A letter from these organizations (ASCAP, BMI, SESAC and Global Music Rights in the USA) might take you by surprise. But there are a few things that you need to know to make sure your business is using music in a legal way that avoids expensive fines. (And by expensive, we mean upwards of $150,000.)

Here are 5 things you need to know about the Performing Rights Industry and its affiliated organizations:

 

1. What PROs charge for is completely legal.

Based on US Law, any time a song (“work”) is performed (broadcast or performed live) in a business, you (“music user”) must pay the creator (“songwriter”) for that right. There are some exemptions, which should be understood. PROs collect fees from businesses and distribute them to the songwriters they represent. This is a complicated process, but we’re here to help simplify and explain.

 

2. This is an old, outdated industry.

The first US PRO (ASCAP) launched in 1914, with competitors SESAC in 1930 and BMI in 1939. (Global Music Rights is the new kid on the block, who launched in 2015). ASCAP and BMI have entered into Consent Decrees with the US Department of Justice. These documents govern and set the standard for collection of performing rights fees by these two groups. These documents are updated every 10 or so years, the last of which came in 2001. (Note: major changes have been proposed on June 30th, 2016 – click HERE to learn more.) All PROs are bound by the last major overhaul to US Copyright Law: the Revised Copyright Act of 1976. These updates help the industry adapt to new standards and technology. But at the end of the day, these changes do not happen often enough, and many businesses are pushing for serious changes and updates.

 

3. PROs are litigious.

Although the PROs are quiet when it comes to their rate structure, they are vocal when venues do not pay their fees. In April 2016, ASCAP sued 10 bars that did not comply. These infractions might not seem like much, but consider each case. ASCAP fined a Cincinnati-bar $90,000 for not paying an annual $5,000 fee. This demand was only made by a single PRO – there are now four in the US. Lawyers are expensive. Fines are more expensive. Paying for a product you use is the right thing to do.

 

4. Balancing the system.

There are movements and efforts to make this a fairer and more transparent industry. Most business owners agree that music is a valued asset to their business. People don’t spend much time in silent bars, coffee shops, restaurants and nightclubs. Music helps drive business. Songwriters should receive compensation for commercial use of their music. Paying PRO fees is the right and legal thing to do. But there needs to be a balanced approach. These fees need to reflect actual music use. Business owners need to know that the money they pay is making its way back to the correct songwriters. A fairer system means more businesses could license music, avoiding fines or lawsuits. More money would flow into the system for songwriters. Transparency surrounding fees is a win-win.

 

5. Technology might be the answer.

As of today, PROs charge businesses and venues a general blanket license fee for music performances. This fee offers the ability to play all music from a PRO’s catalog. This is different from other mediums (radio, television, Internet), which pay only for the music they use. This fee structure, known as a Per Segment License, requires tracking of music use. Until recently, technology could not identify live music performances. With the ability to track music use, businesses can gather the necessary data to potentially negotiate lower fees. On a larger scale, this could lead to Per Segment licenses for all businesses. This could help lower rates for businesses and help songwriters get paid when their works are used.

 

Receiving a warning letter from one of these businesses can be intimidating, and a quick Google search can only add to your fears. But it is important to know what you are paying for. Music helps business, from building customer loyalty to helping sales. While the current system does work in theory, a health balance is necessary. Businesses should only pay for the music they use. Songwriters should receive compensation for the commercial use of their music. More transparency would solve many problems, and technology is here to offer a solution.

Click below for a FREE webinar that discusses how you can start identifying music in your business and potentially lower your performing rights fees. 

5 THINGS TO KNOW: MY BUSINESS GOT A LETTER FROM ASCAP/BMI/SESAC

15 Jun 2016

5 REASONS WHY YOUR BRAND NEEDS MUSIC FOR MARKETING

Why doesn’t your business use music in your marketing?

There are a lot of myths surrounding this concept. Do you think it costs too much? Are you not sure if your customers would appreciate it? Or are you just not familiar enough with how you could use music within your marketing?

The simple truth is that music is easier to use commercially than you might think.

Music has become such a big part of our lives, with the average person listening to music 4 hours each day. Music also evokes emotional responses in listeners, which is absolutely utilized in advertising. HP used a Meghan Trainor song around a tablet advertisement, and the campaign generated a 26% increase in just 12-weeks. Now how about that bass?

If you’re not already convinced, see below for 5 reasons why your business should use music in your marketing efforts.

 

1. Visibility – New Fans

One of the main reasons to use music in your marketing is visibility. Solo artists and bands have fans of their own, and those fans are consumers.  From small social campaigns to lifelong endorsements, marketing with music will increase your visibility.

 

2. Engagement/Loyalty

Music fans are loyal. From downloading music to attending live events and purchasing merchandise, fans are always consuming. They also exhibit high levels of engagement, especially on social media. Have you ever compared your social media traction to that of an artist with a similar-sized following? The difference is staggering, showcasing a reason in itself to use music in marketing.

 

3. Cost Effective

Yes, advertising with music will cost you something, as nothing in life is free. But what you might not consider is how scalable this cost can be, along with your options. If you want to align with an artist that’s sold millions of albums, it might cost you millions. But, local and regional artists – many of whom will become larger, successful artists – are a great alternative. Local artists on the rise have high levels of engagement and loyalty because their audience is a mix of fans and friends. Plus, the cost of aligning your brand with a local artist is much more affordable than you think. In Cincinnati, MusicLi helps businesses use local music for marketing, with song licensing starting at just a few hundred dollars.

 

4. Unique Use

Music in marketing can be a unique way to drive attention to your business or a specific good/service. Pairing your business with an appropriate artist can help drive interest in what you offer. Does your business sell sustainable goods or merchandise like a local Whole Foods? Many artists, from folk to indie and hip-hop, are teaching their audience about sustainability. Now imagine you are trying to market a new locally-sourced energy bar or water bottle. Why not pair with a local eco-conscious artist to offer to drive sales? This could be a free download of their new single with each sale, or a marketing video with using their song. This is just a simple example, but it could be effective in driving visibility and sales.

 

5. Leads to New Opportunities

The music industry is big, and growing by the day. Social media has removed almost all barriers to entry, allowing anyone to become a successful artist. This process, which used to take years of development, can happen almost overnight. This can work in a businesses favor as well. Imagine having an energy drink that uses a local hard rock artist’s music in your marketing video. Say the band shoots their own music video, and they choose to drink your product in the video. Then the video goes viral. You may decide to further your relationship with the band and sponsor which states they drink your product on stage at shows. Now their song has become a hit on the radio, and they go on a world tour. Your visibility from sponsoring the band could help grow your business into a worldwide empire. It might sound unrealistic, but it might be more probable than you think.

 

There are plenty of reasons why your business should consider using music in your marketing. Increased visibility from a highly engaged audience of consumers is the mecca of advertising. Using local and regional artists is a great alternative to expensive national artist campaigns. Working with emerging artists can also lead to new and exciting opportunities to grow with musicians. So the only question is – what are you waiting for?

Click below for a FREE consultation to learn how to incorporate music into your marketing.

5 Reasons Why Your Brand Needs Music for Marketing

01 Jun 2016
5 Futuristic Ways to Sponsor Events

5 REASONS WHY YOUR BRAND SHOULD SPONSOR EVENTS

Why doesn’t your business sponsor live music events?

Have you ever tried to sponsor an event? Do you have a hard time finding an opportunity that connects you to your ideal customers? Do you think it costs too much? Or are you just not familiar enough with how event sponsorship works?

With changes to recent industry and consumer trends, it might be time to seize the opportunity.

 

1. Highly Engaged Consumers – That Actually Consume

Concert goers are serious consumers. Audiences pay for admission, possibly a few drinks, and even merch from the performing musicians. As Digital Music News pointed out, in 2015 over half of all spending on music went to live events. Social media engagement is an entire different point of consideration. Ticketfly found that 31% of 18-34 year old concert goers spend more than half the time on their phone at events. This does not even account for the pre- and post-concert activity that is still tied to the concert.

 

2. Fans like Brands

Live events are experiences for music fans. They are loyal to artists, food and alcohol companies, and even music venues. They also appreciate the right pairing of brands with live events. A study shows that 44% of concert goers have positive feelings towards sponsored brands. 40% said they were more likely to purchase sponsored brands. eMarketer discovered music fans rank higher in both areas compared fans of sports, TV and award shows. Statista reports that LiveNation, the world’s largest concert promoter, hosted over 25,000 events in 2015 alone. That’s an 11.9% increase from 2014. With events ranging from a few hundred to tens of thousands of attendees, imagine what that traction could mean for your brand.

 

3. Growing Industry

Brand spending to sponsors events is a growing industry. Sponsorship.com found that in 2014, music sponsorship spending totaled $1.43 billion dollars, a 4.4% increase from 2013. There is a direct correlation between the increases from audience and brand spending and the number of live events. Why wouldn’t you want to be a part of this growing industry?

 

4. Cost Effectiveness & Commitment Level

Sponsoring live events might be more affordable than you think. The days of spending thousands of dollars just to get your banner hung in a venue are over. Commitment levels for sponsorships are much less than that of other mediums such as TV and radio. Ad campaigns with these formats often run for several weeks or months, and focus on visibility and repetition.  While these features might be helpful to some businesses, in-venue advertising focuses on engagement. Direct consumer engagement leads to conversions, and ultimately to sales. Considering that most events happen in independent businesses and venues, event sponsorship is a largely untapped market.

 

5. New Technology

Technology is quickly becoming the key to successful event sponsorship. Imagine an advertisement from your brand being broadcast over the sound system between acts at an event. Upon hearing that ad all audience members would receive a push notification with your coupon or offer. Technology allows brands to directly connect with audiences with minimal to no action from the consumer. It might sound futuristic, but these advertising opportunities are already available to brands.

 

The world of event sponsorship has gone through dramatic changes in recent years. Consumers are spending more, and brands and events are cashing in. Concert goers are highly engaged audiences, and actually welcome the right sponsors at events. The costs and commitment levels are lower than other traditional advertising methods. New technology is helping brands connect with consumers like never before. There has never been a better time to sponsor an event, and the opportunity to position your brand might be closer than you think.

Click below for a FREE consultation on how your brand can sponsors live events.

5 Reasons Why Your Brand Should Sponsor Events