Tag: Songwriter

15 Nov 2016
5 Things to Know Before Renewing Your Music Licenses

5 Things to Know Before Renewing Your Music Licenses

With the New Year just around the corner, it’s likely time to renew your music licensing agreements. But this industry is under some major changes that could impact all businesses.

In June of 2016, the Department of Justice proposed changes to the Consent Decrees. These agreements govern how ASCAP and BMI, the two biggest US rights organizations, operate. (SESAC and GMR are not bound by these agreements. All four companies are known as Performing Rights Organizations, or “PROs”.) These changes would be the biggest update to the music licensing industry in 75 years. (Note: these changes and this post only relate to US-based PROs.)

Music licensing is a dense topic. Some businesses attempt to avoid paying license fees. But the threat of expensive fines is all too real. New technology is helping businesses negotiate fairer fees and more songwriters get paid. It’s time to take a second look at this industry.

 

1. Current Fee Structures (Bad for Businesses)

Before we jump into proposed changes, it’s important to know what you are already paying for. PROs collect money from music users so they can broadcast music and host performers. Real-world businesses, from concert venues to retail shops, are a part of the “general licensing” category. General licenses are “blanket licenses” which allow real-world music users to play any music within a PRO’s catalog (20 million+ songs). These licenses are determined based on capacity and how the music is being consumed (background music, interactive – band/DJ). Each PRO licenses different songs (although there is some overlap). Each PRO also has a different size catalog. The one thing license fees do not take into account is how much music your business plays from each catalog. It doesn’t make much sense to pay the same amount of money for each license when your business may not use as much music from one or more PRO.  

With music tracking technology, a real-world business can now obtain transparency on their music use and negotiate fees based on actual music usage in their business. This is similar to how many households are cutting the cord with cable companies and only paying for the services and movies they want to watch. These blanket licenses are outdated and inefficient.

 

2. Current Royalty Structures (Bad for Songwriters)

What’s even worse about blanket licenses is who collects royalties from your fees. In the absence of data from real-world music use, the PROs use radio as the main proxy to distribute royalties. This means that if a songwriter performs or is broadcast in your business and is not on the radio, they likely do not earn money. Even worse, your fees are likely going to the big names on commercial radio. We at Soundstr did a case study to challenge this proxy. We sampled 3,000 songs in 12 businesses over 2 weeks. The result was that only 19% of songs played in businesses were also on commercial radio. That means roughly 81% of songwriters would not receive royalties from the use of their music. This is not fair.

 

3. Major Changes (More Mouths to Feed)

So now that you have some back story, let’s move onto changes. The biggest proposed change (actually interpretation of the Consent Decree) is the topic of “No Partial Withdraw.” Currently, music publishers use the PROs to issue public performance rights on behalf of their songwriters to all licensing categories (Radio, TV, Digital & General Licensing). Late last year, all three major publishers (Universal Music Group, Sony/ATV and Warner/Chappell), as well as some independent publishers, signed direct public performance licensing deals with Spotify, Pandora and other digital services. By cutting out the middlemen (PROs), these publishers make more money for their songwriters off direct deals. But, the Department of Justice is pushing to prevent cherry picking these direct deals. “No Partial Withdraw” means that the publishers either have to use the PROs for all four categories or none at all. If the publishers decide to go the “All-in” route, you will still only pay the four PROs (ASCAP, BMI, SESAC and GMR). If they choose the “All-out” option, your music licensing fees will change drastically. If one of the major publishers withdraw from the PROs, you will have another music license to obtain (ASCAP, BMI, SESAC and GMR + Sony, for example). If the tens of thousands of publishers withdraw, you will have many new licenses to pay (ASCAP, BMI, SESAC and GMR + Sony, Universal, Warner Chappell, Downtown, Kobalt, & thousands more). The new system could be complex and transparency around music usage would be essential.

 

4. Technology = Fairer Business Fees & More Songwriter Royalties

Licensing accounts for a large percentage of the entire annual music industry revenue. In fact, in 2014 the performing rights sector was ~31.5% of the size of the entire recorded music industry. (Note: performing rights are not calculated as a part of the recorded music industry.) Technology is looking to disrupt this sector, offering solutions for both businesses and songwriters. We at Soundstr also have some unique solutions rolling out this year. Using our services, businesses can now identify both recorded and live music usage. Having this data would allow a business to negotiate fairer license fees based on pro-rated music usage within their establishment. Either would eliminate overpaying for music or paying for music that was not used. Our mission at Soundstr is to help songwriters earn royalties they deserve for commercial use of their music. By identifying the music used in a business, the PROs can ditch the radio proxy altogether. The 81% of songwriters who were not played on commercial radio would receive compensation for their work. Fairer fees and more royalties sounds like a win-win!

5. The Future of Music Licensing (Better for Everyone!)

The basis of the performing rights industry is simple: when you do a job, you should receive compensation. This is the reason the performing rights industry exists in the first place. In 1847, French composer Ernest Bourget heard one of his works performed in a Parisian cafe, but was not compensated for his work. The lawsuit that followed led to the formation of SACEM, the world’s first PRO. The current system, unfortunately, is not that simple. But the future offers a bright outlook. With transparency around music usage data, new industry standards can be set. Any songwriter can receive compensation for commercial use of their music. Businesses will pay transparent fees based on their actual music use. Currently unlicensed businesses will now be able to afford licenses, pumping more money into the system. The current PRO model will need to be flexible, but the outcome will be a much more sustainable industry.

 

There are a lot of things business owners need to know when it comes to music licensing. This industry is in the midst of some big changes. Staying informed and knowing your options can make a big difference in your fee structure. Why pay for music you aren’t using? And don’t you want to know that your fees are making their way back to the correct songwriters? It’s easy to see the value that music provides to your business. But what about the value that business owners like you provide to the music industry? Technology may finally level the playing field.

 

Click below to learn more about how your business can use Soundstr to identify music usage and negotiate a fairer license. #MusicTransparency

https://www.soundstr.com/renewing-music-licenses

 

 

 

 

 

 

 

 

 

Written by: Brian Penick

Copyediting: Eron Bucciarelli-Tieger, Claire Muenchen

Artwork: Lauren Osinksi

Image: Paul Green Photography

 

30 Jun 2016
Performing Rights, Simplified P3: The Problem & Solution

PERFORMING RIGHTS, SIMPLIFIED P3: THE PROBLEM & SOLUTION

For the final part of our series, “Performing Rights, Simplified,” we’re going to roll up our sleeves and get our hands dirty.

This series has focused on what performing rights are, methods of royalty collection and distribution, and the current climate of the industry. To be clear, we support performing rights. We believe that songwriters should be compensated when their music is used commercially. We also believe that businesses should only pay for the music they use. Our mission is to modernize the system by highlighting areas where transparency is needed. Creative thinking and technology solutions can make this a much fairer industry for everyone.

 

1. Old Industry

Consider how old this industry is. The performing rights industry is over 100 years old. ASCAP, the first US performing rights organization (“PRO”) opened in 1914, with SESAC in 1930, and BMI in 1939. The last major update to this industry was the Revised Copyright Act of 1976. The US Department of Justice has also weighed-in. ASCAP and BMI are governed by “Consent Decrees” via the US government which state additional rules by which these groups operate. These Consent Decrees are reviewed and updated every few years to make sure the PROs are keeping up with advancements in the industry (like technology).

 

2. Fast Action is Needed

Changes to the operation standards have been helpful, but are not happening quick enough to keep up with a modern world. 10-20 years is an eternity in technology terms. Think about how much the music industry has changed over the last 10 years: We’ve gone from CDs to file-sharing, to digital downloads to digital streaming and soon to Virtual Reality. More frequent updates to these Consent Decrees are needed to keep pace with technology and needed to increase transparency. Venues are still overpaying for general blanket licenses. The PROs are filing a growing number of lawsuits with businesses if they will not comply. (ASCAP fined a Cincinnati bar $90k for not paying fees). Artists are still not receiving fair compensation for their work within licensed businesses. Part 2 of this article shows that the more popular songwriters receive the majority of compensation from all performing rights fees. This is based on song weight/value, as it doesn’t take into account a song’s popularity within a specific medium (radio, TV, broadcast or live venue) of performing rights. This is a broken system, and we’ve reached critical mass.

 

3. Transparency & Accountability

If the main issue is transparency, how do we add a layer of accountability?

Look at the way music licensees collect and report data. Radio & TV submit data via several different ways, everything from manually written cue sheets to digital playlist submissions. The problem is verification. Playlist data only accounts for basic music performance. Manual cue sheets for TV is a different beast, as with any time there is room for human error. Yes, this allows for radio and TV businesses to pay “per segment” licenses for music they consume, as opposed to general blanket licenses. However, this still leaves room for verification. Technology could identify and confirm music performances for proper payment and royalty distribution. This could also simplify the process of determining how a performance is “weighed” and who to pay for a performance. (Hint: it’s not always who should be getting paid.)

The need for transparency and verification hits home even harder with businesses and venues. Without the reliable ways of tracking performances (see below), PROs charge music users a general blanket license for the ability to play all music in a catalog as opposed to pro-rated fees for only the music they use.

 

4. Technology is the Answer

How can we fix a broken system? The most immediate answer is technology.

Imagine a device that scans all live and recorded music. Businesses connect this device to soundboards, audio sources, and set top boxes. This device would generate usage reports that could verify music performances in all commercial settings. All businesses could shift from general blanket licenses to per segment payments for their actual music consumption. No more basic playlist submissions from radio stations. Handwritten cue sheets from TV stations would be a thing of the past. Businesses and venues would only pay for the music performed in their establishments. This leads to lower fees for music users and more compensation to songwriters and publishers. Yet, this means more money in the system. PROs would have a more accurate path to distribute funds to the appropriate songwriters and publishers. This would establish transparency, and the performing rights ecosystem would become more sustainable.

 

5. Soundstr Solution

Full disclaimer: this is exactly what Soundstr is doing. Our technology provides music use data, and we are currently working to both raise awareness of our efforts and get devices in the field. We are trying to offer a solution that helps songwriters, venues, businesses and ultimately the future of the music industry. Please join us in our movement.

Sign up for Soundstr’s recognition services for FREE at the link below. Discover where your music is used in the real world and start collecting the royalties you’ve earned.

Performing Rights, Simplified P3: The Problem & Solution