Tag: Transparency

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 These blanket licenses are outdated and inefficient.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

 

13 Jul 2016
5 Things Songwriters Need to Know About the Consent Decree

5 Things Songwriters Need to Know About the Consent Decree

What is the Consent Decree, and why are people talking (and so upset!) about it?

While the music industry can seem glamorous, it does have its “unsexy” parts just like any other business sector. For songwriters, one of the least discussed (yet most important topics) is music licensing. But major changes to the consent decree – the federal agreement that governs how ASCAP and BMI operate – is bringing this topic to the surface.

The truth is, these changes could be the biggest in the music industry in 75 years and greatly impact your career.

So while this might seem like a complex topic now, we’re here to break it down for you. First off, if you are not familiar with Performing Rights Organizations (ASCAP, BMI, SESAC and GMR, “PROs”), read this now. If you are familiar with the PROs and what they do, keep reading. The Consent Decree decisions will impact songwriters, licensors and more. Pretty much everyone in our industry, to a certain degree.

 

1. Consent Decree History

ASCAP and BMI, both of who are non-profit companies, (voluntarily) entered into Consent Decrees with the Department of Justice in 1941. The goal of the agreements was to prevent these two companies from acting monopolistic and regulate how they operate. SESAC and GMR, which are for-profit, are not bound by this agreement. (For a full history of the PROs, click here.) The Department of Justice reviews (and sometimes amends) the Consent Decree every few years to adapt to a changing industry and technology. The proposed updates would be one of the biggest changes to the consent decrees since it was first filed over 75 years ago. (The last changes to the consent decrees were in 1994 for BMI and 2001 for ASCAP.)

 

2. Decision #1: No Partial Withdraw

There are two major decisions proposed by the Department of Justice for the Consent Decree. The first is no partial withdraw. This means that publishers either have to be “all-in” or “all-out” with PROs. Music publishers, with the assistance of the PROs have been asking the DOJ to update the Consent Decrees to allow for partial withdraw. Publishers want the ability to do direct license deals with music licensors for performing rights. In this case, they want to do direct license deals with Digital Services Providers (DSPs) such as Spotify, Pandora, etc. On December 18, 2013, a federal judge ruled that this was not allowed in a case with Pandora and BMI. (A different judge had a similar ruling with Pandora and ASCAP on September 17, 2013.) Yet, shortly thereafter, the publishers went direct to the (digital) source to negotiate better rates, cutting out the PROs as the middleman. This left the PROs to collect on behalf of radio, TV and broadcast/live performances – not digital. The DOJ chose not to update the Consent Decrees to allow for partial withdraw. This means publishers either have to use the PROs to collect on behalf of all mediums, including digital or none at all. If publishers want better rates with Spotify and Pandora, they will also need direct deals in all other mediums. This includes every radio station, TV network, retail store, and live music venue. Publishers would have more work on the admin/collection side, but it might lead to a higher payout for them and their associated songwriters.

 

3. Decision #2: 100% Licensing

The second major decision is called, “100% licensing.” This gives a songwriter with any ownership on a song, even as little as 1%, the right to license the entire song on behalf of all other songwriters. Further, that same song can only be licensed once to a given music licensor. Anyone from the lead songwriter down to the producer that gets a few songwriting credits could license the song. Considering that many co-writers do not share the same PRO, this could lead to several messy scenarios. This is a stark departure from the “fractional” licensing model that the industry currently uses. Fractional licensing means PROs only license their share of a song. In a fractional licensing world, the songwriter (or PRO) with 1% ownership is only able to license their portion. In a 100% Licensing world, when ASCAP licenses a music venue, but only controls 1% of a song, that venue no longer needs to also obtain a license from BMI for that same song. ASCAP must license the full 100% of the song and account back to BMI.

 

4. Short Term Impact

The immediate responses to these proposed changes have not been positive. The CEOs of both ASCAP and BMI have responded, stating their “disappointment” in the DoJ. Other music industry execs have shared this sentiment. The consensus around the short-term impact focuses on the negativity of these rulings. With rate shopping, 100% licensing could devalue the price of music. Licensors will likely be on the hunt for the lowest rate, which could drive down revenues. No partial withdrawal could lead to publishers opting out of the PRO system. Instead of a business needing four PRO licenses, they may now need those four, plus licenses from each of the many publishers.

 

5. Long Term Implications

There are a few implications to consider from these major changes. For better or worse, 100% licensing could lead to a “fixed rate” for music within our industry. This is a long shot, but a fixed rate could help build value (or further devalue) the price of music depending on your perspective. 100% licensing could also place heavy restrictions on the co-writing market. Songwriters may only be able to work with co-writers within their PRO or publisher’s roster. This could lead to a lack of hit songs or more diversity, depending on where you (subjectively) stand. If you’re not already aware, most pop songs have several co-writers, as showcased by popular memes.

 

The biggest potential change could be from the “No Partial Withdraw” ruling. The most contributions against this ruling have come from the PROs, as they should fear this shift. If the DSPs are willing to offer publishers better rates through direct deals or publishers think they can license these services more efficiently by eliminating PRO services fees, this might lead to the end of the current PRO model. With ASCAP and BMI‘s expenses totaling $260M+ in 2015, this money could flow back into the system. This would require the publishers to have direct deals with all radio, TV, background and live music users. It might sound like a stretch, but consider how it could work. Music users would utilize recognition technology to identify all commercial music. A global marketplace could work as an exchange to license and distribute royalties. One organization offering transparency behind rate structures could solve many problems. Businesses would pay fees based on actual music usage. Songwriters could receive compensation for the commercial use of their music. Transparency would allow the industry to fully “Follow The Dollar.”

 

It might sound like a stretch, and again it’s all speculation for now. So much more is likely to happen in the coming months. The PROs and Publishers must respond to the DOJ by the end of July. Lawsuits will likely ensue. Decisions will be delayed as everyone lawyers up and weighs their options. Extremes like ASCAP and BMI merging may actually be considered, despite antitrust lawsuits. The Consent Decrees may even be done away with. Publishers may withdraw from PROs. No one ultimately knows.

 

Regardless of the final ruling on the Consent Decree, we now live in a world where music data is essential. Data impacts everything from songwriting/publishing splits to PRO registration and real world music usage. More overall transparency will be necessary to follow the dollar and understand the true value of music. Songwriters need to pay close attention to this case, as the outcome could have a great affect on their career.

Songwriters – click below to sign up for FREE music recognition services.

5 Things Songwriters Need to Know About the Consent Decree

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

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