EMI's In-House Licensing Move: What Does it Mean for Artists?

[This post was co-authored by FMC Communications Intern Scott Oranburg]

EMI Music CEO Roger Faxon announced today that EMI will start directly licensing a sizeable chunk of its digital music catalog throughout North America, bypassing the American Society of Composers, Authors and Publishers (ASCAP) — a Performing Rights Organization (PRO) that licenses and distributes royalties for the musical composition copyright.

Remember, there are two copyrights in music: the musical composition (think notes and lyrics) and the sound copyright (think music captured on tape or hard drive).

ASCAP members include U.S. composers, songwriters, and music publishers. The PRO compensates artists and publishers for “public performances” of their copyrights — including over-the-air radio, satellite and internet broadcasts, live venues, bars and restaurants, sporting events and other places where music is played.

Over the past decade, EMI’s licenses for certain digital uses have been handled by ASCAP, who in turn pay songwriters and performers their half of applicable royalties, which is typically 50 percent (the other half goes to the publisher). EMI’s move, according to Faxon, will “reduce the burden of licensing… create greater efficiency and, importantly, to reduce the barriers to the development of innovative new services.” By moving its publishing royalties in-house, EMI hopes to streamline aspects of their licensing process. Perhaps, more importantly, they will also bypass the fees ASCAP collects for doing similar work.

EMI will begin the transition by starting in-house licensing for digital use of their April Music Catalog, one of the label’s largest. Meanwhile, ASCAP will continue to license April Music’s some 200,000 songs for non-digital plays. Given the popularity of digital broadcasters like Pandora and the big push to “the cloud,” this shift is certainly significant for the industry.

But what does it mean for songwriters and composers?  

For nearly a century, ASCAP has compensated artists for use of their work over the airwaves. Since its founding in 1914, ASCAP has worked primarily in the collection and distribution of royalties for use of music on radio and television. ASCAP collects fees from radio stations and other music distributors, granting them a blanket license to play any music created by ASCAP members. From there, ASCAP surveys the use of its members’ works over the airwaves in order to distribute owed monies.

At first blush, EMI seems to be looking towards the future. ASCAP was valuable because of its unique capacity to survey the overall performance and broadcast of music. Rather than undergo the laborious process of having radio stations pay rightsholders individually, ASCAP’s blanket licensing fee made it possible for broadcasters, artists and publishers to mutually benefit from airplay while avoiding the burden of itemizing each use.

For obvious reasons, digital plays are more easily monitored, and with greater precision. EMI could theoretically track web-based plays as efficiently as ASCAP and avoid the cost (in both time and money) of outsourcing this process. For a company on the auction block like EMI, this streamlining might also make the company more fiscally attractive to potential buyers and investors as it increases profits.

We care about how the songwriters are compensated. There are legitimate questions about how EMI would go about paying artists. The interests of a non-profit like ASCAP are likely different than a corporation that exists primarily to increase its own profits. Would the songwriter’s half of the royalty be in jeopardy? Might their share of the revenue be held against their “recoupables” — or debt — to EMI? And finally, who would oversee EMI’s artist compensation policy? Historically, individual artists have lacked the resources to ensure that industry acts in compliance with agreements, and they often relied on third parties like ASCAP to protect their rights. Are songwriters and composers simply expected to trust EMI that they will be paid in a timely and equitable fashion?

Maybe it’s streamlining. Maybe it’s fracturing. Either way, we’ll be paying close attention to how things develop in this area of artist compensation.

And speaking of how today’s musicians are getting paid, check out FMC’s latest research effort, the Artist Revenue Streams project, which aims to to assess how musicians’ revenue streams are changing in this new music landscape.


1 comments posted

Really nice to see an outlet

Submitted by Max (not verified) on May 5, 2011 - 4:12pm.

Really nice to see an outlet take the time to spell out, in plain English, why EMI's move is potentially worrisome for artists.

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