Welcome to Part Two of FMC’s look at transparency and why it matters to musicians and composers. In Part One, we described three different types of transparency, and outlined why each matters to anyone who wants to get paid in the digital age:
1. structural transparency: how different services function and how they compensate artists
2. rates and revenue transparency: how money is split, who gets paid what and why
3. repertoire transparency: readily available ownership information to facilitate more efficient licensing and accuracy in payment
Today, we’re going to look at a current hot topic—direct deals for performance rights in music publishing—as a case study.
Remember, when we talk about music publishing, we’re referring to the underlying composition and lyrics, which is separate and distinct from sound recordings (music captured on tape or hard drive). Publishing concerns “musical works,” and rights that belong to composers and music publishers.
A public performance of a musical work is when the underlying composition is “performed” in venues or on AM/FM or digital radio. In the United States, there are three well-established performing rights organization (PROs) that collect and distribute royalties for the public performance of musical works: ASCAP, BMI and SESAC. Of these three PROs, the larger two—ASCAP and BMI—operate under agreements called “consent decrees”—a legal term, which in this instance means a set of restrictions that the government has put in place to curb anticompetitive behavior. (Our fact sheet on the consent decrees has a more detailed history.)
The ASCAP and BMI consent decrees were established several decades ago, at a time when publishers and PROs acted as gatekeepers to musical works to the disadvantage of broadcasters and the public. A compromise of sorts was stuck that allowed ASCAP and BMI to issue “blanket licenses” to broadcasters on equivalent terms, meaning they couldn’t play favorites and the licenses would allow a user to perform whatever was in the PROs’ catalog. For the most part, a radio station—large or small—could pay a licensing fee to ASCAP and BMI and be secure in the knowledge that they were covered.
Composers and songwriters of all backgrounds also benefited to the extent that there was an efficient way for their music to be performed, and the PROs would directly pay the writers’ their 50 percent share. This money was not held by the publishers as part of any “recoupable costs” (or composer debt to the publisher.) The straightforward clarity of this arrangement—including the 50 percent non-recoupable writer income—is a great example of structural transparency.
Now that the marketplace for music is once again shifting (sales are declining and streaming music is growing but not enough to replace lost revenue), there is increased pressure on radio and radio-like services to make up the difference. Whether you think this is appropriate or not probably depends on your vantage point. At FMC, we want songwriters to be paid fairly and welcome increased revenue for musical works across the board. (We’re songwriters and composers ourselves.) But we’re concerned that the big publishers’ plans could come at the expense of revenue transparency, meaning songwriters could have a have a harder time knowing how they’re paid and why.
Let’s look at the specifics of what is being proposed. Right now, music publishers—including Sony/ATV, Universal Music Publishing Group and Warner/Chappell, who together control the largest swath of musical works in the world—are pushing the US Department of Justice (DOJ) to modify the ASCAP and BMI consent decrees. The PROs are also seeking an amendment to the rules, though possibly for different reasons.
The big publishers want the ability to remove partial catalog—namely, digital rights—from the PROs in order to license with services directly. The reason is because they think they can get higher rates, but that’s not a guarantee. What’s more likely is that, like major labels with on-demand streaming platforms, the publishers will demand hefty cash advances or other non-play related income from digital services, and the rates will actually not increase by much, if at all. (More likely, they will offer discounts on per-stream rates in exchange up-front sums and equity shares in the service.) Will any of that “non-attributable” income make its way to songwriters and composers? Given the strong likelihood that the deals will be under non-disclosure agreements, we songwriters will likely never know.
There are other modifications under consideration at the DOJ, including the ability of PROs to license additional rights beyond public performances. We don’t think this is crazy, especially considering that the PROs global counterparts already have the ability to bundle rights. But our rallying cry for transparency also applies to the PROs, who must always be improving their systems to offer the greatest degree of information possible to their writer members about the deals that are entered into on their behalf.
Now let’s talk repertoire transparency. The publishers’ ability to directly license digital performance rights would mean that any online radio service—including smaller commercial or non-commercial platforms and new entrants—would need to obtain specific permission from the publishers in order to perform music. That might not be the worst thing in the world, and one imagines the bigger online radio companies would have an open seat at the negotiation table. The smaller players—college radio, niche webcasters, etc.—may not be so lucky. Maybe that doesn’t bother you, but we believe that the only way more songwriters get paid for performances is when their music has more chances to be played. The promise of online radio was always that it offered more opportunities for a greater diversity of music than would ever be heard on AM/FM. After all, songwriters and fans benefit when more music is performed: songwriters get paid, and fans get exposed to new sounds.
Another major frustration around repertoire transparency comes down to not knowing what is and isn’t in a publisher or PRO’s catalog. Without the benefit of a blanket license or (at the very least, information about what songs are off-limits), broadcasters are opening themselves up to tremendous liability—up to the tune of $150,000 per work for “willful infringement.” For direct licensing to work on any level requires a degree of information about publishing repertoire that simply does not currently exist.
This problem is compounded by the fact that unlike sound recordings, which are typically owned by a single label or performed by a single artist or band, publishing can involve a staggering number of co-writers and publishers. In fact, we counted 13 writers and 17 publishers on a recent Flo Rida hit. These co-writers might not all be based in the United States, and likely belong to rights societies in their own territories. These societies no doubt have “reciprocal agreements” with ASCAP and BMI, who will collect royalties on the foreign writers’ behalf. But what happens if the publishers pull just the digital catalog from the US PROs and aren’t transparent about which writers this affects? Without repertoire transparency, it’s what some would call a potential trainwreck of global proportions.
All of these reasons are why we’re adamant that if direct deals are allowed for the digital performance of musical works, they need have some serious transparency requirements. If you’re a songwriter, we encourage you to let your publisher and PRO know.
Next up in our series on transparency, we’ll look at how data standards and interoperable, global databases can help increase transparency in the music industry.
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