20 Questions for New Artists Part 6: Performing Rights Organization Affiliations
There is a bit of strategy involved with affiliating with a performing rights organization in the United States. All the societies have a creative staff. The decision to affiliate with a particular society should be made after the artist/writer has taken some meetings with the performing rights society and decided if there’s more love coming from one than another.
Most of the time we like to wait until the music is fairly well formed and the band has gelled into a working unit before approaching the societies unless there’s a reason to move more quickly, such as getting a film or TV license, or substantial radio/webcasting play. In more experienced bands, the writers will already have an affiliation, so it is a good idea to know this in advance for purposes of servicing the creative staff with new music, competing for slots on compilations and festival shows, etc.
The major U.S. performing rights societies are the American Society of Composers, Authors and Publishers (http://www.ascap.com/), Broadcast Music, Inc. (http://www.bmi.com/), the Society of European Stage Authors and Composers (http://www.sesac.com/) and Global Music Rights (http://www.globalmusicrights.com).
There are, of course, payment differences among the societies. For detailed background we recommend reading Music, Money and Success by Jeff and Todd Brabec.
A recent case highlights the competitive nature of the U.S. PROs. In order to understand the issue in the case of Shane McAnally, you need to know a little bit about how PROs divide up the revenue they receive. With few exceptions, ASCAP and BMI license music users on a revenue share basis and receive various reports of song usage. Realize that the PROs don’t divide these license fees on an even pro-rata share. Instead they use a formula based on a weighting and credit formula. This includes something called the “Audio Feature Premium Credit” which is a kind of bonus. In a nutshell, and I’m sure they’d argue about this, but the bottom line is that the more successful you are, the more money you get paid because you are more successful:
Audio Feature Premium Credits (AFP – for audio performances only, where applicable): Songs that earn certain threshold numbers of audio feature credits in a quarter receive additional credits in that quarter. These credits are applied to performances on radio, satellite and audio streaming services.
There’s a certain logic to this–as one Nashville musician/songwriter asked me years ago about mechanical royalties, “if I get double scale for a session, why can’t I get double stat for a song” (meaning twice the statutory mechanical royalty rate). That ain’t crazy particularly given the sad state of mechanical royalties.
Shane McAnally left ASCAP to join Global Music Rights, or tried to. As reported in Music Business Worldwide:
Due to internal rules regarding exiting songwriter members, ASCAP continued to license McAnally’s catalog to US radio for two and a half years following his resignation. Yet, according to McAnally (pictured), ASCAP declined to pay him full quarterly bonuses (‘Audio Feature Premiums’) from his biggest hits after he left – despite his co-writers of said songs (and remaining ASCAP members) receiving their share of this extra money.
McAnally’s payments were apparently ‘phased out’ by ASCAP, who paid the writer 100% of his AFP bonus for the first quarter after he left the PRO, but then 75% in the second quarter, 50% in the third quarter, 25% in the fourth quarter – and 0% from then on.
Important: McAnally alleged that this ‘phase-out’ deprived him of $204,612.84 in ASCAP distributions as of his January 2016 accounting statements.
Again according to Music Business Worldwide, Mr. McAnally appealed his case through the rather Kafka-esque appeals process which resulted in a ruling by a panel of arbitrators.
Instead of awarding McAnally the money as an award (again, he actually lost the case regarding how ASCAP applied its policies), the Panel instead ruled that he was owed the exact same amount as ‘costs incurred’.
The Panel concluded: “For the reasons stated in the Comment section of this Award, the Panel has decided to award $204,612.84 to Claimant as costs incurred in relation to its claims which are the subject of this Arbitration.”
MBW quotes ASCAP’s Chairman of the Board and President Paul Williams saying the following:
“ASCAP is of, by and for creators. Our member-elected Board of Directors is comprised of creators and publishers and we care deeply for all of our songwriters. Our priority is to provide the best possible service and to maintain the highest good for all concerned — for every member, from the beginning of their careers to the heights of success.
Our distribution rules are created by the ASCAP Board of Directors and are meant to protect 725,000 members as a whole, and it would be unfair to disregard our rules for the benefit of one songwriter over our broader family. In this singular and unique case, Shane was paid all of the money that he was owed after he left ASCAP and went to GMR….Two full and fair hearings have confirmed this finding. The first hearing was before an independent Board of Review comprised of ASCAP members and the second hearing was before three outside arbitrators selected by Shane and ASCAP.
We were sorry to see him leave the ASCAP family, but we wish him well. Given the results of this thorough review, we believe this case was handled properly and fairly.”
Mr. McAnally’s case is a cautionary tale of how difficult and costly it can be to change PROs which is a process that is infrequent in my experience–so who you pick for your PRO should be carefully thought out as you’ll probably be in business with them for a very long time. The full ruling of the arbitrators is here.
20 Questions Sidebar: “Frozen Mechanicals” and The Importance of Advocacy
There is a certain Truman Show aspect to songwriter royalties–the government sets the royalty rates, not arms length negotiation. But it doesn’t have to be that way, we just accept the government’s role in songwriting because it is the way it has always been for living songwriters and many generations before. The entire statutory rate system is like if Rube Goldberg and Franz Kafka met in a nightmare and disrupted the banking system.
If you’re a songwriter born after 1975 and are not a student of history, you may not fully realize the long-term harm of statutory mechanical rates. If the statutory rate seems improbably low to you, you’re right. It is.
You also may not realize that one good reason that the compulsory license rate for physical and downloads is so low at 9.1¢–and the streaming mechanical is so absurdly low–is because of the extraordinarily low government rates that came before. And this is where a page of history is worth a volume of logic: From 1909 to 1977 the government set the “free market” compulsory mechanical royalty at 2¢.
That’s right–the government froze the compulsory mechanical rate at 2¢ for 68 years. Songwriters are still struggling to recover from this intervention.
After tremendous effort and years of fighting, the statutory mechanical rate increased in pennies but arguably not in buying power. In 1976, the government’s 2¢ rate was increased to 2.75¢, and then gradually rose to 5¢ every two years for the next ten years (largely due to relentless lobbying efforts of songwriter Hoyt Axton). That new royalty rate was the only actual increase that songwriters got. In 1988 the then 5¢ rate was prospectively indexed to inflation (the Consumer Price Index). The rate began to gradually increase due to the indexing. But indexing really just preserves buying power. While it is better than a cut, indexing is a sop for the government wanting you to think they are actually giving you something that improves your life.
There should have been an increase in 1978 retroactively to 1909 which would have been the fair thing to do.
If the rate had been indexed to 1909, the current rate for physical and downloads would be something like 52¢–and again that 52¢ is no actual increase in the songwriter’s buying power. Inflation adjustment is just increasing 2¢ in 1909 dollars for inflationary increases in the CPI to the same value in 2019 in current dollars according to the Bureau of Labor Statistics.
But–that indexing stopped in 2006 for reasons that are unclear. That’s why the mechanical rate has been frozen at 9.1¢ for 13 years. According to Billboard, the freeze was agreed by a private negotiation between the National Music Publishers Association and two major labels and then ratified by the Copyright Royalty Board (which is how these private deals become law). Based on “Phonorecords III” or the Determination of Rates and Terms for Making and Distributing Phonorecords. Docket No. 16-CRB-0003-PR (2018-2022) the 9.1¢ rate will be in effect until 2022. Even if the 9.1¢ rate were itself indexed to inflation starting in 2006, the 9.1¢ rate would be worth 11¢ today.
While not as widely reported in the press as streaming (which depends on the presence of an Internet architecture that is simply not present in many parts of rural America or large swaths of the rest of the world), physical comprises 25% and digital downloads comprise 12% of global music revenues in 2018 according to the IFPI. That’s not nothing and is still a solid chunk of mechanical royalty revenue for songwriters and publishers.
These frozen rates likely have an indirect relative impact on all other statutory rates for songs or near-statutory rates in the ASCAP and BMI consent decrees. (That’s what economic experts are for.) When the government freezes wages but imposes a compulsory license, they also identify songwriters as a class of people who the government has decided are not entitled to negotiate for any value-based increase in their compensation.
On streaming, the headline numbers brag of a 44% increase (currently being appealed by some of the streaming services)–but this is still a rate that starts two to three to four decimal places to the right. Frozen rates create a distortion even in the government’s fake market for songwriters just like piracy benefits Spotify’s growth strategy by creating the illusion that the licensed service’s real competition is with “free”. Songwriters suffer all of these low rates (including the currently frozen physical rates) in the shadow of the 68 year winter from 1909-1978.
But are you ready? When you compare the historical rate of 2¢ to increases in the CPI from 1909 to 1978 when the statutory indexing of the government’s royalty rate started, something strange comes out.
The actual 1978 mechanical would have been a negative 11¢.
So at the current 9.1¢ rate, songwriters haven’t broken even yet compared to 1909. And remember–that’s just to get the same buying power as the rate had in 1909. It’s not an increase.
Remember–the current mechanical rate for physical and downloads has already been frozen for 13 years. In Phonorecords III, that rate will be frozen until 2022 for a total of 16 years. It also must be said that despite the full throated protests over Spotify, Amazon and Google appealing the Phonorecord III streaming rates, the 9.1¢ rate does not seem to be part of that appeal. The issue was, however, raised by George Johnson, a songwriter and one of the appellants (at p. 13 of his brief):
Adjust the 9.1 cent mechanical rate, for 69 years of unrecognized inflation6 from 1909 to 1978 which is self-evident7 and easily calculated by any government economist. The CRB erred by not adjusting the rate to 2019 standards. Additionally, the 9.1 cent rate set in 2006 has not been raised for inflation, or any other reason, in Phonorecords I, II, or III. Since this is an administrative appeal and the courts consider copyright a public right, we pray the Court can immediately factor in lost inflation by using government inflation numbers at the Bureau of Labor Statistics or St. Louis Federal Reserve and make a final determination.
Even if these services sold physical goods or downloads they…ahem…don’t pay a separate mechanical as that mechanical is included in the wholesale price. And you wonder how the rates stayed at 2¢ from 1909 to 1976? Because someone let them stay frozen.
There’s an easy answer to why the government set songwriter price controls with no increase for 68 years. The feds didn’t do that to anyone else whose wages and prices they froze.
The government got away with it because nobody fought back.
UK Official Investigating PledgeMusic Directors, Asks the Public for Information
Don’t believe the headlines–just because there’s no money for artists from the PledgeMusic bankruptcy does not mean that the story is over. It just means that justice is going to take longer. If you were paying attention, it should have been obvious from the beginning that PledgeMusic was a financial roach motel–the money goes in but doesn’t come out.
In the least suspenseful story of the decade if not longer, it appears that PledgeMusic’s officers and directors ran the company straight into the ground. It’s unclear from the Official Receiver’s report (which is available here) whether Pledge had any cash on hand when it filed for liquidation. The Official Receiver appears to value the company’s intellectual property at £20,000 as its only asset. Pledge had £7.4 million in “debt” so nothing for the artists or anyone else.
However, the really important part of the Official ReceiverReceiver’s report relates to the officers and directors.
So unpacking that paragraph, the directors seek to avoid liability by saying they weren’t involved with the “day to day running of the company”. Well, no kidding. That’s why they are directors. But they are answering a question that isn’t relevant. The question is not whether they were involved with the day to day, the question is what did they know about the company’s insolvency and when did they know it? A related question is whether they were willfully blind about the financial condition of the company?
It is difficult to understand how they couldn’t have known about the company’s financial condition. This is not something you find out from interviewing Benji Rogers. This is something you find out by examining board minutes, financial statements, internal accounting, and of course internal emails.
It must be said, of course, that stating that “the company continued to operate as previously” begs the question “previously” to what date? And of course, if it continued to operate as an insolvent, that doesn’t really help them. At all.
Let’s not forget that to a large degree, once the board becomes aware that their company is insolvent, their fiduciary duty shifts from the shareholders to the creditors, especially if the board fails to disclose the insolvency to creditors and fails to seek bankruptcy protection (which goes by different names in the UK, administration or liquidation).
And that last sentence is also telling. Why did the board seek legal advice about whether the pledge monies were or were not trust monies? Again, answering a question that wasn’t asked exactly. Who gave them this advice, what prompted the board to ask for it, when did they ask for it and what happened after they got the advice? Did the lawyer also tell the board that they could tell the public they were soliciting funds for one purpose and then use the money for an entirely different purpose for their or the company’s own benefit?
You see, it doesn’t really matter whether the monies were held in trust if the entire process was a fraud. But I’d still like to hear from that lawyer as to exactly what he or she told them–I seriously doubt that it’s quite as broad as all that.
But here is the punchline of the Official Receiver’s report:
It does not sound to me like the Official Receiver (the liquidator) views her work as completed. What it appears remains to be determined now is whether the cause of the insolvency (or bankruptcy) requires further action, including a referral by the Official Receiver to Scotland Yard and/or the Crown Prosecution Service (which is essentially the prosecution arm of the Home Office–the people with the white wigs for the BBC watchers).
Artists should feel free to call the Official Receiver at the number they gave or I believe you can still email to LondonB.OR@insolvency.gov.uk using the matter LQD5671373 in the subject.
@ericdharvey Misses Music Twitter’s Defining Feature: Refuse Licenses and Pay Zero Royalties via @ArtistRights Watch
Eric Harvey has a great must-read article in Pitchfork about what he describes as “Music Twitter” (“How Twitter Changed Music“). Mr. Harvey makes that case that Twitter was designed with both music and the music business in mind. That is certainly true. Twitter couldn’t be a more perfect way for pop and rap stars to connect with their fans and introduce new music. If willing to put in the time (aka free labor for Twitter), artists from any genre can find it useful. Unbelievable numbers of recordings are promoted, linked, streamed and talked about on Twitter.
Mr. Harvey makes a point that many of us probably didn’t know:
When Twitter was dreamed up, in fact, it was with music in mind. “This is why we built this thing! For concerts and music shows!” Noah Glass told fellow co-founder Jack Dorsey in 2006, according to Nick Bilton’s book, Hatching Twitter. At that point, when the site had only a handful of users, Glass and Dorsey road-tested Twitter at Coachella and attempted a partnership with the 2007 VMAs. As the site grew in popularity, Bilton recounts, pop stars made pilgrimages to the company’s modest San Francisco headquarters, like when a couple of Twitter engineers “found a member of the band blink-182, half-asleep and half-drunk, pouring a small bottle of gin into a bowl of Fruity Pebbles cereal, then chowing down on breakfast.”
But after you read the post, I think you may realize that there’s a dog that didn’t bark–despite the fact that some of Jack Dorsey’s best friends may be musicians, Twitter has consistently refused to even accept the premise that the site needs licenses and should pay royalties. However “intertwined” Twitter may be with the music business, the company steadfastly refuses to acknowledge that value by respecting business of the artists, songwriters, producers, musicians and vocalists who drive what Mr. Harvey shows pretty conclusively is a big chunk of Twitter’s value.
Mr. Harvey dives into the many connections between the company’s founders who designed their product to free ride on the artists they claim to admire. It is clear that Twitter owes a lot of its success to the star making machinery behind the popular song:
Judging by the numbers alone, Twitter is more deeply intertwined with music than any other industry. Four of the top five—and half of the top 20—most-followed Twitter accounts are solo musicians. More than movie stars or major athletes, whose work is more obviously collaborative and done according to others’ scripts, the pop star/fan relationship maximizes what Twitter does best, fostering emotional connections rooted in the personal authenticity of a single, spectacular figure. This has led to an environment where millions of Twitter users are there purely to serve as foot soldiers in their idol’s digital army, and where the tantalizing (or mortifying) possibility of direct contact is always present.
Maybe it’s time that Twitter did the right thing and stopped abusing the absurdly outdated DMCA safe harbor game of whack a mole. Please let’s not be told that Twitter’s value is exposure or that data is worth having your rights ignored. Data may be the new exposure, but you do have to ask how do people like Jack Dorsey sleep at night.
Loophole Competition: Is Google’s News’ Richard Gingras the Counterpart of YouTube’s Lyor Cohen? via ArtistRightsWatch
We’re all well aware of how Google uses self-manufactured loopholes in the DMCA safe harbor to enrich itself at the expense of artists, and run their loophole traps while appearing to “help” artists deal with the Google manufactured whackamole on YouTube with “tools” like Content ID. (See Ellen Seidler’s teaching on this subject, Kerry Muzzey’s post about Content ID from an artist perspective, and Zoe Keating’s statements on the YouTube Content ID shakedown.)
What Google has also done is find someone out there who is willing to promote the corporate line on DMCA abuse, the Chief Loophole. This person very likely gets paid a fortune in both cash and stock options to be the public face of Google’s destructive policies. Or at least a fortune compared to the person’s former colleagues in the copyright category that Google is commoditizing and extracting value from with their loophole seeking behavior.
Google then spends money on a charm offensive directed at these former colleagues—but which falls short of providing the same wealth that they bestowed on the Chief Loophole. They may have many reasons for keeping this class distinction in play, but the message is clear—if you truly go over to the dark side, beaucoup bucks await you. Or it will seem like beaucoup bucks to you because Google’s loophole seeking beat you down so far it looks like up to you.
Yes, I’m describing Lyor Cohen at YouTube and Richard Gingras at Google’s Internet of Other People’s News. Rather than embrace a rights-affirming and privacy-protecting philosophy, these two divisional Chief Loopholers shore up two of the principal sources of Google’s data wealth—news and music.
Lyor Cohen embarrassed himself to little effect as the face of YouTube’s assault on the European Copyright Directive. Mr. Gingras is doing the same in what promises to be the opening act of a long offensive against the European Copyright Directive.
The Copyright Directive has been passed by a vote of the European Parliament and transposed into French law by a vote of the Parliament of France—which the multinational Big Tech bloc like Google lost abysmally by employing a bot strategy that seemed to be modeled on the tactics of the Internet Research Agency as discovered by several European newspapers including the London Times.
The crux of the issue for Mr. Gingras is that the Copyright Directive requires Google to pay a neighbouring rights royalty to newspapers whose work they use. You may have heard the Google Alinsky-style semantical talking point of the “link tax”.
Google is now putting Mr. Gingras forward to be the Lyor-style face of its campaign against journalists and news organizations in France by throwing a new loophole in the face of the French government while at the same time stepping up its charm offensive by offering what certainly look like bribes to news organizations in Europe that play ball.
The loophole is Google’s use of its brutal market power to force newspapers to give them for free that which would otherwise attract essentially a statutory royalty. Mr. Gingras is the face of this, a role for which we hope he’s being at least as well compensated as Lyor Cohen for doing what is effectively the same job—being the face of the charlatan. The good news is that Google tipped their hand early in the transposition process so even France can go back and fix this competition law violation.
Thanks to the Google Transparency Project (full report here) we know that Mr. Gingras also brings a pot of gold to his version of the rainbow, either directly or indirectly, through spending on the ideation and flaring from the shill incubator:
The Google Transparency Project undertook the most comprehensive effort yet to collect all of Google’s payments to media organizations around the world in one place. The analysis included 16 different Google programs and related organizations and spanned more than a decade.
It revealed that Google and related entities have committed between $567 million and $569 million to support at least 1,157 media projects around the globe. The analysis also identified another 170 projects supported by Google for which no funding information was publicly available, suggesting that the total amount the company has spent on media grants is likely far higher.
Google often boasts about its support for journalism, disclosing plans to spend over half a billion dollars on media initiatives since 2013. But Google isn’t always transparent about its spending, making it difficult to assess what the company is giving—and what it may be getting in return.
We haven’t seen Mr. Cohen waiving around this kind of cash aside from a few thousand euro we know about that was paid to some YouTube “creators” to produce anti-copyright directive materials.
Lyor really needs to do something about that disparity. We’re way beyond YouTube “creator” studios now—user-generated never got hundreds of millions. I wonder what Mr. Gingras makes by comparison to Mr. Cohen?
@kantrowitz: As Google Backlashes Have Risen And Fallen, So Have Its Grants To News Organizations via @artistrights
[Editor Charlie sez: Google attacks journalists with one hand, doles out the charm offensive cash with the other.]
Over more than a decade, Google and foundations run by its leaders have given hundreds of millions of dollars to journalists and news organizations around the world, sponsoring drones in Nigeria and Kenya, and local news in the US. But according to a new report, these grants tend to be made in places where the company faces pressure from politicians, the public, and the press, raising questions about whether the tech giant is committed to social good or buying itself goodwill.
The report, written by researchers at the Campaign for Accountability’s Google Transparency Project, shows a spike in funding in Europe when Google was under pressure in the mid- to late-2010s, and a subsequent uptick in the US amid a backlash that’s led to a Department of Justice investigation and calls for its breakup.
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