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Posts Tagged ‘BMI’

20 Questions for New Artists Part 6: Performing Rights Organization Affiliations

October 27, 2019 Comments off

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.

Major Defeat For Google-Era Justice Department, Huge Victory for Sanity and Songwriters

December 19, 2017 Comments off

Great news today that the appeals court upheld BMI’s ruling by the BMI rate court judge that there is no such thing as 100% licensing under the consent decrees.  Although it’s like winning an appeal that the Sun really does rise in the East (attention Berkeley students), it’s good to put that issue to one side and to poke a stick in Google’s eye.

hesserenata

More on this to come, but who can forget the Kafka-esque insanity of Renata Hesse and David Kully, two former Google-era Justice Department antitrust officials who saddled thier colleagues with one of the most bizarre cases in the history of the music business:  100% licensing under the out of date, anticompetitive and frankly destructive PRO consent decrees.

Hesse and Kully’s behavior was so bad that songwriters actually had to sue the DOJ for, among other things, a brilliantly argued claim for unconstitutional taking of property without just compensation as a result of  what clearly appears to be Google-inspired overreach (see MTP’s timeline on Renata Hesse’s assault on songwriters and Scott Cleland’s timeline on how Hesse always seemed to be there at just the right time and just the right place to protect Google’s interest from the government oversight that Google loved to focus on other people–like those pesky songwriters.)

A little tea leaf reading suggests that there may be some appetite at the DOJ for at least cutting back the consent decrees if not sunseting them altogether, particularly since we have GMR and others trying to get into the PRO market in the US.  (A fact that is probably not lost on the MIC Coalition price fixing cartel which no doubt would like to see any new MRO take over PRO licensing for the true one-stop shop.)

More to say on this once I get a chance to read the opinion.

We all owe a big thanks to BMI for taking the fight to the government despite the odds against prevailing over the MIC Coalition cartel.  Truth may be stranger than fiction, but truth has a way of prevailing if you ride toward the guns.

Now maybe the DOJ could reopen an investigation of the real antitrust violators–Google and the MIC Coalition.

How the Rate Court Cottage Industry is Leading to the Destruction of Collective Licensing

January 19, 2013 1 comment

The news that Sony/ATV made a direct deal with Pandora produced some strangely paranoid chatter in the echo chamber.  Sony/ATV can bring Pandora to their knees, getting around the rate court, etc.  I think it’s actually much simpler than that.

What appears to have happened is quite simple–Sony/ATV opted out of letting ASCAP and BMI license their catalog (which now includes EMI so is really quite massive).  This is perfectly legal, nothing shady, although a bit unusual.  They’ve announced they intend to take some digital licensing in house, so everyone should have expected this was coming.

It is perfectly legal because of the antitrust consent decrees that ASCAP and BMI operate under.  A condition of these consent decrees is that every affiliate of ASCAP and BMI retains the right to “opt out” of the blanket licenses (and rates) offered by these societies.  No reason need be given–it is a right that all enjoy.  (SESAC is a private company that does not (yet) operate under a consent decree.)

If a publisher opts out of one license or type of license, they can remain in the blanket license for all other licenses that are in place.  So for example, Sony/ATV can opt out for Pandora, but stay in for broadcast radio or venue licenses.

Why might a publisher opt out of a blanket license?  One reason is financial–they don’t have to pay the PRO collection fee on that revenue stream.  But another reason is that if they stay in the blanket license, then they are subject to rate court proceedings brought against the PRO if negotiations with a licensee (say Pandora) fail.

Rate court proceedings were relatively rare occurances prior to the arrival of Big Tech in our lives.  They have become increasingly common and almost always involve digital services.  In fact, they almost always involve the same lawyers representing the digital services.

Rate court proceedings cost a lot of money.  Millions in legal fees.  And the twist is that if you stay in the blanket license, ASCAP and BMI pretty much have no choice but to submit to the rate court proceeding which is required by their respective consent decrees.  So in this way while the PRO licenses are voluntary–not statutory like the compulsory mechanical license–and the rates are not set by the Copyright Royalty Judges–because they are not statutory rates–the rates are set by U.S. Federal District Courts sitting as rate courts.  (For example, Judge Stanton is the BMI rate court judge in the Southern District of New York.  MTP readers will remember him as the judge in the Viacom v. Google lawsuit who handed Google a complete victory over Viacom at trial in an opinion I found meandering and bizarre, which subsequently was substantially overturned on appeal.)

Rate court proceedings are in many ways similar to the Copyright Royalty Judges and take into account a variety of economic factors, including market rate deals for the same type of license.

Blanket licenses issued by the PROs are one of the great efficiencies in music licensing.  Rate court proceedings gum up the works and undermine the benefit of lower transaction costs in collective licensing.  I wonder if at the end of the day when one takes into account the legal fees and transaction costs concerned when Big Tech fights negotiated rates whether anyone actually comes out ahead.

Meaning if you compare the position of the parties before the rate court black hole and the ultimate rate imposed by the rate court, did the Big Tech company that used its litigation budget to force songwriters into the rate court proceeding actually end up better off?  Or did they just get their jollies from dragging songwriters through costly litigation so that the next time around the PROs were more likely to acquiesce?

One thing that you often hear these Big Tech types say about their direct licenses is that songwriters are better off to not be represented by PROs because even though the direct license rate is lower, it’s more than the songwriter would get through the PRO because they don’t have to pay the PRO “commission”.

Of course, the other benefit from PRO licensing that songwriters get that isn’t discussed is that the songwriters can audit collectively under the PRO’s blanket license.  Big Tech companies hate audits.  The more direct licenses, the less likely that any one songwriter will ever exercise an audit right.  And eventually the audit right will be withdrawn (as is already happening with the YouTube indie publisher license).

So how does this effect Sony/ATV?  Recall that Pandora sued ASCAP in the rate court to try to screw songwriters right about the same time they began their campaign to screw artists in the Congress with the so-called Internet Radio Fairness Act.

If I had to bet, I would bet that Sony/ATV said enough of this BS and withdrew from ASCAP and BMI for purposes of licensing Pandora.  That takes Sony/ATV out of the rate court.  They made a deal with Pandora for a higher rate and shorter term than will ultimately come down in the ASCAP rate court.

Note:  Of course, ASCAP may be able to use the Sony/ATV deal as evidence of a significant market rate for the Pandora service in the rate court, even though Sony/ATV is not party to the case.

Pandora had the choice of excluding all Sony/ATV songs from their service or make a direct deal with the publisher.  And now that Pandora has made that deal once, they will always.

And that’s really all there is to it.

But–if Pandora had not been advised to go to the rate court, would Sony/ATV have made the same decision?

Is Pandora lucky that Sony/ATV didn’t just opt out of the ASCAP and BMI blanket licenses and not license Pandora at all?  That would probably have brought down the service.

And–given the antagonism that was heaped on Pandora by songwriters from outside the US, will the societies representing these songwriters elect to opt out of the reciprocal agreements they have with ASCAP and BMI regarding Pandora and just not license Pandora?

Will other publishers follow Sony/ATV and avoid the rate court?  Won’t that mean that the cost of the rate court will be shared by an ever smaller group of songwriters forced to litigate by Big Tech?

One thing we don’t need is less efficiency and higher transaction costs in music licensing.  Most Big Tech companies and their shills whine about fragmented music licensing, yet the same people drive up those transaction costs while enriching a small group of lawyers who undermine the benefits of blanket licensing.

Do these Big Tech companies have the right to do this?  Sure.  Does it benefit them in the long run to jack songwriters around?  Not really.  If there’s anyone who has an existential threat from Big Tech it is the professional songwriter, often overlooked yet the most important part of the equation.

Continually trying to jack these people around accomplishes one thing:  It hastens the day of full commoditization of culture by Big Tech.  This is what they may think they want, but I would suggest to you that they really don’t.

So they may have the right to do it, but that doesn’t make it smart.  But then I’m just a country lawyer and I’m not as smart as these city fellers.

You can’t blame Sony/ATV given their options.  I’d have done the same.

The Artists, United, Can Never Be Defeated

November 29, 2012 Comments off

Yesterday on Capitol Hill did not quite go the way that the Internet Radio Fairness Coalition had in mind.  At all.  More about that will be written.  Mr. Chaffetz–more about him later, too–had asked Mr. Goodlatte for a hearing on the so-called Internet Radio Fairness Act, and a hearing he got.  I would say mostly a “listening” but that’s good, too.  The hearing was scheduled for 11:30 am and in a brilliant move, David Israelite of the NMPA scheduled a performance by five of our community’s top songwriters in an adjacent meeting room just prior to the IRFA hearing.

The writers were Lee Miller performing his song “You’re Gonna Miss This” (as recorded by Trace Adkins), Kara DioGuardi performing “Sober” (as recorded by Pink), BC Jean performing “If I Were a Boy” (as recorded by Beyoncé), Desmond Child performing his song “Livin’ on a Prayer” (as recorded by Bon Jovi), and Linda Perry performing her song “Beautiful” (as recorded by Christina Aguilera).

Of course there was a masterful political element to the timing and messaging of these songwriters, but first think about this–these writers performed their songs with a single instrument accompanying them.  Just one instrument and the voice, about the simplest instrumentation you can have.

And of course–the song.  These songwriters reminded the audience comprised of Members and staffers of the importance of the songwriter, and they did it by letting the songs speak for themselves.  By performing these songs–not with the vast instrumentation and production values of the recordings that interpreted the songs, they really and truly demonstrated conclusively that which every record company executive knows that is not a hype, not a self interested spin–it really and truly does all start with the song.

The combined Pandora earnings for these songwriters in the first quarter of this year was $587.39.  For over 33 million spins.

And Tim Westergren wants to pay them less.

It’s too bad that Tim wasn’t there for the sing along that Desmond Child led on the chorus of Living on a Prayer.  Since he used to play in a band and all, you would have thought that Tim would naturally gravitate to hanging out with his own kind.

I guess Tim was too busy to show up for a reminder of the investment that these writers are making in his company by giving him a break on royalty rates that all songwriters richly deserve.

When Pandora, and the NAB, and David Pakman and Google complain about royalty rates, remember that’s just about greed.  By handling themselves the way they have, all these people have demonstrated once and for all that they just don’t get it.

That’s OK, they are not our friends.  We don’t have to be friends with everyone we do business with.

But here’s the real deal: Without great songs there are no great records and without great records there is no Pandora.

And that’s the fact.

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