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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.

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