Wait a second…What just happened? Did the United States government actually try to address a problem that has effected millions of Americans for years by introducing a Bill before Congress? Did those blowhards in Washington D.C. stop fighting and tweeting and actually do the job that they were sent there to do?
Here is a draft of H.R. 4706, The Music Modernization Act of 2017.
For years now the streaming revolution has completely disrupted the way consumers listen to music, the way musicians release music and the way rights holders (musicians, publishers, labels etc.) get paid. With the recent onslaught of litigation against giants like Spotify and Apple Music, lobbyists in D.C. seem to have been effective in getting our legislative branch to try to address an over decade old issue.
With the goal of ensuring that streaming platforms (a) don’t get sued, (b) mechanical royalty rates are set as independently as possible and (c) theoretically, getting money to the right people in a faster way, the MMA sets up several new processes for the music industry.
In typical Washingtonian fashion, the Bill introduces yet another bureaucratic body to oversee and administer digital licenses and pay all copyright owners (so long as your works are registered correctly). While, in theory, this sounds like an intelligent move, there are numerous questions about the efficiency of yet another “agency” involved in paying monies to the correct rights holders. We think it is definitely a move in the right direction by centralizing all digital blanket licenses and the decision makers for mechanical royalty rates (without a commission or overhead cost put on the backs of rights holders), but the move begs the question of how effective other government led regulatory bodies have been in the past (Government Shutdown ring a bell?). Lobbyists have touted this move as a departure from the tenured “judges” that rule over the PRO’s (ASCAP and BMI) and allows for a more impartial method in determining amounts paid for performance royalties to songwriters.
Since the inception of streaming services, platforms have avoided paying mechanicals because after filing the required Notice of Intent (or NOI) there is no further requirement to determine the actual right holder of a particular song. So if your information isn’t found or hasn’t been registered, Spotify, Apple, Amazon etc. haven’t had to pay you for streaming your license. The MMA attempts to do away with this giant loop hole. The new oversight/governing body will attempt to collect all data (by working with Content ID/Google and other data aggregators) and theoretically make sure that every song is registered so that every right holder is paid (some minuscule amount) for every stream.
The Bill then sets up a more “free-market” system for determining what mechanical royalty is actually paid to the rights holders (now that they will all be contained within this database). The rights holders and the platforms will have the ability to negotiate and set rates rather than relying strictly on government set rates.
The Bill was introduced to the House Judiciary Committee before the end of 2017 and there it sits. We will be watching carefully, along with millions of musicians and industry folks, to see how it progresses, what changes are made and how much pork is added to it.
We here at L4M had an original goal of making the music industry LESS confusing for musicians by attempting to simplify and decode the mythical “industry standards” that generations of music executives and attorneys had crafted. In our opinion, the standard of the industry was to confuse musicians so that they would willingly give up rights that they needn’t relinquish. The combination of a monumental change in the music industry (with the introduction of the internet) and the easier access to information (such as sites like ours), musicians no longer have an excuse when they enter into horrific label agreements.
If you look over the last several articles posted on L4M, we admittedly have wandered away from the path of simplicity. So, hand in hand with all the kids going back to the classroom this week, we will be returning to the basics. Today’s lesson, what do Performance Rights Organizations or PRO’s actually do and why do you need to register with one?
Most folks in the music industry and many outside of the industry have heard of ASCAP or BMI. However, the numbers decrease signficantly when you ask those individuals what ASCAP or BMI actually do for artists.
ASCAP (American Society of Composers, Authors and Publishers), BMI (Broadcast Music Inc.) and SESAC (Society of European Stage Authors and Composers) are the three performing rights organizations in the US. They have international presence as well, but for this post we’ll just focus on their doings in the US. As their names suggest, PRO’s work with writers who have their music published and broadcast to the masses. They issue licenses to any one or any thing which broadcasts music for more than merely personal enjoyment. As part of those licenses they collect royalties to the composers of music which is broadcast to the public. According to ASCAP itself it:
“protects the rights of its members by licensing and distributing royalties for the non-dramatic public performances of their copyrighted works. ASCAP’s licensees encompass all who want to perform copyrighted music publicly. ASCAP makes giving and obtaining permission to perform music simple for both creators and users of music.” www.ascap.com/about
Think of it this way: You drive your car over to your favorite shopping mall. While en route you jam out to your local rock radio station (if it still exists). After parking, you saunter into the mall which is broadcasting some easy listening jams over its PA system. You wander into Abercrombie & Fitch to see if you can grab that hoodie that The Situation wore on last night’s episode of Jersey Shore and in the darkened perfumed laced store you are accosted by much too loud ska music. Working up a hunger, you then meander into TGIF where you are immediately accosted by 30 flat screen tv’s blasting a Black Keys track over a Cadillac commercial. Exhausted, you get back in your car and switch over to the smooth jazz channel for a relaxing drive home.
Every step of the way during your epic mall journey, songwriters were collecting performance royalties. Let’s take them one at a time.
1. Your car ride to the mall: The local radio station licenses its playlist from the PRO’s and pays a set amount for each song it broadcasts to the appropriate PRO (which is the PRO that the songwriter signed up with and registered its songs). The PRO then allocates the correct portion of that payment amongst the writers of each song which was broadcast. Eventually, the radio’s payment trickles down to the songwriters themselves.
2. The mall itself has a license with the PROs to broadcast its easy listening jams. The same process ensues. PRO’s collect from the mall owners and pay out the appropriate writers.
3. Franchises like Abercrombie and Fitch also have direct licenses with the PRO’s in order to continuously broadcast music to their patrons. So similar to the radio stations and the mall, individual stores will also pay a license fee to the PRO’s to pay for the right to broadcast music.
4. The network which broadcast the Cadillac commercial on television will also pay a license fee to ASCAP. See our article on Licensing to see the other compensation that may be owed for this type of use.
5. See number 1.
The amount of money paid every time a song is broadcast varies. How much does it vary? Well that depends (sorry, but it’s true). The PROs negotiate individual licenses and rates with its licensees. The terms of the licenses depend on a large number of variables including the size of the audience, the time of day of the broadcast, the method of broadcast and even the current financial climate. A song that is featured on a top network drama played at primetime on a Thursday night will surely be worth more in performance royalties as compared to a song that is played over the loudspeaker at Steak and Shake in rural Georgia. However, if you do not register your work with a PRO you will receive the same amount for either broadcast: $0.00.
We are often asked which PRO is better? BMI and ASCAP as the biggest PROs have standard answers as to why they are better than the other. However, as with most things in the music industry, we feel that it comes down to relationships. If you develop a relationship with a representative from a PRO you should stick with him/her. Finding someone to help you through the registration process and explanations as to what royalties are owed is invaluable to any artist. Neither of the organizations have long term contracts, but you have to be pro-active to know when to terminate or they will continuously renew.
This is obviously only a very cursory overview of a much more complicated subject. But, it is a start. If you have more questions, please contact us.
One day a John J. Emo was walking through a mall in Suburbia, USA. As he followed his girlfriend into a Forever 21 he heard a familiar song over the cheap sound system. Why was it familiar? Because Emo wrote the music!
The next day Paula P. Techno was watching an independent horror film. During the first slasher scene a somewhat terrifying and recognizable techno beat could be heard. Techno, who had released her music for free all over the internet, had no idea how her music ended up in the movie.
Finally, somewhere in NYC, Hank H. Hiphop rode an elevator up to see his dad at his office. Typical Musac was entertaining the passengers of the elevator all the way up to the 83rd floor. Hank was dumbfounded to realize that his recording of Catch it Like it’s Cold had been made into an instrumental only masterpiece without his knowledge.
Are John, Paula and Hank a bit slow on the uptake? Probably, but that does not mean that they are dumb. The world of music publishing is also massively confusing. For the independent artist, there are steps to take to make sure that you do not end up like these poor fools; potentially losing out on uncounted royalty payments.
Once you have made the decision to write music and introduce that music to the world (your bedroom mirror or your Aunt Grace do not count) there are several steps you need to take. One of the first steps is to register you lyrics and music as copyrights. This can be done for a sound recording and/or the lyrics of your song. There is a relatively easy online application that is available on www.copyright.gov to fill out.
The next important step is to register with either ASCAP, BMI or SESAC (in the USA). These organizations will help you collect and manage (to a certain degree) performance royalties that are owed to you as the performer of a piece of music. So if your song was performed on Dancing with the Stars or on your local Morning Zoo radio show or even in the airport smoking area, one of these Performance Rights Organizations (PRO) is resonsible for collecting the statutory royalty owed to the writer, performer or composer of the song for the public performance of the song.
PRO’s are not fail-safe. There are a lot of artists that feel that their PRO is not collecting everything that is owed. However, think about how tough of a job that is these days. How many media and consumer outlets are there out there that utilize music? While every person, entity or business that publicly performs music (over the airwaves) is supposed to report the playlist to a database, it is nearly impossible to keep track of everything. Trust me, the PRO’s do 110% better than an individual on his own.
The next step in capturing your publishing and maximizing the value of your publishing income is to form an entity. I’ve written about the need to form an LLC in the past. Publishing is yet another reason to do so. Your LLC will become your first publishing company and will collect royalties for your music. If you are in your band, you can register the LLC with the PRO. That way, the payments go to your LLC and will be split amongst the band members that own a piece of the LLC.
Another advantage of forming an LLC to act as your publishing company is negotiation power with other large publishers (EMI/Sony/Warner). You may get a better split with a publisher if you have already formed and registered your music under your LLC. Instead of signing up with a major publisher and giving up 100% of your publishing for an advance (not that anyone has money for an advance these days), you can negotiate a better split.
Last week I was on a panel with other lawyers, a musician and publishers. We all seemed to agree that the music world is changing and the major label system is beyond repair. The do-it-yourself artist is a reality that is here to stay. But many musicians who are used to having a label handle their registration and publishing do not know what steps to take. This has allowed for an enormous amount of royalties to go unpaid as well as copyright infringement to go unchecked. Throughout this whole process of making music, an artist will need help and guidance. Instead of a label coming to the rescue, now the artist is charged with creating his or her own team of experts. Just like any other business, services have to be outsourced. No one would expect a doctor to be able to play the bass. Similarly, a drummer probably does not know corporate level taxation.
Consult with experts. Find your PRO. Hire a lawyer. Hire an accountant. Treat the music like a business. Whether it is losing opportunities or not collecting what it is owed, without the right team, the D-I-Y artist will see her career D-I-E.