This Mysterious Castle is said to house all uncollected Sound Exchange Royalties. Enter at your own Risk!
We here at L4M often make reference to a somewhat mysterious organization known as: Sound Exchange. However, many people are still confused as to exactly what Sound Exchange does. We constantly receive questions regarding Sound Exchange so we thought we would give a little primer here.
Prior to 1995 artists and labels did not receive a performance royalty for sound recordings. On L4M we have stressed the importance of receiving your publishing performance royalties from ASCAP, BMI and SESAC. However, these organizations only deal with the underlying compositions. Since 1995 artists and labels, in limited circumstances, are now able to receive royalties for the actual sound recordings. This has been the norm in most of the rest of the world for a long while now.
The main areas where royalties are available for artists and labels are: 1. satellite radio (think Sirius), 2. internet streaming radio (think Pandora), and 3. cable music only channels (music with no video, think satellite radio delivered by your cable or satellite provider). Unlike the underlying composition where you have a choice of three performance rights organizations, Sound Exchange is the only organization for your sound recording performance royalties.
So, if a song is played on terrestrial radio only the writers and publishers are entitled to a performance royalty. If the same song is played on one of the above mentioned avenues, the writer, publisher and now, artist and label will receive a royalty.
If you are an independent artist that owns your own master recordings it is important that you sign up as both an artist and as a sound recording copyright owner. This is important because Sound Exchange divides the money as follows: 50% to the copyright owner (usually a label), 45% to the featured artist and 5% to background musicians. As an independent artist where every dollar counts it is imperative to sign up correctly.
For some reason there are a lot of artists and labels which are owed money that have not yet signed up with Sound Exchange. There is no cost to sign up and royalties are paid quarterly. If you think you may be one of these artists or labels you can search here and check: http://www.soundexchange.com/performer-owner/does-sx-have-money-for-you
We hope this helps clarify what Sound Exchange does. Now, go check if you are owed money and sign up. Good luck.
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.
Did you know that the U.S. is grouped with China and Ghana as one of the only countries that does not pay royalties to the performers of a song that is aired publicly (Radio/TV)? Weird, right? Well this odd and troubling (for some) fact may be changing soon. Here is my fellow L4M’er, Eric Malnar with his take on the Performance Rights Act and what changes may be on the horizon:
The Performance Rights Act (the “PRA”) was introduced in the U.S. Senate (S.379) and the House of Representatives (H.R. 848) in February of last year. So why are we talking about this now? Well, as most of you should now, L4M was recently in Austin, Texas for the 2010 SXSW festival and the PRA was the topic of an interesting and heated panel. Interestingly, all sides of the issue were represented, except of course the radio stations (these are the guys who are supposedly adversely affected by the bill). Perhaps invitations were sent but nobody from the radio world wanted to appear on the panel…who knows. It is a shame because it would have been nice to hear their perspective especially since it appears as though the Obama administration is supporting the PRA and it might actually become law.
As a musician or someone who makes money through music, should you care about the Performance Rights Act? Well, it depends on what you do. As many of you know, every time a song is played on terrestrial radio a royalty is supposed to be paid to the songwriter. However, there is no payday for the artist who appeared on the song (singer, guitar player, chime and etc). For example, if I wrote a song for a famous pop singer I would receive the royalty not the singer. This is currently the system for terrestrial radio. Think of Aretha Franklin singing RESPECT. Everyone in the world has probably heard that song, but every time it is played the royalties for public performance go to the writer (specifically his estate) Otis Redding.
Digital sources of music are governed under a different law. Under the Digital Performance Right in Sound Recordings Act of 1995 (“DPRSRA”) digital music providers are required to pay performance royalties for performance of the sound recordings. Many feel that the difference in the way royalties are paid for terrestrial radio versus digital providers is unfair. The PRA would remedy this scenario by requiring a royalty for the singer as well as the background musicians. So as you can imagine, the digital folks, like Pandora and LALA are excited about the passage of the PRA because they feel it will provide a level playing field.
Another often heard argument in favor of the PRA is the fact that other countries do not have the same terrestrial radio exception that we have here in the States. In other words, money is being collected overseas for American artists but it is not being paid because the U.S. does not have a reciprocal system.
Wow, so this all sounds too good to be true, what is the catch you ask? Well terrestrial radio stations are not happy about the PRA. They argue that this will drive up costs and either put them out of business or force them to change their format to talk radio. Thus the dilemma, is it worth receiving new rights under the PRA to the potential detriment of your opportunity (as an artist) to have your music played on terrestrial radio? Back in the day when my band was struggling to get exposure we would have done almost anything to get played on big radio. If the radio industry, which claims to be struggling, pulls music from most of its stations, another avenue for musicians to get exposed is closed.
Regardless of what happens it is important for every artist to understand his or her rights as a songwriter, performer or both. As recording contracts morph into more intricate deals (e.g. 360 Contracts) artists need to be versed on all avenues of revenue. It is no fun talking about music and money in the same sentence but at the end of the day, you need to pay the bills so you can live to play another day.
Stay tuned for updates on the PRA and more insight into some of the hot topic areas of music in film.
The hangover from SXSW has subsided and deals are actually getting done in the world of both music and film. There are several hot topics which are been written, blogged, tweeted and plain old talked about in the music and film industry. Over the next several entries we will try to explore several of those topics.
A new contributor to L4M, Mr. Eric Malnar will update everyone on the public performance royalties debate that is garnering attention from the House, Senate, White House and musicians all over the world. We will also explore what is a standard 360 deal these days and continue to share our experience of working with musicians (both label musicians and independents) in the ever changing industry.
On the film front; just when I thought it was safe to celebrate the passage of Section 181…President Obama seems to have lost the legislation somewhere between health care reform and his next pack of Camels. We are still waiting for his signature on H.R. 4213 and eager film makers are anticipating the one year extension that should have come on January 1, 2010. In other film news, state tax incentives are ever changing so we will try to keep you up to date on the best places to film. Plus, we will walk the newbie film maker through the process of raising funds for an independent movie by explaining all of the paper work (stupid lawyers) that is necessary before you can even accept a check from your mom.
SHAMELESS SELF PROMOTION OF THE WEEK:
One thing I take a lot of pride in is introducing talented people to other talented people. As a lawyer for creative people, I am able to make introductions to some gifted artists which then results in some pretty cool stuff. I always tell my clients to view us as a resource; whether it is introducing managers to artists, labels to artists, licensing companies to advertisers or musicians to other musicians, our clients end up with the same contacts and connections as we have.
Possibly the best example is this song. Our clients, Database, French Horn Rebellion and Hey Champ collaborated to bring you a Remix of Beaches and Friends. The song is doing great on a worldwide level. Enjoy: