Paying the Pipers

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The thing with music is there’s often more than one owner. Singers often work with songwriters – sometime several. Ownership of the rights to a song can also change hands – and be shared in “slices” by several people, too.

So, who gets paid when a song gets played?

And, how?

There are two ways to do this:

Easy – and hard.

The easy way is for a business such as a restaurant, bar or streaming music service like Pandora to pay for what’s known in the business as a “whole work license.” As the term implies, a business pays a single general fee for playback rights.

This money is paid to music collectives called Performance Rights Organizations (PROs). The industry heavyweights – who own most of the publishing rights to most of the music Americans listen to – are the American Society of Composers, Authors and Publishers (ASCAP) and Broadcast Music, Inc. (BMI).

Because the two major PROs, ASCAP and BMI, together effectively control about 90% of the music (having contracts with most of the singer/songwriters) the federal government has imposed marketplace protections via anti-trust consent decrees. These consent decrees allow ASCAP and BMI to maintain their monopolies, but protect consumers from monopoly pricing.

Under decades long practice, a restaurant or other licensee pays ASCAP and BMI for the right to play music and that money is distributed to each stakeholder in a song.

This has simplified book-keeping and kept licensing costs within reason – while also allowing the PROs to make a lot of money. Both ASCAP and BMI have hit record revenues in recent years, with both each topping $1 billion last year.

Apparently, not enough money, however.

A few weeks ago, the PROs managed to get a federal judge in New York to overturn the current arrangement and in its place, impose a fractional licensing regime that’s as Byzantine as it will likely prove to be expensive.

Instead of paying a single general fee to license a catalog containing millions of songs, business and streaming music services would have to negotiate fractional licensing fees individually, to each part-owner of any song’s publishing rights – creating a book-keeping nightmare and a legal nightmare, given the potential for nuisance copyright infringement lawsuits.

Costs would either be transferred to listeners in the form of higher subscription fees (in the case of music streaming services) or businesses that pay to play music in their establishments could simply elect not to buy in – and refuse to pay to play.

Listeners would have less to listen to – and pay more for what’s left.

That’s assuming anyone can figure out whom – and how – to pay.

Fractional licensing of each individual song – and each person legally entitled to a “cut” of the licensing fees – would be like paying multiple farmers for each individual bean in a can of beans.

It’d be a miracle if anyone ever got to actually eat anything.

Worse yet, this judge’s decision could open tens of thousands of businesses across the country to greater copyright infringement exposure. In other words, more litigation or threats of litigation to coerce higher fees.

This is why the Department of Justice’s anti-trust division rejected the PRO’s pitch for fractional licensing. But ASCAP and BMI are big gorillas, not easily spurned. They beat their chests, shook the bars – and got a friendly federal judge, Louis L. Stanton of the Southern District of Manhattan, to overturn the DOJ’s ruling during a “preliminary conference” at which little testimony was given.

The PROs are claiming that fractional licensing is necessary to provide “just compensation” to the artists (singers, songwriters and others associated with the making of music) whose music rights they own.

But the problem isn’t lack of money being made. It is lack of money being paid to the people making the music. ASCAP and BMI have set record revenues for several years running.

But the music creators have little choice, because of the monopoly hold the PROs have on the music business. 

Fractional licensing would allow the monopolists and the major publishers to pad their pockets, but the songwriter could be the loser. If businesses cannot afford to clear all rights or cannot ensure they have cleared all necessary rights, play-lists will shrink. Fewer songwriters will get played, which means fewer songwriters will get paid.

All legal precedent and common sense aside, this is just another reason why Judge Stanton made a mistake ruling in favor of the PROs.

The DOJ ought to fight this one – and put the “gorillas” – ASCAP and BMI – back in their cage.

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7 COMMENTS

  1. Seems like it was late 80’s or maybe the 90’s when Metal Likka started this ball of wax. They were miffed over several things. Having to buy their own drugs was cutting into their lifestyle as well as baby mama’s wanting a piece of the action post baby. And what’s the point of a multi-million dollar house on the beach in Malibu without a stable of ultra-exotic cars? When you order a brace of McLaren F1’s and then somebody can’t dig up the green it’s embarrassing. It’s time to pay them…..again.

      • There’s two groups, often with a great deal of overlap who need to simply be euthanized. One is the people who simply can’t become a bit more responsible but have to go off the deep end and renounce all drugs use, wild living, etc. The other is the born again crowd or simply “found the light” crowd. And rarely have I seen in the people I knew/know who did this much other than a backsliding hypocrite. The people who simply get right in doing right by their spouse/family and can be a productive person rarely have anything to say about their life, what it was or what it is now. I know a few and they admit a bit of hell-raising is a good thing and they’d continue if they could control themselves but they never mention it nor tell someone else how to live.

  2. Left out the biggie in the bunch, the RIAA (Recording Industry Association of America. When I played in a band we had to pay both of them Mudders (RIAA and ASCAP) when ever we played a song in public for cash. Hence after the first year together playing professionally, we stopped playing covers and during the break wrote enough material to last 6 hours. Just another reason I would never play in a band again EVER!

    David Ward
    Guitarman6052@gmx.com

  3. Artists always lose when it comes to money. Because there are always so many of them, there’s always someone else ready to take a worse deal. But then again, there’s always the chance that you’ll win the Powerball and cash in big, and that’s what drives most pop musicians and musicians. Most of whom who aren’t all that talented but have a hook like the willingness to shake their moneymakers or bite the heads off roadies and live farm animals (which are usually more sanitary than roadies).

    ASCAP and BMI are the health insurance companies of the music business. They tell musicians that they’re on their side, but the royalties collected on most hit songs these days are minuscule, even with a big hit. Not to mention the record labels pay advances against future revenue for an album, basically making musicians indentured slaves until the album pays back the production costs, promotion and marketing costs, front money for touring (those busses are expensive, but at least you’re not homeless for a few months), and “miscellaneous.” Again, because there are so many people vying for a recording contract, the industry still holds all the cards.

    Note that the real musicians, the ones who can’t help but make music will make it anyway. My aunt is one of those people. She made a pretty good living over the years teaching piano and performing, but never did any recording until I visited last summer. And every so often when the muse strikes I’ll sit in front of Logic Pro and my keyboard for hours to make a ringtone or other stupid song that I just wanted to hear for myself.

    The other side is that because there’s so much competition for listeners, it’s actually more valuable/difficult to market and sell music than it is to make it. That’s why the Internet hasn’t really changed the business of music very much, just added another distribution medium. There’s so much noise it gets hard to get noticed by anyone other than your friends.

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