BMI

Radio industry group tries to block licensing rate increase

Thursday, October 10, 2013 - 11:00am

The cost of content is a shared issue in terrestrial, webcast, and pureplay balance sheets. Music licensing costs come as a patchwork of statutory and negotiated agreements. Stakeholders on the music content side include composers, performers, and labels.

Three organizations represent licensing rights and costs for composers and songwriters: ASCAP, BMI, and SESAC. SESAC is different from the others: It is smaller, and accepts creators through an application process rather than open admission to its portfolio. SESAC competes with ASCAP and BMI for clients, and negotiates licensing rates on behalf of its composers and songwriters independently.

Now meet the Radio Music License Committee. The RMLC sits at the other end of the bargaining table, representing radio stations’ right to use music in their terrestrial broadcasts and digital streams. The RMLS negotiates content costs with all three so-called PROs (Performing Rights Organizations). Radio stations may step outside of the RMLC’s purview and negotiate separately with the PROs, but most do not.

Here is one more difference between SESAC and ASCAP or BMI, which relates to a legal action happening this week -- action which could determine whether certain licensing costs rise for all radio, broadcast and Internet. ASCAP and BMI rate-setting processes are governed by a “consent decree,” an antitrust mechanism put in place over 50 years ago. The consent decree enables the U.S. government to arbiter licensing rates when negotiations fail, through an adjudicating committee called the Rate Court.

SESAC, because of its relatively small size, was not (and is not) included in the antitrust consent decree. This independence gives SESAC unique potential leverage in making money for its clients by levying high licensing rates on the radio industry. The most recent multi-year agreements between radio and ASCAP/BMI effected a reduction in licensing costs through 2016, according to David Oxenford’s Broadcast Law Blog. SESAC does not receive downward pressure from any outside arbitrating power.

The Radio Music License Committee filed suit against SESAC one year ago, seeking antitrust remedies applied to SESAC. The case has neither been dismissed nor thrown out, and has not progressed. Now, SESAC is due to deliver a new five-year licensing rate plan to the radio industry. RMLC has filed an injunction to delay the (presumed) rate increase, and negotiations of it, until the lawsuit is resolved. Inside Radio quotes the RMLC’s hyperbolic appeal to the court: “SESAC’s planned five-year rate hike would devastate the industry.” 

BMI reports record revenue as streaming's share grows

Monday, September 23, 2013 - 12:20pm

The New York Times writes today that one area of a troubled music industry that's seen consistent revenue growth, and may be poised for more, is songwriter and publisher royalties, collected by groups like BMI and ASCAP.

Webcasters and radio pay these groups when performing music on-air and online. These royalties are not the same as those paid to copyright owners of sound recordings.

Today BMI announced $944 million in revenue for its fiscal year ending in June, a 5% year-over-year increase, and a new all-time high.

Digital services paid BMI $57 million (which includes not only Pandora and Spotify but Hulu, Netflix, and others). While digital was just 2% of BMI domestic revenue in 2009, it's up to 9% now.

Last week (see RAIN here) a federal judge ruled publishers may not withhold certain rights from the ASCAP collective in order to wring more money out of services like Pandora. The decision does not directly affect BMI, says the paper.

BMI announced it's paid $814 million to rights holders in its recent fiscal year, also a new high. Since 2003, the paper repots, BMI's revenue has gone up about 50%.

ASCAP said in March its 2012 revenue was $942 million, down more than 4%.

Read more in The New York Times here.

RAIN Summit West recap: The royalties panel

Friday, May 24, 2013 - 1:20pm

The annual spring RAIN Summit West gathering in Las Vegas last month closed with a discussion of the evergreen topic of music licensing costs and the effects on services. Somewhat encouragingly, the on-stage participants -- representing webcasters, the music industry, rights organizations, and performers -- seemed to agree on more than disagree. The panel, "The Song Plays On," was moderated by attorney and webcasting legal expert David Oxenford.

Attendees heard from artist Patrick Laird, a cellist in the classical/rock outfit Break of Reality. A strong advocate for webcasting, he says his band's experience has led him to believe play (that is, exposure) on Internet radio is far more valuable than the royalties his band earns from that play.

"I'd much rather be played," Laird said. "We've had over 16 million plays in a year on Pandora... we wouldn't get radio play otherwise... but our record sales tripled." He told a story of a promoter finding Break of Reality on line and booking them for a show which paid them more than all their royalties for an entire year.

When the discussion swung to the promotional value of Internet radio versus that of on-demand streaming, Laird (left) said, "Internet radio is what radio has always been, a discovery tool, a way to sell tickets, to fill concerts, to sell music, to get more fans. Internet radio is a better version of radio, it does all those things better. What's important is the growth of the medium. We need to support Internet radio, it's the future of the way people discover music... especially independent artists."

Consultant Ted Cohen, of TAG Strategic, while maintaining that "radio should pay," respects the benefit to artists of being played on services that can now reach "a hundred, two hundred million people." He said, "We're somewhere in the sweet spot -- I don't think the artists and labels are entitled to more... I'm not sure how much less they're entitled to."

This led to panelists considering how services could be even more beneficial to artists. Laird really liked the idea of linking directly to artists' presences on Facebook or YouTube ("that's money right there"), and suggested giving tghe artists themselves an interface to maintain those links.

But SomaFM GM/Program Director Rusty Hodge (right) feels the statutory license is a barrier to some of these methods of promoting new music. He suggested the need for a wider range of licenses, that could, for example, allow for use of music that's currently prohibited by the "performance complement" of the law (such as a rule forbidding play of more than three songs by a single artist in two hours, among others). It "keeps you from doing a lot of creative things," Hodge explained.

Cohen agreed that constraints on webcasters' use of content, even when promoting artists, held back creativity.

Moderator Oxenford then brought up the fact that some services like iHeartRadio and Apple's upcoming service are negotiating directly with copyright owners (and going around the statutory license) to, among other things, avoid the constraints of which Hodge complained. And while services going this route would lose the convenience of a "one-stop" for all their licensing, Cohen said the process of direct licensing has become much easier in recent years: "The goalposts have gotten wider."

Getting back to the statutory license, Oxenford asked if a "percentage-of-revenue" royalty model, such as those employed by publishing performance rights organizations, makes more sense for a young industry like Internet radio (The statutory rate is based on a "per performance" rate, a performance being one song/one listener.).

SoundExchange Senior Counsel, Licensing & Enforcement Brad Prendergast explained "the beauty of a per-performance" royalty is that "every transmission of a track is valued the same -- it's 'delivery mechanism neutral.'" It helps protect the value of the music from an operator that would use a high volume of music but make very little money from the service. (He also reminded the panel that there are indeed some statutory agreements to which SoundExchange is a party that use a percentage of revenue, such as the small webcasters' license).

One recent development the panel brought up was the announced withdrawal of digital rights by some publishers from performance rights organizations (PROs) like BMI and ASCAP. BMI VP/New Media & Strategic Development David Levin (left) explained that publishers are seeing record labels making much more licensing music to services than they are, because the PROs operate under federal regulations that they feel supress the rates they can charge. The publishers tell BMI, Levin said, "Because of the government structure you operate under, we can get a better rate outside of this monopoly, by going direct."

Cohen empathized with the sentiment. "The labels are getting 90% of the revenue, the publishers are getting 10%. That pendulum has to swing a little bit."

We have audio for all of our RAIN Summit West content (including this panel) available via SoundCloud. Look for the links in the right-hand side of kurthanson.com.

We hope to see you Sunday in Vegas for RAIN Summit West!

Friday, April 5, 2013 - 11:50pm

We hope you've planned to join us this Sunday for RAIN Summit West at the LVH Hotel in Las Vegas.

As you probably know, our Las Vegas Summit is our annual full-day Internet radio conference and a co-located education program of the NAB Show. Now in its 12th year, it's the premiere learning and networking event for the industry focused on radio and the Internet.

This year RAIN Summits is very happy to have partnered with online radio tuning service and mobile listening app maker TuneIn to stream live audio from the event (using Backbone Networks technology). If you're not able to attend, you'll be able to listen to live audio of RAIN Summit panels, presentations, and keynote speeches during the event. TuneIn will also archive the audio for later listening. (We'll post the link to the live audio stream here on Sunday.)

One of the industry thought leaders joining us will be Targetspot CEO Eyal Goldwerger (pictured left), to give a "POV" (point of view) address. TargetSpot is the nation's largest digital audio ad network, with nearly 40 million unique listeners to its more than 85 radio group and pureplay affiliates, nearly two-thirds of the online listening population. TargetSpot recently added six new partners to its network, including Songza and Radionomy (see RAIN here). Goldwerger is a board member of Galil Software, and was CEO of XMPie, Inc., which Xerox purchased in 2006.

One topic which will undoubtedly be on many Summit-goers minds is Apple's nearly-certain entrance into the Net radio field. Today we hear Apple may be close to label deals affording them royalty rates at half what Pandora pays!

Our panel "The Song Plays On" is dedicated to the issue of webcasting royalties, and ways services and the industry might work together better. We're very happy to welcome to the panel and to RAIN Summit composer, arranger, and performer Patrick Laird (pictured right), cellist and founder of the group Break of Reality. Last fall when multi-platinum artists signed on to an "open letter" ad critical of webcaster Pandora's efforts for royalty reform, Laird took his own stand and wrote an op-ed for The Hill in strong support of our medium.

He wrote: "It is clear that the effectiveness of internet radio with regard to both product sales and promotional power is overwhelming, and the success and expansion of these companies are of the utmost importance for the future of our group. Internet radio creates an unparalleled opportunity for us to reach millions of people who otherwise might not discover music like ours" (see our coverage here). Laird's an Eastman School of Music graduate with a Performer's Certificate. (Listen for Break of Reality music during breaks at the Summit!)

Broadcast Music, Inc. (BMI) is one of three "performance rights organizations" in this country that collects license fees from businesses that use musical compositions, and distributes royalties to songwriters, composers, and music publishers. David Levin (left) was named BMI VP/New Media & Strategic Development in October, and he leads digital revenues efforts for BMI. Prior to his current position, Levin spent 12 years at Sony Music Entertainment, where he rose to SVP/Digital Sales. He was also VP/New Media and Senior Director/Online Marketing at Sony. He was Director of Marketing at GetMusic.com, a joint venture of Bertelsmann and Universal, and managed market research for BMG.

"The Song Plays On" will be moderated by attorney David Oxenford (more here), widely-regarded as one of the foremost experts on the matter of webcasting royalties. Our other panelists include Brad Prendergast of SoundExchange, Ted Cohen of TAG Strategic, and Rusty Hodge from Soma FM (more info on these three here).

Our RAIN Summit keynote speakers on Sunday will be RAB president and CEO Erica Farber (more in RAIN here) and Rhapsody International president Jon Irwin (more here). More information, including a complete agenda and list of speakers, is available on our RAIN Summit West page.

Yet another major publisher, Universal Group, pulls digital rights from ASCAP and BMI

Wednesday, February 6, 2013 - 1:05pm

Industry news source Digital Music News says the threat of rising music publishing royalties to music services like Pandora is growing -- pointing to hints that Universal Music Publishing will soon adopt the aggressive tactics recently employed by other major publishers.

Major publishing groups (which hold the copyright to written song compositions, for which broadcasters and webcasters alike must pay) like the now combined Sony/ATV and EMI Music Publishing announced last year they would cancel their "digital performance" contracts with performance rights organizations ASCAP and BMI (with whom services can license to access all the music the groups represent). The move frees the publishers from the rate-constraints imposed by the federal government, and forces services like Pandora to negotiate directly with the publisher for a license to perform its music.

In January came news (here) that Pandora's bill for Sony/ATV music went up 25% -- and that's for a one-year term which will need to be negotiated again.

Immediately industry observers began to warn (here) that publishing groups no longer subject to rate regulations can make life very difficult for those who'd license music. Billboard.biz reported this week UMPG has announced it will withdraw its digital rights from ASCAP and BMI (BMG Chrysalis has also negotiated the option to withhold its digital performance rights, but hasn't yet decided if it will.)

UMPG chairman/CEO Zach Horowitz told Billboard, "In order to ensure that our songwriters are fairly compensated, we believe the best approach is for us to negotiate directly with these services. For that reason we notified both ASCAP and BMI at the end of last year that we will be withdrawing our digital rights for controlled catalogs at the earliest opportunity."

According to its financial reports, Pandora pays music publishers 4.1% of revenue for the use of musical compositions, a far cry from the 55% it pays for copyright sound recordings. So while music publishing royalties aren't yet the immediate threat sound recording royalties are, no service is currently ready to take on yet more expense (including Pandora, by far webcasting's most successful). Yet that 12-to-1 ratio of what labels earn versus the publishers, and presumably the sense that a written song is as valuable a commodity as a recorded one, are seen as major drivers in the move towards publishers directly negotiating with services, and getting higher fees.

Read more in Billboard here and in Digital Music News here.

Oxenford: Individual rights deals may eventually set precedent for blanket licenses

Tuesday, January 22, 2013 - 1:20pm

Industry attorney and rights/royalties authority David Oxenford is suggesting the system of simple, one-stop music licensing that has enabled services to easily pay for the use of copyright music, and rights-holders to earn on their creations, may be breaking down.

Last week news broke (here) that webcaster Pandora's bill to perform compositions held by Sony/ATV will go up 25%. Pandora's agreement with ASCAP and BMI no longer covers Sony/ATV work, and they must settle separately -- without the oversight of a rate court. Some fear this is just the first domino falling, soon to be followed by other publishing groups breaking away from the Performance Rights Organizations (PROs) ASCAP and BMI, which aggregate rights and rightsholders (making the licensing of music simpler for both copyright owners and users). See our followup to the Sony/ATV and Pandora news here.

Oxenford joins those warning that if more large publishing groups withdraw from the PROs, the process gets harder for music users -- with no rate court oversight (to regulate rates).

Keep in mind some owners of sound recording copyrights have peeled away from the collective -- in this case, SoundExchange. In those cases, labels or label groups like Big Machine have made separate deals with broadcasters that decrease webcasting royalties.

But, if this fragmenting of rightsholders continues and accelerates, life could become more complex and expensive for smaller players -- both smaller services and smaller rightsholders. As Oxenford points out, smaller services don't have the manpower to negotiate all they agreements necessary for a comprehensive service; smaller publishers may be left relying on the PROs, and with fewer members, admin costs as a percentage of earnings will rise.

"Note, in some cases, any advantages of the larger players may fade away, as marketplace agreements can often be the best evidence of what the royalties set by a rate court or the CRB should be, in which case these directly licensed rates will end up being extended to all players in the industry," Oxenford writes.

Given the direct deals for sound recording and publishing rates so far, "we might see higher rates for music publishing, but lower rates for sound recordings over time."

Read his entire blog post at Broadcast Law Blog here.

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