TRADITIONAL PERFORMING RIGHTS: Revolution, Evolution

Successful songwriters love performing rights organizations.  Unsuccessful songwriters find the PROs, as they’re called, terribly disappointing.  For songwriters who have just had a major hit, the big check in the mail comes from the PRO in one or two lump sums, while the mechanical royalties dribble in from the publisher in a steady but less impressive succession of checks.Successful songwriters love performing rights organizations.  Unsuccessful songwriters find the PROs, as they’re called, terribly disappointing.  For songwriters who have just had a major hit, the big check in the mail comes from the PRO in one or two lump sums, while the mechanical royalties dribble in from the publisher in a steady but less impressive succession of checks.

For the unsuccessful songwriter, PROs can be disappointing because while they are essentially a clearing house for performing royalties, they present an image to the struggling songwriter being a benign nurturer of young talent.  PRO membership personnel listen to songs, pat young writers on the back, occasionally present seminars or orientations and sometimes even connect young writers with publishers or labels.  But their good will can only go so far.  The money they distribute is for achievement, not for promise.

It’s surprising how many songwriters do not really understand what performing rights organizations do and how they do it.  So I hope already knowledgeable folk will indulge me while I explain.  There are three important performing rights organizations in the United States, ASCAP (American Society of Composers, Authors & Publishers), BMI (Broadcast Music Incorporated) and SESAC (originally, the Society of European Stage Authors & Composers).  ASCAP was founded in 1914 by a group of songwriters and publishers based in New York.  SESAC, the smallest of the three and the only for-profit of the three, came into being in 1930.  BMI was founded in 1939 by broadcasters who felt that ASCAP was overcharging the radio industry for their music.

PROs mainly do three things: 1) They acquire the right to represent the song catalogs of various publishers; 2) they license, for a fee, the performance rights to those songs to radio and television stations, night clubs, auditoriums, businesses and other venues that exploit the performance of those songs; and 3) they distribute the income from those fees to songwriters and publishers on the basis of data they feel reflects the use of those songs by the licensees.

Successful songwriters sometimes imagine they have a warm and fuzzy relationship with their PRO.  That’s a little like imagining they have a warm and fuzzy relationship with General Motors because they drive Chevrolets.  If you are a songwriter and have a friend and ASCAP, or BMI or SESAC, by all means be glad for the friendship, but do not imagine that 20 years from now when your time as a hit writer is done, your PRO will nurse you through your old age.  That is not their purpose.

Today is a time of huge change in the music business, a time of shrinking revenues for many record companies and radio stations.  PRO revenues have held up well so far, but the future is uncertain, yet promising. We recently spoke with several key figures at all three companies to get an idea of where they’re headed.

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Commentary: Chris Amenita

ASCAP Sr. V P of New Media and Technology

Consumer Choice

Since 1995 we’ve been seeing different business models that involve user choice compared with what existed before.  More people have access to high speed bandwidth from home, via cable or phone company (DSL).  Websites can be more complex in how much music is available and how people can access it.  Before, it sounded like radio.  Nowadays they can request what they want to hear.  Users can create their own playlists and formats.

Web Data Precedence

We still get info on what is played.  That is not going to change.  What is changing is the proliferation of smaller sites that aren’t as well known.  More music is being performed.  More titles are being used. Our distribution will reflect that.  In a digital environment we are hoping that reporting will be more accurate and more timely.   Right now accuracy is lacking because there are no standards…so web sites report differently.  We’re trying to standardize so we don’t have to edit. Also, ASCAP is a founding member of DDEX (Digital Data Exchange), which is trying to create standards that will be used in the digital distribution of music files. It aims, among other goals, to improve the efficiency of information-sharing and transaction-processing between the participants in the digital music supply chain. Check on www.ddex.net for more info on this.

Strategic Partnerships

ASCAP currently owns 50 percent of a broadcast monitoring company called Mediaguide. This company uses its own proprietary finger-printing technology along with an extensive monitoring network to identify performances of music, and also advertising, in [media outlets that include] Radio, TV, cable, and Internet. Mediaguide has many clients that want access to this information, so the utilization of this technology gives ASCAP a leadership position in the deploying and developing of new techniques and systems that a PRO can use to improve efficiencies and operating capabilities. We have had interest from a number of new technology companies that have expressed a strong desire to have access to our broadcasting monitoring infrastructure, and this could lead to ASCAP further utilizing new technology advances in monitoring capabilities.

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Commentary: Pat Collins

SESAC President/COO

Background

SESAC is the smallest of the three major American PROs.  In the ‘40s we began having regional music coming out of the South. SESAC had a lot of Christian Music too.  Remember that this was a private company; [Paul] Heinecke had started the company, grown the company, and when he passed on, he passed the business down to his daughter, Alice Prager. And she was not enamored with the business and didn’t feel the need to grow the business… The business was sold at the end of 1992 to three music industry folks-Freddy Gershon, Steven Swid and Ira Smith.  Their strategy was to grow the company; they invested their money, and they didn’t take any money out of the business for many years. They began to bring on folks-we needed to tech up-there was very little technology in the company.  They brought on Bob Dylan and Neil Diamond, their first major signings to help grow the repertoire, because this business is all about repertoire. You can’t ask someone to pay a license fee if you don’t have someone they’re playing.  Dylan and Diamond were the beginning.

The Blanket License

SESAC offers a blanket license that opens up its entire repertory for an annual fee… Over the last decade we have become increasingly reliant upon the Internet.  Many of our licenses are available via the net, via download, so that our potential licensees can look at it [online] through an electronic signature, give us their credit card information, they become licensed, and we’re not wasting resources. There are roughly two major areas of licensing, there’s the broadcast business-which included radio, television, satellite radio, cable TV-and then there’s what we call the general licensing business.  This area includes hotels, country clubs, restaurants, night clubs, auditoriums, music on airlines, the circus-just about anyplace where you can imagine. There are literally hundreds of thousands of locations out there that come to learn that music enhances the atmosphere of their business. Music is loved by everyone-as we sit here, music plays in the background.

Spreading the Wealth

We distribute for every performance that we can learn about, and then we distribute using radio as a proxy.

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Commentary: Richard Conlon

BMI Vice President of Marketing and Business Development, Media Licensing

Ch-Ch-Changes

Innovation drives our business.  Technology has created new revenues streams for our writers and publishers from websites, to satellite delivered services, to cell phone based entertainment services and more.  As these new services have come on the scene, the workload in licensing, as well as  tracking, processing and paying out royalties on these performances has increased exponentially, luckily technology helps us on these fronts as well.  We have built out the infrastructure to provide enhanced online services to our writers and publishers, electronic deposit of royalties and even pod casts showcasing our newest affiliates.  On the licensing and administration front, we have created online interfaces for the licensing of websites and digital electronic music use reporting systems that allow us to process hundreds of millions of performances every quarter and make detailed distributions.

Up for the Challenge

This is a dynamic time and it requires dynamic responses.  It has never been more important for PROs to nurture the value of copyright and to continue to provide all of the services in the digital world that we always have in the analog world.  These services range from creative support to legislative vigilance and copyright administration and of course royalty distributions to our writers and publishers.

Competition?

In light of all of the complexities of the market, many view our role as trusted broker to be more important than ever.  Writers and publishers need to know that a trusted entity is making new markets for the copyrights and fairly distributing royalties…while our licensees place a great value on our ability to put the right royalties back in the right pockets every quarter.  In the United States, we have always functioned in a competitive PRO environment.  Given a fair and level playing field, we believe that this competitive environment has fostered benefits and innovation for our affiliates and licensees alike.