Continuing our series on Performing Rights, Simplified, let’s dive into the topic that everyone wants to know about – money.

Let’s start with a quick review. Performing rights are the right to perform music in a public setting. This can be via radio broadcast (terrestrial), television, in a business or venue. Any performance (“use”) of a song (“work”) requires the user to pay the songwriter and publisher. A songwriter is a composer and lyricist (often the same person, although these can be different parties). The publisher is the individual or organization that controls the payment of the song. The distribution of the payment to the respective party is a royalty.

We know that Performing Rights Organizations (“PROs”) are big companies. ASCAP and BMI manage 10.5 million songs each, with SESAC managing 400,000. (Global Music Rights is not publicly stated.) These groups license TV Stations, Radio Stations, Digital Services and over 100,000 real-world business establishments. This is a multi-billion dollar industry.

So the big question is, where does this money go?

Following the dollar starts with how PROs collect fees from music users. There are four main categories: radio stations, TV networks, digital services and businesses/venues. There are distinct qualities that make these mediums different.

1. Radio & TV

In general, radio and TV focus on pre-recorded material. (This is aside from any live performances on these mediums.) Music broadcast over these mediums requires licensees to submit playlist information. This comes in the form of playlists from radio and manually submitted playlists “cue sheets” from TV stations and video content producers. In some regards, these mediums are ahead of others, but still leave room for error from lack of verification.

2. Song Weight/Value

There are a variety of factors that determine the “value” of a song performance. Christiane Kinney, a music attorney at LeClairRyan, LLP explored how “not all performances of music are weighed equally.” Here is the post from DIY Musician (via CD Baby):

• the type of usage (e.g., “featured” or “on camera” performances, theme, background, jingle/promo, infomercial, etc.);
• where the music is performed (e.g., commercial, college, or satellite radio, NPR, network or local TV, cable networks, etc.)
• the negotiated rate each licensee pays (with commercial radio and network TV stations paying the highest rates); and
• for TV and cable performances, the time and length of the performances (with longer clips receiving higher royalties, and prime time paying more than late-night  or midday programming).

The unfortunate side of having so many variables is that the PROs do not offer much transparency. BMI lists several breakdowns surrounding creator royalty collection, without any hard numbers. ASCAP’s website offers their royalty calculator. But without key variables for the formula, it doesn’t offer much help.

(source: ASCAP Payment System)

3. Businesses & Venues (General Licensing)*

Until recently, limitations in technology have prevented music recognition in real-world commercial settings. This means that PROs charge music users based on the ability to use all music from their catalog. This “general blanket license” gives businesses and venues the ability to play any music from a PRO’s catalog. This fee structure is different from radio and TV, who are only charged for the music they use. Imagine paying for everything on the menu at a restaurant, allowing you to eat anything, as opposed to the only item you want to eat.

*Promoters

Concert promoter licenses are a special use case within the area of General Licensing. Rather than pay blanket licenses, large concert promoters deduct PRO fees from touring artists on a per ticket basis. A deduction is made for all PROs, without consideration of the performing songwriter’s PRO affiliation or the PRO affiliation of the music broadcast between bands. This means performing artists pay the fees for music they don’t perform.

4. Radio Proxy

Song weight/value play a major role in determining what songwriters are compensated for live performances. In the absence of artist submitted setlist data, PROs rely on radio chart data to make assumptions on the music used by real world businesses. They assume the music played on the radio is the same as the music played in a business. Less than 2,000 radio stations are monitored by digital technology and there are over 10,000 radio stations in the United States. Many songwriters never stand a chance of being paid. A recent proof-of-concept study uncovered only 20% of the music used in those businesses was also broadcast on the radio. This mean 80% of the songs heard in businesses were not receiving general performance royalties and worse, that money was being paid out to the wrong individuals!

5. Temporary Solution

The PROs have made an attempt to start compensating songwriters for live performances. ASCAP OnStage, BMI Live, and SESAC’s Live Performance pay songwriters for submitting setlists. But this process relies on an action from the songwriters. There are movements like #IRespect Music and #MusicTransparency are trying to change this. They encourage PROs to adapt technology for more transparency and a fee structure based on actual music use, like radio and TV. Technology could improve accuracy across all mediums. Verification would help songwriters and publishers receive compensation for commercial music use.

We’ve identified the problem: lack of transparency. Royalty collection and distribution are not utilizing proper technology solutions. This is an outdated and inefficient system. So, how do we fix the problem? That’s exactly what Soundstr is working to do, and what we’ll discuss in Performing Rights, Simplified P3: The Problem & Solution.

• How Performing Rights Organizations calculate royalty fees
  • ASCAP – http://www.ascap.com/members/payment.aspx
  • BMI – http://www.bmi.com/creators/royalty/how_we_pay_royalties/basic
  • SESAC – http://sesac.com/WritersPublishers/HowWePay/PaymentInfo.aspx
  • GMR – http://globalmusicrights.com/

Calling all songwriters: we need to have an important discussion about performing rights. We’ll try to keep it simple, but this is important – so listen up.

There are a LOT of misconceptions about this part of the music industry. “What are performing rights fees? Aren’t performing rights just for cover bands? You have to be popular to make money from them, right? Where does this check in my mailbox come from and why am I receiving it?” These are all common questions from songwriters.

We’re here to set the record straight, once and for all. What you might not know could be holding back your career and keeping you from collecting royalties you have earned.

1. What Are Performing Rights?

Let’s start with the basics:

Performing Rights – are the right to perform music in a public setting. This can be via radio broadcast (terrestrial), television, digitally or in a real-world business or venue.

Performance – the use of a song (“work”) requires the user to pay the songwriter or publisher.

Songwriter – is a composer and lyricist (sometimes the same person, although these can be different parties).

Publisher – is the individual or company that controls the payment of the song. The distribution of the payment to the respective party is a royalty.

2. Who Is Responsible?

Performing Rights Organizations (“PROs”) collect performing rights fees from music users. In the US the PROs are ASCAP, BMI, SESAC and Global Music Rights. There are ~50 PROs worldwide. In order for a songwriter or publisher to collect royalties from a PRO, they have to register with one of these organizations. ASCAP and BMI are open to the public; SESAC and GMR require a private invitation. You must choose one based on your country of origin and the available PRO’s open registration.

3. Why Are They Necessary?

Copyright law governs performing rights and these organizations. The law protects the creator of the song and lays the framework for the songwriter to be paid for the use of their hard work. So if a radio station, TV network, business or venue wants to publicly broadcast music, they must pay for that right (pay the songwriter) according to copyright law. If you do a job, you should get paid for that job. Songwriters are no different. PROs issue licenses for the right to use music and collect fees for all music used, regardless of whether the work is a cover or original song. The PROs then distribute royalties to songwriters and publishers. (More on this in the next installment: Performing Rights, Simplified P2: The Money.)

It is important to note that these laws are old (100 years!) and in the midst of big changes. (Hint: check out Performing Rights, Simplified P3: The Problem & Solution.) Performing rights are a major part of the music industry’s revenue stream.

4. How Does A Songwriter Access Them?

A composer of a song registers with a PRO (only one) as the songwriter. Registering as a songwriter with a PRO is free. If the songwriter and the lyricist are separate people, they would need to register their own accounts. After registering as a songwriter, an artist needs to define who their publisher will be. A songwriter can either register as their own publisher or work with a third-party publishing company, which is typically through invitation. Registering as a publishing company will most likely have an associated fee, but is necessary to collect publishing fees. PROs split most royalties 50/50 to songwriters and publishers (unless parties agree otherwise). A songwriter that does not have an associated publisher – even if it is themselves – is leaving money on the table.

5. When To Register

Any songwriter that has released music or plans to should register with a PRO. With so many distribution channels, it is impossible for a songwriter to track all performances of their music. A TV network on the other side of the country (or world) could already feature one of your songs in a show. You could be a fan favorite on a jukebox at a bar in your own backyard. Any unregistered songwriter could be leaving money on the table.

All songwriters should register with a PRO. Songwriters should educate themselves on how this industry works. Basic information could be the difference in collecting the royalties you’ve earned.

Stop leaving money on the table, and start learning how you can get the most out of your music. Find out more in our next article, Performing Rights, Simplified P2: The Money.