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Gema

BERLIN — GEMA, the German performing rights organization (PRO), today sued OpenAI for copyright infringement in Munich regional court, alleging that the technology company used without permission lyrics from songs to which GEMA licenses rights. This makes GEMA the first PRO to file such a lawsuit, although it controls some rights that U.S. societies do not. This also seems to be the first case involving only lyrics; the case does not involve recordings. In its announcement, GEMA described the suit as a “model action,” aimed at clarifying copyright law in Germany, and potentially all of Europe.  
Since OpenAI offers copyrighted song lyrics in response to prompts, GEMA is alleging that the company trained its software on song lyrics that it has the rights to license, so it is suing the company for violations of the making available and reproduction right. (Making available is a right under European law that in this case is roughly analogous to the right of public performance, or in this case public display. It’s also alleging two infringing reproductions – one to ingest the lyrics for training purposes and another when they are output.) In the U.S., PROs do not control mechanical rights, so they would not have the standing to file such a lawsuit. 

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So far, most of the music business lawsuits involving AI companies have been over the ingestion of recordings, although that by definition would also involve the underlying compositions. But OpenAI is already facing a considerable amount of litigation, including a putative class action from authors, a lawsuit from The New York Times, and one each from online publishers and other newspapers. The issue in the U.S. is whether or not copying to train an AI qualifies as a “fair use” exception to copyright law. The record label cases against Suno and Udio will involve the same principle. 

European copyright law provides “exceptions and limitations” to copyright, rather than fair use, and the 2019 Copyright Directive allows text and data mining unless rightsholders opt-out. In this case, however, GEMA has opted out for all of the works it licenses. (GEMA does not license the lyrics for all the songs in its repertoire, but the lawsuit involves ones for which it does.) This lawsuit aims to clarify the law, and it has the support of some big German songwriters, as well as their publishers. 

“Our members’ songs are not free raw material for generative AI systems providers’ business models,” said GEMA CEO Tobias Holzmüller in a statement. “Anyone who wants to use these songs must acquire a license and remunerate the authors fairly. We have developed a license model for this. We are taking and will always take legal action against unlicensed use.”

The lawsuit comes as rightsholders around the world are becoming more concerned about how AI will affect the value of their works, as well as how they should be compensated for how it is trained. At the end of September, GEMA presented a licensing model for generative AI software that would compensate songwriters and publishers. It has also sent letters to AI companies stating they must license GEMA works in order to use them.

Since OpenAI both operates servers and makes content available in Germany, it will presumably have to operate according to German law. This seems clearer than the U.S. system, where fair use often involves considerable uncertainty. However, European countries do not offer rightsholders the opportunity to collect damages as high as they can get in the U.S. 

A representative for OpenAI did not immediately return a request for comment.

For the past several years, the organizations that collect public performance royalties have been growing far faster than most of the music business, especially in Europe. Revenue at the French collective management organization SACEM rose 34% in 2022, while its UK counterpart, PRS for Music, doubled its revenue since 2014. The growth is fast enough to make the whole alphabet soup of initials exciting to the point of attracting investment-backed rivals to the traditional nonprofits — think BMI, which just took on outside investment, or Kobalt’s AMRA. 
Until about a decade ago, the traditional collective management organizations, known as CMOs, licensed rights within a given territory for compositions played in public — at concerts, in stores and restaurants, on television and radio, and eventually from streaming services. (Some also collect for mechanical rights or neighboring rights and remit that to rightsholders through related organizations.) And while European CMOs still do that, for the last decade they have also competed against one another to represent and license online rights in Europe and some other territories (not including the U.S.). This has made the most complicated part of a complex business even harder to understand, since it allows publishers and songwriters to assign different kinds of rights in different territories to different CMOs. In the U.S., for example, songwriters can join ASCAP or BMI, then assign certain rights in other territories to different organizations, in order to collect that money directly instead of indirectly, although only very successful creators tend to do this.  

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As the pandemic subsided in 2021, CMO growth turned to hypergrowth, fueled by increases in online revenue, the reopening of restaurants and stores, and the roaring comeback of the concert business. The annus mirabilis was 2022, especially for the European societies that represent the most U.S. repertoire: SACEM grew 34%, PRS 23%, Sweden’s STIM 20% and Germany’s GEMA 13%. Now growth is coming down to earth, but it’s still healthy — last year, revenue grew 5% at SACEM (where distributions grew 19%), 12% at PRS, 8.4% at GEMA and 14.2% at STIM. So I was eager to write a column about how important this is for songwriters and the music publishing business that supports them, what this means for the future, and how creators can figure out which CMO would be the best for them. Instead, I ended up spending a few days staring into an abyss of uncertainty.  

Growth in CMO revenue means that either the publishing business is growing, a given CMO is faring better than its competitors, or some mix of the two. But although the European Union mandates transparency, each CMO accounts for revenue so differently that it’s very hard to compare them. For example, STIM categorizes revenue collected from online licenses in foreign territories as “foreign income”; SACEM considers this “online”; while PRS treats this income as online when it licenses rights directly and foreign when it doesn’t. It gets considerably more complicated from there.  

As competition among societies heats up, the most important few are pulling away from the rest. PRS, GEMA and STIM operate ICE as a Berlin-based pan-European licensing hub, and most publishers and other societies license online rights in Europe and other countries either through it or SACEM, which is a hub in its own right. That means at least some of the growth at those societies is coming at the expense of their European competitors, although it’s hard to tell how much. 

Even as CMOs compete, they also cooperate in various ways — including remitting money to one another. Some of the success of societies actually depends on their rivals: GEMA members will make more if SACEM maximizes the money it collects on their behalf in France, for example. The closest analog I can think of is world trade, where countries drive prosperity by boosting the success of their counterparts while also trying to outcompete them. Consider that every CMO wants to account to its members faster than its rivals, but final accounting is only possible once numbers come in from other markets. It’s a game that can only be won by both beating and boosting rivals. At this point, the abyss starts to stare back.  

Perhaps since the CMOs depend so much on one another, the top executives agreed on a few points — most important that growth will come back to earth and that as it does, cost efficiency will become more important. “I think we will continue to see growth but not at as fast a pace as during the pandemic,” STIM CEO Casper Bjørner told me. As that happens, “I think cost ratio becomes really important,” GEMA CEO Tobias Holzmüller added, referring to the percent of revenue that goes to expenses, which has historically been between about 10% to 15% and is generally declining. And since the CMOs collect relatively similar per-play payouts from streaming services, Holzmüller said, “You compete on cost and services.” 

SACEM CEO Cécile Rap-Veber said the same: “What matters to me is value for our members.” PRS CEO Andrea Czapary Martin has also prioritized efficiency, setting a goal of getting the PRS cost ratio below 10%, which it did in 2023 for the second year in a row, in addition to cutting its administration rate for royalties from online services by 20%. “We can do this,” Martin said recently, “because we are surpassing our targets.” The idea is that, amid the accounting chaos, cost ratio might emerge as a comparison that’s easy for songwriters and publishers to measure.  

Cost ratio may be an easy way to compare CMOs — but even that gets complicated because different sources of royalties come with very different costs. For example, general licensing revenue for music played in stores or restaurants is relatively expensive, since signing licensing deals with new businesses is relatively labor intensive. Revenue that comes in from online services costs less, while income from foreign counterparts is cheaper still. That gives an advantage to CMOs that depend more on foreign revenue relative to their size — and it helps STIM and PRS reduce their costs. (This isn’t the whole story; these societies are also very well-run.) It also makes SACEM’s 10.76% cost ratio even more impressive.  

For all their competition, in fact, the big European CMOs aren’t always even playing the same game. STIM gets 73% of its income from foreign and online royalties, so to some extent its success is tied to that of Swedish songwriters who write for global pop stars, although it has to make sure they can’t get a better deal from another CMO. GEMA is at the opposite end of the spectrum — more than a third of its revenue comes from general and concert licensing, for which it takes in more than its rivals, presumably partly because the German economy is the biggest in Europe. PRS collects more online and foreign income, partly because English-language repertoire travels globally. SACEM, the oldest CMO and the biggest outside the U.S., benefits from operating its own hub. Breaking this down to determine the best deal for a given creator gets even harder, and it may just depend on which of those specialties offers the most appealing advantage. 

That doesn’t mean competition isn’t working, though — even if some executives said that they measure themselves against their performance in previous years more than that of rivals. “Competition has forced a lot of us to improve our efficiency,” Rap-Verber told me when SACEM announced its results. And that benefits creators who join any CMO. 

GEMA’s revenue rose 8.4% in 2023, to €1.28 billion ($1.4 billion), the German collective management society (CMO) announced April 8, and for the second year in a row it will distribute more than a billion Euros to its members – €1.08 billion ($1.17 billion) to be exact. That income was offset by an expense ratio […]

To judge from the results of a report commissioned by GEMA and SACEM, the specter of artificial intelligence (AI) is haunting Europe.
A full 35% of members of the respective German and French collective management societies surveyed said they had used some kind of AI technology in their work with music, according to a Goldmedia report shared in a Tuesday (Jan. 30) press conference — but 71% were afraid that the technology would make it hard for them to earn a living. That means that some creators who are using the technology fear it, too.

The report, which involved expert interviews as well as an online survey, valued the market for generative AI music applications at $300 million last year – 8% of the total market for generative AI. By 2028, though, that market could be worth $3.1 billion. That same year, 27% of creator revenues – or $950 million – would be at risk, in large part due to AI-created music replacing that made by humans.

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Although many of us think of the music business as being one where fans make deliberate choices of what to listen to – either by streaming or purchasing music – collecting societies take in a fair amount of revenue from music used in films and TV shows, in advertising, and in restaurants and stores. So even if generative AI technology isn’t developed enough to write a pop song, it could still cost the music business money – and creators part or even all of their livelihood.

“So far,” as the report points out, “there is no remuneration system that closes the AI-generated financial gap for creators.” Although some superstars are looking to license the rights to their voices, there is a lack of legal clarity in many jurisdictions about under what conditions a generative AI can use copyrighted material for training purposes. (In the United States, this is a question of fair use, a legal doctrine that doesn’t exist in the same form in France or Germany.) Assuming that music used to train an AI would need to be licensed, however, raises other questions, such as how many times and how that would pay.

Unsurprisingly, the vast majority of songwriters want credit and transparency: 95% want AI companies to disclose which copyrighted works they used for training purposes and 89% want companies to disclose which works are generated by AI. Additionally, 90% believe they should be asked for permission before their work is used for training purposes and the same amount want to benefit financially. A full 90% want policymakers to pay more attention to issues around AI and copyright.

The report further breaks down how the creators interviewed feel about using AI. In addition to the 35% who use the technology, 13% are potential users, 26% would rather not use it and 19% would refuse. Of those who use the technology already, 54% work on electronic music, 53% work on “urban/rap,” 52% on advertising music, 47% on “music library” and 46% on “audiovisual industry.”

These statistics underscore that AI isn’t a technology that’s coming to music – it’s one that’s here now. That means that policymakers looking to regulate this technology need to act soon.

The report also shows that smart regulation could resolve the debate between the benefits and drawbacks of AI. Creators are clearly using it productively, but more still fear it: 64% think the risks outweigh the opportunities, while just 11% thought the opposite. This is a familiar pattern with the music business, to which technologies are both dangerous and promising. Perhaps AI could end up being both.

GEMA, the German collective management organization (CMO), announced Monday (July 24) that it has acquired a majority stake in the SoundAware Group, a Dutch company that provides music recognition services to collecting societies (including those in the Netherlands and Belgium) as well as market research and media companies. SoundAware will continue to operate independently from […]

Despite a challenging economy and the lingering effect of the pandemic on the concert business, the German collecting society GEMA took in 1.178 billion euros ($1.25 billion) in revenue in 2022, a 13% increase over 2021. This year, for the first time, the organization’s distributions will exceed a billion euros. 

“This is a record result,” said GEMA CEO Harald Heker in a statement. “The resurgence of events and music performances means a relief for our members after three hard years.”

Some of this increase reflects the continued growth of streaming, but some of it is due to the recovery from the pandemic.

GEMA collections from public music performances, its biggest category of revenue, grew to 357.5 million euros ($381.6 million), up 43.7% over 2021 (but still below the 407.4 million euro high of 2019). Online, the organization’s third biggest category, grew to 301.3 million euros ($321.6 million), up 26.5% over 2021. (Radio and television collections, the second biggest category of revenue, dropped 3.9% to 325.1 million euros [$347 million].) The amounts of money GEMA collects from levies on computers and items with blank memory, as well as from physical goods, both declined – by 27.7% and 9.2%, respectively.  

GEMA is one of the first international collecting societies to announce its 2022 results, but its counterparts are expected to report good years as well, for some of the same reasons. Last month, ASCAP reported a 14% increase in collections over 2021, to $1.52 billion. (Collecting societies report their results differently, so exact comparisons can be difficult.) While organizations struggled to maintain revenue during the pandemic, the comeback of the concert business – and public life in general – should now boost all of them.  

GEMA’s good news comes at an interesting time for the organization. As the 2014 EU directive on collecting societies continues to push them into competition with one another online, GEMA has emerged as one of the bigger and more successful organizations. In addition to its own operations, GEMA operates the online licensing and collecting hub ICE with STIM (Sweden) and PRS for Music (UK). Heker has led GEMA since 2007 and is expected to retire by the end of the year, and there is talk that GEMA will name its next CEO by summer.

Like many collecting societies and organizations of publishers and songwriters, GEMA believes that music-streaming is unfair to their side of the business, and rewards labels and artists disproportionately.

“The trend towards streaming must not lead to authors’ rights being undermined,” Heker said in the same statement. “GEMA’s most important task is and remains to stand up for fair remuneration in all areas and thus at the same time to secure conditions for a lively and diverse musical and cultural landscape.”