State Champ Radio performance royalties
While the Mechanical Licensing Collective’s announcement last month about the “final final” Phonorecords III Copyright Royalty Board rate determination adjustment seemed to imply songwriters and publishers were due another roughly $400 million to, sources say the number likely overstates the coming financial windfall.
After a more than two year wait that included an appeal process, a remand, a new partial rate trial, and then the time to recalculate and resubmit adjusted play reports, sources say that number may correctly assess how much more money was earned and reported due to the CRB determination covering 2018 through 2022 — but it also likely includes payments that have already been made.
Within the total adjustment, about $250 million in net extra mechanical royalties will be paid out thanks to the adjustment, with practically all of that coming from the 2021-2022 period. Those royalties will be paid out beginning in May by the Mechanical Licensing Collective, the agency created by the Music Modernization Act to collect and disburse mechanical royalties from on-demand digital streaming services. This means adjusted monies paid out by the MLC will probably begin reaching songwriters from their publishers in the following quarter.
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The rest of the roughly $400 million adjustment comes from performance royalties. But sources at the U.S. performance rights organizations say they are surprised by the MLC’s claim that another $138 million has been discovered in the resubmitted play reports required by the final rate determination.
The MLC may be the best positioned to understand this, though. Because the mechanical rate formula calls for the digital service providers to report how much they paid in performance royalties each month — or estimate how much they will pay — the MLC has insight into how much was reported collectively for mechanical and performance royalties for the period of 2018-2022 before the rate determination was finalized. It also has insight into how much performance royalties totaled after the play reports were resubmitted with the adjustments due to that final determination. The final determination happened in August 2023, eight months after the 2018-2022 term ended, with the resubmitted reports due Feb. 9, 2024.
In contrast, the PROs themselves only know what they each individually have been paid, and each digital service only knows what they individually have paid out to each PRO. Neither of those sides can see the whole performance revenue pool like the MLC can, unless they share information with competitors, which is unlikely but possible. Consequently, sources at PROs and digital services say they are surprised and puzzled by the MLC’s announcement that more performance royalties were found due to the adjusted reports. Others say the MLC’s announcement has caused consternation between songwriters and PROs. One source at a PRO suggests that the MLC including performance royalties in its report was a “marketing mishap.”
PRO sources insist that whatever performance royalties came in have largely already been paid out, and they don’t expect any new windfalls. And sources at the digital services say that, from what they can tell, the streamers have already paid out all the performance royalties that were due and they don’t expect to be making further payments.
Meanwhile, sources at PROs say the MLC’s announcement has caused significant confusion, leading songwriters to inquire about when they will get additional payouts for performance and why they were not made aware of this sooner.
Even if the performance royalties have already been paid, many executives in the music industry are speculating about what caused such a significant increase. The all-in mechanical formula that was determined by the CRB in Phonorecords III, by itself, doesn’t do anything to change performance royalties, which are typically decided by private negotiations between PROs and streaming services.
It’s possible digital services made mistakes when they reported the monthly performance royalties the first time around. The MLC could also have made a mistake either when it added up all the interim royalties paid while parties were awaiting a final determination or when it subsequently adjusted performance royalties for the period.
Alternatively, some of the PROs could have negotiated deals that tie their performance rates to the statutory mechanical rate. That would mean when digital services reverted to paying a lower mechanical rate while the 2018-2022 rate was still being determined, they wound up paying lower performance royalty rates, too — which later increased after the final CRB rate determination. But while some PRO sources concede that they try to negotiate for at least 50% of the statutory rate as a floor, they also say they don’t have any deal triggers specifically tied to the mechanicalrate.
Another theory is that one or two of the PROs might have been operating under an interim royalty rate with one or more streaming services while working through negotiations, which hypothetically weren’t finalized until recently. If those performance royalty rates have now been decided, the adjustments could be reflected in this total reported number. But several sources say they aren’t aware of any instances where this has happened.
It isn’t unusual for there to be streaming royalty adjustments after the fact, even without a new subsequent “final final” rate determination, sources point out. As it is, streaming services will sometimes need to make estimates on reporting monthly performance and mechanical royalty payments and then later adjust if necessary once the period has closed. At that time, the new payment would be made and the expense adjustment would be reported to the MLC — not two years later, sources say.
Performance and mechanical royalties have a see-saw effect where an increase in one will result in a decrease in the other. That’s because the formula for calculating the mechanical rate includes a first step in the formula that initially acts as a cap for an all-in publishing royalty pool that combines the two. This has publishers worried. If the services have already fulfilled all of their performance payments and the PROs have paid out all the received performance royalties, then how can the services now claim that $138 million as an additional deduction in the resubmitted reports? By claiming additional performance payouts, that would likely reduce the potential mechanical royalty payouts on the resubmitted report.
Aside from whether more money is coming, how these publishing royalties are paid — as performance or mechanicals — matters to publishers and songwriters.
For example, if that newfound $138 million in performance royalties needed to be paid out, it would likely mean that only about $120 million to $125 million of it would flow to songwriters and publishers because of the PROs’ overhead expenses.
If, instead, that $138 million was mechanical royalties, the songwriters and publishers would get all of that because the MLC has no overhead expense deduction since digital services finance the operation. But, instead of it getting paid out separately and directly split between publishers and songwriters, these royalties are paid to publishers, who then distribute royalties to their writers, but usually after recouping. So, the difference in where the payment comes through matters significantly to songwriters and publishers.
Overall, this adjustment seems to weigh more favorably for the mechanical royalty pool. Previously, during the interim period, the $2.77 billion in total publishing royalty payouts from digital services were weighted 50.93% to mechanical and 49.07% to performance. But after adjustments, including subtracting a slight overpayment in mechanicals for the years of 2018-2019, the $3.16 billion in total publishing royalties paid out by digital services to the PROs and the MLC works out to 52.63% paid in mechanical and 47.37% to performance, or nearly a two-percentage point increase for the former.
Eventually, when the MLC digs into the resubmissions and compares them to the earlier monthly play reports, it will likely be able to discern if the additional $138 million is coming across the board from all services or if a specific service or two accumulated the bulk of the new reported performance royalties. But if that doesn’t solve the mystery, another process is beginning that could bring in an answer. Last month, the MLC served notice on some 50 digital services that it is performing audits on them. If all else fails, that should bring some clarity to the mystery.
On Friday (Feb. 23), the Mechanical Licensing Collective (the MLC) announced that they found $419.2 million in adjusted royalties for the U.S. mechanical royalty rate for streaming for 2018-2022, so when will the publishers and songwriters actually see the new influx of cash?
The MLC says it will begin releasing some of this money to rights holders in May and will continue the pay-out process steadily through the end of the year. This means that independent songwriters who are already signed up with the MLC will see some of these adjusted royalties hit their bank account as soon as May, but signed songwriters will likely see this reflected in the following quarter’s royalty statement from their publishers.
But the $419.2 million sum reported by the MLC is not all about to land in songwriters’ and publishers’ pockets – as much as one third of that amount might have already been paid out.
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The total sum owed to songwriters and publishers is divided into two types of royalties: mechanical and performance. There is $281.4 million in mechanical royalties to be paid out, and $137.8 million in performance, which is not paid out through the MLC but is paid directly to the PROs by the DSPs. However, some of the DSPs actually overpaid publishers for mechanical royalties during the period of 2018-2020 (also called the Phono III “historical unmatched period”) which cuts down the bonus actually owed to songwriters by $28.8 million in extra payments. Taking over-payments into account, the total amounts to around $390 million.
Sources in the U.S. PROs have told Billboard that they are surprised by the so-called performance royalties adjustment of $137.8 million because most of the money has already been paid out; or in the case of money received in the fourth quarter of 2023, will soon be paid out. Removing performance money from the total ultimately lowers the new adjusted royalties due to songwriters and publishers to $252.2 million.
Adjusted mechanical royalties from 2018-2020 that are matched by the digital services and/or their service providers will be distributed to publishers and songwriters by streamers directly, but because this is the period where some overpayments occurred, the bulk of these new adjusted mechanical royalties stem from underpayments made in 2021-2022, which will be paid out by the MLC. (The MLC was founded in 2021, and thus only works with money made after that point, plus unmatched and unclaimed funds before then).
Long Time Coming
Those who have been following the proceedings of the Copyright Royalty Board (CRB) — the government entity which regulates and determines how much publishers and songwriters get paid for mechanical royalties in the United States — have been waiting on this announcement for years.
The CRB reevaluates these royalty rates every five years, and for the five-year period called “Phonorecords III” or “Phono III,” which refers to 2018-2022, the board initially determined a new royalty rate for on-demand streaming in 2018 that was thought to be especially friendly to the music business. But some of the streaming services fought back with an appeal against that decision the following year, hoping to lower the rate and make it more comparable with the rates for the Phono II period (2013-2017).
That was the start of a lengthy and contentious legal battle between publishers, songwriters and streamers at the CRB, and it lasted until August 2023, when the Phono III rate was finally settled for good. The final rate for Phono III was not as favorable as the CRB’s 2018 initially determined rate, but it was still considered a win by the music business establishment.
Because of this multi-year back-and-forth, the streaming services were unsure of how much to pay publishers and songwriters for that entire five-year period. While they waited for more information from the CRB, some paid publishers at the Phono II rate and some paid publishers at the overturned 2018 Phono III rate, meaning some underpaid publishers and some overpaid. To make matters even more complicated, the way mechanical licensing on the publishing side worked systematically changed during Phono III due to the passage of the Music Modernization Act (MMA) of 2018.
The MMA helped alleviate what many believed was an inefficient mechanical licensing system. Previously, streaming services had to license each song on their platform individually, tracking down the proper parties – whether that be an indie songwriter or a publisher – and working with them directly. Due to the complexities of achieving this, hundreds of millions of mechanical streaming royalties for publishers and songwriters got stuck in limbo, forming what many have called “black box royalties.” (The MLC now uses the term “historical unmatched and/or unclaimed royalties.”)
The MMA set up a new licensing system for publishing mechanicals that covers all musical works under one simple blanket license. To administer and implement this new system, the MMA created the MLC, but the MLC did not start its operations until January 2021, meaning mechanicals earned during the first half of the Phono III period (2018-2020) were paid out the old fashioned way, while 2021-2022 mechanicals were paid to the MLC.
There are still more royalties to come: The MLC notes that several streaming services missed their deadline for reporting adjusted royalties and that it expects the total figure to increase by another $10 million to $15 million once those additional royalties come in. Every month that these services are delinquent on their payments, they incur a late fee tied to a percentage of the amount that is outstanding, though given most of those delinquent digital services are delinquent are smaller players, these late fees are not believed to amount to a meaningful number.
All in all, this means somewhere around $270 million in new adjusted mechanical royalty payments are coming to publishers and songwriters this year.
A coalition of artist and label groups is calling on legislators to urgently address a 2020 court ruling that risks seeing European musicians lose out on millions of euros in royalties each year to U.S. acts.
For decades, American musicians have been denied royalties for the use of their music on broadcast radio or when it’s played in cafes, shops and bars in many overseas countries due to the lack of equivalent terrestrial radio performance and public performance rights in the United States. This practice is based on a principle known as material reciprocity, which means that broadcast and performance revenues are only paid out to countries that apply the same rights.
The longstanding practice of reciprocal treatment was, however, suspended in the European Union (EU) by a 2020 ruling from the European Court of Justice (ECJ). In that decision, the ECJ decreed that all recording artists are entitled to an equal share of the royalties generated when their music is played on radio or in public premises in the EU, regardless of their nationality — or the absence of radio and performance rights in an artist’s home country.
Brussels-based independent labels trade body IMPALA says the ECJ ruling will result in European artists and labels losing out on around 125 million euros ($137 million) in royalty income each year, with the equivalent sum instead going to U.S. musicians. Previously, these broadcast and performance royalties were mostly divided up between local labels according to their market share.
European countries that currently withhold public performance and broadcast royalty payments to U.S. artists and labels include the United Kingdom, France, Belgium, Denmark and Ireland. (Outside of Europe, three countries —Japan, Argentina and Australia — also deny royalties to U.S. musicians because of a lack of reciprocal rights).
In 2019, prior to the court ruling, SoundExchange, which issues licenses to online and satellite radio services, estimated that recording artists and rights holders in the United States lost out on an estimated $350 million in royalty payments due to what it called the “unfair treatment of music creators.”
So far, the Netherlands is the only EU country to change its legislation in line with the ECJ ruling, which has become widely known as the “RAAP” case in reference to Irish collection society Recorded Artists Actors Performers (RAAP), which initiated the reforms by taking legal action against Phonographic Performance Ireland (PPI) in 2020. In that case, RAAP challenged PPI in the Irish High Court after it reduced royalty payments to performers from a 50-50 split with labels to around 20%. The case was then referred up to the ECJ, which made the now-controversial ruling in September of that year.
U.S. repertoire represents around 40% of all public performance and broadcast income collected annually in the Netherlands, according to Dutch collecting society SENA. Until recently, this income was neither collected nor distributed. Since the change in practice, SENA has increased its tariffs on public performance royalties from 12.5% to 26%.
Will Maas, chair of the Netherlands’ musicians’ union, said in a statement that the rise in rates is not enough to make up for the additional U.S. repertoire now being collected, resulting in a “clear and substantial drop” in revenue going to Dutch and European performers. “This is what awaits other countries if nothing is done to address this,” he added.
In response, IMPALA executive chair Helen Smith wants the European courts to reverse its 2020 ruling and restore the principle of material reciprocity.
“It is the EU’s responsibility to prevent European artists and producers losing millions every year to the USA, which has chosen not to protect these rights,” said Smith in a statement. She added that the lack of terrestrial radio performance rights and public performance rights in the United States costs the world music economy “hundreds of millions, if not billions a year.”
IMPALA also supports a flexible solution that would enable EU countries to pay U.S. artists if they already did so before the ECJ judgment.
Other music groups and CMOs backing IMPALA’s call for action include Adami in France, the Swedish Musicians’ Union, Belgium’s PlayRight and the German Federation of Musicians. They argue that reciprocal treatment forces countries to raise their own levels of protection for musicians by not allowing nations to benefit from other countries’ rules unless they follow the same standards.
Not everyone in the music business is against the ECJ ruling and the push for so-called national treatment — whereby foreign recording artists and labels receive the same types of royalties as the nationals of a given country — to be standardized across the global music business. Executives who back national treatment say that any fall in label income would likely be offset by the increased set of rights and royalty collections elsewhere in Europe resulting from the ECJ decision.
That, however, is not a view shared by IMPALA or its members.
“Hundreds of thousands of artists count on the EU to do the right thing,” said Dutch musician Matthijs van Duijvenbode in a statement, “and to do it fast.”
American Society of Composers, Authors and Publishers (ASCAP) has launched a new social media campaign that appears to be in response to a recent Billboard exclusive that revealed that ASCAP’s main competitor, Broadcast Music Inc (BMI), may sell itself to a private equity firm. Sources say the potential deal has an estimated price tag of $1.7 billion.
Just two days after the Billboard story was published on last Wednesday (Aug 23), ASCAP — which, along with BMI, is one of the largest U.S.-based performing rights organizations — posted a graphic on Instagram and X (formerly known as Twitter) that read: “ASCAP. Creators first. Not for profit. Not for sale.” In the caption of the post, ASCAP continued to point out that it is the “only U.S. PRO that operates as a not-for-profit” and that it is the “only one founded and governed by songwriters, composers and music publishers.”
In the last three days, the organization has posted seven other similar posts on its socials, seemingly highlighting their distinctions from BMI. The posts include quotes like: “Private equity never wrote an iconic love song,” “ASCAP. Growth without greed,” and “ASCAP writers. Who owns us? Who gets paid? You. And you.”
ASCAP CEO, Elizabeth Matthews, provided a statement about the social campaign to Billboard, saying “it’s important for everyone to understand what makes ASCAP different. We are a membership association, founded and run by songwriters, composers and music publishers. We are the only US PRO that operates as a not-for-profit, and our distribution policy is set by a board of writers and publishers, who are elected by our members. ASCAP’s governing articles require us to put creators first, which puts us in a category of one. And we’ve been overwhelmed by the positive response from our members.”
“Our focus is not on how our competitors position themselves,” replied a representative of BMI when asked to comment on ASCAP’s latest social posts. “Relying on the past never sustained a business for the future. Our goal is to stay ahead of the changing industry and invest in our business to grow the value of our affiliates’ music. Any path forward would prioritize the best interests of our songwriters, composers and publishers, including their financial success. Our focus is on delivering for our affiliates.”
BMI first began experimenting with its business model in March 2022 when it hired Goldman Sachs as an outside advisor to explore new strategic opportunities for growth. This was believed to include a possible sale to an outside firm, but by August 2022, Bloomberg announced that BMI had ditched its exploration of such a sale. A few days later, Billboard found that the PRO laid off about 30 staffers from its workforce, citing “uncertain” economic conditions.
By October 2022, BMI announced that it would be switching from its 80-plus year status as a non-profit organization to a for-profit company. In an interview with Billboard at the time, the company’s CEO and president, Mike O’Neill, explained that the company made this switch because “growth requires investment, not just maintenance… This new [commercial] model will grow at a faster rate.”
This summer, reports surfaced that BMI was once again considering a sale. O’Neill explained to his staff in a memo that the company’s new for-profit model and recent investments into improving its operations “has only intensified outside interest” in purchasing the PRO.
Amid growing concern about the future of BMI, songwriter groups — including Songwriters of North America, Black Music Artists Coalition, Music Artists Coalition, Artists Rights Alliance, and SAG-AFTRA — provided Billboard with an open letter to BMI on Aug. 18. Outlining three areas of concern, the songwriter groups question how they will be impacted by BMI’s increased profits; the proceeds from any potential BMI sale; and what may happen operationally at BMI in the event that the organization is sold. “Songwriters have a right to understand these decisions and how it impacts us,” the letter read.
Days after, Billboard reported that multiple sources say BMI is considering an offer to sell to New Mountain Capital, a private equity firm that has been quietly shopping for music assets over the last few years, according to sources. The deal has yet to be signed, as New Mountain Capital has entered an exclusive window to scrutinize the deal. Sources suggest that the deal, if it takes place, will be worth around $1.7 billion.
In response to that exclusive, the same songwriter groups provided Billboard with another open letter to BMI on Aug. 28, expressing that they were “extremely disappointed and upset” to hear the news of a possible sale. The coalition asked for BMI’s chief executive to respond to songwriters with more information “prior to taking any other action” towards the possible sale to New Mountain.
A coalition of songwriter and artist groups have expressed that they are “extremely disappointed and upset” with BMI in a letter to the firm’s CEO and president Mike O’Neill. Obtained by Billboard, the letter is written in response to last week’s news that the performing rights organization may sell to private equity firm New Mountain Capital for around $1.7 billion, according to multiple sources.
Consisting of Songwriters of North America (SONA), Black Music Action Coalition (BMAC), Music Artists Coalition, Artist Rights Alliance, and SAG AFTRA, the coalition’s new letter asks O’Neill for “real, substantive answers” to questions they posed to the company leader in a previous letter from Aug. 18, citing that O’Neill’s original response did “not answer any of [their] questions.”
The Aug. 18 letter addressed three major concerns: BMI’s profits; the proceeds from any potential BMI sale; and what may happen operationally at BMI in the event that the organization is sold.
Five days later, on Aug. 23, Billboard reported that BMI was, in fact, in the process of selling. Spurred by that report, the coalition wrote their second letter to O’Neill, asking for the executive to respond to songwriters “prior to taking any other action” towards its possible sale. “If you do not want to provide us with written answers, we are happy to meet with you as a group,” it says.
They also call out BMI for responding to their last request by saying that there was an uplift in BMI’s distributions last year. “Of course distributions went up — all PROs’ revenue went up,” the new letter reads. “This does not answer any of our questions. And it does not explain where the $145m EBITDA (as reported by Billboard today) came from and why that money was not distributed to songwriters.”
A representative for BMI replied to the letter in a statement to Billboard a few hours after its receipt, saying, “Relying on the past has never sustained a business for the future. Our goal is to stay ahead of the changing industry and invest in our business to grow the value of our affiliates’ music. Any path forward would prioritize the best interests of our songwriters, composers and publishers, including their financial success. Our focus is on delivering for our affiliates.”
BMI’s changing business model has been the source of concern and confusion within the music industry since March 2022. At that time, it was reported that the performing rights organization had hired Goldman Sachs as an outside advisor to explore new strategic opportunities for growth. As a non-profit organization since its inception over 80 years prior, the Goldman Sachs news signaled a major shift for BMI and was rumored to include a possible sale to an outside firm. In August 2022, however, Bloomberg announced that BMI had ditched its exploration of such a sale. A few days later, Billboard reported that the PRO laid off “just under 10%” of its workforce, about 30 people, in order to approve “efficiency” during “uncertain economic times,” said O’Neill in a company-wide email.
Last October, BMI announced that it would be switching from its non-profit status to become a for-profit company. O’Neill explained to Billboard that the company made this switch because “growth requires investment, not just maintenance… This new [commercial] model will grow at a faster rate.” Given the fast-shifting performance royalty landscape, moving from in-person to mainly digital collections, BMI appeared to want to invest more in modernizing its operations with its new model.
This summer, BMI resurfaced the potential of selling to an outside firm. In a memo to staff in late July, O’Neill said that the company has been increasingly interested in a sale over the last year. He added that by leveraging the company’s new for-profit model and recent investments made into BMI to improve its operations, BMI “has only intensified outside interest.”
Read the songwriter groups’ full letter here:
Mr. Mike O’NeillBroadcast Music, Inc.
Re: BMI
Dear Mike:
We were extremely disappointed and upset to read the announcement of BMI’s sale to New Mountain Capitol.
Songwriters have real questions and deserve real answers before any further action is taken. While we appreciated you responding to our letter, all of our questions went unanswered.
Your response was that distributions went up last year. Of course distributions went up – all PROs’ revenue went up. This does not answer any of our questions. And, it does not explain where the $145m EBITDA (as reported by Billboard today) came from and why that money was not distributed to songwriters.
We understand that a deal has been agreed, but has not closed. Prior to taking any other action, we are giving you another opportunity to provide songwriters with real, substantive answers to the questions we posed.
If you do not want to provide us with written answers, we are happy to meet with you as a group.
Sincerely,
Black Music Action CoalitionMusic Artists CoalitionSongwriters of North AmericaSAG-AFTRAArtist Rights Alliance
While the Radio Music Licensing Committee awaits an appeals court decision in its so-far unsuccessful attempt to combine rate court proceedings with ASCAP and BMI under a single judge, the trade group has filed federal petitions to begin the processes separately in the Southern District of New York.
Usually, such rate proceedings petitions are initiated after negotiations between the performance rights organizations and the RMLC prove fruitless. Under these petitions, the PROs will each make the case for what rate it thinks their songwriters and publishers are entitled to receive when their songs are played on the radio. This time out, for the period of 2022-2026, the RMLC is seeking to maintain the same rates it had under the prior agreement which covered 2017-2021.
In July 2022, the RMLC tried to get ASCAP and BMI combined into a single rate proceeding, thus showing its hand that it felt rate negotiations had failed. For decades, each PRO had its own separate rate proceeding, but about seven or eight years ago, the RMLC began a new rate court strategy of trying to assign market share to the four U.S. PROs — ASCAP, BMI, SESAC and Global Music Rights — in attempt to keep the rates in parity with market share, irrespective of each PRO’s song catalog. In filing its petition to consolidate the rate proceedings to the Southern District of New York, which oversees both rate proceedings and the ASCAP and BMI consent decrees, the RMLC said the act was justified by the Music Modernization Act of 2018 that changed how the the Southern District assigns the rate court proceeding.
The step to combine the rate proceedings into one was seen by some music industry executives as a further attempt to pursue that rate strategy. Having a single judge, instead of bifurcated rate court proceedings, could benefit the RMLC because it would likely pit BMI and ASCAP against each other, vying for a higher rate than the other with both PROs arguing over market share.
But in May this year, Southern District Court Judge Stanton ruled against the RMLC’s consolidation petition so the radio trade group subsequently appealed that decision. The Second District Appeals Court has yet to issue a ruling on the RMLC motion, but in the meantime, the RMLC is getting the ball rolling with the rate court by filing amended petitions on BMI on Aug. 10 and on ASCAP on Tuesday.
Despite filing petitions for the two rate court proceedings, the RMLC petition for the ASCAP rate court proceeding says that if the Second Circuit Appeals Court ultimately agrees with the RMLC position to combine the two rate court proceedings into one, “it reserves all rights at the appropriate time” to pursue a unitary action against ASCAP and BMI.
The ASCAP rate proceeding covers the current five-year term which began on Jan. 1, 2022. In the prior term (2017-2021), RMLC said it paid a combined 3.51% of net revenue as a royalty pool for the two PROs, with ASCAP getting 1.73% of that based on market share claims it made at the time — which the RMLC now says was “a representation that turned out to be false.” Meanwhile, BMI received 1.78% of radio stations’ net revenue.
Nevertheless, in May 2022, according to the petition, the RMLC asked ASCAP and BMI if they would be willing to roll forward the combined 3.51% of net revenue royalty pool, provided that ASCAP and BMI would agree on a mechanism for assessing each of their market shares.
Although the rate level would be the same, the RMLC implies it is actually an increase because the combined ASCAP and BMI share of total performances on RMLC stations likely has diminished since when the prior agreements began, the RMLC argues in its petition.
Meanwhile, it looks like BMI is requesting a rate increase from 1.78% to 2.95%, according to what the RMLC states in the BMI petition; while the RMLC ASCAP petition doesn’t disclose the rate ASCAP is seeking.
The RMLC didn’t immediately respond to a request for comment.
“The RMLC would rather continue to waste time and money on expensive litigation than simply paying songwriters a fair royalty for the use of their music,” ASCAP CEO Elizabeth Matthews said in a statement. “It’s not that complicated. Simply treat music creators who support your successful and profitable businesses with dignity and respect and everyone wins.”
While the PROs and the RMLC wait for the rate court proceedings to make a determination, all parties have agreed to an interim rate that allows radio to continue to play music without copyright infringement.
BMI’s recent rate court victory substantially increasing songwriters and publishers’ royalties for live events will be appealed, according to a notice filed by the North American Concert Promoters Association on Wednesday (June 21).
In May, Southern District of New York Judge Louis Stanton awarded the performance rights organization a 138% increase in rate to 0.5% of the event’s “revenue” with an expanded definition of the term to include tickets sold directly onto the secondary market, servicing fees received by the promoters and revenues from box suites and VIP packages. That 0.5% was up from what BMI said was a blended rate of 0.21%, based on 0.3% interim rate for venues that held less than 10,000 seats; and the interim 0.15% for venues that held more than 10,000 during the period of 2018-2022.
At that time, Stanton also set rates for the retroactive period of 2013-2017, with the previously used, less expansive “revenue” definition that only reflected earnings directly from the face value of primary market ticket sales. Those rates ranged from .08% of revenue for venues of up to 2,500 seats to 0.15% for venues with 10,000 or more seats.
On Tuesday, however, lawyers for the concert trade group filed a notice with the Southern District of intent to appeal that decision in the U.S. Court of Appeals for the Second Circuit, according to the filing submitted by Weil, Gotshal & Manges, the law firm representing the concert promoters. The notice to appeal could mean that the group will appeal; or it could be a procedural move that keeps open the option to appeal. The concert trade group had 30 days to file the appeal notice from the last day in court— a few weeks back on a BMI motion regarding interest on whatever fees might be owed from the 2018-2022 term covered by the newly set rates for that period.
In a statement BMI said the concert industry has long fought against rate increases for songwriters.
“Given Live Nation, AEG and [the North American Concert Promoters Association’s] bizarre position throughout trial that concertgoers attend concerts for the experience of the staging, videos and light shows, as opposed to the actual songs and music being performed, their appeal was not a surprise to BMI,” BMI president and CEO Mike O’Neill said in a statement. “For decades, the live concert industry has fought to keep rates suppressed. And even now, when they are making more money than ever, in more ways than ever, they are determined to deny songwriters and composers the fair value of their work, despite the fact that without their contributions, a concert wouldn’t even be possible. BMI will continue to fight on behalf of our affiliates, the creators of the music that is the very backbone of the live concert industry, to prevent that outcome.”
The concert promoters did not. respond to a request for comment at time of publishing. In May, an AEG spokesperson said “AEG Presents and NACPA were defending performing artists, who bear the costs of BMI fees, in this litigation.” Concert promoters have long billed the performing artist for performance rights organizations’ royalty fees.
Two years after the pandemic and its temporary shutdown of concerts and many stores and restaurants devastated the collective management organizations that license public performance royalties for songwriters and publishers, some of those CMOs are reporting record-setting financial results. In April, German society GEMA and the United Kingdom’s PRS both collected and distributed their highest amounts ever. And on June 21, French collective management society SACEM announced that it had collected €1.41 billion ($1.54 billion) in 2022, 34% more than in 2021, and distributed €1.06 billion ($1.15 billion) — a 19% increase over the previous year. Both numbers represent new highs — both for SACEM and at least for European societies.
“Thanks to the resumption of concerts, the explosion of digital, the new agreements signed with the many users of SACEM’s repertoire, and the strategic shift undertaken in its transformation plan, SACEM had a record year in terms of both collections and royalties distributed,” said CEO Céclile Rap-Veber in the organization’s announcement. “These results demonstrate, once again, our ability to adapt and strengthen our expertise in a highly competitive and rapidly changing sector.”
For SACEM, as for all CMOs, some of the increase in revenue and distributions comes from the return of live concerts, which are a significant source of royalty revenue. But the success also reflects the growth of streaming, as well as the ability of CMOs to negotiate better prices for the compositions they license. It’s also important to note that SACEM’s results will not just affect French composers and publishers: CMOs now compete to represent the rightsholders for online use in most countries, excluding the U.S., and SACEM licenses the work of composers around the world, as well as the repertoire of Universal Music Publishing Group
SACEM, the oldest music collecting society, is setting the pace for its rivals. Its collections of €1.41 billion ($1.54 billion) are higher than those of GEMA, which in 2022 took in 1.18 billion euros ($1.25 billion), and PRS, which had revenue of 836.2 million pounds ($1.04 billion).
Direct comparisons are inexact, however, since all of the CMOs use different accounting procedures. (The two biggest U.S. CMOs, ASCAP and BMI, are also constrained in their negotiations by antitrust consent decrees.) SACEM, for example, counts money it collected and distributed in 2022, but since it takes some time to distribute funds, the money it pays out trails slightly. This implies that distributions will rise in the first part of next year. “In 2023, taking into account collections in the second half of 2022 and the first half of 2023, we expect to reach a new distribution record,” SACEM said in its announcement.
SACEM also lowered its expenses. Its ratio of operating expenses to collections was a low of 11.65%, down 3.15 points from 2021. As competition among CMOs heats up — especially between SACEM and the ICE hub run by GEMA, PRS and the Swedish society STIM — all of the societies are trying to cut costs.
In 2022, for the second year in a row, online was the biggest source of royalties — up 38% to €493 million ($538.27 million). The second largest category of revenue was television and radio, which accounted for €353.1 million ($385.56 million), up 19%. General royalties contributed €327 million ($357.06) — up 93% partly due to the return of the live music business.
The financial results only include SACEM’s core operations of collecting public performance and mechanical royalties for composers and music publishers, both in France and for online uses in most countries around the world. They do not include SACEM’s neighboring rights revenue from television and radio play of sound recordings, or the subsidiaries like the one it operates to license the neighboring rights of newspapers and periodicals when their works are used by online companies like Google and Facebook.
The American Music Fairness Act (AMFA), which would require AM/FM stations to pay performance royalties to music creators and copyright holders for radio airplay in the U.S., just cleared a key hurdle in Congress — though the bill is unlikely to pass before the new session of Congress convenes in January.
In a mark-up session on Wednesday (Dec. 7), the House Judiciary Committee (which deals with copyright matters) voted to advance the bill, clearing its way for a full vote on the House floor. To become law, the bill would need to be approved by the full House of Representatives as well as the Senate and then signed into law by President Biden. However, the proposed legislation is unlikely to pass in the current session of Congress, which is drawing to a close at the end of the month, unless it’s tacked onto a must-pass bill during the lame duck period.
In an opening statement prior to the vote, Judiciary Committee ranking member Jim Jordan (R-Ohio) noted that bipartisan negotiations over the AMFA in recent months “stalled and never reached a resolution,” though he expressed confidence the bill could make it through the next Congress.
“While today’s debate is an important start in this conversation, if the American music Fairness Act has not become law this Congress, negotiations must resume next year,” Jordan said. “We believe there’s a deal to be struck here that is fair to all sides most importantly, fair to taxpayers and consumers.”
The AMFA is just the latest attempt by members of Congress to compel radio stations to pay performance royalties, which is a common practice in other countries but has not historically been required in the U.S. In Nov. 2019, Sen. Marsha Blackburn (R-TN) and Rep. Jerrold Nadler (D-NY) introduced a similar bill, the Ask Musicians for Music Act, which would have allowed artists and copyright owners to negotiate performance royalty rates with radio stations in exchange for permission to play their music. That piece of legislation followed a previous bill, the Fair Play Fair Pay Act — also introduced by Blackburn and Nadler — that set out to achieve the same goal.
The AMFA was introduced in the House by Reps. Ted Deutch (D-FL) and Darrell Issa (R-CA) in June 2021, with the legislation announced during a press conference attended by singers Dionne Warwick and Sam Moore and Dropkick Murphys singer/bassist Ken Casey. A companion bill was introduced in the Senate by Sens. Alex Padilla (D-CA) and Marsha Blackburn (R-TN) this past September.
Unlike satellite/online radio and streaming services, AM/FM stations pay only songwriter royalties on the music they broadcast. To rectify that, the AMFA legislation would establish fair market value for radio performance royalties in the same way it has been for those other platforms.
The bill was a response to the Local Radio Freedom Act, a non-binding resolution introduced in May 2021 by Rep. Steve Womack (R-AR) and Rep. Kathy Castor (D-FL) that opposes the imposition of a performance royalty, which proponents argue would be financially devastating for broadcasters. A companion resolution was introduced in the Senate by Martin Heinrich (D-NM) and John Barrasso (R-WY). Both resolutions are backed by the National Association of Broadcasters (NAB), which has long been opposed to enforcing a performance royalty payout on terrestrial radio.
In a statement on Wednesday’s vote, Recording Academy CEO Harvey Mason jr. called it “an important step,” adding, “I am grateful to Chairman Nadler, Rep. Issa, and members of the committee for supporting the music community’s right to fair pay. It is vital to the health of our industry that creators are compensated for the use of their intellectual property on terrestrial radio, and the Recording Academy will continue to advocate for AMFA until this bill is signed into law.”
The Recording Academy is a key supporter of the AMFA along with organizations including the AFL-CIO, the American Association of Independent Music (A2IM), the American Federation of Musicians, the Recording Industry Association of America (RIAA), SAG-AFTRA, SoundExchange and the musicFIRST Coalition. Over the past several weeks, more than 100 artists including Warwick, Common, Harry Belafonte, Jack White, Becky G, Cyndi Lauper and Gloria Estefan have signed their names to a letter urging lawmakers to support the bill.
“To be clear, this fight is far from over,” said musicFIRST chairman and former Democratic congressman Joe Crowley in a statement. “We still have further to go before this important bill can be passed into law and improve the lives of artists across this country, and we know that Big Radio corporations will continue to oppose us every step of the way.”
In his own statement celebrating Wednesday’s vote, SoundExchange president and CEO Michael Huppe called on the full House to pass the bill. “Tens of thousands of music creators – our family, friends, and neighbors – are counting on Congress to do the right thing and help them get paid for their work. We cannot let them down,” he said.
On the other side of the issue, NAB CEO and president Curtis LeGeyt thanked the committee members who voted against advancing the AMFA, along with members of Congress who have supported the Local Radio Freedom Act resolution that stands in opposition to the bill.
“These lawmakers understand that AMFA will harm local broadcasters and audiences around the country, undermine our ability to serve their communities and ultimately fail artists by leading to less music airplay,” said LeGeyt. “Broadcasters urge the recording industry to join us in serious discussions instead of using the few legislative days left in the calendar to pursue divisive legislation that faces broad congressional opposition.”
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