SESAC
In the end, 2024 was the year that the U.S. performance rights societies found out what type of valuations they can command when they are put up on the block. As the year comes to a close, a select group of private equity suitors is kicking the tires on yet another performance rights organization, SESAC, according to sources.
Those sources say that deals like New Mountain Capital’s acquisition of BMI in February and Hellman & Friedman signing a letter of intent in September to replace Taxes Pacific Group as the majority owner of Global Music Rights that gave GMR a $3.3 billion valuation served as a catalyst for some private equity firms to reach out to SESAC’s corporate owner Blackstone to see if it was interested in selling.
Consequently, Blackstone is fielding inbound interest from a group of private equity firms that unsuccessfully bid on GMR, according to a source familiar with the matter.
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Many private equity firms look at GMR and are “all shocked by the final valuation,” says a music asset investor. “Those firms have a real appetite for music because music assets are doing well.” In fact, some sources suggest that SESAC has been a fantastic performer for Blackstone. Nevertheless, as an investment firm representing institutional clients, Blackstone has a fiduciary obligation to maximize returns on their investments. So with the aid of the Moelis & Co. and Morgan Stanley investment banks, Blackstone is selectively and informally shopping the PRO and its subsidiaries to a targeted group of private equity firms, while so far eschewing to reach out to potential strategic buyers, sources say. “You can’t blame Blackstone for testing to see what the market will pay for SESAC,” says one music asset buyer.
SESAC, Blackstone, Moelis and Morgan Stanley executives either declined to comment or didn’t respond to a request for comment.
Blackstone, which bought SESAC in 2017 for $1.125 billion, has since invested in the company as the PRO, led by chairman John Josephson, has been making subsequent add-on acquisitions to complement its core business. During Josephson’s tenure, SESAC has acquired the Harry Fox Agency and Audiam to go along with earlier acquisitions like RumbleFish and Christian Copyright Licensing International. What’s more, in 2021, when Blackstone bought Hasbro’s music assets, including the MNRK record label and the Audio Network production music house, the latter company was added to SESAC’s portfolio. (Sources say Audio Network is included in the SESAC assets being looked at, but Billboard could not determine if MNRK is also included in any potential deal.)
Along the way, Blackstone loaded up SESAC with about $1 billion in debt through a series of asset-backed bond offerings, with the latest securitization for $180 million happening earlier this year. On Feb. 8, Kroll Bond Rating Agency (KBRA) noted that the proceeds from that bond sale would be used for “distribution to equity investors” as well as to pay certain transaction expenses and make deposits into certain transaction accounts.
According to that credit rating report, SESAC had revenue of $388.6 million in 2024, presumably the fiscal year ended Jan. 31, 2024. It also said that the company is expected to hit over $400 million in its current fiscal year, likely the one that will end Jan. 31, 2025. What’s more, that $388.6 million revenue total tracks only the SESAC businesses that are part of the collateral for the February 2024 securitization offering, which included SESAC, Christian Copyrights and Audio Network. Revenue from the Harry Fox Agency (HFA), the Stephen Arnold Group (SAG) and a few other smaller entities are not included as collateral. With HFA and SGA consistently reaching a combined total of $20 million to $25 million, according to revenue numbers given in earlier SESAC bond rating documents — published by the likes of Morningstar and the Kroll Bond Rating Agency — for 2022 and 2019 SESAC bond offerings, it’s conceivable that SESAC’s revenue was already above $400 million by the end of its most recent fiscal year. Those assets are included in what’s being shopped, sources say.
A 2019 Morningstar analysis found that SESAC has had a 12.9% annual growth rate since 1994. While that report didn’t cite revenue from those earlier years, other SESAC-related documents obtained by Billboard through the years show that SESAC had grown from $9 million in revenue in 1994 to about $57 million by 2004, then to about $206 million by 2014 and about $275 million by 2018.
While it’s unclear what price will tempt Blackstone to sell, sources say that as recently as last year, Blackstone and SESAC executives were saying that the PRO and its subsidiary companies were carrying about a $2 billion to $2.5 billion valuation. However, that’s when its securitized net cash flow was $118 million on collections (revenue) of about $318 million, versus the latest financials, which put securitized net cash flow at $147 million on $388.6 million in revenue, according to the Kroll report. That represents increases of 24.6% in securitized net cash flow and nearly 22.2% in collections/revenue over the prior year. Besides that growth, the implied valuation of SESAC is further enhanced by the BMI and GMR deals, which shows that PROs are attractive to private equity, sources say.
Unlike BMI and ASCAP, SESAC and GMR are not stymied by consent decrees, which is also a positive as far as private equity is concerned. A further deal point is that SESAC has a diversified revenue base. According to the Kroll report, at the end of fiscal year 2024, SESAC derived 37.2% of its annual revenue from general licensing, 21.7% from digital, 18.9% from TV, 9.7% from Audio Network, 6.4% from radio, 0.7% from foreign affiliates and 5.5% from other efforts.
On the other hand, that percentage breakout shows that even with the company’s diversification efforts into related music industry functions, its core business remains SESAC’s performance rights licensing, which it does through a boutique strategy of inviting songwriters to join as members. Through this strategy, it has landed such clients as Bob Dylan, Adele and Neil Diamond.
Still yet another plus that suitors will find attractive, says a music industry source, is the savvy stewardship of SESAC under Josephson. “He is been very effective there,” that source adds.
Moreover, in order to improve profitability, SESAC has been quietly pruning songwriters who are not generating enough royalties from their catalog. According to Kroll, the number of songwriter and publisher affiliates (with the former presumably the preponderance of the total), has shrunk from 35,000 in 2019 to 15,000 last year.
Pricing is paramount in whether Blackstone will do a deal. But it will be weighted against the possible return on investment if it chooses to retain ownership of SESAC. As it is, Blackstone and its equity investors likely have already clawed back a good portion of their initial investment in SESAC. In addition to the aforementioned possible equity distribution from the February bond offering, during the eight years it has owned SESAC, it’s likely that Blackstone made earlier dividend payouts to investors from the PRO’s profits down through the years; and possibly from earlier bond offerings, too. Besides that, Blackstone has provided itself with an annual $30 million management fee as measured against 16% of SESAC’s core retained collections, whichever is greater. (While the rating agencies do not define core retained collections, that could be the equivalent of net publisher share — what’s left after making royalty payments to songwriters and publishers.)
As for possible suitors, so far the only private equity firm that has come up in more than one conversation with music industry sources is TA Associates, a Boston-based private equity firm that says it has raised $65 billion in capital. A perusal of the investment firm’s website reveals that it has invested in another music company: In 2022, it acquired TouchTunes, the digital jukebox network that supplies music to bars, clubs, restaurants and other social spaces in North America and Europe. Moreover, a source says that TA may have even looked at SESAC in the past; SESAC has come up for sale a few times over the years and consequently had a few other institutional investor owners in the past, including Rizvi Traverse; before that, Oct-Ziff Capital Management Group was a minority shareholder in the company.
TA Associates representatives couldn’t be reached for comment over the year-end holidays.
Moelis, which is one of the banks said to be shopping SESAC, has made its mark elsewhere in the music business in 2024. Earlier this year, it was the buy-side advisor to New Mountain Capital in its BMI acquisition and the sell-side advisor for GMR in its search for an investor to replace the Texas Pacific Group. Morgan Stanley has music industry experience, including investing with Kobalt in making music acquisitions, among other deals.
Additional reporting by Elizabeth Dilts Marshall.
The arbitration process governing SESAC’s performance license rates has determined that for the 2023-2026 licensing period, a blanket fee of 0.2824% of revenue — or a 10.4% increase from the prior period’s rate of 0.2557% of revenue — will be set, according to a press release from the Radio Music License Committee (RLMC).
The rate represents the amount SESAC, a performing rights organization (PRO), can charge stations in exchange for playing works from their repertory over terrestrial radio.
Each side characterized the final rate determination differently, with the RLMC claiming victory because the arbitration panel rejected SESAC’s efforts to more than double the rate, and also substantially expand the license revenue base. But SESAC says the arbitration award reflects a failure by the RLMC in its attempt to lower the rate.
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The rate decision is retroactive to Jan. 1, 2023, which means that stations paying the SESAC interim licensing fee at 2022 rates will receive “a modest true-up adjustment.” The arbitration process governing SESAC’s rates came about as a result of a 2015 RMLC antitrust litigation settlement with SESAC that set forth a rate arbitration process for the next 20 years.
The RMLC announcement claims SESAC sought to justify its efforts to increase rates and expand the licensing revenue base by relying upon rates set for other music licensors.
Meanwhile, SESAC’s statement on the determination says the RMLC failed in its attempt to tie SESAC’s rates to those of BMI and ASCAP, the two U.S. PROs, which operate under consent decrees that mandate a rate trial in the Southern District of New York when negotiations fail.
“Despite the fact that no increase was warranted, the arbitration decision reported here constitutes a significant victory for RMLC-represented radio stations given SESAC’s demands, and comes at a challenging economic time for the industry,” RMLC chairman Ed Atsinger said in a statement. “The RMLC intends to continue to defend and protect the interests of its members at a time when all of the performing right organizations are seeking to aggressively increase their fees.”
In another aspect of the rate determination, the RLMC said that “long-form license terms are still being worked out but it is expected that the non-music format stations will continue to pay the same 77.5% discount” off of the above music stations’ headline rate. Mathematically speaking, that means the RMLC expects that the non-music rate fee will be set at 0.06354% of revenue, or a 10.5% increase from the prior rate of 0.0575%, Billboard estimates.
“The arbitration award reflects another failure of the RMLC to impose regulated rates on SESAC since SESAC and the RMLC concluded their settlement in 2015,” SESAC performing rights president and CEO Scott Jungmichel said in a statement. “The panel awarded SESAC an over 10% increase while rejecting the RMLC’s attempts to lower the rate, turn back the clock, and yoke SESAC to the regulated rates paid by ASCAP and BMI. In addition, the revenue base subject to the fee is significantly greater than the revenue upon which station groups had sought to pay under the 2017 award.”
SESAC Music Group has acquired media software and services company HAAWK, which specializes in copyright management and the monetization of indie music, film, television and video catalogs. HAAWK (Helping All Assets With Knowledge) offers full-service admin of YouTube’s Content ID system and Facebook’s Rights manager platforms, including Instagram. HAAWK will also operate alongside Audio Salad […]
James Leach, vp of creative services and West Coast operations for SESAC, passed away on Thursday (Oct. 17) in Los Angeles. The well-respected music industry executive died following a battle with cancer.
Beginning his tenure at SESAC in 2001 as director of writer/publisher relations, Leach covered pop, R&B and rock. During his 23 years with the performing rights organization, Leach signed funk legend George Clinton, Lalah Hathaway and Ab-Soul as well as songwriter/producers such as Nate “Danja” Hills, Harvey Mason Jr. (The Underdogs) and John “Jaylien” Wesley. He also established the company’s Los Angeles office.
Paying tribute to Leach, SESAC commented in part on its website, “Emanating from his warmth, kindness and enthusiasm for life, James will continue to shine light on those he knew … James was not just a leader for the Los Angeles-based creative services team but a constant wellspring of support and inspiration for SESAC-affiliated songwriters and publishers. In addition to his deep love of music and unwavering dedication to nurturing talent was his advocation of culture and DEI. He continuously promoted awareness and understanding. His ethos of service and making things better was the keystone of his work.”
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Hailing from Montclair, N.J., before relocating as a teen with his family to L.A., Leach graduated from Pepperdine University with a degree in broadcast management. His lifelong love affair with music and the arts laid the foundation for a multi-faceted career that included stints in TV and radio sales, as a recording studio owner and as the head of his own music placement firm, Leach Entertainment. Internships at Famous Music and Michael Jackson’s ATV Music (prior to its merger with Sony) led to his being appointed director of creative affairs at ATV. During his seven years there, Leach signed writer/producers like Keith Crouch and Derek Allen and also worked with the catalogs of Jackson, The Beatles and Sly & the Family Stone.
Returning to Famous Music as director of creative affairs/urban music, Leach signed then-unknown songwriter/artist Akon. After leaving Famous, Leach worked as a music supervisor and consultant. His credits in that arena include the popular ‘90s series New York Undercover and Magic Johnson’s The Magic Hour.
A Billboard R&B/Hip-Hop Power Players honoree in 2019, Leach was presented with the Entertainment Advocate Award by the Living Legends Foundation in 2015. He also served on the foundation’s advisory board.
Calling Leach “the consummate professional,” Living Legends Foundation chairman David C. Linton tells Billboard, “He brought such value to enhance our mission of ‘service, scholarship and preserving the legacy of Black music executives.’ His presence will be missed both professionally and personally. Our prayers go out to his family and all who know and love him.”
Leach is survived by his mother, Claudia Leach, in addition to his siblings and other family members. The family is asking that donations in his honor be made to The Mr. Holland’s Opus Foundation.
YouTube and SESAC have settled their rate dispute, meaning the performance rights organization’s catalog will soon be back up on the YouTube platform, according to representatives from both sides.
“We are pleased that SESAC reconsidered our offer,” a YouTube representative said in a statement. “We’ve reached a deal and content will come back shortly. We appreciate everyone’s patience during this time.”
SESAC executives also say they are pleased with the deal. “We have reached an agreement with YouTube to equitably compensate SESAC’s songwriters and publishers for the use of their music,” SESAC Performing Rights president/COO Scott Jungmichel said in a statement. “We appreciate the support and patience of our affiliates, as well as the artists who perform those songs. During our negotiations with YouTube, our affiliates’ works were unilaterally removed by YouTube ahead of the contract end date of October 1, 2024. YouTube has begun the process of reinstating videos featuring these songs.”
The deal was struck after YouTube pulled down a portion of SESAC’s repertoire, including songs from the likes of Bob Dylan, Adele, R.E.M., Green Day and Zac Brown, among others. When YouTube users wanted to play a video containing music from artists signed to SESAC, they were greeted with a message stating, “This video contains content from SESAC. It is not available in your country.”
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Artists and songwriters including J Cole, Sam Smith and Kanye West who are not signed to SESAC also had songs taken down due to having credited co-writers who were signed with the PRO. In addition, sources say, even some SESAC songwriters whose publishers have direct deals with YouTube had their songs taken down.
The YouTube representative indicates it will take a day or two for everything to go back up online. As it is, some videos still have the “is not available in your country” notice, while other songs by songwriters signed to SESAC are once again available on the service. Apparently, YouTube was still in the process of removing videos when the deal was struck, so while some notable SESAC songs were taken down over the weekend, other songs by the same artists, and even songs on the same album, were still available.
According to sources, YouTube global head of music Lyor Cohen was making phone calls at the end of last week to managers, labels and publishers, warning them that the takedown was coming. When executives who received the calls asked why the music was taken down, Cohen apparently answered that YouTube and SESAC were too far apart in negotiating the rate.
Meanwhile, other industry sources say they heard that an agreement was reached in principle on Saturday morning (Sept. 28), before YouTube started heavily pulling down SESAC songs.
Jack Harlow won songwriter of the year and also song of the year at the 2024 SESAC Music Awards, which were held at The Highlight Room in Hollywood on Tuesday (Sept. 17). He took song of the year with his smash hit “Lovin on Me,” which topped the Billboard Hot 100 for six weeks in 2023-24.
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Remarkably, this is the fourth year in a row that Harlow has won both awards. His previous song of the year winners were “Whats Poppin” in 2021, “Industry Baby” in 2022 (which won in a tie with “Heat Waves” by Glass Animals) and “First Class” in 2023. “Whats Poppin,” Harlow’s first top 10 hit on the Hot 100, featured DaBaby, Tory Lanez and Lil Wayne. “Industry Baby,” his first No. 1, was a collab with Lil Nas X.
Harlow, 26, wasn’t at the event in person but sent a video in which he said, in part, “Thank you for those awards. Much love to SESAC. I wish I could be there. I’ve been at SESAC since I was a teenager and we’re obviously the best in the world. So, thank you for the love and much love.”
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Sony Music Publishing was named publisher of the year for the third year in a row, taking home multiple awards including “3D” recorded by Harlow and Jung Kook, as well as “Good Good” recorded by Usher, Summer Walker and 21 Savage.
Willie “Prophet” Stiggers, Black Music Action Coalition (BMAC) co-founder, president and CEO, was presented with SESAC’s Visionary Award in recognition of his organization’s ongoing work creating equity in the music industry. “Prophet’s dedication to equality and racial justice has inspired us all to do more and build a stronger, more equitable creative community,” said Mario Prins, vp of creative services. “I’m proud to call him a friend.”
SESAC’s Sam Kling, Willie “Prophet” Stiggers, SESAC’s Mario Prins
mèShell studio
Additional award-winning writers include Jimmy Napes, Ariana Grande, Green Day, Fede Vindver, and longtime SESAC songwriter Traci Hale for her co-write with SESAC writer and performer Burna Boy.
This marked the third year the awards were held in Los Angeles. The event was attended by top music industry executives, artists, songwriters, and publishers including Prophet, Bryan Michael Cox, Alex Isley, Knox and Kenyon Dixon.
Artist and SESAC songwriter Tamara Jade served as MC for the evening for the second year in a row. Opening the show were Scott Jungmichel, SESAC president & COO, and Sam Kling, chief creative officer, as well as Mario Prins, VP, creative services, and Diana Akin Scarfo, VP, creative services & operations.
For event highlights, visit @SESAC on Instagram. A full list of winners is available at sesac.com.
On June 26, SESAC Latina will mark its 30th anniversary of representing top-tier songwriters globally with its annual SESAC Latina Music Awards Gala at the Beverly Hills Hotel in Los Angeles, Billboard Español can exclusively announce.
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The event will recognize the exceptional talent and achievements of its affiliated songwriters and publishers, awarding honors such as song of the year, publisher of the year, and more.
Additionally, the SESAC Legacy Award will be presented to Latin Grammy-winning songwriter/producer Luciano Luna, celebrating his illustrious career and significant contribution to Latin music. “I am very grateful for this distinction; it motivates me to continue dedicating myself to writing stories with my songs and being a good example for new generations of songwriters,” Luna said in a press release.
The Sinaloa creator has recorded over 250 productions, mostly in the regional Mexican music genre, with iconic acts such as Julión Álvarez, Gerardo Ortiz, Banda Los Recoditos, Banda MS, Régulo Caro and more. As a co-author, his collaborations include Joss Favela, Edén Muñoz, and others.
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“We’re thrilled to celebrate the magnificent and vibrant talent within the Latin songwriting community,” remarked SESAC’s CCO, Sam Kling. “The SESAC Latina Music Awards always showcase exceptional songs and songwriters, making it an unforgettable evening.”
Celeste Zendejas, senior vp of SESAC Latina, added, “SESAC Latina’s 30th anniversary is a celebration of continued growth, endless creativity, and the global success of the exceptional talent behind the music. On this milestone year, we honor all our incredible songwriters who continue to inspire us with their profound lyrics and soulful melodies,”
She continued, “We are thrilled to present the Legacy Award to one of the most distinguished songwriters of our generation, Luciano Luna, who has sustained a remarkable career throughout the years.”
The award ceremony is sponsored by City National Bank and Rossi, P.C.
NASHVILLE — In a keynote interview on the last day of the Music Business Association annual conference, SESAC CEO John Josephson easily sidestepped an early question on what he thought about the seemingly hip-hop-like feud that had recently evolved between ASCAP and BMI, over the latter’s decision to switch to a for-profit model and its subsequent acquisition by a private equity firm. But he wasn’t shy in touting the advantages his company offers songwriters and publishers over the competing U.S. performance rights organizations.
When BMI announced it was switching to a for-profit model and was acquired by New Mountain Capital, ASCAP took to social media reaffirming its commitment to pay out out all revenue it collects — minus overhead — and unlike BMI, not taking any profit.
“I have nothing to add to that conversation,” Josephson said in response to the feud characterization put forth by interviewer, Billboard editor at large Robert Levine.
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Josephson nevertheless acknowledged that it will be interesting to watch BMI’s evolution of its business model, saying it may cause indigestion but he doesn’t think it will have a big impact. Beyond that, he said it will also be notable to see “what will happen to the beef between some of the large publishers and BMI.”
When Levine observed that some rights holders say it is tricky to leave some U.S. PROs, Josephson responded, “The great thing about the U.S. market is people can choose” a PRO.
But when Levine pointed out that it isn’t always easy to leave some PROs, Josephson agreed, pointing that there has been friction in moving from one PRO to another that has even resulted in arbitration. However, at SESAC, “we don’t view our writers and publishers as captives,” he said. “If they want to leave, they are free to go. We win by delivering better service and more money. If you do that, then you don’t have to make it difficult to leave.”
In focusing on SESAC’s future, Josephson said that the company has an infrastructure that serves as an intermediary between rights holders and businesses that want to exploit music and it has been looking for ways to leverage that capability. “We think we can double or triple our market share,” Josephson said.
It has already grown considerably through the acquisitions of 11 different companies, including the Harry Fox Agency, Audiam and Audio Network, within the last decade, he said. It also has a joint venture in Mint Digital Services with the Swiss collective management organization SUISA. All in all, its multi-pronged approach has made SESAC a global company, he added.
Furthermore, he added SESAC currently has a “backlog of 7 or 8 companies” it is talking to now about acquiring. If deals are made, Josephson said SESAC can help such companies “grow at a faster rate than they already have been organically growing,” all of which will deliver “compound growth.
Beyond its PRO, SESAC divides its company into three segments, church music resourses, audio-visual licensing and music services for publishers and labels. Of the latter segment, which includes the aforementioned HFA, MINT, and Audiam, he said. “We are not interested in the long tail. We are interested in small publishers and small labels. Over time we want to broaden services that we offer to those customer groups.”
In turning to church music resources, he said Christian Copyright Licensing International (CCLI) has been “a great business for us.” In fact, he said, it was the “first extension of our business to be global,” with more than 50% of the church licensing occurring outside the U.S. He conceded that licensing to that segment is not without challenges, noting that churches tend to operate on a non-profit business and may expect to pay lower rates, “even though they are multi-million dollar commercial enterprises.”
As for SESAC’s audio-visual segment, he said it is a much bigger” business for the company that it is for ASCAP or BMI.
For the last seven years, SESAC has been majority owned by the giant private equity firm Blackstone, which he says has been a great relationship and a phenomenal capital source.
“They give us a lot of latitude to pursue our vision of where we want to take our business,” Josephson said. “It’s’ not like they tell us what we can do and can’t do. They think about what’s best for the longterm business.”
When interviewer Levine observed that most private equity often invest with the goal of cashing out within five years, Josephson said that the Blackstone fund that invested in SESAC has an investment goal of holding a company for “10-15 years, which is why we were interested in selling to them. They don’t think about what we can do to goose earnings this year,” and instead focus on the long-term.
When Levine expanded to the overall impact that private equity has had on the music business in recent years, Josephson observed that in the past private equity had sometimes disappeared from the music industry equation. But going forward, “as long as interest rates don’t go up further dramatically…private equity’s involvement in the music industry may wax and wane but I don’t think it will disappear.”
SESAC Music Group today (March 5) announced a deal with the Korean Society of Composers, Authors and Publishers (KOSCAP) that calls for KOSCAP to represent SESAC’s repertoire in Korea and for SESAC-owned Audiam to administer KOSCAP’s publishing rights in the U.S.
The deal makes SESAC one of the first big collective management organizations (CMOs) to move its rights out of the established Korea Music Copyright Association (KOMCA) to KOSCAP, a competitor that the government approved in 2014 to increase competition in the market. KOSCAP will represent SESAC’s online and offline performing rights in Korea, and the catalog of the Harry Fox Agency, the SESAC Music Group’s mechanical rights entity, will follow next year.
The Audiam deal calls for that company, which the SESAC Music Group bought in 2021, to collect performing, mechanical and other audiovisual rights in the U.S. on behalf of KOSCAP.
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Charles Park
Although this might seem like just another deal in the alphabet soup world of collective rights management, it highlights the growing competition among CMOs – and how that is leading to different kinds of international deals. In October, SESAC made a deal to have its offline performing rights in Italy managed by Soundreef, a private company just over a decade old, instead of the traditional society Italian collecting society, SIAE.
“Why did we switch?” Alex Wolf, president of international of the SESAC Music Group, told Billboard about the KOSCAP deal. “We’re convinced about the competence and the responsiveness of the management and we’re convinced that we will increase our revenues. This is a bet on the future.”
Just a decade ago, only a few markets had competition among CMOs, which didn’t compete with one another across borders. Since 2014, though, when the European Union passed the Directive on collective management of copyright and related rights and multi-territorial licensing, European societies have had to compete for online rights in the EU, and many other countries have opened up as well. This has led to competition among established organizations, as well as new companies like Soundreef – both to represent writers and publishers and to make deals with foreign CMOs.
“It’s a great honor to partner with SESAC, a global leader with a world-class catalog and one of the premier Performing Rights Management organizations in the world, along with Audiam’s innovative technology to administer our catalog in the US,” KOSCAP COO Charles Park said in the press release announcing the deal.
A songwriter recently posed a distressing question with me: Do the songs he writes for the church that are classified as “Christian Music” get treated differently by the performing rights societies (PROs)?
The inference that a song is penalized in some way by an organization collecting royalties is not correct, but the songwriter was onto something. Songwriters who write music categorized as Christian often do feel they earn less than their secular counterparts. There needs to be an explanation as to why the perception exists and what can be done to change it.
The explanation goes back to how performance royalties are collected. They flow from three key segments of the market:
Digital service providers (DSPs), such as Spotify and Apple Music
General licensing from bars, nightclubs, restaurants, and live venues
Broadcast media including terrestrial radio and television stations
All genres are treated equally on digital services, in terms of tracking, but Christian music is not your typical soundtrack at most bars, nightclubs and restaurants. And venues for Christian music concerts tend to be small community locations, such as churches. Promoters at these venues are unaware (either genuinely or deliberately) that licensing is required, even though they are holding a commercial concert with ticket sales.
That leaves television and terrestrial radio, and this is where I believe the system is fundamentally broken. The Copyright Royalty Board (CRB) allows “educational” radio stations, typically small nonprofit community stations, to operate with a significantly lower rate structure that is not set on a percentage of revenue such as commercial stations, but rather a fixed fee structure based on the population of the community where the station is located.
For example, here in New York City the station WPLJ 95.5FM broadcasts Christian music to more than 8 million people, and in 2023 will pay a capped amount of performance licensing fees to ASCAP, BMI and SESAC, a total of $15,029, combined. These fees will not vary, no matter how much revenue is generated by the station.
WPLJ is part of the Educational Media Foundation, a 501(c)(3) nonprofit organization that runs a network of almost 500 terrestrial radio stations that broadcast Christian music. They claim the lower non-commercial rate under Section 118 of the Copyright Act and the related CRB rules because it is a nonprofit. When you look at the network’s publicly available information and the CRB rate sheet, you can see that they are paying an estimated combined total of around $1 million dollars in performance license fees.
It may seem reasonable for a non-profit to pay such limited amounts to perform music. But here is where the current regulatory regime is broken. The publicly available 2022 financials show the nonprofit collected $238 million in revenue, primarily through donations and sponsorships to the Christian content focused broadcast network. The network now has over $1 billion in assets, adding $50 million to those assets in 2022. Additionally, the salaries of the executive team for 2022 totaled $5.4 million. This is a far cry from the small volunteer-run community stations the CRB rates are meant to protect. How can it be that executives earn more than five times the total amount the network pays the entire song writer and music publisher community that create the songs upon which its network depends?
It must be said very clearly this network and others like it have done nothing wrong and they are a great resource to the wider community. However, just because it’s not wrong doesn’t make it right. I believe that it’s inherently unfair for these networks to exploit the CRB rate structure that’s available to educational radio stations given their financial profiles and the significant amount of money they raise using music to build a large audience. No matter how much money large non-commercial networks collect, and in this case primarily using Christian music to generate those revenues, the CRB license fee structure is capped. Commercial radio pays rates that are generally set as a percentage of revenue and not capped. Many high-earning Christian stations are paying as low as 10% of what commercial stations earning the same revenue would pay.
So back to the songwriter who felt his work was penalized. The answer is yes, he’s partially right; he is indeed paid less, but not due to prejudice on the part of PROs. The lower earnings are due to the lower royalty fees collected across the broader market that uses Christian music.
If we and the Christian songwriter and publisher communities believe that Christian songwriters should be paid on par with other writers, then the PROs as well as the Church Music Publishers Association (CMPA), should work together to create a dialogue with these high- earning broadcasters and ask that they opt out of the CRB rate structure and negotiate fair license fees for the Christian songwriter community. Or alternately, advocate for a revision of section 118 of the Copyright Act that would exclude wealthy “educational” broadcasters. This, along with financial transparency regarding the revenue collected and music licensing fees paid by anyone who gets a US Government-approved discount, should help level the playing field for all songwriters, regardless of what kind of songs they compose.
Malcolm Hawker serves as chief operating officer for SESAC Music Group, where he is charged with overseeing the operations of all the organization’s portfolio companies. Prior to joining SESAC, Hawker served as the president and CEO of CCLI (Christian Copyright Licensing International), a global rights licensing and resource company.