I remember exactly where I was and what I was doing when I heard the news. On July 1, 2016, I received an iMessage with a link to one of the biggest setbacks I’ve witnessed in the music industry since Napster. It had been announced that the Department of Justice (DOJ) ruled against ASCAP and BMI in their attempt to change the government’s 1941 consent decrees policies on music licensing. If you're unfamiliar with what companies like ASCAP and BMI do, click here.
For those of you that are unaware, due to section 115 of the U.S. Copyright Act, once a nondramatic musical work has been commercially released the copyright holders are obligated to license the use of the music to anyone interested. In other words, once you release a song anyone else can play it and perform it as long as they pay the right holders a very low flat-rate royalty. Licensees include online streaming services, venues, restaurants, arenas, and any other place where music is played and performed publicly. This is called a compulsory license. Although this license is contingent on a few other deciding factors, such factors aren’t enough to prevent this from happening.
As online streaming continues to dominate the music industry, record labels and publishers are suffering from lack of record sales. Subscribers to these streaming services pay a small fee to access to a vast library of music. Here lies the problem. While services like Spotify continue to grow, record labels and publishers are still receiving the minimum flat rate to license their music. ASCAP, BMI and major publishers requested that the DOJ allow them and others to negotiate their licensing fees as well as remove certain albums from streaming services. Not only did the DOJ deny this request, they implemented 100% licensing. A policy that requires performance rights organizations (PRO’s), the companies that collect your royalties, to license 100% of a song without getting consent from other owners of the works.
What does this mean to you?
Plenty! First off, a vast majority of indie creative artists are already unaware of the multiple layers of the music business and its complexities. To this day I still see upcoming artists get jerked around and screwed over for their lack of industry experience. 100% licensing only makes the industry more confusing and puts you, the creative, in a position to not only lose money but also not be paid the little money you do earn from streaming. I’ll explain.
At some point or another, almost every record released is a collaboration between two or more “creatives.” Rather it a songwriter and a producer or two songwriters and a piano player, each of these collaborators own part of the record. If one individual is with ASCAP, one SESAC and the other BMI, each collaborator’s PRO is responsible for handling the administrative duties on behalf of the creative. These duties were only applied to the percentage of the song represented by the PRO.
With 100% licensing only one of these organizations is necessary to obtain a license for the song. In addition to this, each PRO calculates royalties differently. Therefore, licensees can shop around to get the lowest rate to license your music and you can’t do anything about it. Not only are you making little to no money from streaming services, you may not even be aware of money owed to you.
Consider this. What happens to your money if you’re with ASCAP, and BMI whom your cowriter is registered with, licenses your record but doesn’t have any of your information to pay you your royalties? Exactly! PRO’s are now in a position where not only are they responsible for the administrative duties to their registered creatives, they’re also responsible for collecting and distributing royalties to anyone else on the song. Let that sink in. This is just one of many things an indie creative just getting started must consider. Click here to for a more in-depth break down of the necessary things to considerations.
Are you upset or confused?
If you plan on collaborating or commercially releasing your music you should be. With this announcement, collaborations amongst creatives that belong to a different PRO’s may begin to decline over time. Creatives now have to worry even more about being paid correctly for their contributions to a record. The DOJ plans to announce their final decisions near the end of July. In the meantime, PRO’s have yet to give up and are considering other options. Although this decision shouldn’t affect your relationship with your PRO, it may be a good idea for you to keep this in mind as you continue to collaborate with others.
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