Your Local Pizza Place Pays 4 Different Companies to Play 1 Song. That’s Stupid.

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If you don’t have contracts with multiple PROs, your tiny shop can be sued for infringement.  But why does this have to be so complicated?

I managed three different contracts for three different performance rights licenses at my former company.  So I know how much of a hassle this can be.

And the whole time I was thinking, ‘why can’t I just sign ONE damn contract and have ONE payment to cover it all?’

But first: what’s a PRO?

If you’re running a business that plays (or ‘performs’) music, you definitely need to know this.  A ‘PRO’ is a performance rights organization, which issues blanket licenses that allow you to ‘perform’ music for your customers (or radio listeners, or whatever).  If you don’t have proper agreements to pay PROs, you can get hit with a huge bill, lawsuit, or both.

Or, even get shut down (yes, I’ve seen this happen).

Actually, there are now four PROs in the US: ASCAP, BMI, SESAC, and GMR (a limited PRO covering the works of a smaller group of higher-end songwriters).  All of these groups essentially monitor plays across the country, then pay out their member publishers and songwriters.

Which is where this gets really complicated.

Because every PRO has its own roster of publishers and songwriters.  So, the writer for a Shania Twain song might be signed with ASCAP, while the writer for a Toby Keith song might be signed with BMI.  It’s a total patchwork, so you need several licenses to avoid getting sued.

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And here’s where this gets even more complicated.  Because one song often has multiple writers, each signed to different PROs.  So payments from different businesses are getting split accordingly (at least theoretically, but that’s another story).

So it’s entirely possible that one song requires administration by four different PROs, all essentially doing the same function.

The system is so screwed up that the US Government has now ordered that a license from one PRO should cover everything.

That’s right, your dysfunctional, do-nothing US government actually stepped in on this one.  Because up until recently, every establishment playing music had to secure licenses with four different PROs.

Now, the music publishing industry is fighting back for their own bloated inefficiencies.  That’s right: the PROs have their special interest lawyers, lobbyists and PR hacks, and are spending millions trying to protect a ridiculous market inefficiency.

Just last week, BMI was challenging the US Department of Justice in court over its 100% license ruling.  Now, a panel of judges at the US Second District Court of Appeals in Manhattan are weighing whether ‘full works licensing’ is legally sound.

Of course, licensees are willing to pay, they just don’t want to juggle payments to four different organizations.  And they want to negotiate a license with one rights organization, with a simple law that allows full licensing (even if other writers from other PROs are involved).

The PROs say no: every work must be uniquely negotiated.  They like ‘fractional licensing,’ and they’ve been fighting to preserve that since 2016.

Why all that effort?  The reason is that market inefficiencies are actually a great way to make a handsome profit.

It’s simple.  If every PRO has to administer, collect, and distribute royalties for fractional parts of songs, then all three keep making money.  Administrative costs are a profit center, even if the company claims to be ‘non-profit’.

And if the local pizza place has just one simple payment and licensing process, that lessens the need for multiple, overlapping organizations.  And, overlapping sets of salaries for redundant workforces (and CEOs, board members, etc.)  It’s a perfectly complicated mess that makes a lot of people a lot of money — but basically sucks for anyone else.

And by the way: that includes the songwriters themselves.

I’ve had some interesting conversations with some successful songwriters over the years.  And they’ve always told me that PROs like ASCAP are like a giant ‘black box’.  You get a check and cash it, but you aren’t getting a detailed spreadsheet of plays.

That includes digital plays, which seem to be getting dwarfed by more ‘traditional’ plays — at least according to some formula nobody understands.

Which is funny, because the technology absolutely exists to break down every single play in every single store in America.  Actually, that goes for every single licensee, everywhere, including radio.  In fact, there’s a massive disruptive opportunity to install that monitoring, and directly pay every songwriter according to their exact plays — even at a negotiated rate.

Not an estimate that’s statistically significant, but the exact plays.   In fact, some of the largest music publishers in the world would love to do that — if they could just figure the tech part out.  All it takes is the right company and some smart investors, and this industry starts to change really, really fast.

Maybe that’s a future that can’t come fast enough.

 


image:mohamed1982eg (CC0)

10 Responses

  1. Anonymous

    why is it that licensee needs to pay the pro’s when they have negotiated a deal directly with the publisher and label….is that not just an example of double dipping ?

    • Paul Resnikoff

      The answer to that question is very long, drawn out, and complicated. But I think (have to check my notes) that a federal judge recently ruled against a mish-mosh of independent deals + a blanket arrangement. At least that’s the latest ruling.

  2. Anon

    Why are you ignoring all the background music providers which consolidate license payments for each PRO per its catalog? Such as DMX and Pandora for business (as stated by another comment). I’m sorry but this article here is not pragmatic in its assertions.

  3. Human

    No mention of the many background music services that handle payments to every PRO! This article is not at all pragmatic in its assertions. PRO’s aren’t perfect. But this magical monitoring tech does not yet exist… at least not for every realm of performance that PRO’s handle (TV, Radio, Live, General background). Maybe one day the publishers will receive this market disrupting monitoring tech, and PRO’s will become obsolete but this is no where in the near future. What of the Global PRO infrastructure and licensing cross boarders?

  4. Paul Resnikoff

    Well, it actually HAS been invented, in that all of the pieces of a direct performance recognition, accounting, and payment solution exists right now. Look: I could pick two talented music tech execs (I can think of at least 10 in my head right now + an industry attorney to make it all legally sound) that could deliver a pragmatic system for automatically (a) recognizing every single song in every single performance environment, and (b) constructing an interface that can be accessed by any artist with (c) an easy payment platform that drops the money in their account within 30 days.

    It’s a 2018 solution to replace a 1988 solution that currently exists right now (with 7 figure salaries to the smart men and women keeping the old system afloat).

    Fuck it: I will help you build this, and talk to the right people. You can be up and running in 2 years + put at least 2 PROs out of business w/in 5.

    You’re welcome.

    drops mic

    • Wendy Day

      As the crowd cheers “Do It! Do It! Do It!” I’ll lend marketing help…

  5. Remi Swierczek

    You local pizza place SHOULD BE PAID for music they play and sell to their patrons!

    Time to convert 5,000,000 public places (including pizza shops), 1,00,000 terrestrial and internet Radio stations and 7 STUPPPPPPID streamers on Ek’s DOPE to simple discovery based music stores.

    Play the best, ad and sab free, with 49¢ charge for ADDITION to your personal play list. Simple solution leading to $300B music business by 2030 with HARM only to YouTube and Vevo.

  6. Rob

    We have a Soundmachine subscription in our grill that covers all these business licenses, so much easier.

  7. Cindy

    Subscriptions for business music and retail radio solutions (like aforementioned Pandora for Business & Soundmachine) will generally range from $17 – $40/mo per location and the services will normally handle the business licensing paperwork on your behalf (for ALL PROs) – so they’re definitely the most cost-effective “one payment” solution.

    Would highly recommend this article for the most common business music licensing questions and answers: https://cloudcovermusic.com/blog/licensing-questions-legal-business-music/