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.
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.