Monday, October 1, 2012

What Sony/ATV's Direct Negotiation With iTunes Means

The Beatles image from Bobby Owsinski's Music 3.0 Blog
In a move that may signal a change in the way business is done in the music industry, music publisher Sony/ATV Music will soon negotiate directly with iTunes, Amazon and every other online music distributor directly. In effect, they're cutting out the traditional performing rights organization middlemen of ASCAP, BMI and SESAC.

Sony/ATV with begin this new policy with The Beatles catalog, which obviously carries considerable leverage; so much so that The Beatles now have their distribution deal directly with iTunes that bypasses their record label EMI (let's see how long that lasts now that EMI is owned by Universal Music).

It should be noted that the direct negotiation is only for online distribution and doesn't apply to broadcast performance or physical product mechanical royalties.

By bypassing the PROs, Sony/ATV sets a precedent that the PROs should be very wary of. One of the things about online music distribution online is that the detail of information is high. You know exactly where every sale is coming from and can easily have that info at your fingertips. The PROs have a stranglehold on the analog world in that they do blanket deals directly with the broadcasters then pay out to publishers and songwriters by their own complex formulas, since the royalty data is a lot more nebulous.

While it seems a bit far-fetched that any publisher would even dream of cutting a PRO out of the picture, you have to believe that at some point the airplay info will become granular enough that they may begin to wonder why they need a PRO in the middle of everything.

Then again, The Beatles are such a unique case that they still warrant special handling. Regardless, keep an eye on this since it may be a harbinger of things to come down the road.

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