Bar Owners Fighting BMI Over High Fees

Bar owners across the country are getting more up in arms at what they claim is BMI's "take-it-or-leave-it" fee structure and canceling music events as a result, according to an article in phillymag.com.

Every public establishment, whether it's a bar, coffee house or restaurant, has to pay the performing rights organizations (BMI, ASCAP and SESAC) if they want to have music playing, whether it's live, radio, or a jukebox.

The problem is, according to many bar and club owners, that BMI imposes what seems like a random fee that could rise at any time without a cap. If they don't pay, then BMI's deep pocket attorneys take the owner in court, which most bar and club owners just can't afford.

The bars are fighting back though, thanks to their local beverage associations. The Pennsylvania Licensed Beverage and; Tavern Association, The Food and Beverage Association of San Diego, and the Michigan Licensed Beverage Association have all teamed up to create the Fairness In Music Licensing Coalition, which hopes to change the way this portion of the copyright law is implemented.

Right now BMI charges on the number of people that will fit into the club, but if that isn't available they use the establishment's square footage, which almost always doesn't represent the number of people that the place holds.

No one argues that the songwriters and publishers shouldn't be paid, by the way. It's just how they're being charged that's at issue.

The big problem here is that everyone loses when a venue stops having live music, so this is something that both sides should work diligently to sort out.

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BMI Wins A Royalty Fight With Pandora

As you probably know, BMI and ASCAP have been fighting with Pandora for quite a while over the performance royalty rate that Pandora pays.

The streaming service was paying 1.75% of it's total revenue to the performance rights organizations (PROs), which all of the organizations deemed an unacceptably low rate.

ASCAP managed to renegotiate that rate up to 1.85% in December, but now BMI has won an improvement on that up to 2.5% in the latest court ruling. BMI actually asked for 3.825% initially, but was only granted the lower number.

This was an interesting development for a couple of reasons. Songwriters and publishers will get paid more, which is always a good thing. But the fact was that BMI was forced into this since many large publishers like Sony/ATV, Universal Music Publishing, and BMG Publishing pulled out of BMI and renegotiated their own deals with Pandora. They also settled at the 2.5% mark.

The 2.5% rate is about a 33% increase, so songwriters and publishers can rejoice in that fact, but it's only for non-interactive part of the streaming business. Unfortunately more money is being collected on the interactive part of the business from services like Spotify, but that money flows through the record labels first instead of a PRO or publisher before it gets to the songwriter. Until that changes, songwriters will continue to get the short end of the royalty stick.

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The Big Shake Up In Licensing On The Horizon

Everyone acknowledges that the current copyright law that we live under is outdated, but it's been really difficult getting any updates to the law passed in recent years, mostly because of special interest groups and the fact the a complete overhaul is required rather than just a few band aids.

That overhaul just got a little easer thanks to a 245 page report issued last week by the US Copyright Office officially throwing its weight behind some big time changes that would definitely benefit copyright holders.

The paper made a number of specific suggestions, many that will bring some large media corporations (like broadcasters, for instance) kicking and screaming into the 21st century. Here are some of the things proposed.

1. Everywhere in the world except the United States artists get paid when one of their songs is played on the radio (the songwriter gets paid, but not the artist). The artist gets paid when a radio station or streaming service streams online in the US, but not for traditional terrestrial airplay as it's claimed to be "publicity." The broadcasters have successfully lobbied forever about how their business would be destroyed if forced to pay artists while they've raked in billions. Now the Copyright Office finally agrees with what artists, managers, record labels and even the general public has been saying for years - let's pay the artists for airplay.

2. There's a funny loophole in copyright law where a song from before 1972 can be used by radio or streaming services without payment to the copyright holders. There's been a number of high-profile lawsuits (The Turtles successful suit being one) about the fairness of this doctrine, and the Copyright Office agrees that pre-1972 songs should be treated just like post-1972 songs.

3. The amount of money that performance rights organizations like ASCAP and BMI can collect is governed by a piece of anti-trust legislation called the Consent Decree. Basically what it means is that these organizations must offer licenses on equivalent terms, but those terms haven't been updated to keep up with the latest technology or the evolution of the business, so copyright holders are still bound to a rate that's decades old. It's actually a much deeper subject, but the gist is that the Copyright Office is finally agreeing that the Consent Decree should be reevaluated and updated for the Music 4.0 world we live in.

4. Producers get a royalty on units sold, but the payment can either come from the record label or directly from the artist, which means that it can be really difficult to get paid sometimes. The Copyright Office recommends that producer payments now be administered by Soundexchange as a way of freeing the label and artist the burden of accounting, but also making sure that the producer gets paid as well.

There are other recommendations in the paper, but any one of the above will bring sweeping changes to a system that badly needs it. Read the full report.

Sony Threatens To Pull Out Of ASCAP And BMI

In what may be a glance at the music publishing world to come, Sony/ATV Music Publishing has threatened to end its relationship with music licensing agencies ASCAP and BMI if the changes it wants aren't implemented. And it looks like Universal Music Publishing could be lining up to do the same thing.

The issue primarily stems from the payments received from streaming royalties, which most publishers think is too little, especially when compared to downloads. Then there's the fact that the performing rights organizations (PROs) have always been nebulous how their payouts are determined. Writers and publishers alike have been frustrated for years over the disparity between royalties payments between ASCAP and BMI on the same song, where one will be higher than the other on one statement, than switch on the next.

Given the fact that we live in an age where song use tracking and royalty accounting is so much easier than in the past, it would seem that the PROs usefulness might now be diminished. Where for most of the 20th Century they were a total necessity for the publishing business, today that's becoming less true, since every play can be digitally tracked.

Sony/ATV has a catalog of over 2 million songs, including huge earners from The Beatles, Taylor Swift and Lady Gaga. Pulling out of ASCAP and BMI would be a significant blow to those organizations, and probably just the beginning of the snowball rolling downhill. It wouldn't be long before the other large music publishers followed suit.

It's probably inevitable that this will happen eventually. What's for sure is that we're about to witness both big changes in the industry and some history in the making right before our eyes.

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Has The Time Come For A New Collection Society?

Performance royalty collection societies like BMI and ASCAP have been around almost a hundred years (in the case of ASCAP), and while they've been essential to the well-being of the songwriter and publisher, some wonder whether they're a product of another time that hasn't quite kept up with our Music 3.0 age.

For one thing, in our new streaming world, some publishers and record labels feel they can do the job better than these companies, and have made their own deals with Internet broadcasters, something that would have been unthinkable even 5 years ago.

Now it seems that a new collection organization in Germany may show the way for other territories.

Currently GEMA is the equivalent of BMI or ASCAP in Germany, but the new Cultural Commons Collecting Society (also known as C3S) began in 2010 especially for musicians and songwriters that did not wish to be represented by GEMA. The company is now in the middle of a crowdfunding campaign to raise the necessary funds to go head to head with the big dog of the marketplace, and already has close to 500 supporters.

I'm not sure that C3S can make a dent in GEMA, given that it doesn't have the deep pockets required to be a player (at least at the moment), but it does exhibit an emotion that many are feeling; that it's time for something new and fresh.

We'll check back from time to time to see if C3S is gaining traction. If it does, you can bet that execs and songwriters in other parts of the world will be watching.

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New Artist Checklist

I've posted a previous article a few months ago about SoundExchange, the company that collects and distributes royalties for online and satellite music streaming. It's something that every musician should register for if you have music that's playing online, since that's the only way you'll get paid as a performer (ASCAP, BMI and SESAC only collect for mechanical and performance royalties for songwriters, not musical performances).

They've recently posted a New Artist Checklist that's so good that it deserves reposting. Even if you've been around for a while, chances are you missed at least one of the following. Check it out.

Register your copyrights Copyrights to your original creative works exist as soon as you fix the sounds or words or notes to a medium (written down or recorded). But to secure additional legal rights, you must register your copyrights with the US Copyright Office. Electronic registrations can be processed much more quickly than mailed registrations. Also, sound recording and music composition recordings can be registered together, which, if you own both, is cheaper than doing them separately.  Draft an agreement between band members In the glow of the creative process, it’s easy to forget to put things in writing. Write out an agreement in case issues come up at a later time (and they often do). The agreement should address the rights and responsibilities of the band members including who owns what percentage of the business, what property is owned or controlled by the business (including the band name, web site, and equipment) and who funds the bands and looks after its finances. Break out the percentage of ownership rights of each track – who wrote it? How will you split royalties? Discuss what will happen if band members depart, or new members join. Again, we suggest you consult a qualified attorney, to see if and when incorporation or a formal partnership would be recommended to help protect your assets. At any stage, it’s important to have some kind of written agreement in place.  Trademark your name and logo The US Patent and Trademark Office oversees trade and service marks. Make sure no one else owns the rights to your name and/or logo and if not, be sure to register it. It may be your only way to prevent someone from claiming he or she owned the name first, or claiming to be you later. Registrations can be made in different “classes” to cover recordings, live performances, merchandise and other classes, so make sure you cover the bases. Registration costs can add up in a hurry, but a band or artist name and brand may become one of your biggest assets, so it’s well worth it to protect it early.  Form a company (or companies as necessary) for your label, songwriting/publishing, touring, merchandising, etc.) It’s important to look at your work as a small business, not just a creative hobby, and to get all your legal protections in place. Forming a company, partnership, sole proprietorship or LLC and keeping separate financial records can help ensure that you’re compliant with taxes and can protect your interests. A consultation with an entertainment attorney and/or an accountant is strongly recommended.  Pick a songwriting Performing Rights Organization and register – ASCAP, BMI or SESAC If you’re a songwriter or publisher with a song copyright, you’re entitled to collect royalties from public performances of your musical compositions (for instance, the royalties that you are entitled to receive when the songs you wrote are played on the radio). ASCAP, BMI and SESAC take care of this kind of licensing, collect fees from them and pay them to you. They all cover the same copyright, so you only need to affiliate with one. Check out their websites and see which might be best for you.  Register with SoundExchange If you performed on and/or own the masters of a sound recording, you can collect royalties from anyone who streams that track digitally (webcasters, satellite or Internet radio, etc). SoundExchange is the only organization designated by the US government to collect and distribute these royalties, so register now to claim your money. It’s totally free.  Arrange for Distribution Set up an account for digital distribution with an aggregator like IODA, INgrooves, TuneCore, The Orchard or similar companies which allow you to make your music available to the public for digital downloading at popular sites like iTunes,Amazon and others. Be sure to properly enter all metadata accurately during this process since it will propagate everywhere after that. Understand the obligations, splits and commitments you make by entering into an agreement so that you know how it may limit other opportunities.  Embed metadata about each track into each digital file. If a music service opens your file or pops in your CD, and sees ‘Track 1’ and ‘Artist Unknown,’ you could miss out on royalties. While services and webcasters are supposed to report all the tracks they play, they’re busy, and you need to make it as easy as possible. Many millions of dollars have been earmarked for “promo only,” “self-released” and “artist unknown.” Include, at the very least, the artist or group name, copyright holder or label name, and track and album titles, and the ISRC number, if available. Most mastering software includes the ability to embed this data, and online services are available.   Buy/register your website address and social network domains  Start your online marketing and fan building by registering and creating your domain names. It’s common practice for vendors to buy up domains in hopes they’ll be able to jack up the price to sell them back to you when you need them, so pin down the names as soon as you can. Also, create your band’s official profiles on the various popular social networking and sharing sites such as MySpace, Facebook,Twitter, iLike and YouTube.  Check out organizations and associations which may benefit you  There are lots of groups out there doing great things for musicians. Not all of them will be right for you, but a few of them may be. Consider unions like the American Federation of Musicians and the American Federation of Television and Radio Artists, which represent a wide variety of musicians and performers, at all stages in their careers. Check out what groups like The Recording Academy and musicFIRSTare doing to protect your work. There are also payment funds, including the Alliance of Artists and Recording Companies and the AFM & AFTRA Intellectual Property Rights Distribution Fund, which may have funds to offer for certain kinds of work you’ve done. Many regional and local organizations are also available, and many of these groups offer member benefits and discounts on services you may use. Educate yourself about all the associations which may be open to you, and find out what choices can help you advance your career.   Build your web presence Use your site and social network profiles to sell merchandise, display a photo gallery, and dispense news updates and tour events. Keep the information fresh and interesting. Cross-link and expand your social network communications to drive fans to your website. Consider periodic email or other mass-blasts to keep your audience informed. Be authentic and consistent.  Get health and equipment insurance You want to be able to rock on for years to come, so don’t take any risks. When you’re on the road or at gigs, equipment can disappear, so find affordable but adequate insurance. In addition to private companies, some labor unions and organizations, offer health plans, but do your research to find the right plan for you. Check out the Health Insurance Navigation Tool (HINT) program—a good place to start looking, and get some free advice.  Build your team and assign responsibilities (merchandising, bookings, social media, accounting, licensing, publicity, email management, etc.) Build your business by having the right helpers in place. Assign those tasks to the person or group best suited to them. Many online enhancements or replacements for hired help are available (SonicBids, CDBaby, TopSpin,ReverbNation, Rumblefish, FanBridge, Nimbit and others) which allow artists to take on many of these tasks themselves.  Create great music!  There is no substitute for creative productivity. This is what artists do. So create often and let your audience know what you’ve been up to. It’ll take a lot of work, but before you know it, you could be living the dream.  ----------------------------------- Follow me on Twitter for daily news and updates on production and the music business. Check out my Big Picture blog for discussion on common music, engineering and production tips and tricks.