PROs

Why Rights Organizations Want to Make Music Together

Music rights collection societies can’t seem to get enough of each other these days. Last week’s news that France’s SACEM, the UKs PRS, and ASCAP in the U.S. will collaborate in a project to build a prototype blockchain-based metadata linking system was only the most high-profile example of a trend that can trace its origins back at least to SESAC’s acquisition of the Harry Fox Agency in 2015.

Overshadowed by the SACEM/PRS/ASCAP announcement was confirmation last week that Canada’s main performing rights organization SOCAN is in advanced talks with SODRAC, which licenses reproduction rights in Canada about merging the two organizations. In Europe, meanwhile, the cross-border PRO consortium Armonia Online is now up to nine member societies and is eyeing expansion beyond the Continent, Armonia officials told RightsTech.com,  including to North America.

Not all such moves have the same immediate causes or motivations. SOCAN, for instance, has already swallowed MediaNet (formerly MusicNet) and Audiam as it strives to build an end-to-end rights-management platform with reach beyond the Canadian market and a merger with SODRAC, which in addition to representing Canadian songwriters and publishers is the exclusive representative in Canada for music works from 100 other countries, would be of a piece with that broader strategy.

Armonia Online’s growth has been driven by an EU directive to improve transparency and governance of collection societies and facilitate cross-border licensing.

The SACEM/PRS/ASCAP announcement would seem to be at least partly defensive: If blockchain-based metadata management is coming to the music business anyway, better that it be designed to the benefit and specifications of the PROs than risk having to conform their processes to a system designed by and for others.

To one degree or another, however, all reflect the impact of two underlying and related dynamics. One is the increasing complexity of the market for music rights, as both the number of use-cases for music explodes, creating a demand for more efficient and integrated licensing solutions.

The other factor behind the growing urge to merge among collective licensing organizations is the rapid spread of new rights management technology. The growing availability of DIY publishing tools and independent publishing and rights management platforms (think Kobalt) means that, over time, collective licensing organizations will need to manage ever more payouts and account to ever more clients than they have been accustomed to.

That will require much greater granularity of data and greater transparency into the tracking of uses and payment of royalties — something blockchain proponents tout for the technology. But it also puts a high premium on scale. The need to track more uses, and make more and smaller payments to more and smaller rights owners, will generate pressure to drive down the collection societies’ own costs, through greater scale, shared infrastructure around cost-centers like metadata management, and adoption of technology.

Rather than disintermediating collective rights management organizations, in other words, improved rights management technology could, paradoxically, create an incentive for them to get bigger.

Photo: Jens Thekkeveettil (CCO)

Solving Fractions: Rights-Tech Startup Offers an ‘Alternative’ to ASCAP, BMI

The U.S. Department of Justice last month notified the federal Second Circuit Court of Appeals of its intent to appeal a lower court ruling that effectively overturned the department’s controversial decision barring fractional licensing by ASCAP and BMI.

The appeal all but guarantees that the question of whether the performance rights organizations (PROs) must offer so-called 100 percent licenses to all the songs in their catalogs, rather than only the share of the rights held by the publishers and songwriters each PRO purports, respectively, to represent, will continue to hang over the industry well into 2017 and perhaps longer.

copyright-law-gavel-2016-billboard-650“While we hoped the DOJ would accept Judge Stanton’s decision, we are not surprised it chose to file an appeal.,” BMI president and CEO Mike O’Neill said in a statement. “It is unfortunate that the DOJ continues to fight for an interpretation of BMI’s consent decree that is at odds with hundreds of thousands of songwriters and composers, the country’s two largest performing rights organizations, numerous publishers and members of the music community, members of Congress, a U.S. Governor, the U.S. Copyright Office and, in Judge Stanton, a federal judge.”

The case arose from a request filed with the Justice Department in 2014 by the PROs themselves, for modifications to the consent decrees that have long-governed how ASCAP and BMI grant performance licenses to broadcasters, venues and others outlets that publicly perform live or recorded music. In response to that request — which concerned efforts by some music publishers to withdraw digital performance rights to their catalogs from the blanket licenses issued by the PROs — the DOJ initiated a review of current licensing practices. In the course of that review, the antitrust division unexpectedly broadened its focus to the question of fractional licensing in general, rather than the narrower question of partial withdrawal of digital rights.

In the end, the antitrust division decided not to grant the requested modifications for digital rights. But it concluded that the language and intent of the consent decrees had always required 100 percent licensing and that any current industry practices to the contrary would need to change. It gave publishers and the PROs one year to make whatever changes to their systems were necessary to comply.

“The Division reaches this determination based not only on the language of the consent decrees and its assessment of historical practices, but also because only full-work licensing can yield the substantial procompetitive benefits associated with blanket licenses that distinguish ASCAP’s and BMI’s activities from other agreements among competitors that present serious issues under the antitrust laws,” the department said in a statement issued at the conclusion of its review. “The Division’s confirmation that the consent decrees require full-work licensing is fully consistent with preserving the significant licensing and payment benefits that the PROs have provided music creators and music users for decades.”

The consent decrees at issue in the case date to the 1940s. They were the result of separate lawsuits brought by the Justice Department against ASCAP and BMI, alleging each organization was illegally exercising market power obtained by aggregating performance rights from nominally competing publishers and songwriters in violation of the Sherman Antitrust Act. In the course of that litigation, DOJ concluded that the blanket licenses offered by the PROs brought meaningful efficiencies to the market for performance rights by sparing music users from having to negotiate separately for the rights from tens of thousands of songwriters and publishers. The consent decrees, which settled the cases, were designed to allow music users to benefit from the efficiencies of blanket licensing while putting strict limits on how those licenses could be structured and sold.

But what if there were other ways to achieve the efficiency of blanket licensing without requiring the collective — and thus potentially anti-competitive — management of performance rights?

That’s the premise behind the National Performance Rights Exchange (NPREX), a Nashville-based startup that has built a marketplace platform it claims will enable publishers and record labels to license performance rights directly to broadcasters and digital service providers (DSPs) without going through ASCAP or BMI, and at a fraction of the cost of what the PROs charge.

The NPREX marketplace is modeled on financial exchanges like the Chicago Board Options Exchange and NASDAQ. At its heart is a pricing algorithm that takes in multiple signals from the music performance market regarding supply, demand (popularity), comparable works performance, and other data to yield pricing parameters that both licensees and licencors can use to determine the value of a song and then settle on a final, clearing price based on real-world usage data.

“The problem for publishers has always been, what is my profit-maximizing price?,” NPREX founder and CEO Lee Greer told RightsTech.com. “And in the music business, there’s a large number of other rights owners trying to do the same thing at the same time, with the same set of buyers. So it’s a very complex, interdependent thing.”

The collective licensing system resolves that dilemma, by rolling everything into a single price, but it doesn’t actually solve the problem and doesn’t necessarily maximize publishers’ profit.

“We’ve solved that problem in a way that offers an alternative to the collective licensing system, along with fractional licensing,” Greer said.

An economist and attorney, Greer is a former chief economist for BMI. “I actually proposed to BMI that they build an exchange for direct licensing,” Greer said. “They said, ‘that’s interesting,’ but I was told not to talk about it anymore.”

Greer eventually left BMI to develop an exchange himself, and built the first version of what became NPREX in 2013.

“We solved a pretty ridiculous math problem, but it’s not a new math problem,” Greer said. “It was solved by economists maybe 25 years ago and is now used in financial exchanges and is well understood. The issue was getting the right inputs to make it work for music.”

Along the way, NPREX came to the attention of the Justice Department, which interviewed Greer and his team during the course of its review of the ASCAP and BMI consent decrees. Greer will pay what he describes as a “courtesy call” on the antitrust division on Thursday (12/8) to demonstrate the NPREX platform. He will also be participating in a public meeting organized by the U.S. Commerce Department (with input from the RightsTech Project) on Friday (12/9) on Developing the Digital Marketplace for Copyrighted Works.

This week’s meeting with DOJ is not directly connected to the department’s review of the consent decrees, or to any broader review of the collective licensing system, according to Greer. “This is more about a goodwill gesture on our part,” he said in an email. “I want them to understand that is is indeed do-able to implement a systematic direct licensing mechanism that complies with copyright and antitrust law.”

NPREX is set to begin beta testing is marketplace shortly, followed by an initial capital-raise, “which I think will be fairly notable,” Greer said. “We have NDAs with several publishers and third-party data suppliers to the industry. We have the kind of support that will create an end-to-end solution.”

 

Should We Believe All The Negative Hype Surrounding New DOJ Rules on PROs? 

The DOJ’s recent ruling does away with partial licensing in favor of 100% licensing, meaning any author of a song can issue a license for the entire song. The PROs say the new system will “cause chaos” in the publishing world and lead to a precipitous drop in income for songwriters and composers.

Wrong. Here’s some real talk — 100% licensing will infuse some badly needed price competition in the music publishing world and make the PROs more responsive to the hundreds of thousands of restaurants, venues and club that pay a collective $15 billion a year for licensing.

Source: Should We Believe All The Negative Hype Surrounding New DOJ Rules on PROs? – hypebot

SESAC launches ‘linking’ tool to speed up revenue for publishers 

John Josephson_SESACUS-based collection society SESAC has launched a new online song linking tool which it says will accelerate revenue and expedite clearances for publishers and distributors. The tool allows publishers to link their compositions to recordings, and integrates with the combined database of SESAC Performing Rights, Rumblefish and The Harry Fox Agency (HFA).

“Our investments in technology and database management allow our team to offer better service and enhanced revenue opportunities for songwriters and their business partners,” said John Josephson, Chairman and CEO of SESAC Holdings, Inc.

Source: SESAC launches ‘linking’ tool to speed up revenue for publishers – Music Business Worldwide

From Modeling To Measuring: A Blockchain Solution For Music At Political Events 

Certainly, music being played at arenas – particularly pre-recorded music – could easily be measured, rather than still being modeled. For example, a Shazam-like listening device could be deployed to capture which songs are being played in real time.

In this manner, artists would know precisely when and in what context their music is being used. This would not only allow for artists to have better information, but for venues too to be able to have a better sense of the precise cost related to their music use.

Source: From Modeling To Measuring: A Blockchain Solution For Music At Political Events – Forbes

PRS for Music chief talks financials, blockchain and YouTube

Robert-Ashcroft-150x150Ashcroft was keen to talk up the significance of PRS for Music’s investments in back-end technology, from its core systems in the UK to its European joint venture with German and Swedish peers GEMA and STIM. PRS says the number of music ‘uses’ it processed rose from 975bn in 2014 to over 2tn (trillion) in 2015 – a reflection of the deluge of streaming data.

“These are highly-specialised systems. No other business has to store copyright data on the scale that we do, and then the matching of sound recordings reported to us by the DSPs with the songwriters that wrote them,” said Ashcroft.

Source: PRS for Music chief talks financials, blockchain and YouTube

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