(Part 3) Wheel of Fortune: Rotating Judges & Rate Disputes With PROs
- Omar Landery
- Mar 11, 2019
- 2 min read
Performance Rights Organizations (“PROs”) like ASCAP, BMI, and SESAC in the U.S., are an integral part to the operations of the music industry. PROs provide intermediary functions for songwriters, which include collecting the songwriting performance royalties (1) between copyright holders (songwriters & rights holders, i.e., publishers) and music users, (2) those who wish to use copyrighted works in public locations, such as shopping and dining venues, and (3) digital music services (like Tidal and Spotify).
Similarly to PROs, SoundExchange collects recording performance royalties for recording artists and labels whenever a music is performed publicly — but only for digital performances.
Performance rights royalties are integral to a creatives’ way of life -- since the amount of money paid to the songwriter depends on several factors:
the format the song sells in,
how many copies are manufactured,
whether the song is performed much in public,
how many streams the song gets digitally, and
whether the songwriter is registered to a PRO.
Royalties, also known as ‘mailbox money’, are paid over time, and negotiable higher rates. Currently, each PRO reports to one designated rate court judge for every rate dispute. The Music Modernization Act (MMA) included a new provision that would ensure a “wheel” approach – this method would allow PROs to face a rotating group of judges, as is the case with regular claims in federal court. In the digital age, when new industries are emerging and using music in unique ways, the “wheel” method should be more reactive to fluctuating market conditions as they arise.
The "wheel" method also guarantees that the district judges for rate setting disputes reviews each rate case with fresh eyes, without opinions acquired from previous cases.
Without the MMA, PROs rates are governed by consent decrees, which means the federal rate courts can set the performance royalty rates (i.e., per radio play, per stream) for songwriters and composers without considering additional evidence.
Now, thanks to the MMA, judges are allowed to consider the impact and complexities of the current music landscape, as well as a PROs’ proposed rates, when making their decisions. Major DSPs have already openly stated their intentions of challenging the most recent ruling to increase mechanical royalties by 44%.
In Part 4 of our Blog Series, we will examine setting royalty rates more closely and what it means for artists, labels, and publishers.
For more information on the Music Modernization Act, check out our other posts in this Blog Series.
Part One: AMPA: Direct Payments from SoundExchange for Producers & Engineers Part Two: The Music Licensing Collective & Statutory Rates for Song Reproduction
If you have questions regarding your current contracts, and understanding your rights to performance royalties, please contact us for a free consultation.
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