(Part 4) Setting Royalty Rates for PROs (ASCAP, BMI, SESAC & SoundExchange)
- Omar Landery
- Mar 18, 2019
- 2 min read
As highlighted in Part 3, 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).
Currently, PRO 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. Thanks to the Music Modernization Act, judges are now allowed to consider the impact and complexities of the current music landscape, as well as a PROs’ proposed rates, when making their decisions.
SoundExchange was never governed by a consent decree, which means they can negotiate royalty rates on the free market. Recording artists get paid close to nothing when their music is played on AM/FM radio (because there are no performance rights for recordings on terrestrial radio), but they are typically paid at least 5x more than songwriters when music is performed digitally, like on Pandora. That’s because of SoundExchange’s negotiation power, and the limitations of PROs. AM/FM broadcasters do pay songwriters, but it’s at a royalty rate ultimately set by the courts.
“There’s a big disparity between what the recording artist makes and what the songwriter, composer, or publisher makes for the same digital streams. A song can be played on Spotify, and the recording artist will get paid as much as fourteen times more than the songwriter. Our change to Section 114(i) of the Copyright Act would simply allow us to introduce the rates charged for sound recordings so the rate court has all relevant evidence when making a decision about songwriter compensation for digital streaming.” (Profile)
This change ultimately means PROs, on behalf of its membership songwriters, will be able to enter into fair negotiations with rate setting judges to determine the fair royalty rates due to songwriters 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
As always, if you have questions regarding your current contracts, and understanding your rights to performance royalties, please contact us for a free consultation.
Comments