This Week In Royalties: Carlin America Publishing's Valuation, Blockchain Adoption, and Canadian PRO Mergers

Apr 14, 2017

Benom Plumb, Assistant Professor of Music Industry Studies at the University of Colorado Denver, reviews the biggest stories of the week affecting music royalties. He is a music industry professional, not an attorney.

Carlin America Publishing Catalog For Sale: Includes Elvis, AC/DC Songs (Billboard)
Benom's Take: This catalog of classic songs is being shopped by Ossie Kilkenny, a financial accountant and advisor to Carlin America. The shopping may only be “exploratory” to see what big fish will bite. It’s reported that the major publishing companies have interest (naturally), as well as private equity investors and independent publishers. Carlin is reportedly wanting a $250 million valuation and has an NPS (Net Publisher Share) of about $15 million. Asking a 16.7x multiple is certainly high, but not out of the realm of possibility with a catalog of classic songs. The issue is that some of these songs, given their age, will eventually fall into the public domain. Other songs run the risk of having the copyrights revert back to the songwriters via the “Termination Right” under U.S. Copyright Law. Without getting too legal, composers and authors (for post-78 works) can take the copyright back from their music publishing companies, 35 years after the date they assigned the copyright. I am definitely oversimplifying the termination right here, but due to it’s complexity, we’ll have to come back to that subject another day.

If I were an interested buyer on this deal: I’d have a team of people researching the worldwide royalty earnings, licensing and songwriter agreements, copyright registration dates and any copyright termination notices that have been filed with Carlin America and the U.S. Copyright Office. The outcome of that research will determine the leverage in negotiating the final multiple. Either way, this catalog is a gold mine of music assets and I wouldn’t be surprised to see a purchase price of 8x - 12x that $15 million NPS.

British, French and American Performing Rights Organizations Utilizing Blockchain Technology To Improve Royalty Collections (Music Week)
Benom’s Take: This is great progress toward improving accuracy in worldwide performance royalty collections between the U.S., Britain and France. In the complicated world of royalty collections, each musical composition and sound recording has a unique code assigned to it for royalty and performance tracking. Every commercially released sound recording receives an ISRC code (International Standard Recording Code) and every commercially released musical composition receives an ISWC code (International Standard Work Code). You could think of these as our music royalty “Social Security” or “EID” numbers. In other words, we’re not getting paid royalties without these codes. The hope of this blockchain technology is that it will improve royalty matching between the song and its recording(s), speed up licensing and reduce errors and costs for everyone. For more details on blockchain technology and its use within the music business, see the next article below.

It’s Time For the Music Business to Start Embracing the Blockchain (Billboard)
Benom’s Take: Dina LaPolt makes a good case here explaining the issues surrounding blockchain, how it works and why its use within the music industry is necessary. Ms. LaPolt is an industry acquaintance of mine and truly a brilliant mind amongst music industry attorneys and professionals. She states: “With all the problems creators face with the monetization of digital music, we cannot wait around for a change in the laws in order to give digital services the information they need to start paying the right people, and paying them in real time.” I don’t know if blockchain is the answer, or if it will stick or not, but she’s definitely onto something about not relying on the government to solve our problems. The “new” music business must be more open-minded toward new technologies like blockchain and at the least, work toward the creation of an all inclusive music copyright database for more accurate tracking and payments.

Canadian Music Rights Groups In Merger Discussions (Billboard)
Benom’s Take: In Canada, there are three primary music rights collection societies: SOCAN (for public performance royalties) and CMRRA and SODRAC (for mechanical royalties). As stated in the article, Canada and the U.S. are the only two major countries where performing rights and reproduction rights are not managed jointly under the same roof. I have done a lot of business with SOCAN and CMRRA, but I am not as familiar with SODRAC. I do know that it’s membership is majority French-Canadian and virtually all communication is in the French language. Interestingly enough, CMRRA already has a joint venture with SODRAC and CMRRA is not mentioned in this merger discussion. My question is how will CMRRA fit into this and how would a SOCAN/SODRAC merger affect the CMRRA-SODRAC joint venture? Either way, it’s a step to harmonize with the rest of the world on royalty collections. Virtually all developed first world nations manage performance and reproduction royalties under the same organization.