This Week in Royalties: March 13 - 17

Mar 17, 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.

Pre-1972 Sound Recording Performance Rights Kicked to CA Supreme Court  (Billboard)
Benom’s Take:  
There are two connected issues at stake here: (1) Federal Copyright protection for pre-72 sound recordings and (2) Public Performance rights of sound recordings. The Turtles (Flo & Eddie) cases are at the forefront of both issues. Quick background: There isn’t any U.S. federal copyright protection on sound recordings before February 15, 1972. All sound recordings made before that date are protected under state laws, which complicates things to say the least. For example, in 2014 Flo & Eddie won a big court victory in California over SiriusXM, while just this February, SiriusXM won a big court victory in New York. In addition to that, the Federal government doesn’t recognize an AM/FM performance right for sound recordings either. Keep in mind that most of the developed world outside of the U.S. recognize both of these.

There absolutely has to be a final decision at the federal level to supersede the contradicting state court cases. I’m not an attorney, but in my opinion Congress could simply “flip the switch” and recognize federal copyright protection for all pre-72 sound recordings. If we could add 20 extra years of copyright protection under the 1998 Sonny Bono Copyright Term Extension Act, we should be able to grant federal copyright protection to pre-72 sound recordings. These issues will come to a head very soon. Perhaps the California Supreme Court will be a foreshadowing of an eventual U.S. Supreme Court Case to decide these issues once and for all. It’d be nice if SCOTUS would rule on both issues at the same time - a two for one deal!

Streaming Accounting Costing More Than Royalties?  (Hypebot)
Benom’s Take:  
I have a lot of experience with this one and the short answer is: YES. It’s a huge drain of time and resources to process all of these lines of royalty data that show just fractions upon fractions upon fractions of pennies, for thousands and thousands of pages. If that were the only income source (thankfully it’s not!) it would be a nightmare scenario for the cost-benefit analysis of any business. If we compared most companies streaming royalty income vs. company overhead, many would likely report it costs more to process these streaming statements than the income actually received. However, this problem is likely just a growing pain of the new streaming economy. I’m optimistic that better streaming rates will be set for songwriters and music publishers through the current (or future) Copyright Royalty Board hearings. See last week’s post here for more details.

Pandora Just Released It’s Spotify Killer (Fast Company)
Benom’s Take:  
I don’t think I’d go so far to say that Pandora Premium is a Spotify killer, but time will tell. Spotify did just reach the milestone of 50 million paid subscribers. However, it’s long overdue for Pandora to evolve into the interactive streaming model. The problem for Pandora is that this creates even more royalty overhead for the company and they haven’t shown good profitability over the years due to these royalty obligations. Under Pandora’s traditional non-interactive model, they pay lower royalty rates. Interactive streaming requires negotiating more expensive (and have I mentioned, very secretive?) direct license deals with record labels. On the publishing side, this means an interactive mechanical royalty paid to Harry Fox Agency, in addition to public performance royalties to ASCAP, BMI, SESAC and GMR. If Pandora can manage the extra royalty overhead and provide a better streaming experience, it will hopefully benefit all parties involved and promote healthy competition in the streaming market. As the article states, “Pandora undoubtedly would have been better off had it entered the on-demand music market two or three years ago. Now that it’s here, we’ll see if brand seniority, good design, and smart curation are enough to keep bigger competitors at bay.”