This Week In Royalties: Music Biz Goes To Washington, Spotify Capitulates, and ASCAP Cashes In

Two new bills in Congress aim to give more power and payments to sound recording rightsholders for radio play, Spotify agrees to album windowing in advance of an IPO, and ASCP reports record earnings.
April 7, 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.

“Fair Play, Fair Pay Act” Bill Reintroduced in Congress (Hypebot)
“The PROMOTE Act” Bill Would Let Labels Pull Music Off Radio (The Tennessean)
Benom's Take: Both of these bills propose to tackle the AM/FM radio royalty issue. This royalty currently doesn’t exist in the U.S. for sound recordings and recording artists. For example, when Jimi Hendrix’s recording of Bob Dylan’s “All Along The Watchtower” is played on classic rock FM stations, only Bob Dylan and his music publisher get paid. The Hendrix estate and record company do not.  

In short, “Fair Play, Fair Pay” creates the AM/FM radio royalty. I’m encouraged the bill states that this new royalty cannot be used to lower songwriting royalties (which radio already pays). The “PROMOTE” Act could certainly cause an interesting dynamic by allowing artists and sound recording owners to “opt out of the unpaid use of their music.” I’m not exactly sure how artist’s “pulling” their music from radio would look in practicality, but it’s an interesting concept nonetheless.

It sounds like both bills are gaining attention and building support, so that’s a good thing for our industry. It’s absurd the United States of America, leader of the free world, lines up with countries like North Korea, Iran and Rwanda on the AM/FM radio royalty. Virtually all developed countries, especially our close friends in the EU zone, recognize and pay this royalty to record labels and recording artists. I support the proposals in these bills and it gives me great hope that we will have long overdue copyright reform in the near future.

Spotify Will Window Albums On Premium, As Universal Music Group Finally Inks New Deal (Music Business Worldwide)
New Spotify ‘IPO’ Could Come As Early As September? (Music Business Worldwide)
Benom’s Take: Under the new multi-year licensing deal, Spotify will now allow Universal artists to place new album releases only on Spotify’s paid premium platform for up to two weeks. The deal is reported to give Spotify a break on revenue sharing in exchange for meeting subscriber growth targets. This deal has been a tough negotiation and had been going on for a couple of years. The finalized agreement is an essential piece of Spotify’s positioning for an IPO. It will certainly add some market and investor confidence now that the deal is finalized.

Interestingly enough, it’s reported now that the IPO could instead be listed directly on the US stock exchange as early as September. Meaning that Spotify will bypass selling shares to investors first and offer shares for a price based on supply and demand of public exchange. It would allow Spotify to save on associated IPO underwriting fees but certainly rolls the dice on how the market will react to a direct listing.  

ASCAP Delivers Record-High Revenues for 2016 (Music Row)
Benom’s Take: Good news for ASCAP writers and music publishers! A $918 million distribution to writers and publishers for 2016 is up almost 6% from 2015. The report shows a 41% increase in streaming revenue, which is more good news and consistent with the industry-wide data showing increases in streaming revenue. ASCAP has a good distribution-to-collection ratio of $0.88 to $1.00. Meaning, for every $1.00 collected, ASCAP distributes $0.88. Of course, ASCAP has the largest market share in  U.S. public performance royalties and these 2016 numbers are encouraging for the market at-large.

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