This Week in Royalties: SoundExchange Acquires CMRRA, DoJ Doubles Down on Consent Decree, and Spotify Admits Artists Aren't Paid Enough (Sort of)

May 19, 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.

SoundExchange Acquires Canadian Mechanical Royalty Society, CMRRA (Music Business Worldwide)
Benom’s Take: The acquisition is big news in the ongoing movement to streamline data and royalty collections between sound recordings and music publishing. The fact that SoundExchange has now entered the music publishing royalty market is proof of progress toward making worldwide licensing and royalty collections more efficient. Many other territories around the globe house various licensing and royalty collection operations under one roof - or at least, they have partnerships with other societies that streamline it in such a way as to “appear” under one roof. The matching and sharing of royalty data between societies is an essential part of the business and as we’ve seen lately, acquisition is one way to accomplish this (i.e. SESAC purchasing HFA, etc).

As a refresher, SoundExchange is the U.S. society that licenses and collects non-interactive streaming royalties for sound recordings on satellite and internet radio. CMRRA is the Canadian society that licenses and collects mechanical/reproduction royalties on musical compositions for songwriters and music publishers. The outcome of this acquisition should mean more precise matching of sound recording data (the ISRC codes) to musical composition data (the ISWC code). Accurate matching of these codes for sound recordings and musical compositions inevitably results in more accurate and timely royalty payments for both copyrights. It will be interesting to see if SoundExchange continues to expand its operations further into the music publishing royalty market. If so, it could give SoundExchange a new, competitive edge.

British Mechanical and Performance Royalty Societies Seal Long Term Deal (Music Week)
Benom’s Take: Here’s a great example of what I’m talking about regarding royalty collection societies housing operations under one roof. The MCPS-PRS Alliance has been a constant in the world of British royalty collections for quite some time. Though they are technically two separate and distinct societies representing songwriters and music publishers (MCPS collects mechanical/reproduction royalties, while PRS collects performance royalties), they have effectively operated as one company. This new long term deal is good for stability in the high-caliber royalty market of the UK.

Department of Justice Files Appeal in BMI Consent Decree Ruling (Billboard)
Benom’s Take: In short, the DoJ has bigger fish to fry with that whole Russia-Trump investigation “thing.” I think this 11th hour appeal is simply a holding pattern move until the DoJ’s Antitrust Division head is confirmed by the Senate. The DoJ appeal is a big deal, of course. Many of us in the industry were hoping that under the new administration, the DoJ would drop their (absolutely terrible) interpretation of performance royalty licensing for songwriters and music publishers. Unfortunately, they didn’t drop it (yet).

As discussed previously, the DoJ’s “100% licensing” interpretation would cause chaos and havoc in the music publishing industry. The industry has always operated under “fractional licensing” and the DoJ’s insistence of “100% licensing” only stands to harm songwriting and music publishing performance royalties. It’s my hope that the DoJ will eventually see the value in loosening its overly strict regulation of public performance royalties and let the free market solve it’s own problems. However, that hope is fading with news of this appeal. Stayed tuned on this developing story, it’s a game changer either way you slice it.

Sony/ATV Music Publishing Upgrades Royalty Portal, Plans App Launch (Music Business Worldwide)
Benom’s Take: The royalty portal systems that Sony/ATV and Kobalt have created give both companies an edge in clientele acquisitions, royalty payouts and data transparency. The idea is that your royalty account at your music publisher works just like your online banking portal. You can see all of your royalty data in “real time," in addition to all historic royalty reports. In some cases, for example, a client might even request an advance of those accrued royalties before the scheduled royalty pay day. Most music publishers pay semi-annual or quarterly accountings. The ability to see royalty earnings in real-time and get money immediately, instead of once every 3 to 6 months, is a huge leap forward for royalty transparency and payments. Although, it’s worth mentioning that these systems are proprietary and it makes it much harder for the smaller publishing companies to compete.

Spotify’s Troy Carter Concedes Artists Aren’t Being Paid Enough By Streaming Services (Billboard)
Benom’s Take: Troy Carter (formerly Lady Gaga’s manager) has a full plate with his Spotify gig and helping the Prince estate. His voice carries weight in the industry and I think his comment at this week’s Music Biz Conference in Nashville, came as a surprise to many. At least he’s honest. He’s right that artist’s aren’t being paid enough and that the hit songs matter more now than ever. I appreciated his example about the “old album model”: how a songwriter on a hit song would earn the same as a songwriter on a unpopular song (based on mechanical royalties from album sales).

The streaming economy now demands that royalty payments simply reflect how an individual song performs before the listening public. I think that’s great and it’s absolutely fair. My main beef on this issue is the contradiction of government regulation vs. the free market setting the streaming royalty rates. I believe if we could unravel those spaghetti noodles, the whole industry would be in better shape and find a more equitable solution to establish streaming royalty rates for all.