A US congressional committee has said it is concerned about “how efficiently” America’s collecting societies “are distributing general licensing revenue”, and in particular whether independent songwriters and smaller publishers are losing out at the expense of big names. The lack of transparency regarding how money is distributed is raised as a particular issue.
The committee also says that licensees, like bars and restaurants, are concerned that there are now five performing rights organisations representing songwriters in the US, and the “proliferation of PROs” increases the risk of copyright infringement claims and expensive litigation.
This is all set out in a letter from members of the House Judiciary Committee to Shira Perlmutter, boss of the US Copyright Office. According to Billboard, she is urged to investigate the concerns raised about the five US PROs: BMI, ASCAP, SESAC, GMR and AllTrack.
It’s usually the US Department Of Justice that is asked to investigate these things, though it only directly regulates the big two societies - BMI and ASCAP - which is presumably why this request for a wider review of collective licensing in the US has gone to the Copyright Office.
Distribution and transparency
The Judiciary Committee wants the Copyright Office to review how the different PROs monitor what music has been used and therefore which writers and publishers need to be paid.
“It is difficult to assess how efficiently PROs are distributing general licensing revenue based on publicly available data”, they write. “For example, it is difficult to determine how accurately lesser known and independent artists as well as smaller publishers are being compensated compared to widely popular artists and major publishers”.
To that end, the Copyright Office should “examine how the various PROs currently gather information from live music venues, music services and other general licensees” regarding the use of their members’ songs, in order to inform how royalties should be distributed.
That examination, the letter says, should consider “gaps and discrepancies” in royalty distribution, and how new technologies or business practices could address the issues. And also “the extent to which the current distribution practices are the result of existing legal and regulatory constraints”.
The lack of transparency that surrounds collective licensing is an issue all over the world. While some societies are more transparent than others about how they distribute the money they collect, even the most transparent societies are often criticised by songwriters and publishers.
This is especially true when it comes to revenue streams where it’s not entirely clear what music a licensee has used, such as when songs are played or performed in a cafe or bar, and the owner of that business isn’t tracking which specific songs that involves. This income is often colloquially referred to as the black box.
In the UK, Blur’s Dave Rowntree is leading a class action against PRS over its management of the black box. His lawsuit criticises the lack of transparency regarding how that money is distributed, while claiming that far more of it should be flowing to songwriters instead of publishers than is currently the case. Rowntree says the issues are “because of bad data and processes” and “in today’s digitally connected world, there’s no excuse for either”.
The “proliferation of PROs”
When it comes to the number of PROs in operation, the US is unusual. In most countries there is a single collecting society representing the performing rights of songwriters and music publishers. That creates its own issues, because those societies are basically monopolies.
For writers and publishers, the lack of competition arguably reduces the incentive for societies to enhance their services. For licensees - people and organisations licensing music via those societies - there is concern that a society could use its monopoly to unfairly increase its rates. Regulation often exists to try and overcome these issues.
Assuming that regulation works, having a single collecting society is actually beneficial for licensees, because many licensees need something nearing a global blanket licence. They play a large amount of music and are not in a position to secure a licence or pay royalties on a song by song basis. In a country where there is a single society, it can provide that kind of licence.
When you have five societies each representing a different repertoire, it’s not usually practical for a licensee to restrict what songs it plays to just one society’s catalogue. Which means the licensee needs to get five licences. Which is quite a lot of work.
ASCAP and BMI are the big two societies in the US. ASCAP, like most collecting societies around the world, is a not-for-profit organisation owned by its members, while BMI is now a for-profit business owned by private equity.
The three smaller PROs are also privately owned, including SESAC and GMR, and the newer AllTracks, which set itself up to better represent independent artists who possibly feel, rightly or wrongly, that the other societies prioritise the interests of superstars and major players.
The US isn’t the only country where there are multiple societies representing the same kind of rights but for different repertoires. However, in some of those other countries, while there are multiple societies for artists or writers to choose from, there is one central entity that actually issues the licences, which then passes money through to the different PROs.
This is the situation in Brazil where, like the US, there are multiple societies representing the performing rights in songs, but one entity - ECAD - sits between them and licensees.
In its letter, the Judiciary Committee says that licensees in the US, including bars, restaurants and other small businesses, “have reported receiving demands for royalties from new entities claiming to represent songwriters”. As a result, “licensees are concerned that the proliferation of PROs represents an ever-present danger of infringement allegations and potential litigation risk from new and unknown sources”.
To that end, the Congress members want the Copyright Office to “examine the increased costs and burdens imposed on licensees for paying an ever-increasing number of PROs, factors that may be contributing to the proliferation of new PROs, and recommendations on how to improve clarity and certainty for licensees”.