Performing Rights Organizations – a history and overview

Performing Rights Organizations aggregate the performing rights of writers and publishers and then negotiate licenses with all the users of music, collect the income from those licenses, and distribute that income after first deducting their operating expenses.

This post was excerpted and adapted from Five Star Music Makeover: The independent artist’s guide for singers, songwriters, bands, producers, and self-publishers (Hal Leonard). Reprinted with permission.

In addition to the mechanical right, the Copyright Law also provides us the right to control the public performance of our musical compositions. This right covers “public” uses such as:

• Performances of music (whether live or via radio) in concert venues, hotels, bars, restaurants, coffee shops, etc.
• Performances on radio stations
• Performances on TV stations or networks
• Performances on the Internet

Though the Copyright Law gives us as writers and publishers the ability to license this right ourselves, it would be pretty much impossible for all of us to negotiate licenses between ourselves and every venue, radio station, TV station, etc. using our music, so the concept of the Performing Rights Organizations (or PROs) arose. These organizations aggregate the performing rights of writers and publishers and then negotiate licenses with all the users of music, collect the income from those licenses, and distribute that income after first deducting their operating expenses. In the U.S., there are three well-known PROs, ASCAP, BMI, and SESAC, and a fourth, GMR, founded in 2013. Let’s do a brief overview of each of them.

ASCAP

ASCAP (an acronym for the nonprofit American Society of Composers, Authors and Publishers) was the first PRO to be established in the U.S. and was founded in 1914 by songwriter Victor Herbert to protect the performing rights of himself and his Tin Pan Alley contemporaries like Jerome Kern and John Philip Sousa as well as many others. But ASCAP ran into trouble in the ensuing twenty-five years due to complaints that the organization had a monopoly and was raising licensing rates too high. The Justice Department sued ASCAP for anti-trust reasons in both 1937 (in an effort that was abandoned) and 1941. As a result of the 1941 case, ASCAP signed what is referred to as a consent decree, stipulating that ASCAP was required to set “fair rates” and could not discriminate against any users of music. Should a user of music feel that the rate they are being asked to pay is not fair, they are able to litigate that issue with the federal court that oversees ASCAP’s consent decree. (More on the consent decree later on in this section after we have covered the other PROs.)

ASCAP is owned and run by its over half a million members, who are songwriters, composers, and music publishers, and represents millions of songs. ASCAP is governed by twenty-four members of their Board of Directors, twelve of whom are songwriters or composers and the other twelve of whom are music publishers. As of this writing, songwriter Paul Williams (“We’ve Only Just Begun,” “Rainy Days and Mondays” and “The Rainbow Connection” from 1979’s The Muppet Movie) is the president of ASCAP and chairman of the board of directors. In spring 2015 ASCAP announced that they were the first PRO in the world to achieve over $1 billion in revenue (for calendar year 2014) and of that amount $883 million was distributed to its members.

BMI

BMI (an acronym for the nonprofit Broadcast Music, Inc.) was founded in 1939 by the broadcasters as a response to ASCAP trying to increase the fees they were being asked to pay – which became the subject of the Justice Department’s anti-trust actions mentioned above. So in order to provide competition, the broadcasters started BMI as their own PRO and in 1941 signed their own consent decree similar to ASCAP’s.

Rhythm and blues music and country music formed the initial bulk of material represented by BMI when they opened their doors, because they were genres that were not really being represented at ASCAP. BMI proudly established at their outset an open-door policy where any songwriter of any genre of music could become a BMI member. BMI now also has over a half million members and represents millions of songs. Its board of directors consists of leaders in the broadcast industry. As of this writing, BMI is run by its president and CEO, Michael O’Neill, who has risen through their ranks for the last twenty years. For its fiscal year ending June 30, 2015, BMI announced record gross revenues of $1.013 billion and distributed $877 million of this to its members.

SESAC

SESAC (originally an acronym for Society of European Stage Authors and Composers, but the society stopped using the full name in 1940) was founded in 1930 by German immigrant Paul Heinecke in an effort to help European publishers with their American royalties. In its early years, SESAC not only represented music from Europe but also represented an extensive gospel catalogue. In 1992 SESAC was purchased by a collection of investors including Stephen Swid, Allen & Co., Freddie Gershon, and Ira Smith. In 2013 the private equity firm Rizvi Traverse Management bought a 75 percent stake in SESAC for a reported $600 million. As a privately owned, for-profit company, SESAC does not disclose its financials. SESAC controls a minority of the market compared to ASCAP and BMI but is working aggressively to change that. As of this writing, SESAC is run by its chairman and CEO, John Josephson, who has been a board member of SESAC since 1992 and was appointed to this new position in 2014. SESAC does not accept everyone who applies for membership – they must approve you or invite you to join.

GMR

GMR (an acronym for Global Music Rights) is the fourth and newest PRO option in the U.S. It was started in 2013 by music industry mogul and legendary manager Irving Azoff and PRO executive Randy Grimmett. GMR is an invitation-only PRO that so far only represents the performing rights of superstar artists and songwriters such as Don Henley and the late Glenn Frey (of the Eagles), Pharrell Williams, Ryan Tedder, Shane McAnally, Bruno Mars, members of Fleetwood Mac, and the estates of John Lennon and Ira Gershwin, among others. GMR feels that through technological efficiency they will be able to extract and distribute higher royalties for their clients then the current distribution models at rivals ASCAP and BMI. GMR, like SESAC, is a private, for-profit company, and it will be interesting to see how their repertory develops over the next several years.

Which one do I join?

These PROs operate mainly through the issuance of what are called blanket licenses. They negotiate licenses with TV stations both big and small, radio stations both big and small, websites, etc., and for one blanket fee these users get the ability to perform every composition in that PRO’s catalogue. The license fees in these blanket licenses are typically a percentage of that media or entity’s advertising revenues for a year. So, for the most part, as long as a TV or radio station has licenses in place with all of these PROs, it can play anything from any of their catalogues.

Each PRO has its own distribution rules, and it is a subject of constant debate as to which PRO might pay better than another. Needless to say, they are all in competition with each other, and my recommendation is that, if geographically possible, you try to meet with writer/publisher representatives from each of them and determine who seems to like your music the most and who you feel “gets you,” because a proactive and close relationship with advocates at your PRO can do a lot for your career. All the PROs have dedicated staffs whose job it is not only to help their writer and publisher members with anything administrative, but also in many cases to assist with collaborations and introductions to industry people who could potentially help move your career forward. Most of these PROs also sponsor various workshops and events for the benefit of their members in all aspects of the industry. Their respective websites are great sources of information both on the music publishing industry in general as well as their specific organizations.

Song registration

The most important thing to understand with any of these PROs is that you must join whichever one you chose as two different member types – a writer member and a publisher member. They are two different agreements and thus you receive two different streams of income from the PRO when your music gets performed anywhere. If you sign up as a writer and not a publisher, you will not receive your publisher’s share of income, and vice versa. Once you are both a writer and publisher member (see sidebar “What Is a Publishing Company?”), the PRO won’t know what to pay you on if you don’t register your songs with them! All the PROs’ websites allow online registration of works, but I cannot stress enough that once you create a song and you put it out to the public in any fashion (even if just playing live at a local bar), you need to make sure that you register that song with your PRO. They will need all the writer names and the splits between them, and all the publishing company names and the splits between them. You can also indicate what your artist or band name is as the “performing artist” on the song registration.

This information can sometimes be helpful in allowing the PRO to match your song registration to incoming performance data so that ultimately you can receive the royalties due you. All of these PROs share your song registration data with their sister PROs around the world in every country where they have reciprocal agreements, so that, should you earn royalties for performances taking place in another country, then the local PRO in that country knows where to send your royalties. We will address this situation in more detail in a later section on “International Publishing.”

What is a publishing company?
When you sign up to be a publisher at a PRO you have to choose a company name. You usually have to list three choices in order of preference so that there are other names to try to secure for you should your first choice be already in use by someone else. Please know that this does not mean you must set up a real company to go with this name. The PRO publishing company names are just names—you can set one up and list yourself as the owner and use your social security number for tax purposes. Once you start earning significant money, then you can discuss with your accountant whether you would benefit tax-wise from setting up a corporation to receive your income rather than receiving it personally.

What and how you get paid

In the end, the PROs are doing their job when you are receiving the royalties you are rightfully owed. It is a very complex topic to address how each and every PRO tracks performances and pays out on them, but one general concept that is worth knowing about is being paid on either a census basis or a survey basis. A census basis means that a PRO pays on every performance that occurs. This is the case for the major TV networks like ABC, CBS, and NBC, as well as the major cable outlets like HBO and Showtime. This is also the case for the major metropolitan radio markets like New York City, Los Angeles, and others. A survey basis means that the PRO will survey a particular medium or geographical area for a limited and random period of time (or times), and if your song gets played and identified during the survey period, then you will get paid.

But if your song gets performed during a time when your PRO is not surveying that area or medium, then you will not get paid. Everyone knows it’s not a perfect system, but the PROs have to do what’s called “follow the dollar.” Where their blanket fees are large for the larger TV networks or larger radio stations in the larger cities, then it makes economic sense to spend the time and money to identify all performances from those. But the smaller the media and the smaller the city, the smaller the ad revenue is going to be, so therefore the blanket license fee will be that much smaller, and there comes a point where you can’t spend more money trying to track performance data then the money a PRO is being paid for that blanket license. This makes complete sense. But it does sometimes mean that you will have performances that don’t get recognized and paid.

The only consolation is that the royalty you are missing would be small anyway, since that medium is being tracked on a survey basis, and the blanket license fee out of which you would be paid is small. The logic follows in reverse – the more performances you are able to get in the big TV and radio markets, then the higher your royalties will be. And they can add up to be substantial – particularly for radio. A huge commercial radio single can still generate well over $1 million in performance royalties in the U.S. alone, but those are hard to come by.

Where you won’t get paid

One exception where you won’t get paid performance royalties that is worth mentioning is for movie theaters. You will recall the anti-trust actions against ASCAP in the 1940s that resulted in the creation of BMI. In 1942, a group of motion-picture theater owners brought a similar anti-trust action against ASCAP.The case,which was finally decided in 1948, was called Alden Rochelle, Inc. vs. ASCAP. The theater owners brought the action for what they felt were monopolistic practices with regard to the royalties that the theaters were at the time required to pay to show movies in their theaters. ASCAP lost this action, and as a result no PRO in the U.S. is able to collect performance royalties from theaters in the U.S.

When we as publishers grant licenses to the movie studios we are also granting them the performance license to play our music in the theaters in the U.S. Though this is a bummer, it has been this way since 1948 and will likely never change. But the silver lining (which will be covered later in a bit more detail when we get to “International and Sub-publishing”) is that in the remaining countries in the majority of the world, songwriters and music publishers do receive royalties from the gross box office receipts of movies shown in these countries. And when your song is used in a very successful movie, this can add up significantly.

This post adapted from the book Five Star Music Makeover , from a chapter written by Michael Eames. Eames is a composer, songwriter, and pianist with film scoring experience. Specializing in music publishing, he is the president of PEN Music Group, where he oversees all aspects of the operation, from pitching the catalogue to business development. Over the course of this career, he has handled the catalogues of such artists as Jimi Hendrix, Chicago, and Roy Orbison.

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