MMF criticises Sony/ATV’s threat to withdraw from collective licensing

When Sony/ATV Music Publishing CEO Marty Bandier penned a letter to the publisher’s US songwriters stating its intention to withdraw from the two biggest performing rights societies in the US, the Department of Justice began a review of the consent decrees included in the collective licensing deals with US rights associations BMI and ASCAP.

The major publisher first requested to start licensing some digital music services, like Spotify, to achieve market-share royalty rates. However the current consent decrees – which both performing rights organisations (PROs) operate under – do not currently allow partial withdrawals. That hasn’t stopped Sony/ATV and its subsidiary EMI Music Publishing from going ahead and beginning the direct licensing process anyway. The threat then escalated when Bandier stated that if the DoJ doesn’t provide the reforms, Sony/ATV will consider withdrawing from collective licensing completely.

The comments were made despite the massive legal undertaking the publisher would be forced to complete to licence every radio station, promoter, venue, retailer and business in the US who publicly plays their artists’ music.

Now, the UK’s Music Managers Forum (MMF) has responded to Bandier’s letter expressing it concurs the consent decrees that govern ASCAP and BMI are outdated but it is alarmed Sony/ATV would withdraw from the PROs and “attempt to issue licences directly to US users thus complicating licensing.”

The letter, which can be read in full below, states if the publisher goes ahead with the withdrawal it could hurt writers’ income and transparency.

“While the MMF is wholly sympathetic to Sony/ATV’s frustrations,” the letter reads, “the threat of withdrawal is an issue for the entire global community of composers and societies.”

Sony/ATV have since responded with: “While we appreciate the MMF’s views, our responsibility is to look out for the best interests of our songwriters. As we move through this process we are continually guided by the principles of fairness and transparency and we think we are adhering to that.”

Interestingly, Sony/ATV this week announced plans to publish its full global music catalog on its website.

Read MMF’s letter to Marty Bandier below.

The Music Managers Forum shares the concerns expressed by Sony/ATV as to the complexity of licensing systems in the USA and worldwide.

Part of the problem is indeed the constraints in the USA on licensing negotiations imposed by the outdated Consent Decrees that govern ASCAP and BMI and prevent them securing a fair market rate for their members. That the US Department of Justice is currently reviewing the Consent Decrees is a positive development.

However, on behalf of our songwriter clients, the MMF is alarmed at the suggestion by any music publisher, especially one with such considerable market power as Sony/ATV, that they would withdraw from the performing right organisations (PROs) and attempt to issue licences directly to US users thus complicating licensing.

Sony/ATV cannot withdraw any non-US writers’ works from the US PROs and issue licences for their work as they do not own the right in any songs written by any writer who is a direct member of a PRO outside the USA. These non-US writers assign their performing right directly and exclusively to their local PRO on a global basis. The right is owned by the PROs who have the sole authority to issue licences – to the exclusion of the writer and the publisher. These non-US rights are passed exclusively to the US PROs by the non-US societies.

Publishing contracts outside the USA only give the publisher a right to share in the revenue from the performing right, but not ownership of the right itself. For example, as long as The Beatles, the Rolling Stones, Coldplay, Jean Michel Jarre and Adele etc. continue as members of their local PRO, no US publisher can issue licences for their work. As far as we’re aware, the letter from Sony/ATV was not sent to non US writers, once again highlighting the complications posed for licensees of territorial posturing in a global digital marketplace.

While the MMF is wholly sympathetic to Sony/ATV’s frustrations, the threat of withdrawal is an issue for the entire global community of composers and societies. There are at least four other reasons why US withdrawal and direct licensing are a risk to writers’ livelihoods.

Potential licensees will still have to go via the PROs as well as the publishers which could lead to differential pricing and more complicated and more costly transactions.

Writers’ contracts routinely state that they are not entitled to be paid a share of revenue that is paid as advances, lump sums or is not able to be “directly and identifiably” attributed to their work. How confident can writers be that they will be paid their shares of direct licence monies?
Co-writing songs is a common practice. How does a co-writer signed to a different publisher get paid when his writing partner is signed to a publisher who is issuing direct licences? He has no contractual relationship with his partner’s publisher to rely upon.

The PROs allocate unique identifiers to each song or composition (the International Standard Works Number or ISWC). These have now been allocated to over 95% of the world’s musical works and their use across the globe ensures that usage and works are correctly matched and writers paid what they are entitled to be paid. Many music publishers operate their own, different identifiers. The lack of common work identifiers between publishers and the PROs complicates revenue allocation.

The global network of non-profit PROs has served the consumer, the music users and the song writing and publishing community well for over a century. Despite the challenges of the digital environment, PROs provide economies of scale and streamlined licensing which keep transaction costs manageable. Writers sit on their Boards and can influence policy. While the PROs may not be perfect, they allow creators a voice and a direct income stream. Adjustments to this system should be nuanced and carefully thought through. More importantly to our members’ clients, solely national focus poses a grave threat to the livelihoods of every writer, American or not.[1]
[1] Once before Sony/ATV led the charge with a direct licence to a US music service. The result has been a disaster for the whole music community. Every song writer and music publisher in the world is still paying back US $150 million to background music services in the US as a result of an ill-advised direct licensing deal concluded by Sony/ATV and other independent publishers in the US. These direct licences were agreed at a fee 70% less than the licensee was paying via the PROs!

It is a matter of public record that Sony/ATV accepted an advance of US$2.3 million and an administration fee of US$400,000 from DMX, a major US background music service. Buried in the agreement was a per location licence fee that was 30% of what DMX was paying the PROs. Bad for business? Not for DMX. The US Rate Court proceedings that followed had the effect of reducing the licence fee for every background music service in the USA. The global music community is still refunding the licence fees to background music services in the USA as a result and licences going forward sit at 30% of the former PRO value. Writers and publishers will never recover from the damage to the value of their royalty income in this sector of the market.