The United States Copyright Office (USCO) has the PRO market in its crosshairs.
In February, the USCO launched a significant inquiry into the Performance Rights sector aimed at exploring “questions related to the increase in the number of PROs and the licensing revenue distribution practices of PROs”.
The modern US business now counts six PROs, including the ‘traditional’ organizations (ASCAP, BMI, and SESAC) alongside three newer entrants: Global Music Rights (founded in 2013), PRO Music Rights (2018), and AllTrack (2019).
The launch of the PRO inquiry follows significant activity in the US PRO landscape in recent months, including the news of GMR’s majority acquisition by US-based private equity company Hellman & Friedman, valuing it at USD $3.3 billion.
Blackstone was also reported in January to be exploring a potential $3 billion+ sale of SESAC.
As part of the investigation, the USCO launched a call for written submissions from the public, with a deadline of Friday last week (April 11). ASCAP, BMI, GMR, and SESAC all responded at length.
BMI, self-described as “the world’s largest PRO” representing over 22 million musical works from more than 1.4 million affiliates, submitted a 30-page response to the Copyright Office arguing that concerns about PROs are primarily an attempt by music users to reduce licensing fees.
In its filing, BMI supports market competition while expressing concerns about newer PROs: “BMI strongly believes the US market for the licensing of the public performance right benefits from free and fair competition.”
BMI also highlights its own transparency, having “made ownership information for each work in its repertoire publicly available online since 1995.”
BMI says its joint initiative with ASCAP, Songview, provides data on “over 20 million works, amounting to over 90% of the music performed in the US.”
“It’s no surprise that, once again, music users are attempting to underpay songwriters and composers for their creative work.”
Mike O’Neill, BMI
BMI further argues that existing laws are sufficient: “27 states have enacted comprehensive laws governing the licensing of public performance rights,” it says, suggesting this makes additional regulation unnecessary.
BMI then rejects the notion that distribution issues affect licensing obligations: “Whether a PRO ultimately distributes the ‘correct’ amount of royalties to the ‘correct’ songwriter… impacts neither the obligation to license nor the value of the license to the music user.”
BMI President & CEO Mike O’Neill said of the org’s submission: “It’s no surprise that, once again, music users are attempting to underpay songwriters and composers for their creative work. As always, BMI will continue to fight to ensure that does not happen.
“As our filing makes clear, we work tirelessly to protect the livelihoods and professions of music creators and copyright owners through the public performance royalties we collect and distribute.”
ASCAP, describing itself as “the only U.S. PRO that operates on a not-for-profit basis,” submitted a 40-page response to the Copyright Office representing over one million members. Its filing warns that further regulation of PROs “would cause immeasurable harm to music creators.”
ASCAP’s filing emphasizes the mutual benefits of collective licensing: “Collective licensing through PROs generates valuable procompetitive efficiencies for both the creators and users of music,” it says.
The PRO also highlights existing regulatory burdens: “American songwriters, composers and music publishers are some of the most heavily regulated business owners in the country.”
Further regulation, it says, would “diminish the amount of royalties available for distribution to its members.”
“Licensees are seeking more regulation of PROs because they want to pay songwriters less.”
Elsewhere, ASCAP states: “Distribution matters should be decided between music creators and their chosen PROs, not by licensees or government entities.”
ASCAP argues the US PRO system is essential in the marketplace. “If PROs like ASCAP didn’t exist, they would need to be invented,” it says, as no other entity could efficiently monitor “trillions of performances” annually.
Finally, ASCAP contends that complaints about the United States’ PRO system from music users (i.e. licensees such as restaurants) mask their true intentions: “The complaints levied by some music users about the lack of transparency of PRO song ownership are particularly disingenuous,” suggesting these users are “simply trying to pay less for music than they would in a free market negotiation.”
ASCAP CEO Elizabeth Matthews stated: “Licensees are seeking more regulation of PROs because they want to pay songwriters less,” adding that “if transparency, efficiency and innovation are the goals, more free market competition among PROs is the answer – not unnecessary government intervention.”
In its filing with the US Copyright Office, Global Music Rights argued that the current competitive performing rights marketplace, fostered by the four major PROs (ASCAP, BMI, SESAC, and GMR), already ensures fair compensation for songwriters while providing value to licensees.
GMR positions itself as a “boutique PRO”, offering “individualized service, increased transparency, and enhanced economic terms” that songwriters weren’t receiving from existing PROs.
In its submission, the organization emphasizes its commitment to transparency, noting that it “will provide any prospective licensee with its current catalog in a downloadable, searchable format” and has a policy of not seeking “enforcement of any song not listed on its website”.
“many of those businesses use GMR’s music without regard for copyright law, continuing to perform music at their bars, restaurants, and hotels without securing the requisite license from GMR to do so.”
GMR criticizes some newer PRO entrants like AllTrack and Pro Music Rights for allegedly not providing the same level of transparency in their dealings with licensees, suggesting these organizations “have not entered the performing rights marketplace with the same degree of candor, legitimacy, and transparency”.
In response to a question about the ‘technological and business practices [that] exist or could be developed to improve the current systems for usage tracking and royalty distribution,‘ GMR argues: “Most physical business establishments that perform music have not availed themselves of a music service that provides data for use in a distribution… Instead, they perform music with little regard to the need for clear and consistent data to be used by the PROs for the distribution of royalties.
“Moreover, many of those businesses use GMR’s music without regard for copyright law, continuing to perform music at their bars, restaurants, and hotels without securing the requisite license from GMR to do so.”
In its filing, SESAC – which represents over 15,000 songwriters, composers, and music publishers –emphasized the importance of songwriter choice and freedom in music licensing.
The for-profit org’s filing argues that competition among PROs benefits songwriters: “It is precisely the ability of songwriters and publishers to choose their performing rights organization that ensures distribution practices will be adjusted or modified when they raise concerns.”
Interestingly, SESAC highlights that most food and beverage establishments are already exempt from paying songwriter/publisher royalties in the US due to the Fairness in Music Licensing Act (FMLA), which exempts venues smaller than 3,750 square feet.
“Nearly 70% of restaurants and over 90% of bars remain exempted from paying royalties to songwriters or publishers for music broadcasts.”
SESAC
According to a study commissioned by SESAC: “Nearly 70% of restaurants and over 90% of bars remain exempted from paying royalties to songwriters or publishers for music broadcasts. And the exception’s reach only increases when we focus on genuine ‘small business’ operations — covering 74% of restaurants and 94% of bars with 10 or fewer employers.”
An attached economic study by NERA Economic Consulting confirms that the FMLA “continues to exempt the majority of U.S. food and beverage service establishments from the requirement to pay music licensing royalties” and “disproportionately protects small businesses.”
SESAC’s filing also outlines the org’s data collection and royalty distribution methods, noting: “SESAC PRO spends millions of dollars per year purchasing, storing, and processing data from numerous sources in order to inform its royalty allocation and distribution processes.”
SESAC also addresses concerns about repertory transparency, explaining that all established PROs provide easy access to their catalogs: “SESAC PRO maintains an open, online database that is easily searched by artist, song title, writer or publisher. A quick search of the top artists any establishment would like to play will indicate whether a SESAC PRO license is needed.”
The filing concludes that a competitive marketplace with multiple PROs benefits the industry: “A competitive music licensing marketplace with multiple PROs provides choice for songwriters and publishers, and ensures concerns about distribution practices will be addressed when raised by PRO members and affiliates.”
SESAC’s filing is attributed to Christos P. Badavas, the firm’s EVP & General Counsel.Music ComeOn
