When royalty collection costs outweigh the benefits, is it smaller artists that miss out?

Blog picThe accuracy of data regarding the reported use of music is key in determining the level of royalties paid to authors, publishers, performers and producers. Improvements in technology to identify what music has been played and performed at all manner of venues and establishments has resulted in higher collections and greater confidence that royalties are reaching the correct recipients. But is there a point where collection costs outweigh the benefits? And if so, are the smaller, less commercial artists the ones in danger of missing out?

UK authors’ society PRS for Music recently published figures showing that revenues earned from the use of British music overseas have doubled since 2002. UK songwriters and composers earned £187.7 million (US$300.4 million) globally last year, up 10.6% from £169.6 million in 2010. In 2002, overseas collections stood at £85 million. PRS said the rise came partly from improved licensing and efficiency of distribution around the world.

Royalties from international live concerts have jumped almost 1,000% in the past 10 years. Although revenues from the use of music on TV have risen 100%, largely because of the availability of more channels and the greater use of UK authors’ music in TV programming, some have questioned why the disparity between the two growth rates is so large.

Smaller artists missing out
David Elkabas, co-director of international music-management company MN2S, told Music & Copyright recently that there is a difference between the accuracy of reporting the use of music in live performances and music used by broadcasters, as well as music used on commercial premises. He also thinks that because of problems of accuracy, many smaller artists that are already struggling to make an adequate return on their music are missing out on royalties.

Elkabas says that in the UK, whether an artist plays live in front of thousands of people at a concert or at a smaller venue, the music is accurately reported and royalty fees are distributed directly to the music-rights holders. But such accuracy of reporting is not being applied to a variety of license-paying users, such as night clubs and smaller radio stations. This means that even though artists make a fair return from live performance, there are big holes in the level of royalties they earn from the use of recorded music.

PRS for Music does not receive detailed reporting from smaller radio stations or most night clubs on what music was broadcast minute-by-minute. Unlike the larger TV and radio broadcasters and live concert events, smaller radio stations are only obligated to submit sample playlists. Royalty fees distributed are based on the anticipated number of times a song could have been played according to its exposure, popularity and position in the music charts at that time.

The distribution of licensing fees for music played in dance clubs and other smaller premises, such as hairdressers, restaurants, stores and pubs, is based on various analogies, formulas and sample comparisons that estimate which songs were most likely broadcast and how often. This system means that money derived from these venues is more likely to be paid to authors of more commercial songs that have been broadcast on mainstream radio or featured in published charts. Creators of experimental and more-underground music, which are played at dance clubs week in and week out, might well be missing out on their share of these royalties.

Elkabas considers such inaccuracies to be clear evidence that the current reporting system is out of date and is not a fair representation of the music played across venues, especially in clubs. He says that an inconsistent music-reporting system is more beneficial for copyright holders with national exposure.

Fair comment?
PRS told Music & Copyright that increases in total collections by the authors’ society have, in part, come from the better tracking of music use and data transfer, as well as improved cooperation from its society partners. PRS says it is “always trying to improve” the tracking of music use. Where it is economic to do so, PRS receives accurate reporting. However, the authors’ society acknowledges that it will never receive totally accurate reporting from its small blanket licenses for community radio stations or stores and offices. In the UK, 95% of radio and TV is on a pay-per-play basis. Although the aim is for 100%, the license value for small community radio stations is low, and therefore any improvements in measuring music use must be balanced between costs and benefit.

Other collection societies face problems similar to those faced by PRS. For example, Dutch authors’ society BUMA/STEMRA told Music & Copyright that it does not have minute-by-minute information from local radio stations either. BUMA/STEMRA’s research showed that what local radio stations play is 98% the same as the repertoire of the larger radio stations. To get this 2% totally accurate would “cost far more than it would benefit.”

For small venues, hospitality services and retail outlets in the Netherlands, a number of companies provide tailored music. For example, local service Alcaz offers the DDJ music system, in which music users select the music they want to play in their establishments. BUMA/STEMRA has deals with these companies and can use the information they provide to make sure the correct authors receive their fair share of royalty payments.

Acceptable losses
Online service offerings by collection societies have gone a long way toward improving the accuracy of music-use reporting. In Germany, for example, GEMA has teamed up with performers and producers society GVL to produce a new electronic report format for radio and TV that generates the broadcasting report for the licensee using metadata. GEMA also offers an online service for live music, whereby concert organizers, music directors and performers can file performance details.

But there are some instances of music use in which accuracy of reporting will always be patchy. Although mobile-music-recognition software and basic digital mobile devices can easily identify music, these applications have their limitations, especially since the volume of music use to be identified is immense. However, critics such as Elkabas suggest that the way in which royalties are reported, calculated and distributed has failed to keep up with technology changes. Setting the right balance between implementing change to increase accuracy of reporting and settling on acceptable levels of nonreporting is not easy. There will always be a small percentage of music use that is not accounted for. But what is concerning is that it seems that smaller artists, who are already struggling to earn a living from music, might just be the ones suffering the most.

David Elkabas is co-Director of MN2S, an independent, International music management and talent booking agency. David has 17 years experience in the music business, representing an international roster of DJs, producers and live artists across a diverse spectrum of musical genres.

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