Court Lets Venues Deduct Fees From BMI License For Directly Licensed Music

from the this-might-be-a-bigger-problem-than-creative-commons dept

While ASCAP is busy attacking Creative Commons and refusing to debate, it appears that the performance rights organization may have a bigger problem on its hands. Reader Beefcake alerts us to an important ruling against BMI, the other big US performance rights group (there's also the somewhat smaller SESAC). The case itself involves a commercial music company, DMX (who provides music to various venues such as stores, restaurants and bars), that had been licensing some music directly from publishers and writers. But, as plenty of venues have learned, the big Performing Rights Organizations tend not to care whether or not you've directly licensed works (or just used public domain or non-covered works). They still demand a blanket license. This ruling, however, says that if you "directly license" works, you can get an adjustable fee blanket license, which would let venues decrease the amount they pay BMI (and, one would assume, ASCAP and SESAC), by deducting a portion for the directly licensed music:
Now, it's important to point out that this seems to cover specifically deductions for when DMX directly licenses BMI music. The way DMX's fees are set up, it appears to pool all the royalties it needs to pay into a certain bucket, and then splits it up by percentage of music played. So, theoretically, playing lots of freely licensed music could also decrease the rate paid to BMI.

The key here, however, is that this not only gives venues more incentive to directly license music in some cases (many won't, of course, because it's too big of a hassle), it also may force more transparency on BMI and the others. One major complaint we constantly hear about ASCAP and BMI is the lack of transparency in how they act in terms of counting performances and determining payouts. But, as the analysis of this ruling notes, DMX appears to be the opposite:
DMX's accounting to publishers and writers for direct licensed works features quarterly accounting 45 days after the end of each quarter, as opposed to the typical performing rights organization schedule of 9 or more months after a performance. DMX also provides direct counts of the number of plays of each work.
So, for artists upset about the way BMI or ASCAP treats them, it can now make more sense to just deal directly with DMX, which will pay them faster, give them more accurate and up-to-data data, and potentially pay out higher rates. It creates a bit of a competitive element that BMI and ASCAP could really use.


Reader Comments (rss)

(Flattened / Threaded)

  1.  
    identicon
    Anonymous Coward, Jul 30th, 2010 @ 3:24pm

    Jamendo FTW!

     

    reply to this | link to this | view in thread ]

  2.  
    identicon
    Anonymous Coward, Jul 30th, 2010 @ 3:26pm

    Just thought a moment and this may not be so good those collection agencies will just up the price to make up for the loss.

     

    reply to this | link to this | view in thread ]

  3.  
    identicon
    Anonymous Coward, Jul 30th, 2010 @ 3:34pm

    So if a restaurant only plays creative commons music that gives permission for them to freely play the music, does this mean the restaurant no longer has to pay a third party anything?

     

    reply to this | link to this | view in thread ]

  4.  
    identicon
    Anonymous Coward, Jul 30th, 2010 @ 4:09pm

    Re:

    The third parties will still claim that they are owed a license, just in case the restaurant "accidentally" plays something from one of the big labels or one of their customers hums a few bars of "Happy Birthday".

     

    reply to this | link to this | view in thread ]

  5.  
    icon
    cc (profile), Jul 30th, 2010 @ 4:43pm

    IIRC, venues are forced to pay BMI to allow artists to perform their own music. This will probably change that...

     

    reply to this | link to this | view in thread ]

  6.  
    icon
    Auditrix (profile), Jul 30th, 2010 @ 4:46pm

    Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    Direct performance licensing has been happening for years, particularly in the broadcast industry, and this decision makes it easier. However, one point that people fail to consider when discussing direct performance licensing is why the performance rights organizations exist all over the world:

    Perhaps you can negotiate higher fees and get paid more quickly by cutting direct deals for the use of your song, instead of registering it with a PRO (ASCAP, BMI or SESAC). However, if many parties opt to do this, publishers and writers will be in trouble. This is because publishers and writers as individuals do not have as much negotiation leverage - or monitoring and collection capabilities, especially abroad - as they do collectively. This is why the PROs exist in the first place.

    Techdirt readers may fundamentally disagree, but this is the bottom line in my view: The overall "pie" will ultimately shrink and there will be less money for composers and publishers to share if there is a big movement towards direct licensing. It may be be a tempting move in the short term, but in the long run, direct licensing is bad for writers and publishers.

    Either way, people on both sides of the DMX case are members of the California Copyright Conference, where this issue has been debated in years past. I serve on the Board of the CCC and I expect we will cover this issue with the relevant parties in attendance at our annual Legal Update panel discussion, which will take place in September at the Mariott in Sherman Oaks, CA.

    Not to get too off topic, but the CCC Board member who is scheduled to moderate the panel discussion is Kenneth Freundlich, Esq., who represented Royalty Logic and other entities in court when he argued that the US Copyright Royalty Board is unconstitutional. (IIRC, I think DMX may be a client of Royalty Logic, or its founder, Ron Gertz.) Since the constitutionality of the CRB is another topic that has been covered repeatedly by Techdirt, the CCC Legal Update panel discussion mentioned above may be of general interest to some Techdirt readers. You can find more information at http://www.theccc.org if you are interested in checking it out. Hope to meet some of you there.

     

    reply to this | link to this | view in thread ]

  7.  
    icon
    harbingerofdoom (profile), Jul 30th, 2010 @ 5:01pm

    Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    the fly in your ointment is that there is really no proof whatsoever that any of the money is going to the artists themselves in the first place.
    given the lack of credibility in their accounting practices that have been seen so far, it seems that for the most part, concern for a smaller pie for those that actually do the creation part of content is no more than big ol' crocodile tears.

    prove the money is going to the artists in the first place, then i might consider your arguments as having some merit.

     

    reply to this | link to this | view in thread ]

  8.  
    icon
    Auditrix (profile), Jul 30th, 2010 @ 5:10pm

    Re: Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    I can't share my clients' personal financial records with you, but I can assure you that they receive millions annually from the PROs. Since mechanical income has declined so much over the past decade, income from the PROs is more important than ever.

     

    reply to this | link to this | view in thread ]

  9.  
    icon
    ChurchHatesTucker (profile), Jul 30th, 2010 @ 5:33pm

    Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    The overall "pie" will ultimately shrink and there will be less money for composers and publishers to share if there is a big movement towards direct licensing.

    Good. The whole 'pie in the sky' model is part of the problem. Get your money up front and stop entangling those of us down the line.

     

    reply to this | link to this | view in thread ]

  10.  
    icon
    Auditrix (profile), Jul 30th, 2010 @ 5:39pm

    Re: Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    The PROs do collect performance fees up front and then allocate them to individual works based on subsequent usage. So, I don't know what you mean by "entangling those of us down the line."

     

    reply to this | link to this | view in thread ]

  11.  
    identicon
    NAMELESS.ONE, Jul 30th, 2010 @ 5:45pm

    YOU GUYS realize scribD has a malware traking cookie they are being sued over

    groklaw.net look on the right side news articles
    BAN and change software time

     

    reply to this | link to this | view in thread ]

  12.  
    icon
    Anonymous Coward (profile), Jul 31st, 2010 @ 12:06am

    Expect a very strong law about this to be passed through Congress very shortly...

     

    reply to this | link to this | view in thread ]

  13.  
    icon
    Richard (profile), Jul 31st, 2010 @ 6:53am

    Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint


    Perhaps you can negotiate higher fees and get paid more quickly by cutting direct deals for the use of your song, instead of registering it with a PRO (ASCAP, BMI or SESAC). However, if many parties opt to do this, publishers and writers will be in trouble. This is because publishers and writers as individuals do not have as much negotiation leverage - or monitoring and collection capabilities, especially abroad - as they do collectively. This is why the PROs exist in the first place.


    How is this "collective bargaining" different from what used to happen with (say) the printers' trade unions in the UK. That "collective bargaining" was universally regarded as a bad thing, obstructing progress. Why should songwriters be treated any differently?

     

    reply to this | link to this | view in thread ]

  14.  
    icon
    minijedimaster (profile), Jul 31st, 2010 @ 8:18am

    Re: Re: Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    I think he was getting at (correct me if I'm wrong) the fact that the mentality of I created this "art" and am therefore entitled to revenues from it for the rest of my life is part of the problem and needs to change. In the real world no one gets paid for work they performed 50 years ago. I go to work everyday and get paid for that day's contributions to the company. I don't go to work for one day and get paid for that day for the next month. Make sense?

     

    reply to this | link to this | view in thread ]

  15.  
    icon
    Auditrix (profile), Jul 31st, 2010 @ 9:31am

    Re: Re: Re: Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    Well, I guess if you don't believe in rewarding people on merit, I can see your point.

    But contingent compensation exists "in the real world" to reward people (and entities) on the merit of the work they created.

    This way, creators like George Gershwin earn more than the throngs of sonwgriters whose music you have never listened to. That seems fair to me, or at least fairer than the alternatives.

     

    reply to this | link to this | view in thread ]

  16.  
    icon
    Auditrix (profile), Jul 31st, 2010 @ 9:43am

    Re: Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    I know nothing about printers trade unions in the UK, but I suppose if you object to collective bargaining overall, you might object to PROs as well, even if they are not "unions."

    Power of the many, like power of the few, can be used wisely or abused. Therefore, collective bargaining is not all good or all bad - it depends on the specific situation.

     

    reply to this | link to this | view in thread ]

  17.  
    icon
    Richard (profile), Jul 31st, 2010 @ 3:00pm

    Re: Re: Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    Power of the many, like power of the few, can be used wisely or abused. Therefore, collective bargaining is not all good or all bad - it depends on the specific situation.

    True, but my feeling is that the current situation with the PROs is that they have too much power since they are effectively monopoly organisations.

    In addition "power of the many" is usually wielded by a few on behalf of the many - but not always in their best interests. The PROs act as monopolies in both directions towards licensees and towards songwriters.

    Direct licensing breaks that monopoly in both directions and will probably be beneficial for smaller venues/licensees and for less well known writers.

    Suppose you are a songwriter who has written a moderately good song - but it is not particularly well known. Even if we assume that PRO distributions accurately reflect performances it is unlikely that you will see much money under the present system.

    If a venue has a license that allows them to play any music from the current monopoly PRO then there is no reason for them to do anything but stick to the popular favourites. However if they can have a license for a smaller set of music (including your song) for a smaller sum - then there is an incentive to go that way and you will get some money.

     

    reply to this | link to this | view in thread ]

  18.  
    icon
    Richard (profile), Jul 31st, 2010 @ 3:24pm

    Re: Re: Re: Re: Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    But contingent compensation exists "in the real world" to reward people (and entities) on the merit of the work they created.

    Rewarding on merit is one thing - but what we actually have is very far from that.

    1) Are you really saying that having written a little tune is worth more than (say) saving lives as a surgeon.

    2) Royalties reward popularity - not merit - and popularity is often created by marketing decisions and associations quite unrelated to the quality of the work.

    3) Royalties tend to create huge rewards, well beyond the needs of the recipient - or almost nothing - with little ground in between.

    4) These so called rewards on merit can only exist because of the mass reproduction technology that has been created by engineers and scientists, who never see anything like those rewards. Without the technology musicians would earn no more than they did in the days of Machaut. Now the technology is changing and it will take the rewards away again. Best to react like Job!


    This way, creators like George Gershwin earn more than the throngs of sonwgriters whose music you have never listened to.

    Correction the estate of George Gershwin. George himself saw comparatively little of the rewards. Copyright enables people other than the creator to share and often capture its grotesque rewards.

    That seems fair to me, or at least fairer than the alternatives.

    What alternatives have you seriously considered?

     

    reply to this | link to this | view in thread ]

  19.  
    icon
    Jay (profile), Jul 31st, 2010 @ 6:37pm

    Re: Re: Re: Re: Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    "This way, creators like George Gershwin earn more than the throngs of sonwgriters whose music you have never listened to. That seems fair to me, or at least fairer than the alternatives."

    I do have to add that there are other decisions that can affect this merit-based system.

    One such route is the payola system that hampers radio. We should also not forget ASCAP and BMI closing down places for allegedly A) not paying for their music or B) refusing their licence.

    I'm sure if we could get away from a merit based system, and more towards a direct impact or fixed stipend system, it may work all the better overall.

     

    reply to this | link to this | view in thread ]

  20.  
    identicon
    Anonymous Coward, Aug 1st, 2010 @ 8:16am

    Yes Please! We have needed competition for a long time. For too long their word has been law.

     

    reply to this | link to this | view in thread ]

  21.  
    icon
    Hephaestus (profile), Aug 1st, 2010 @ 2:22pm

    Re:

    "Just thought a moment and this may not be so good those collection agencies will just up the price to make up for the loss."

    If they up their prices it will cause people to choose other sources for music. It is a death spiral for companies that up their prices, and a golden egg for those that compete. The collection agencies that track every song played will have artists runing to get on board. This will lead to the artists outside the top 200 actually getting paid and the slow errosion and collapse of the current collection agencies.

     

    reply to this | link to this | view in thread ]

  22.  
    icon
    Hephaestus (profile), Aug 1st, 2010 @ 2:27pm

    Re: Re:

    "The third parties will still claim that they are owed a license, just in case the restaurant "accidentally" plays something from one of the big labels or one of their customers hums a few bars of "Happy Birthday"."

    This however will be stuck down if anyone challenges it in court. The U R a criminal taxes were struck down in a spanish??? court on CD's. Someone will eventually play only CC music in a Barn full of horses, a restaraunt, etc in the EU and will challenge this in the EU courts.

     

    reply to this | link to this | view in thread ]

  23.  
    identicon
    Anonymous Howard, Aug 1st, 2010 @ 3:03pm

    Killing a monopoly is a good thing.

     

    reply to this | link to this | view in thread ]

  24.  
    icon
    Hephaestus (profile), Aug 1st, 2010 @ 3:15pm

    Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    Cedar - hello again and welcome back. I spent a couple nights driving home thinking about what you said.

    You are in the wrong industry at the wrong time in history. I personally hope you go kicking and screaming into the dark night as the California content industry crashes and burns over the next ten years.

    I have one suggestion for you, fight as hard as you can, but know full well that it isn't going to prevent the cost of content from going to zero. Make as much money as you can off these people. Never let it stress you out. Always smile knowing that what you are doing is what these people want. In the end walk away rich, with a big cheshire cat grin, and dont harp on the fact that the Cali content types couldn't see what was happening around them.

    PS ... I forgot which bridge you have your house under the one in LA or San Fran ... ;)

     

    reply to this | link to this | view in thread ]

  25.  
    icon
    Auditrix (profile), Aug 3rd, 2010 @ 2:17pm

    Re: Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    Thank you for your thoughts, Haphaestus.

    Do you work with IP or just consume it?

    If I wanted to be rich, I would not spend so much time fighting for artists in an industry that has fallen off a cliff, nor would I so often read and post on Techdirt, lol!

    My office is in a tower in the Century City area of Los Angeles, but I often descend from the clouds to audit major companies worldwide. Which reminds me, I must get back to work.

    All best.

     

    reply to this | link to this | view in thread ]

  26.  
    identicon
    Anonymous Coward, Aug 8th, 2010 @ 11:40pm

    Re: Direct Performance Licensing is Shortsighted from a Writer or Publisher Standpoint

    "The overall "pie" will ultimately shrink and there will be less money for composers and publishers to share if there is a big movement towards direct licensing."

    If there is a big movement towards direct licensing the overall pie of aggregate output (the thing that economies should seek to maximize) will grow because increased competition means lower prices which means more music will be purchased. It also means more artists can get exposure which will help them sell other things or to get people to pay to come to their concerts.

    Also the fact that money no longer goes to the middlemen will also facilitate lower prices (and hence more music) and more money going to the artists.

    More artists will be employed and get paid being that the increased aggregate output caused by a competitive market will necessitate more workers (artists) to produce work.

     

    reply to this | link to this | view in thread ]

  27.  
    identicon
    still titled, Oct 20th, 2010 @ 8:43am

    not just a deduction

    The economic incentives for BMI appear to disadvantage smaller artists...


    Happy customers are paying customers and what better way to encourage happiness than a little music. But if you get what you pay for, then shouldnít a shopkeeper pay for music?

    BMI whole-heartedly agrees. They emerged as a way to collect royalties from radio stations, but they also assess payments from bars, restaurants, bowling alleys, stores and others that might play an iPod or a radio, use a CD player or a karaoke machine, or feed a jukebox during the course of business. BMI and its peers organize permission to play music by selling each of these businesses licenses. For every dollar they collect, they disburse eighty-seven cents in the form of royalty payments to artists. If the dulcet tones of the latest tween sensation sweetens the atmosphere, encourages people to linger, and sells a few more hair-clips, then perhaps it is worth the money. The shopkeeper is happy. The artist is happy. But is the right artist happy?

    BMI knows that music is valuable. They know to whom it is valuable. But they donít necessarily know who is delivering the value. Radio stations have playlists. They can be publicly monitored for accuracy. But what the local wine bar or Italian restaurant plays isnít. Instead, BMI applies statistical analysis to predict whatís playing on those iPods and cd-players, and itís based on what they know from the local radio stations. It seems like a reasonable approach. Use local radio play to predict what people listen to locally, but it belies the reason why one might play a cd or use an ipod...

    http://stilltitled.com/2010/10/05/permissible-wealth-bmi-and-market-power/

     

    reply to this | link to this | view in thread ]


Add Your Comment

Have a Techdirt Account? Sign in now. Want one? Register here
Get Techdirt’s Daily Email
Save me a cookie
  • Note: A CRLF will be replaced by a break tag (<br>), all other allowable HTML will remain intact
  • Allowed HTML Tags: <b> <i> <a> <em> <br> <strong> <blockquote> <hr> <tt>
Follow Techdirt
A word from our sponsors...
Essential Reading
Techdirt Reading List
Techdirt Insider Chat
A word from our sponsors...
Recent Stories
A word from our sponsors...

Close

Email This