Courtesy of EMI Publishing
The music business has undergone drastic changes during the Internet era, but until recently, one thing that hadn't changed was the role of the American Society of Composers, Authors and Publishers, known to the industry as ASCAP. This performance rights organization has helped songwriters and music publishers get paid when their songs are played in radio broadcasts, on elevators and in clubs for nearly 100 years. But as broadcasting moves online, ASCAP's future may be uncertain.
Take its relationship with the major record label EMI as an example. Like many labels, EMI has a publishing arm that controls several different catalogs of songs. April Music, one of those, holds the rights to some 200,000 songs, including works written and performed by Jay-Z, Mos Def and Beyonce. Holding those rights means that when any of those 200,000 songs are played in public spaces or in front of an audience, April Music — along with the song's writer — is paid a fee by the broadcaster.
How do they know which songs were played in which place? That's where ASCAP comes in. ASCAP is a performing rights organization, or PRO, founded in 1914 by songwriters. They created the group, which negotiates with broadcasters (who could be a guy who owns a rural bar with a jukebox that hasn't been updated in decades, or a major radio operator like ClearChannel), so they would be paid when their songs were played on the radio. ASCAP sends staff out into the field to listen, keep notes and collect fees.
"We had individuals in recreational vehicles traveling around the United States taping over-the-air broadcasts of radio and television," says John Lofrumento, the CEO of ASCAP.
Today, ASCAP has more advanced technology, Lofrumento says, which can use a sort of sonic fingerprint to recognize and track music as it's being performed on the radio, in real time.
But as fans start to listen to more of their music online, keeping track of how often a song is played via Internet-based streaming services is even easier.
"YouTube and Spotify and Apple and MOG and Rhapsody and all these online digital streaming services already track the public performances of the songs," says Jeff Price, the CEO of the digital music distribution company TuneCore. "They can just click a few buttons and spit out a report that shows how many plays there have been."
The ease of online tracking is why EMI has decided to drop ASCAP for tracking digital rights — the music that gets played online — for its April Music catalog. In a statement, Roger Faxon, the CEO of EMI Music Publishing, says that the company is trying to create more efficiency. He says he wants to reduce the barriers to the development of new online services.
Market analyst Phil Leigh agrees that the new arrangement will help start-up companies, which he says can't afford to pay the rates that applied to old businesses. "Therefore," Leigh says, "the music publishers want to be able to negotiate with them directly in order to provide rates that enable them to get into business."
Leigh points to Pandora, the online radio network, as an example. Despite having 90 million users, Pandora still can't make a profit. Which suggests a dilemma for the industry if it still wants to make sure people get paid for the performances of their songs: Songwriters could get paid less, or Pandora could sidestep ASCAP and other major performing rights organizations like BMI and SECAC and negotiate directly with the numerous different music publishers over the thousands of different songs it wants to play.
Leigh and other analysts say that EMI may be the first big publisher to cut ASCAP out of digital rights negotiations, but it won't be the last. TuneCore's Price says that in an age of shrinking profits, companies like EMI want to eliminate the fees they have to pay to ASCAP. EMI might be especially concerned with short-term cost-efficiency at this particular moment, since it recently put itself up for sale.
"They want their balance sheet up," Price says. "That's why EMI is rushing around doing this, because they're trying to get bought by Russian billionaires."
The interests of EMI's publishing arm may not necessarily be those of the songwriters it represents. As it is now, ASCAP takes a fee from payments it collects, then distributes the rest of the money equally between songwriter and publisher. Casey Rae Hunter, of the nonprofit advocacy group Future of Music Coalition, says the big music publishers don't have the same obligations to songwriters that ASCAP does to those same people, its members.
"What is EMI's responsibility to the songwriters who are part of their publishing empire, and can we trust that this company is going to honor the 50-50 split that songwriters have worked out and honored over the years?" Hunter asks.
Stories about songwriters and musicians not being paid royalties by their record labels because those labels claimed the sales weren't enough to recoup advance payments are common in the industry. TuneCore's Price says if you're an older artist with an older contract, that same issue might play out online if EMI collects directly from Internet broadcasters.
"If you are a legacy songwriter and you are in a deal with EMI Music Publishing and EMI has paid you an advance in order to co-own your copyrights, which is what they do, and that money is now all given to EMI as opposed to the PRO, and you're unrecouped — meaning they've advanced you money and you haven't earned enough back to pay them back because you only do that off the money that you've earned from your share of the copyright — you're not going to get any money as a songwriter," Price says.
For now, digital music rights make up a very small portion of the royalty pie for songwriters and publishers. ASCAP reports that of the $935 million it collects each year, only $17 million comes from digital sources. But everyone, including ASCAP, knows that's going to change. If EMI is successful in its move to negotiate its own digital rights, and others follow, the PROs may turn out to be yet another casualty of the shift to online music.