Meeting of the Minds

How Collective Management Organizations Remunerate Musicians Worldwide: A Guide for U.S.-Based Songwriters and Performers

Daphne A. Bugelli and Daniel J. Gervais

©2017. Published in Landslide, Vol. 9, No. 5, May/June 2017, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

The glamorous lives of modern music royalty like Taylor Swift and Drake may lead aspiring songwriters and performers to dream of being like their idols: “twenty-five, sittin’ on $25 mil.”1 To help reach that level of success, however, music creators (songwriters and performers) should understand where their revenue comes from and how to maximize it.

One major source of music creators’ revenue is payments they receive from collective management organizations (CMOs). CMOs are entities designed to facilitate music licensing for both music users and music creators. In the United States, the best-known organizations are commonly referred to as performing rights organizations (PROs). In this article, the broader, international term “CMO” will be used to refer to organizations, both in the United States and abroad, that manage public performance rights and other music rights, such as the right of mechanical reproduction.

International and National Recognition of Authors’ Rights

Authors’ rights in their creative works are recognized on a national level as well as an international level. In 1886, the Berne Convention for the Protection of Literary and Artistic Works was adopted. This treaty, still today the most important copyright treaty in existence, focuses on “the protection of the rights of authors in their literary and artistic works.”2 This goal was reiterated in part in the 1994 Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement), another international agreement, which was part of the Marrakesh Agreement Establishing the World Trade Organization (WTO), in which most of the Berne Convention was incorporated.

Every sovereign nation enacts its own laws on intellectual property protection and enforces those laws. However, parties to international agreements such as the Berne Convention or the TRIPS Agreement have agreed to be bound by a set of minimum standards. These treaties provide a floor or baseline for copyright protections. Laws protecting authors are also found in the domestic legislation of most countries. The U.S. Constitution, for example, states that “Congress shall have Power . . . [t]o promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”3 Article I, section 8 of the U.S. Constitution thus protects authors’ works and gives authors exclusive rights, while also encouraging public dissemination, use, and reuse of protected works. This balancing of both sides of the policy scale, namely to protect the author’s exclusive rights (i.e., to prevent certain uses of the protected works) while securing the public’s interest in accessing, using, and reusing works, is difficult to achieve. At times, it seems paradoxical to try to maximize both the creation and the dissemination and access to new human knowledge expressed as works of art and of the intellect.4

Protection of Music: The Basics

In most countries, including the United States, songs are protected by two separate copyrights. The musical work or composition—that is, the song itself (for example on sheet music)—has its own copyright protection. In fact, the lyrics and music can be protected as different works if they weren’t created at the same time or jointly. The sound recording (the fixation of a performer or performers performing the song) has its own set of rights. The duration (term of protection) of all such rights is independent from one another.

U.S. copyright law provides authors of original works with a bundle of economic rights. These can be described broadly as the right to make copies of the work (reproduction right, or in the case of many commercial uses of music, the “mechanical right”), the right to publicly perform or communicate the work to the public (performance right), and the right to create adaptations of the work (derivative right).5 In the United States, mechanical rights and public performance rights are often managed by different CMOs, while derivative rights and the work’s use in films, advertising, or theater (synchronization and grand rights) are managed by authors or their representatives (publishers) on a case-by-case basis. Countries outside of the United States recognize another set of rights for authors of musical works called moral rights. These give an author the legal right to be given credit for his or her work or to remain anonymous (right of authorship), and the right to oppose “mutilation” of the work even after transfer of the copyright (right of integrity). Moral rights are not transferred to or managed by CMOs, but CMOs have been known to play a role in their enforcement at an author’s request.

Independent of the above-mentioned authors’ rights, other countries recognize related rights or neighboring rights. These are rights given to nonauthor third parties who are connected to the creation of the copyrightable work. The most common parties holding related rights in musical works are performing artists, music producers, and broadcasting organizations. For example, a performer who records a song written by a songwriter does not hold the exclusive author’s rights granted to the songwriter because the performer is not the song’s author. The performer does, however, hold a related right to prevent the recording and public broadcasting of his or her performance of that song without consent. Of course, for both songwriters and artists, granting a license to each individual music user would be a hugely time-consuming endeavor. This is where CMOs enter the scene. In the United States, by contrast, the sound recording has almost a full copyright (a full copyright without the right of public performance but with the addition of an exclusive right to license digital audio transmissions), while performers only enjoy a right to prevent “bootlegging,” or unauthorized recording of their live performance and a right to a payment for noninteractive transmissions (managed by a CMO, namely SoundExchange).

Functions of Collective Management Organizations

CMOs facilitate the legitimate dissemination of music by offering a (ideally one-stop) licensing option to the music user. CMOs also relieve the author, or other rights holder, of an otherwise significant burden. CMOs can thus dramatically reduce transaction costs for both authors and users. Without CMOs, authors and publishers would need to contract with each music user separately. For each agreement, they would be responsible for setting the terms, establishing their own licensing rates, collecting payments, and enforcing the agreement. This would be very time consuming for the author and could hinder his or her ability to focus on creating new music, one of the goals of copyright protection. Due to the hassles involved in establishing effective agreements with each licensee, a world without CMOs would likely be one with a limited selection of music performed in public venues like retail stores, bars, and restaurants, or a world in which creators and other music industry players would have a very hard time generating income for their work. If every author was responsible for licensing his or her public performance rights for each use of each musical work or song, it is likely that venues would only enter into a limited number of agreements based on their budget and their connections with local songwriters or publishing companies. This would significantly reduce the number and variety of songs that could be performed in a venue and would essentially limit the public’s “access to new human knowledge.”6

CMOs are therefore uniquely positioned to fulfill the goals of copyright law. Ensuring songwriters and publishers get paid for the use of their works indirectly promotes the creation of new works by creating viable financial flows for professional authors. By creating a simple and less expensive way for music users such as radio stations, television channels, bars and restaurants, department stores, and dance studios to license music, they are maximizing both dissemination and access to new works.

CMOs enter into agreements with music rights holders to establish a repertoire of protected works such as songs. The CMO’s members are usually songwriters and publishers, or performers and record producers. The exact members and the related agreements depend on the type of rights the CMO manages.

Some CMOs [such as the Performing Right Society (PRS) in the United Kingdom] insist on a complete assignment of the right of public performance for authors’ rights or performers’ rights. With this type of agreement, the author or performer transfers his or her ownership of the right to the CMO. Other CMOs [including American PROs] operate as agents for an author or performer, with the author or performer retaining the right but agreeing that the CMO can administer the right on their behalf.7

Music users, including those from the venues mentioned above, purchase a license from a CMO to gain access to those songs for public performances or reproduction. Typically, venues purchase a “blanket” license, which allows them to use any song in the CMO’s library. According to the major American CMO, Broadcast Music Inc. (BMI), “[t]he numbers involved can range from a few hundred dollars for clubs of a certain size to millions of dollars per year for TV networks.”8 The CMO continuously gathers data from users (which many large users now generate automatically by using software that tracks the music they use) and outside sources to determine the amount due to each songwriter and publisher per quarter. This amount depends on many factors, including the number of times a song was played, the size of the venue that played the song, and the size of the audience reached. The CMO keeps an administrative fee and then distributes the remainder of its quarterly revenue to its members proportionately.

Varied Approaches to Collective Management of Copyright

There is no international standard on how to manage copyright and its related/neighboring rights. Neither the Berne Convention nor the TRIPS Agreement, for example, addresses the collective management of exclusive rights such as the right of public performance. Instead, they basically allow each country to take its own approach. That said, most countries currently have at least one music-focused CMO in place. International associations such as the International Confederation of Societies of Authors and Composers (CISAC) advocate on behalf of songwriters and composers “to secure fair remuneration for creators for the use of their[] works anywhere in the world.”9 The World Intellectual Property Organization (WIPO) has also recognized the importance of collective management in music licensing, publishing several guides for artists on collective management of copyright and developing open-source industry-specific software that is used by many small and/or developing countries.

WIPO has also proposed to create a global database for music called the International Music Registry (IMR). The IMR “would provide accurate and authoritative basic information about musical works, sound recordings and music videos [from around the world], which is an essential element in ensuring licensing of such works in the digital era.”10 The IMR would create a platform where “users would also be able to make more informed decisions regarding which CMOs to negotiate licenses with based on the utility of each individual CMO’s catalog to their online music service.”11 Although the IMR would function as a database, not as a licensing entity, it could still have a noticeable impact on lesser-known authors by identifying them to industry professionals seeking to license the song for film, television, or advertising. While the IMR would be an important asset to CMOs worldwide, there are no definitive plans to create the database at this time, and as of this writing the effort could be described as unsuccessful.

For Songwriters and Publishers

In the United States, songwriters and publishers have three large and well-established CMOs to choose from: the American Society of Composers, Authors and Publishers (ASCAP); BMI; and the Society of European Stage Authors and Composers (SESAC). A blanket license from ASCAP grants an establishment access to “over 10 million ASCAP songs” from “more than 600,000 members.”12 Similarly, BMI represents nearly 12 million musical works from over 750,000 copyright owners.13 SESAC, the smallest of the three American PROs, “currently licenses the public performances of more than 400,000 songs on behalf of its 30,000 affiliated songwriters, composers and music publishers.”14 ASCAP and BMI pay royalties to their members quarterly while SESAC pays on a monthly basis. BMI and SESAC do not charge their songwriters membership dues. ASCAP does, but it is not uncommon for ASCAP to waive membership fees for promising songwriters.

Songwriters may only be represented by one PRO at any given time. Publishers, however, can be members of multiple PROs. It is possible for a songwriter to run his or her own publishing company and register music with all three PROs in this capacity, but the songwriter would only receive a writer’s share from the organization where he or she is a registered writer. Songwriters can, however, terminate their agreement with one PRO and switch to another, a practice that is quite common.

A major difference between U.S. and international CMO practice is that two of the three U.S. CMOs do not manage mechanical reproduction licensing. Until recently, mechanical licensing in the United States was handled almost exclusively through the Harry Fox Agency (HFA), and the collective licensing of the performance right had no direct connection to this process. Since 2014, SESAC has partnered with HFA to streamline the music licensing process offering “a comprehensive digital rights management platform designed to simplify the administration of musical compositions and master recordings.”15 SESAC’s service is similar to the European model, notably followed by PRS for Music (United Kingdom) and SACEM (France). In many European countries, a music user can license both mechanical rights (the right to physically reproduce a sound recording) and public performance rights (the right to play or perform a song to the public) from the same CMO, making the process easier for both music users and rights holders.

For Performers and Producers

The right for performers and music producers who have created a sound recording to receive royalties for the public performance of their recording is often considered a “related” or “neighboring” right in copyright law as distinguished from copyright proper. In the United States, the CMO SoundExchange manages these rights with relation to “noninteractive”16 digital music services including Pandora Radio and SiriusXM Radio. SoundExchange collects royalties from the digital music user and pays them to “featured artists” on, and producers of, sound recordings. A featured artist is defined as “the group or individual most prominently featured on a sound recording, track or album.”17 Nonfeatured artists like session musicians or backup vocalists can receive royalties from one of two much smaller organizations, American Federation of Musicians (AFM) and SAG-AFTRA. It is also worth noting that although a featured performer is not typically entitled to a writer’s share for his or her performance on a sound recording, performers are sometimes included in the CMO registration process as cowriters, especially in the country music genre.

Many countries, including the United States, Canada, Germany, the United Kingdom, France, and Japan, have systems involving separate CMOs for authors’ rights and performers’ rights. Currently, the Societies’ Council for the Collective Management of Performers’ Rights (SCAPR), a not-for-profit international organization, represents 58 CMOs dedicated to performers’ rights. SCAPR’s main goal is to “improve the efficiency of management of rights and the conclusion of bilateral agreements.”18 These bilateral agreements, known as reciprocal representation agreements, allow two international performers’ CMOs to license each other’s repertoire in their respective territories.

Dollars and Pence: How Does a U.S. Author or Performer Get Paid for Public Performances Abroad?

Understanding that nearly every country has its own unique CMO system is useful, but it does very little to help musicians in the United States understand how to collect their royalties. Thankfully, most foreign CMOs have reciprocal agreements with their U.S. counterparts.19 What this means for a songwriter or featured recording artist in the United States is that by registering your music with a U.S.-based PRO you are covered! Royalties will be collected in the countries where the music is performed by local CMOs, which will take an administrative fee and then send the money to an American PRO where the musician is a member. The U.S. PRO will take an administrative fee and then disburse the royalties to its member. Each foreign CMO has its own data collection method and its own payment distribution schedule, which can significantly slow down the process of receiving internationally earned royalties in the United States. ASCAP, BMI, and SESAC all have additional methods for collecting and verifying the data collected by foreign CMOs, and they encourage members to report public performances of their works abroad to ensure that the royalties collected outside the United States are based on accurate data. Conversely, foreign creators who are members of a large CMO in their home country often share the same benefits under reciprocal agreements that allow their music to be licensed in the United States through a partner organization.

For performers and producers, the situation is more complex. Because U.S. law does not include a public performance right in sound recordings, many foreign CMOs representing related/neighboring rights refuse to pay U.S. performers and producers for the broadcasting of U.S. recordings.

In the case of creators’ rights, there is also an added layer of complexity. To facilitate the public performance of musical works abroad, many music publishers engage in subpublisher agreements. Subpublishers can facilitate placements with international music users such as live performance venues and radio stations. The agreement may also allow a new version of the song to be created in hopes of appealing to a different audience. Changes can range from altering the style of the song through remixing to recording it with a local artist singing translated lyrics; these new versions are known as local covers. The subpublisher will take a portion of the publisher’s share, ranging from a typical 50/50 split to 75 percent for the subpublisher on local covers. These arrangements theoretically do not affect the writer’s share of public performance royalties.

A Simple Takeaway

For U.S.-based musicians, the takeaway is simple: Songwriters should pick a PRO, write a (hit!) song, register it with their PRO, and (hopefully) watch royalties roll in. Performers can cowrite songs they perform and try to negotiate a writer’s share to maximize earnings. Next, performers should register their recordings with SoundExchange to get performance royalties from both domestic and international digital performances. Thanks to the United States’ robust collective management tradition and the bilateral agreements in place between every major American CMO and most international CMOs, U.S. creators can reap the benefits of collective management. Although most CMOs take a substantial cut of royalties before paying music creators, given the alternative hassles of individual licensing agreements, “what it all comes down to, is that everything is going to be quite alright.”20

Endnotes

1. Drake, Feat. Lil Wayne, The Motto, on Take Care (Cash Money Records Inc. 2011).

2. Berne Convention for the Protection of Literary and Artistic Works art. 1, Sept. 9, 1886, S. Treaty Doc. No. 99-27 (1986).

3. U.S. Const. art. I, § 8.

4. Daniel Gervais, Collective Management of Copyright: Theory and Practice in the Digital Age, in Collective Management of Copyright and Related Rights 15 (Daniel Gervais ed., 3d ed. 2016).

5. 17 U.S.C. § 106.

6. Gervais, supra note 4, at 15.

7. David Stopps, World Intell. Prop. Org. [WIPO], How to Make a Living from Music 51 (2d ed. 2014), available at http://www.wipo.int/edocs/pubdocs/en/copyright/939/wipo_pub_939.pdf.

8. Kevin Zimmerman, Royalties and Their Collection, Broadcast Music Inc. (Apr. 28, 2004), http://www.bmi.com/news/entry/Royalties_and_Their_Collection.

9. What We Do, Int’l Confederation Soc’ys Authors & Composers, http://www.cisac.org/What-We-Do (last visited Mar. 14, 2017).

10. World Intell. Prop. Org. [WIPO], What Copyright Infrastructure Is Needed to Facilitate the Licensing of Copyrighted Works in the Digital Age: The International Music Registry?, at 5, WIPO/IP/AUT/GE/11/T12 (Sept. 23, 2011), http://www.wipo.int/meetings/en/doc_details.jsp?doc_id=183060.

11. Kristen Greeley, Note, Recommendations, Communications, and Directives, Oh My: How the European Union Isn’t Solving Its Licensing Problem, 44 Geo. J. Int’l L. 1523, 1543 (2013).

12. About Us, Am. Soc’y Composers, Authors & Publishers, https://www.ascap.com/about-us (last visited Mar. 14, 2017).

13. Licensing FAQ, Broadcast Music Inc., http://www.bmi.com/licensing/#faqs (follow “Q: What is BMI?” hyperlink) (last visited Mar. 14, 2017).

14. About SESAC, SESAC, https://www.sesac.com/About/About.aspx (last visited Mar. 14, 2017).

15. Id.

16. “Noninteractive services are very generally defined as those in which the user experience mimics a radio broadcast. That is, the users may not choose the specific track or artist they wish to hear . . . .” Licensing 101, SoundExchange, https://www.soundexchange.com/service-provider/licensing-101/ (last visited Mar. 14, 2017).

17. Artist & Copyright Owner, SoundExchange, http://www.soundexchange.com/artist-copyright-owner/#sthash.iTDr75KW.dpuf (last visited Mar. 14, 2017).

18. What Is SCAPR?, SCAPR, http://www.scapr.org/what-scapr (last visited Mar. 14, 2017).

19. See Affiliated Foreign Societies, Am. Soc’y Composers, Authors & Publishers, http://www.ascap.com/about/collecting/affiliated.aspx (last visited Mar. 14, 2017); International: Agreements with Foreign Performing Rights Organizations, Broadcast Music Inc., http://www.bmi.com/international/entry/reciprocal_representation_agreements_foreign_performing_rights_societies (last visited Mar. 14, 2017); SESAC’s Agreements with Foreign Performing Rights Organizations, SESAC, https://www.sesac.com/WritersPublishers/HowWePay/foreignpros.aspx (last visited Mar. 14, 2017).

20. Alanis Morissette, Hand in My Pocket, on Jagged Little Pill (Maverick Records 1995).

Daphne A. Bugelli

Daphne A. Bugelli is a graduate of Michigan State University College of Law, class of 2016, and a member of the Tennessee Bar. She is currently the South Regional Director at Kaplan Bar Review. Ms. Bugelli is passionate about working with musicians and practicing in the area of entertainment law in Nashville.

Daniel J. Gervais

Daniel J. Gervais is a professor at Vanderbilt Law School, where his research focuses on international intellectual property law, having spent 10 years researching and addressing policy issues on behalf of the World Trade Organization, the World Intellectual Property Organization, and other organizations. Before joining Vanderbilt Law School in 2008, Professor Gervais was acting dean of the Common Law Section at the University of Ottawa, where he also served as acting dean and as vice-dean for research and academic vice-dean. He is a member of the American Law Institute.