06 Nov Why We Shouldn’t Expect Performance Rights Organizations To Be Transparent…Anytime Soon
TuneSat recently reported that 80% of music played commercially is unreported or misreported. The Performance Rights Organizations (PROs) and major record labels (Universal-BMI, Sony, Warner Brothers), the “majors,” have the technological capability to be accurate and transparent about performances and payments, but they choose not to.Why do they refuse to be transparent? They have no incentive to be.
That’s the story on the record radio performance side of the industry and it’s the same story when it comes to royalties for music in film and television. As it stands now, the three PROs–ASCAP, BMI, and SESAC–report what music was performed, how much to collect from broadcasters, and the royalty paid to writers/composers. If you’re keeping track, there are only three PROs and three major record labels that control approximately 80% of music rights globally.
The majors overwhelmingly dominate the market, making the majors the PROs’ biggest clients.
So, with millions of music performances every quarter, each of the PROs aggregate a gargantuan amount of data, data no musician or composer could hope to decipher, a fact these companies count on. In fact, so much data is generated that the PROs and majors don’t bother verifying every transaction. Let’s say Universal owns 33% of all the music globally and ASCAP brings in $6 billion dollars in the first quarter. Instead of calculating the exact amount based on individual performances, ASCAP would simply pay 33% of the $6 billion to Universal. This arrangement is good for ASCAP and good for Universal, but it is bad for the small percentage of independent companies and artists who want to get paid for every single performance. And if one quarter Universal demands 35%, but Sony and Warner Bros. retain their percentages, the difference comes out of the independents’ percentage of the pot. With so little market share, and thus no leverage to compete with the majors, the independents cannot push back against this unfair arrangement.
The issue of transparency and accuracy is not one of capabilities. The technology to calculate this detailed information exists, but these companies choose not to use them. Doing so would tamper with a system that works very well for them at the moment. These companies have absolutely no incentive to change, and until they do, until they can make a more accurate system of auditing work for them, or until something forces a transformation, there will be no change in how business is conducted.
TMC, an independent music company, on the other hand, has built its own internal auditing system that it manually maintains. In some quarters, where TMC tracked music performances on film and television, it found that not one of the performances were reported by the PROs, and therefore the artists and publishers would not have seen any payments if not for TMC’s audit. Additionally, companies sometimes receive money from the PROs for music that is un-trackable. Meaning, the record labels take in revenue from these performances, but don’t know which artists should receive the payment. In these cases, the record companies simply pocket the money. And these cases are not rare, nor is the amount of money minuscule.
The arrangement between the PROs and major record companies is unfair and hurts independent artists and publishers trying to generate income from their music on film and television. But until the companies have a compelling incentive to change, there is nothing to tip the scales.