Sony/ATV Music Publishing's note to writers, sent last week, re-iterating that it might withdraw completely from the two large performing rights societies, ASCAP and BMI, has drawn a response from the London-based Music Managers Forum. The group said it is opposed to such actions because it could make music licensing more complicated and may impact writers' earnings.
In its letter, Sony/ATV said that it was frustrated by the rates its songwriters receive in digital licensing deals and would appeal court decisions made in the ASCAP and BMI rate courts that ruled that music publishers had to be all-in or all-out -- that the partial withdrawals of digital rights as Sony/ATV did for one year with Pandora are not permissible under the consent decree. In addition to appealing those rulings, both PROs, Sony/ATV, and Universal Music Publishing Group have reached out to the Dept. of Justice on the issue, who have responded by opening up a review on the consent decrees to see if they needed to be changed, considering the evolution of digital licensing.
The Music Managers Forum -- which claims over 400 music managers as members including the organization's chairman Brian Message, who oversees Radiohead and Nick Cave; Adam Tudhope, who oversees Mumford & Sons and Keane; and Scott Rodger who oversees Paul McCartney and Bjork -- recognizes that partial withdrawal could be positive for writers ,and said that the DOJ's review of the consent decree is "a positive development."
The Music Managers Forum appears to be worried that, if the decree isn't amended, then Sony/ATV would completely withdraw, which it said could hurt writers' income and transparency.
"While we appreciate the MMF's views, our responsibility is to look out for the best interests of our songwriters," Sony/ATV said in a statement. "As we move through this process we are continually guided by the principles of fairness and transparency and we think we are adhering to that."
In its letter to writers, Sony/ATV said that, if its appeal of judicial rulings and the DOJ's review towards amending the ASCAP and BMI consent decrees are unsuccessful, then it is prepared to fully withdraw from the PRO's.
Possibly in preparation for such a move, Sony/ATV announced that it would make a complete and organized list of its song catalog available on its website.
Even though Sony/ATV only sent its letter outlining the three-pronged strategy it was pursuing to U.S. writers, excluding non-U.S. Writers, the London-based Music Managers Forum went out of its way to point out that Sony didn't have the right to withdraw foreign-based writers from the U.S. PROs. Outside the U.S., songwriters assign their performing rights directly and exclusively to their local PRO on a global basis, MMN said.
"The right is owned by the [foreign, local] PROs who have the sole authority to issue licenses -- to the exlusion of the writer and the publisher," the Music Managers Forum wrote in their statement. "These non-U.S. rights are passed exclusively to the U.S. PROs by the non-U.S. societies. Publishing contracts outside the USA only give the publisher a right to share in the revenue from the performing right, but not ownership of the right itself."
Consequently, because potential licensees will still have to go to the PROs as well as to withdrawing publishers, MMF worries that the stituation could lead to differential pricing and more complicated, and costly, transactions, particularly in songs with co-writers. "How does a co-writer signed to a different publisher get paid when his writing partner is signed to a publisher who is issuing a direct license," MMF wondered. "He has no contractual relationship with his partner's publisher to rely upon."
The MMF warned that if Sony/ATV follows through and withdraws completely from the PROs, there are at least three other reasons why U.S. direct licensing deals would pose a risk to writers' livelihoods.
It said such a withdrawal could make record-keeping and proper payments more difficult if Sony/ATV and other withdrawing publishers don't use the Internnational Standard Work Code (ISWC), which it says ensures works are correctly matched. "The lack of common work identifiers [digital tagging of tracks] between publishers and the PROs complicates revenue allocation," the MMF said.
Secondly: Much like indie labels, the MMF said it is worried about "digital breakage," because writers' contracts routinely state that they are not entitled to a share of revenue, like advances, that are not directly and identifiably attributed to their work. The implication is that if a publisher is signing direct deals, such revenue might grow. MMF questions how writers can be confident that they will be paid their shares of payments from direct licenses.
Finally, the MMF points out that writers sit on the board of the PROs and can influence policy. "While the PRO's may not be perfect, they allow creators a voice and direct income stream," MMF wrote. Adjustments to this system should be nuanced and carefully thought through. More importantly to our members' clients, national focus poses a grave threat to the livelihoods of every writer, "American or not."
The MMF pointed out in its statement, which was first reported on by Music Week, that the last time Sony/ATV led the charge in doing direct deals -- with music background service DMX -- it resulted in "a disaster for the whole music community," MMF wrote. "Every songwriter and music publisher in the world is still paying back $150 million to background music services" as a result of Sony's direct deal.
In a 2010 court case involving what a carve-out rate should be in order to discount the BMI blanket license and take account of direct payments to Sony/ATV, the rate BMI rate court judge cut the negotiated annual blanket fee of $36.36 nearly in half, to $18.91 per store.
Some have argued that, in setting its new lower rate level, the court used the Sony/ATV direct deal with DMX as a market negotiated rate, which was 30% less than the per-location license fee that the PROs had negotiated with DMX, according to MMF.
A top music industry publishing executive not affiliated with Sony/ATV disagrees with the MMF take that Sony/ATV was the cause of the lower payments to the industry. "Its not Sony/ATV's fault that the judge ignored everything Sony/ATV was getting in the direct deal and only looked at the per location rate," that executive said. Other elements of the deal paid Sony/ATV a $2.3 million advance and an administration fee of $400,000, according to MMF.
The rate set in the BMI court also impacted ASCAP and other music publishers that had cut direct deals. Consequently, the industry had to credit DMX and other background services to the tune of about $150 million, according to the MMF and other industry sources.