Global Music Rights, ASCAP, BMI and Pandora Get Nitty and Gritty in CMJ Discussion

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The CMJ Music Marathon celebrated its 35th year with a more focused approach -- while its concert schedule remained as dense as ever, organizers whittled down and focused up what had become a sprawling programme of panel discussions and networking sessions.  As CMJ CEO Adam Klein acknowledged to Billboard early last month (Sept. 1), the festival -- which takes place over five days throughout Manhattan and Brooklyn -- has "had some challenges."

This past Friday (Oct. 16), a discussion titled "The Changing Landscape of Collective Music Licensing" brought key stakeholders, including one who has kept very quiet as of late, to the large ballroom of the Dream Hotel, CMJ's new home base, which had operated out of NYU's Washington Square campus for many years.

Moderator Larry Miller (professor of music business at NYU Steinhardt) led the panelists -- Clara Kim (chief counsel, ASCAP), Randy Grimmett (CEO Global Music Rights), Stuart Rosen (svp and general counsel, BMI) and Elizabeth Moody (vp global content licensing, Pandora) -- through a sometimes heated overview of the complex world of music publishing and the collective licensing that forms its spine.

BMI's Stuart Rosen began by outlining his industry's formation, spurred by governmental concerns of a monopolistic market position by ASCAP. In 1941 the Dept. of Justice took the first steps towards its eventual issue of the consent decree for ASCAP, establishing the statutory rules which still define the contours of performance rights organizations in the U.S., of which there are now four (ASCAP, BMI, SESAC and Global Music Rights). "The Internet was some science fiction writer's idea of a dream," said Rosen."Imagine operating under rules created 50 years ago. The competitive landscape is quite different, and its to question whether they should in fact exist," Rosen argued. The consent decrees are currently under review by the DoJ.

Rosen's mention of a changed competitive landscape could be interpreted as a direct reference to Global Music Rights, the newcomer run by his fellow panelist Randy Grimmett. The company launched two years ago under the direction of respected music industry veteran Irving Azoff, who chose Grimmett -- an ASCAP veteran -- to run the boutique performance rights organization (PRO). Since announcing its launch in early 2014 and making waves months later with claims of a bombshell lawsuit against YouTube, the company has kept quiet on its operations, until this past Friday, at least.

"This is so anti-climactic," Grimmett told the audience, referencing the acute interest many attendees, and the moderator, had in his business' dealings. Grimmett explained that GMR's formation began a year before the world was aware of its existence. "I'd say we operate on a pretty low-key basis. I don't think we've ever sent a press release on any deal we've done -- haven't announced them, and we don't have a PR team. This isn't an experiment to upset the apple cart in such a way that causes the user community [users in this context refers to companies like Pandora, those whose business is based on the usage of licensed music], who are very active in D.C., to go there an claim they're being victimized by songwriters."

"We started in May of 2013. When Irving approached me it was a daunting task, to say the least. To start something that is part of a $2 billion business, to go into a marketplace that's data-driven -- intensely data-driven -- required a huge capital investment." Grimmett said part of his company's advantage was its newcomer status, allowing for GMR to jump into the 21st century, without going through the decades-long maturation -- and heavy paper trail -- of ASCAP and BMI. "We had an advantage, starting with modern technology."

Of most interest were the numbers that Grimmett shared on GMR's development. "We're up to about 90 clients, who represent a wide swath of American music. We have licensing deals with three dozen or so entities -- the major licensing deals are not in place yet," he said, referencing technicalities between the organizations. For example, if a writer is a member of a PRO and wants to move to another PRO, the first PRO can hold the writer to any license in effect with the licensee until it expires. "We have entered the marketplace and been able to offer something different," he continued. "I've certainly lost as many deals as I've gained, but I feel like what we're attempting to do is something that will be good for all songwriters and publishers. If there's a way to have an arm's length, open market negotiation, that's the ideal situation for any creator."

"We're small enough so that any user could say thanks but no thanks." Grimmett concluded.

From there the discussion moved into acrimonious territory, covering recent rate court rulings -- which, essentially worked out in Pandora's favor on the one hand and BMI's on the other -- the Digital Millenium Copyright Act and the concept of fractional licensing. At the core of these arguments is the relationship between music publishing companies like Sony/ATV, performance rights organizations like BMI and ASCAP, users such as Spotify and Pandora -- and the U.S. Dept. of Justice. The structure of performance rights in the U.S. is such that the two largest PROs have, for over 50 years, been subject to the judgements of federal rate court judges and legal determinations by the Dept. of Justice. As Rosen explained, when the byzantine subject (one of many) of fractional licenses was raised: "About three years ago, when publishers started talking about digital rights withdrawal -- they wanted to stay in PROs for all uses, except the digital music service space. That forced [BMI] and ASCAP to start having discussions with the DoJ. Rights withdrawal was determined to not be permitted." ASCAP and BMI describe their situations in terms of having one arm tied behind their backs; as the world evolves rapidly, their fortunes are tied to the yoke of government oversight.

Pandora executive Moody raised her own concerns, who described an anachronistic documentation and payment structure which lets money slip through the cracks. It's an argument that has been referenced often recently, under the umbrella call for transparency. "In my experience, most publishers don't know what they own -- it's a complicated problem," said Moody. "We're looking at what we pay out, and it doesn't add up -- whenever we do the math, there's quite a discrepancy.  If we had a more transparent marketplace, we'd be having a much more realistic conversation about [the rates Pandora pays to PROs]. There's a lot of money being lost, not being distributed accurately, because the data isn't there."