ASCAP Warns of Immediate ‘Disruption’ in Member Payments Due to Coronavirus

ASCAP President and Chairman of the Board Paul Williams
Ari Perilstein/Getty Images

ASCAP President and Chairman of the Board Paul Williams speaks on-stage at the ASCAP Annual Membership Meeting during the 2019 ASCAP "I Create Music" EXPO at Lowes Hollywood Hotel on May 2, 2019 in Hollywood, Calif. 

Meanwhile, BMI is not expected to be impacted by the economic downturn until later because it uses a different business model.

ASCAP has delayed payments scheduled for April 6 until April 28 in a move to ensure quarterly writer payouts are fully funded. The delay was due to late payments from licensees, according to an April 3 email from ASCAP president and chairman Paul Williams; and ASCAP CEO Elizabeth Matthews who sent out a follow-up note to members on April 5.

"As COVID-19 has continued to escalate and more and more of our licensee businesses have shut down, we have had to carefully review our cash forecasts and plan for more disruption to our revenue collections and member distributions," Williams' email stated. "As I mentioned in my last letter, the pandemic will have a material and negative impact financially on almost every category of licensing, so it is important to ensure that we are prepared for a decline in both revenues and distributions, which is why we took the step weeks ago to freeze numerous operational expenses."

ASCAP will be transitioning to a more flexible distribution schedule throughout 2020 and 2021, he added. That's because all licensee business partners are likely trying to figure out how to navigate the economic downturn, which will cause payment disruptions to the performance rights org.

In her email to members, Matthews said ASCAP has "already been contacted by numerous licensees who are attempting to pay less, pay late or not pay at all." But even with that, "the April 28 writer distribution will be fully funded as we had originally anticipated," she added.

In addition to anticipating late and/or short-changed payments, the push to April 28 allowed ASCAP to "go through a collection cycle [for the first quarter] payment due dates to determine accurate cash flow before finalizing the funding pool and processing hundreds of thousands of distribution files for payment processing services," according to Matthews' email.

Matthews added that some of the vendor services ASCAP uses to process and pay the distributions "have also been materially impacted by COVID-19, so there is a domino impact that we are constantly navigating in terms of ensuring business continuity."

Meanwhile, BMI is not expected to be impacted by the economic downturn until later because it uses a different business model, paying out quarterly revenue from collections made in an earlier time frame. That means that collections from licensees for the quarter ended March 30 will be made in September 2020 while current quarter collections — which are expected to have a bigger revenue downturn than the first quarter, since the economic shutdown didn’t begin until March 12 — will be paid out in January 2021.

Consequently, BMI's payments for the current quarter were from the period ending Sept. 30; and since there was no payment disruptions back then, and it had plenty of time to process performance reports, the PRO made its first quarter payments early so that its writers could at least have some financial certainty as the overall U.S. economy was falling apart.

"I'm pleased to share with you that our distributions for the next six months will remain strong, and we do not anticipate any impact to BMI's fiscal year 2020, which ends June 30, BMI president and CEO Mike O'Neill said in a March 16 email to members. "However, given the current environment, we do anticipate that BMI's fiscal year 2021 will be impacted, perhaps not in the first six months, but likely in the second half. It's too early for us to tell the extent of the impact, but we are paying close attention as the situation evolves."

Likewise, SESAC, in a March 18th email to its members, said it would make its March 31 distribution on schedule and added that subsequent distributions are also planned to occur on their regularly scheduled dates.

Going forward, the main areas expected to be impacted are collections from radio, television/cable and general licensing. For instance, radio is generally dependent on local advertising so with most businesses shut down, that revenue has dried up. While TV and cable have national advertising, local advertising is also a big factor so that industry also will be suffering revenue downturns, which translates into payment shortfalls to PROs like ASCAP and BMI.

General licensing is also expected to be hit hard, as payments from live music venues will cease while all concerts are canceled. Moreover, with most states ordering a shutdown of bars and restaurants, it's unlikely any of them will be renewing their annual license if it comes up for renewal during the shutdown. And if they make monthly payments, it's unlikely that their PRO license payment will be a priority.

With a shutdown of TV productions and commercials, synchronization is likely to take a hit at some point in the future too.

International payments, which usually lag domestic collections, likely will be impacted too as many foreign territories were hit by COVID-19 before the U.S.

Meanwhile, for the time being, performance payments from streaming services likely won't be impacted, but that may change as unemployed people look to reduce expense outlays, with subscriptions being an obvious thing to cut. But the industry likely won't have a handle on how that is going until May or June.

In his letter to ASCAP members, Williams noted that they worked with other industry orgs to lobby Congress to include “financial relief and protections for songwriters and composers as part of the massive government relief package." He also said ASCAP was supporting MusiCares' special coronavirus relief funds; and launched Music Unites Us, "an important web portal for our members and the community, with vital information to help our members cope with this crisis, including how to access financial relief through government and other programs and many more resources."

Matthews cautioned in her email that "it is important that we are all prepared for the future and we try to limit the number of surprises. For those of us who work at ASCAP, our duty is to ensure that ASCAP survives to serve the next generation of creators and publishers. While things are tough right now, I remind myself that ASCAP has survived two world wars and several economic crises, so we stand on the shoulders of our predecessors to successfully fight through this pandemic. ASCAP and our ASCAP members are worth fighting for, and on behalf of all ASCAP employees, I promise you that we will do whatever it takes to fight for ASCAP and fight for you."

In O'Neill's email to BMI members, he said, "BMI is dedicated to our mission of making sure you are paid for your unparalleled creative work, whenever and wherever it is played. As always, thank you for your trust. BMI is a family, and our hope is that you focus on your health and wellbeing, while we focus on the rest. We will continue to keep you updated as information develops."

Like the other PROs, SESAC reports that its staff is working remotely but is open for business, via email, phone or video conference. "We recognize the profound impact this situation is having on our affiliates, particularly as relates to the CDC’s social distancing directive and the many closings of live performance venues that have taken place over the past 10 days as a result," SESAC CEO John Josephson wrote in the March 18 email. "While we remain hopeful that our lives will return to normal in the near future, now more than ever, we’re committed to doing all we can to ensure that you have the resources you need so that you are able to thrive and provide the creative nourishment and kindness that you so graciously give to the world."

While some songwriters have tweeted that they were blindsided by the ASCAP announcement, songwriter organizations say they understand the current difficulty in making timely payments, let alone possible truncated payments in the future.

“Globally the music industry is seeing more harsh financial impact brought by effects of the Coronavirus,” Nashville Songwriters Assn. International executive director Bart Herbison said in a statement. “To quote ASCAP for instance, ‘we have already been contacted by numerous licensees who are attempting to pay less, pay late or not pay at all.’ So, songwriters need to prepare accordingly for the coming months. NSAI’s job right now is to make the American songwriter community aware of such economic realities and to seek even more possible relief to help them get through this time.”

Likewise, Songwriters of North America said that while the ASCAP steps will be felt by songwriters, they also understand why ASCAP took the steps it did. "As songwriters and composers we rely heavily on our performance royalties,” the organization said in a statement. “We all count on our PROs to collect and distribute those payments. While having our funds delayed at this time will be very difficult for many of us, we appreciate ASCAP’s transparency in laying out the challenges that they may face. These are unprecedented times. SONA supports those in our music community who are being forced to make difficult decisions every day, including these emergency measures ASCAP has taken which allowed them to fully fund the writer distribution.”

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