At the National Music Publishers' Association annual meeting yesterday at the Marriott Marquis in New York City, NMPA president David Israelite pointed out that the music industry has moved beyond the period of copyright theft and denial of the industry's rights but there are still challenges ahead, and he urged record labels, music digital services and publishers to continue to work together.
Those parties "have a common interest in building a strong foundation," he said, without which nothing can happen. "Even if we disagree on rates, we can work together" on common issues. Like RIAA chairman and CEO Cary Sherman, who addressed the meeting before him, Israelite noted that too often publishers have been at odds over royalty splits. He also pointed out publishers have managed to get 50/50 splits when film, television or commercials use music where the government is not involved in synchronization. Once again, Israelite reminded everyone in attendance that the NMPA's goal is to get fair pay for songwriters, and he laid out the case for fairer rates for performance and mechanical licenses.
In mechanical licensing, where labels are in a free market but publishers have to deal with a compulsory license carry statutory rates, there is a ratio of about 9-to-1 in favor of record label revenue over music publishing's share, since publishers tend to get about 91 cents per album while labels get a blended wholesale revenue per album of about $8.00. In the performance digital area where BMI and ASCAP operate under consent decrees, the money split is about 14-to-1 in favor of record labels, he said, referring to the 56% of revenue that Pandora paid record labels last year versus the 4.1% it paid music publishers. This issue is important to publishers because synchronization only makes up about 30% of revenue, while the rest is almost evenly divided between mechanical and performance revenue, so the publisher share is out of balance.
To be fair, he added, record labels don't get paid performance royalties from terrestrial radio, "but it’s not our fault, because they are getting screwed by broadcasters and we shouldn't be screwed to make up for it" in the digital space. He urged publishers to support labels in their push to get performance royalties from terrestrial radio, citing two long-term goals that publishers still have: getting out from under the consent decrees (or at the least getting them adjusted), and pushing to get out of dealing with the compulsory license so publishers can engage in a market with a willing buyer and willing sellers.
Speaking to the labels and digital music services, he said, "We should be able to disagree about rates while agreeing to work together to fix the system so licensing works." While record companies can tout where the publisher's songs would be without its artist, and publishers can ask where the label's artist would be without their songs, 94 of the top 100 songs in the Billboard Hot 100 last year had outside songwriters or an outside songwriter working with the artists.
These themes were echoed in Sherman's address to the NMPA. He noted that while publishers and record companies have a long history of being at odds with one another, now is the time to pull together for common goals. In the past, "both sides were focused on short-term gains," and neither was looking at long-term benefit to the entire music community.
"When publishers sought to change the penny rate structure to a percentage royalty back in 1980, record companies resisted it," he noted. "A couple of decades later, record companies wanted a percentage rate structure, but now the publishers said no. In other words, the publishers were for it before they were against it. And record companies were against it before they were for it."
There are other examples where publishers and labels have each flipped their positions over time, but that is historical baggage, he said, reminding the publishers of when they successfully worked together figuring out how to license subscription services like Rhapsody, the rate settlement the two sides reached last year, and the five new rates for business models the two created last year, all of which is still awaiting the Country Radio Broadcasters' approval.
To foster an industry where publishers and labels work together, "record companies have withdrawn from the legal debates over whether a download is a performance; [and] PRO’s and songwriters have worked with us so they could accept the creation of a public performance right for artists and labels."
Now, the industry is at the point where publishers and labels together will have "to rethink the business." He added, "If we were inventing this industry from scratch, would we design it the way it works now? Seems unlikely." He called for a reworking of the mechanical licensing system and also wondered if mechanical and performance could be licensed more efficiently and tied together, which would give digital services certainty about their publishing costs."
Earlier in the event, Israelite presented an award to Shapiro Bernstein in honor of their centennial anniversary in business. He also presented the President’s Award to Florida Congressman Ted Deutch, while the organization also honored songwriter Toby Keith, who performed a couple of songs for the membership.