EMI Music Publishing recently announced that it was withdrawing the right to license digital public performance rights in its April Music catalogue (which holds the rights to over 200,000 songs including works written and performed by Jay-Z, Mos Def and Beyonce) from ASCAP, one of the three U.S. performing rights organizations or "PROs.” "The digital world demands a new way of licensing rights in musical compositions," said EMI Music Publishing Chairman & CEO Roger Faxon, who also serves as EMI Group CEO. "By bringing these rights back together our aim is to reduce the burden of licensing, to create greater efficiency and importantly to reduce the barriers to the development of innovative new services. That absolutely has to be in the interest of everybody involved in the process -- songwriters, licensees and consumers alike." I strongly disagree.
The reason d’être of the PRO's is to provide "blanket licenses" to those who publicly perform music. In exchange for paying a small percentage of revenues, physical venues such as clubs and restaurants, radio and TV stations, and digital users such as webcasters like Pandora or subscription services that stream music like Rhapsody, are assured of legally using any commercially distributed song because SESAC, ASCAP and BMI collectively represent virtually all commercially released music and each one offers a license that allows the performance of their entire repertoire.
If other publishers follow EMI's lead, and start exclusively offering direct licenses to digital services, a nightmare could befall those services. There are literally thousands of music publishers. Although the majors, EMI, Warner Chappell, Universal and Sony/ATV represent a great deal of commercially released music (approximately 50 percent), they hardly represent all of it. So instead of dealing with 3 entities, webcasters and other digital services that stream music would potentially have to deal with thousands of licensors. And this would go for "mom and pop" operations as well as major digital services such as Pandora. But most small webcasters and subscription services which stream music would not have the resources to deal with all those licensors. This could potentially mean closing shop, or at least curtailing their choice of music to songs represented by the major publishers so as to limit the time they spend on negotiating licenses; a result that EMI probably would not mind at all, but which would hurt many digital services and thereby hurt music fans.
Another catastrophic consequence of publishers withdrawing digital rights from the PRO's would be the price of licensing public performance rights. Collectively the PRO's collect approximately 7 per cent of ad revenues from webcasters and other websites performing digital music. ASCAP and BMI charge approximately 3 percent each and SESAC, the smallest PRO, collects approximately one percent. The total tab is affordable. Moreover, ASCAP and BMI operate under consent decrees. As a result, they must be careful about upping their rates because under those consent decrees the licensees can challenge any increase in fees in what is known as the "Rate" court. But if the publishers unhinged from the PROs they could charge whatever rate they liked or refuse to license their music altogether. The result could be disastrous with many digital services unable to afford to perform music and either closing if they were exclusively music based, or discontinuing their use of music.
Another deeply troubling consequence of EMI's action is the negative impact on its own writers. ASCAP, BMI and SESAC all pay writers directly. For every dollar paid, 50 cents goes to the publisher and 50 cents is paid directly to the writer. But if EMI collects the licensing revenues, many of its writers may never see a dime. The reason is that many of their writers are "unrecouped." This means that the writers have not earned back the advance they originally received. Therefore EMI may "credit" many of their writers' accounts, instead of actually paying them.
Some have contended EMI's move is primarily meant to boost its bottom line since they could charge more than what ASCAP is currently paying them, avoid the modest administrative fees charged by ASCAP (approximately 5 percent), and retain a great deal of the monies that would otherwise be paid directly to their own writers. In light of EMI's impending sale by its owner Citibank, some argue that EMI’s plan is to enhance their bottom line and thereby up the price that a potential buyer would be willing to pay.
Whatever its motives, EMI's action could have a disastrous effect on the music business and music fans by killing or at least stunting the growth of digital music services which represent a key element in the potential recovery of the music business in the wake of the dramatic decrease of CD sales, as well as depriving their own writers of income that they currently receive.