Tech Tip:Mumbo Jumbo: Performances: Where the Real Money is - Part 1
Part 1 | Part 2
by Jeffrey & Todd Brabec
The Performance area (radio, television, cable, concert halls, muzak, web sites, etc.) represents for most successful writers and music publishers the greatest source of continuing royalty income.
A top 10 worldwide hit song can easily earn one million dollars for its songwriter and publisher with a #1 song capable of earning 3 million dollars worldwide. A theme song to a successful television series can top 2 million dollars in earnings for its writer and a major worldwide concert tour can generate well in excess of $1,000,000 in songwriter and music publisher earnings. The great thing about this area is that the royalties continue to flow for many years after a song's initial success.
Over 4 billion dollars in performance monies are collected each year by organizations representing over 750,000 writers and music publishers throughout the world. These organizations, known as performing right organizations (PROs), negotiate license fee agreements with the users of music (radio and television stations, cable services, web sites, concert halls, airlines, background music services, etc.), collect the fees; and then distribute the monies back to their writer and publisher members who have performances in the areas licensed.
Simply put, when you listen to a song on the radio or in a television program or on the speaker in a supermarket or in a large concert hall, the writers and publishers of the songs you are hearing are making money.
The basis for these many billions of dollars in writer and publisher royalty payments is the performance right - a property right recognized by the U.S. Copyright Law as well as the copyright laws of most countries of the world. This right recognizes that a writer's creation (song, underscore to a movie or TV series, symphony, opera, etc.) is a property right and informs anyone that wants to use it that they must, in practically all situations, get permission through a license and make a payment.
Performing Right Organizations
Practically every major country in the world has a collection society which administers the performance right. Writers and publishers join these collection societies, almost all of which are writer and publisher owned and controlled, in order to receive their royalties. In the U.S., three separate organizations do the job. They are:
ASCAP (The American Society of Composers, Authors and Publishers), the largest performing right collection Society in the world, is a membership association founded in 1914 and is owned by its writer and publisher members. ASCAP's annual revenues are in excess of 650 million dollars and it distributes all money each year after operating costs (approximately 14-15%) to its writers and publishers. ASCAP has a Board of Directors of 12 writers and 12 publishers who are elected by the writer and publisher membership.
BMI (Broadcast Music Inc.) is a broadcaster owned corporation founded in 1939. It collects in excess of 550 million dollars a year with operating costs in the area of 16 to 17%. BMI has a Board of Directors of 13 representatives associated with the broadcasting industry and one BMI employee.
SESAC started out as a family owned business and was founded in 1930. It was bought by a group of investors in 1992 and is now a for-profit corporation. SESAC does not release information on revenue, operating costs or amount of profit that goes to its owners.
The main areas that are licensed in the U.S. by the PROs are the television networks (ABC, CBS, NBC, Fox, UPN and WB), local television (over 1,000 stations), pay cable services (HBO, Showtime, The Movie Channel, etc.), basic cable and superstations, radio (over 11,000 stations), public broadcasting television and radio (PBS), colleges and universities, nightclubs, bars, concert halls, hotels, pay per view, web sites, symphony orchestras, etc.
Of the over 1 billion dollars collected each year by ASCAP and BMI, the breakdown of the license fees collected from each area are as follows:
Television and Cable: 35%
General: 13% (includes clubs, concert halls, background music services, etc.)
Interest and Miscellaneous: 3%
Each PRO negotiates license fees with groups or entities that use music (radio stations, television networks, live music venues, etc.). The amount of the license fees received are based upon many negotiating factors with one of the main considerations being which writers and repertory (songs, movies, television series) are represented by that organization.
License fee deals with users of music can take many forms. Some are based upon a percentage of the user's revenue; others a flat fee; others on the number of subscribers; with others based upon admission prices, seating capacity, entertainment expenditures, number of full time enrolled students, as well as other factors. No license can be for a period longer than 5 years.
© 2002 Jeff Brabec, Todd Brabec
his article is based on information contained in the new, revised paperback edition of the book "Music, Money, And Success: The Insider's Guide To Making Money In The Music Industry" written by Jeffrey Brabec and Todd Brabec (Published by Schirmer Trade Books/Music Sales/435 pages). musicandmoney.com