One of the youngest executives in the music industry, Scott Austin talks about how to break into the music business and the future of the industry.
One of the youngest executives in the music industry, Scott Austin talks about how to break into the music business and the future of the industry.
If you’re an artist and you plan to sell records once you are signed to either an independent or major recording company this is important to keep in mind. Good Luck in your Musical Career!
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Performing Rights Organizations (PRO) should be regarded as any artist/songwriter’s best friends. Societies such as ASCAP, BMI and SESAC are responsible for collecting all performance royalties and distributing them to their members, which include songwriters and publishers (but not the record labels). The income generated by these licensing deals is crucial for music creators. In the United States, ASCAP and BMI are by far the largest of the three organizations, collecting a combined 96-97% of all performance royalties. SESAC, the only other PRO in America, is much smaller and takes pride in being selective as to whom its members can be. This explains why its share of the performance royalty collection market is so much smaller than the other two, as ASCAP and BMI are open to almost any artist having a commercially released recording, a published printed sheet music, or claimed “evidence of a performance of the composition.” SESAC is also privately owned, meaning it is not obligated to publicly divulge any of its financial statements or internal procedures relating to royalty collection and distribution. It is for those reasons that this article will focus on ASCAP and BMI.
ASCAP collected $935 million in royalties worldwide for 2010, a 6% drop from their record high $995 million in 2009. BMI on the other hand, collected $917 million, just a slight increase on 2009. Although for both societies the amount distributed is usually around $100 million lower than what is collected, these two organizations distributed a combined $1.684 billion to their members in 2010. Deductions are meant to cover operational costs, which seems fair when taking into account the massive amount of computational power it takes to keep track of their enormous catalogues worldwide–and that’s not even including all of the litigation efforts deployed to protect those very same catalogues from unscrupulous use. However, the way these outlays are calculated vary slightly between the companies.
ASCAP stands for the American Society of Composers, Authors, and Publishers and the name describes exactly who actually runs the company. Their board of directors is comprised of 12 writers and 12 publishers, each elected by the members for two-year terms. Their president is also elected by the membership and has “traditionally been a writer” himself. This means that the people at the head of this company aren’t isolated from the creative side of the business and share common goals with most of their members. BMI, on the other hand, stands for Broadcast Music, Inc. and was originally formed by members of the broadcasting industry. Their board of directors is different from ASCAP’s in that instead of consisting of a mix between writers and publishers, it is made up of 13 people closely affiliated with various broadcasting industry corporations. The first thing that comes to mind when one hears about BMI’s affiliations is that there might be a conflict of interest, considering that BMI is collecting licensing fees from the same broadcasting companies represented on their board of directors. Many critics also point to the fact that BMI has many more members than ASCAP, 460 000 compared with 330 000, but collects and distributes almost $100 million less than ASCAP in royalties. However, although these issues aren’t completely unfounded, many factors must be taken into account when assessing the reasons for this apparent discrepancy in licensing monies collection.
First of all, a larger pool of members does not necessarily translate into more money from performance royalties, as not all of the members’ materials are commercially successful. We must keep in mind that being a member of one of these societies has no effect on whether an artist’s music will be played or not, especially since they almost exclusively focus on collecting licensing fees and have very little to do with artist promotion. That being said, it is more than likely that the ratio of artists whose music is publicly performed in BMI’s member pool is smaller than at ASCAP, explaining how they could have more members all the while collecting less money. Furthermore, more members do not necessarily translate into larger catalogues. ASCAP has a higher average of songs per member, making their catalogue larger than BMI’s and once again explaining why they would collect more money.
Regarding public performance, there are blanket licenses, which are the most popular type of license issued by a PRO. A blanket license in effect gives the licensee the right to play any music that is part of the PRO’s catalogue for a set period of time, at the end of which the fee is usually renegotiated, making adjustments when needed. These are issued to most radio stations, television networks, bars, clubs, and pretty much anywhere music is publicly performed. It is also important to note that these Performance Rights Organizations do not have the right to license dramatic works, i.e. musical plays, operas, ballets, musical comedies, etc. This is an important distinction because these types of works contain what are called grand rights and are usually licensed by “the composer or the publisher of the work.”
The other major type of license issued is called the per-program license and in a way has been the Achilles’ heel of the PRO’s economic power. A per-program license, simply put, is issued on a per-program basis, meaning that a different license needs to be obtained every time a television station, for example, uses music that is part of either ASCAP, BMI, or SESAC’s catalogue. Logically, these licenses are much cheaper than blanket licenses, and in turn tend to reduce the revenues collected by these companies. Many types of broadcasting mediums who previously used blanket licenses have begun to make the change towards per-program licensing, which partly explains the $65 million drop in revenue collected by ASCAP from the 2009 to 2010.
It is also important to note that although artists and publishers typically rely on the performance rights organizations to handle most of their public performance licensing matters, the agreements signed with ASCAP and BMI are non-exclusive. This means that the writer and publisher of a specific work are free to license the song to third parties at any time, as long as they give proper notification to their PRO. Nonetheless, a writer can only be a member of one Performance Rights Organization at a time. This is explained by the fact that if a writer were to be a member of two or more PROs, he would be getting paid multiple times for the same use of his song, which would count as fraud. Similarly, the writer and publisher of a work must be part of the same PRO. Although this may seem complicated, all major and indie publishers have to create three separate income entities, one for each organization (again, a song can only be part of one PRO’s catalog, or else it would receive double or triple the payments).
These payments can be a significant source of income for even marginally successful songwriters. In Music Money and Success, Todd Brabec, ASCAP’s former Executive Vice President and Director of Membership, discusses the specific amounts a writer and publisher can expect to collect in various circumstances. One of his examples, although slightly outdated, is for the number one song of the year on the Billboard pop charts; artist and publisher earnings were each, respectively, about $2 million a year. Other examples look at a theme song on a hit television series, which can earn $500,000 for a five year period or for a hit song’s lifetime earnings which can average $7.5 million. These figures represent an important share of a writer’s income, therefore explaining the importance of signing with one of these companies.
This once again opens the debate as to which PRO is best and leads us to another major difference: the distribution of their collections. The two organizations in fact use very different methods of distributing royalties.
ASCAP uses an extremely complex, yet efficient, way of calculating artist royalty statements by attributing each writer a certain amount of credits based on the different types of airplay each respective song got for a specific quarter. The weight attributed to each play depends on the combination of the type of use, the licensee weight, the “follow the dollar” factor, the time of day when the song was played (for television), and the general licensing allocation. All of these factors are multiplied together to give us a certain number of credits, which are later multiplied by a credit value in dollars, finally arriving at a dollar amount to be paid out to the writer. There are also “premium credits”, which ASCAP attributes to songs having reached a certain threshold of plays on radio or for songs used as themes or underscores on “highly rated networks and television series.” It is also important to note that with the arrival of new public broadcasting mediums, ASCAP has tailored the above calculation methods in order to accurately represent their market share of the broadcasting industry.
At the other end of the spectrum, BMI has come up with dollar figure amounts for specific types of plays, which also vary depending on the type of use, time of day, duration of use, etc. They basically calculate the amount of plays received for a certain song and then multiply that number with the rate based on the aforementioned airplay categories. Another important aspect of BMI’s payment plan, generally 30-40% of all royalty statements, is called the voluntary add-on method. After much research and multiple phone calls to BMI, the calculation method used for these voluntary add-ons remains nebulous even though they represent a significant chunk of the artist’s royalty statements.
Thus, the payment methods employed by the two companies are dissimilar and should definitely be taken into consideration when one is looking to sign with a PRO.
It should be noted as well that total revenues include foreign sources of income. ASCAP and BMI, through the help of affiliate international PROs, collect royalties for performances across the world. ASCAP’s international revenue for 2009 was posted at $301.7 million, roughly 30.5% of their total income for the year. Similarly, in 2009 BMI reported that of the $905 million collected, $258 million came from international royalties. A chart included in the 2009 issue of Music & Copyright showed that the large majority of the international royalties collected came from Western Europe (68.8%). Asia Pacific came in a distant second with 13.6%. During a recent visit at Berklee College of Music, Seth Saltzman, ASCAP’s Senior VP of Member Management, was quoted saying that the Asian market was one of the great, untapped resources of the various performance rights organizations and that with their rapid rate of industrialization and population growth, a large increase in revenues collected from these areas should be expected in upcoming years.
Other differences between ASCAP and BMI include areas such as the writers’ and publishers’ involvement with the organization. ASCAP, being a membership organization, is very focused on membership involvement in many activities such as voting for the board of directors and selecting the president of the company. BMI is a corporation and does not rely on its members for the selection of the board of directors or president. Arguments for both methods can be made–proponents of ASCAP stating that it is essential for member’s voices to be heard in order for the company to keep in line with writer’s and publisher’s best interests, while proponents of BMI say that most songwriters have very limited business knowledge and that most decisions pertaining to the health of the business should be made by professionals specializing in these specific areas.
These two companies also differ in the way that they calculate airplay time earned for each specific song. Monitoring the roughly 10,000 radio stations in America would be close to impossible, so the two have come up with rather ingenious ways of using representative samples of the total airplay during a quarter, to calculate how many times a song has been publicly performed. Television tracking, on the other hand, is much easier since television stations produce logs for every single song, whether it is the theme to a show or simply a background jingle that appears during a program. These are then compiled and stored in gigantic databases before being used to calculate royalty payments.
A music writer or publisher should exercise due diligence in choosing either. Even SESAC, of which little reference has been made here, can be advantageous if its serves well a niche market in the writer’s genre of choice—like. For instance, SESAC Latina, a division solely devoted to various genres of Latin Music. Ultimately, the PROs are a practical response to enforce the collection of performance rights in a variety of old and new media outlets, clubs eateries, and larger entertainment venues—and not just nationally, but internationally.
by Frederic Choquette
 Brabec, Todd. Brabec, Jeffrey. Music Money and Success, Sixth Edition. Schrimer Trade Books, New York, NY, USA. p. 286.
 Music & Copyright, Issue 433. April 06, 2011.
 Brabec, Todd. Brabec, Jeffrey. Music Money and Success, Sixth Edition. Schrimer Trade Books, New York, NY, USA. p. 285.
 Ibid. p. 285.
 Music & Copyright, Issue 433. April 06, 2011.
 http://www.ascap.com/members/payment/royalties.aspx. April 18, 2011.
 Brabec, Todd. Brabec, Jeffrey. Music Money and Success, Sixth Edition. Schrimer Trade Books, New York, NY, USA. p. 297.
 http://www.ascap.com/about/annualReport/annual_2009.pdf. April 19, 2011.
 Music & Copyright. April 06, 2009.
The Returned Value of PROs
It’s true that industry professionals and artist mind sets could not be farther apart. They are on two totally different sides of the game, yet working together as a team. All industry people probably receive anywhere from 15 to 200 emails or calls a week from indie artists wanting to work with them or get their advice. This is not an exaggeration. Most of these calls/emails are unfortunately misguided and are not going to get the artist anywhere just based on their approach. As an indie artist I am sure this must be incredibly frustrating… constantly sending out emails to industry people and not receiving replies. You’ve been told that to be proactive you have to mail, call, email, and send presents to industry representatives to get their attention. This is NOT true… let me help you out here.
Here are some tips for indie bands at appealing to industry people and approaching them with higher chances of success. This is coming from someone who has been on both sides of the fence for many years! Some of it might sound harsh, but trust me it will work!
1.) Do not cold call.
In this day and age cold calls are just downright annoying and disruptive. You will not get your target industry person at their best if you bombard them on the phone. Email and let it wait in their queue. They will get to it when they have time and will be in a much better mind frame to deal with you! Another thing, DO NOT cold call them on their cell phone or text them. I can guarantee this will result in them feeling annoyed and bothered that someone called them on their cell when they are out and about, when it could have been a simple email.
2.) See things their way.
Industry people are business people. They want to hear great music but also want to hear profitable music. This mixture sounds different for every industry person based on their personal experiences and musical taste. Regardless of your sound, you need to show industry reps that you have something going on and something that they could profit from investing in. You have to show them that you’re on the right track without them and there is an urgency for them to get involved. Send a short and sweet email that outlines some of your bands biggest selling points. For ex. big press moments, tour history, good support shows, or festival appearances. This is how they can gauge how well your band is doing. Don’t forget to include links and your contact info. Make your email short, professional, and quickly get to the selling points of your band. Also, don’t forget an un-replied to email is not a waste of time. You have planted that seed and they will refer back to the email when the time comes.
3.) Make them come to you.
If you’re thinking after reading that last paragraph, “but I don’t have any selling points” then chances are it’s probably too early on in your career to be emailing these people. Focus on building your story and value. Instead of spending your time making cold calls and sending emails spend your time building your plan and reaching out to media and promoters (a lot of which these tips can be used for as well). Also, don’t forget to perfect your craft. Live shows and recorded material should be top notch. Then when you have gained a buzz and the support of the media, trust me the industry will follow. It is their job to pay attention to indie bands that are making waves. They will notice when a band is really talented and building a strategy, I can guarantee it. This is the best situation to be in because they are coming to you and you are in the place of power because they really want to work with you! Creating that urgency isn’t easy but it is what sets apart the flocks of artists and the ones the industry and media call “up and coming”!
4.) Come on easy.
Remember now, you want to build a team around your band that is as excited about your music as you are. You want your future manager, label, publicist, etc. to really stand behind what you’re doing. I highly recommend starting off your email relationship with inviting the industry rep to a show or asking them to take a listen to a link. Then see where things go. Your initial email should never read “I would love to work with you, can you represent me?” Most of the industry people who are good at what they do like to have a personal relationship with their clients and their clients’ music. All you have to do is put the invite out there and when the time is right they will respond. Who knows they might fall in love with your music or they might not.
5.) Be confident.
When you send your email DO NOT, I repeat DO NOT, make excuses for the material you’re sending, for example “here’s a link to our music they’re not the best recordings because we did them in my basement” or “here’s a link to our website, sorry the graphic design sucks because we haven’t updated it for 3 years”. If you are not proud of what you are sending them to do send it. Period.
6.) Learn how to truly network.
We live in a world with multiple ways to get in touch with someone you don’t know. If there is a target person on your mind, find them on twitter and chat with them about something relevant. Look them up on Facebook and see if you have any friends in common who could possibly introduce you. Get creative. I have a golden rule I always stick to: If you are the first person who has ever told me about your band, chances are I am not going to think twice about it. I consider myself pretty involved and if there was something really hot coming out of Ottawa, for example, chances are I would have seen friends posting it on social media sites and someone would have told me about the great show they checked out. I am constantly asking local bloggers and music fans for their tips, so if you are the first person to tell me about YOUR band you aren’t doing a very good job blowing people away with your live shows. Get creative about meeting people and be genuine, this will go a long way.
7.) Be patient.
If the industry person you emailed is doing a good job at what they do, the more emails they will receive, daily. Your band is not their top priority. There are simply not enough hours in a day to get to all the emails. Do not take it personally.
8.) Proofread your email.
Grammar is important. You wouldn’t send a resume in with typos, would you? Being rock and roll and typing emails while you’re high and drunk is only awesome when you’re making people lots of money. The rest of the time it will get your email landed in the trash bin immediately.
and last but not least…
9.) Never burn bridges.
Just because one industry person doesn’t appreciate your tunes it doesn’t mean an opportunity won’t come across their desk one day that’s perfect for your band. It also doesn’t mean they don’t have friends that could love your band. Another example… Say you hate major labels and a rep from Warner asks for your record. The stupidest thing you could do is tell him you’re not interested because they might have been interested in putting your band on a support tour for one of their artists, having you do some co-writing, etc. Always keep your mind open and remember the industry is very connected. Everyone who is in it has fought to be where they are and will most likely some value to your career at some point.
So there you have it. There is a right team for every artist. If you’re making good music and going about it the right way those people will find you because it’s their job to find you. Be patient and build something on your own in the meantime.
If you feel like you have no idea where to start building that strategy then ask for help. Lots of industry people will offer consultations, like us! Soak in the knowledge and put one foot in front of the other. Nothing happens fast in this industry. Every decision a person in power makes is based on a number of factors and timing. If you’re looking to speed up this development process then you’re in the wrong industry. Trying to rush this will mean you will end up working with the wrong people and learning the hard way that good things come to those who wait. I am not saying sit back and do nothing, I am saying start getting smart about your career and learn how to truly attract the people who can make you successful.