This week SoundExchange, the non-profit rights organization that collects the royalties paid by digital music companies for the public performance in the United States of sound recordings, announced that it had acquired CMRRA (the Canadian Musical Reproduction Rights Agency, Ltd). CMRRA licenses the reproduction rights to musical works in Canada. As we have written before, musical works or musical compositions are the lyrics and music for a song, while the sound recording is the actual recording of that song by a singer, band or other performer. We have also written before about the difference between the public performance right and the right to make reproductions of songs (including “mechanical rights”), rights that arise in different contexts and usually require a different type of license before a music service can use a song in its business. Why would a company that licenses the public performances of sound recordings in the US acquire a company that licenses reproduction rights in Canada?
SoundExchange’s public notice talks about its ability to “integrate and streamline the administration and distribution of sound recording and music publishing royalties.” And it also highlights that the deal will allow it to “offer a broad and comprehensive range of services to rights holders in both sound recordings and music publishing and music users alike across North America.” While SoundExchange suggests that it is the first company to offer a comprehensive range of services in licensing both sound recordings and musical works in North America, this deal instead seems to be part of a trend where rights collectives are merging to offer such comprehensive services in licensing both public performance rights and the rights to make reproductions, for both sound recordings and musical works.
Just last year, we wrote about the combination of SOCAN, the Canadian collective for public performance rights in musical compositions, with Audium (a company offering composers worldwide services to maximize both their performance and mechanical rights) and MediaNet (a company that specializes in musical clearances for both sound recordings and musical works. This was on the heels of the acquisition of the Harry Fox Agency, essentially the US counterpart of CMRRA by SESAC (which specializes in musical work public performance right clearances in the US), following SESAC’s acquisition of Rumblefish, a company that specialized in providing clearances of sound recordings for videos, commercials and other purposes, particularly for online uses.
In looking at all these deals, some of what we said last July bears repeating. This consolidation under one roof of public performance and mechanical rights to musical compositions, along with rights to sound recordings, promises at some point in the future, a one-stop shop where music users (including digital music services like Spotify or Deezer, and perhaps even smaller music users like podcasters) can obtain all the rights that they need to use music in their businesses. This same drive to consolidate music licensing services was also, to some degree, behind the push for revisions to the ASCAP and BMI antitrust consent decrees, as ASCAP and BMI wanted the clear right to license mechanical rights as well as the public performance rights they now provide. Even the publisher withdrawals from ASCAP and BMI by major publishing companies that are affiliated with major record labels may have had similar ideas behind them as some have speculated that these major music companies could bundle the licensing of sound recordings and musical compositions (see our article here where we made the same observation).
The idea of a one-stop shop, where a music user can go to obtain all the rights necessary to use a piece of recorded music in a digital music service – whether it be by an individual trying to obtain the rights to use a piece of music in a YouTube video or a podcast, or a company like a Spotify, Apple, Amazon or Pandora trying to use music on a broader scale in some sort of digital on-demand music service – seems facially attractive. Instead of having to deal with multiple rights holders – a PRO for performance rights, Harry Fox or a private company to clear the mechanical rights from the publishers, and the record label (and in some cases the artists themselves) to obtain rights to the sound recording – being able to get all the rights in one place seems attractive.
But issues arise. One, of course, is pricing. ASCAP and BMI, and to some degree SESAC, are all subject to antitrust consent decrees to limit the degree to which they can package musical compositions together and exploit their broad catalogs of must-have music to charge what are feared to be monopoly prices. Similar regulatory oversight over “tariffs” charged by licensing organizations exists in Canada and many other jurisdictions. SoundExchange itself is subject to control over the rates that it charges for the public performance of sound recordings by the oversight of the Copyright Royalty Board which sets the standard rates that it must make available to digital music services that comply with rules set out in the Copyright Act. The ability of any of these new one-stop shops, which could potentially have hundreds of thousands of compositions and recordings in their catalogs, to achieve the same anti-competitive pricing is a concern of many music users.
In addition, there is the question of how easily all of the pieces can be put together to provide the kind of seamless music services that any music user would want. The pieces of SOCAN – Canadian public performance rights, mechanical rights to the catalog of music held by Audium, and the large but still limited universe of sound recordings cleared by MediaNet – do not necessarily give services the near universal access to music to which most music services aspire. The same goes for the collection of brands assembled by SESAC and now that to be offered by SoundExchange. Perhaps these are but first steps to true one-stop shops, and we will see more progress toward universal, one-stop licensing of large catalogs of music develop over time.
But, at the same time, there is also a move toward fragmentation of music rights, seemingly making the potential for a universal one-stop shop for music rights harder to imagine. For instance, publishers holding the rights to major songwriters works have been pulling out of ASCAP and BMI to license their work through other organizations. For instance, GMR, the PRO founded by Irving Azoff, the well-known music executive and artist manager, has already obtained the rights to license compositions by artists including the Eagles, John Lennon, Pete Townshend, Adele, Prince, Journey, Bruce Springsteen and Pharrell Williams (as well as many other major). GMR has already made its presence felt in the licensing of US radio stations (see our articles here and here. There are other organizations worldwide looking at similar business models to that provided by GMR. Publisher withdrawals from ASCAP and BMI, the issues about fractional licensing raised by the DOJ’s recent inquiry into ASCAP and BMI (see our articles here and here) and the rise of other rights organizations, promise more complications in reaching a unified one-stop shop for the clearance of music rights.
So what does this all mean? It seems to mean that traditional players in the music industry are looking to expand their services to better provide a broader array of music services to the music industry – particularly the worldwide digital music industry. The ability to offer these services in a one-stop shop may be particularly important to larger digital music services that offer a diverse array of musical products, from Internet Radio to on-demand music to services in between. For these companies, the full range of rights is needed to provide these diverse services (see our articles here and here about the different rights needed for different types of music services). While once you saw services like Pandora offering only noninteractive streaming (Internet Radio or webcasting) while services like Apple offered only downloads in the days of the iTunes music store, now these services and many others by companies including Spotify, Amazon and Google offer the full-range of music services from on-demand listening to specific songs to radio-like pre-programmed streams. But will these combinations be helpful for smaller services still trying to specialize in offering consumers products in particular niches? Will these moves simplify or complicate licensing? Only time will tell, and with the tides seemingly pulling in all directions, it may take some time to sort it all out.