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.
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The Canadian performance rights society SOCAN (essentially the Canadian version of ASCAP, BMI and SESAC) has announced the purchase of Audiam, a private company that specialized in representing composers trying to maximize their music rights collections – both for performance rights and mechanical royalties – worldwide. Audiam also claims to provide a comprehensive database of rightsholders to both musical compositions and sound recordings – a valuable commodity in and of itself, as there is no uniform public registry for such rights. This follows SOCAN’s purchase of MediaNet, a company that specializes in obtaining clearances for music (including sound or master recordings – the musical compositions that SOCAN has traditionally licensed as recorded by a particular singer or band) so as to provide those rights to digital music stores or services, eliminating the need for these services to separately negotiate terms with sound recording performance rights holders. 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 goal seems to be the motivation behind SESAC’s acquisition in recent years of the Harry Fox Agency (which also handles mechanical licensing – the rights to make reproductions of musical compositions needed for downloads and even on-demand streams) and Rumblefish, a digital service providing clearances for the use of sound recordings in videos, commercials and for other purposes. 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).
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In recent months, SESAC has been writing letters to broadcasters who are streaming their signals on the Internet, asking for royalties for the performance of SESAC music on their websites.  More than one broadcaster has asked me why they have any obligation to SESAC when they are already paying SoundExchange for the music that they stream.  In fact, SoundExchange and SESAC are paid for different rights, and thus the payments to SoundExchange have no impact on the obligations that are owed to SESAC.  SESAC, along with ASCAP and BMI, represent the composers of music in collecting royalties for the public performance of their compositions.  SoundExchange, on the other hand, represents the performers of the music (and the copyright holders in those performances – usually the record companies).  In the online digital world, the SoundExchange fees cover the public performance of these recordings by particular performers (referred to as "sound recordings").  For an Internet radio company, or the online stream of a terrestrial radio station, payments must be made for both the composition and the sound recording. 

To illustrate the difference between the two rights, let’s look at an example.  On a CD released a few years ago, singer Madeleine Peyroux did a cover version of the Bob Dylan song "You’re Gonna Make Me Lonesome When You Go."  For that song, the public performance of the composition (i.e. Dylan’s words and music) is licensed through SESAC.  The actual "sound recording" of Peyroux’s version of the song would be licensed through SoundExchange, with the royalties being split between Peyroux and her record label (with backing singers and musicians receiving a small share of the SoundExchange royalty). 


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In the last two weeks, we have seen Capitol Hill rallies by the Free Radio Alliance, opposing what they term the “performance tax” on radio, and yesterday by the Music First Coalition, trying to persuade Congress to adopt a performance royalty on the use of sound recordings for the over-the-air signal of broadcast stations. We’ve written about the theories as to why a performance royalty on sound recordings should or should not be paid by broadcasters, but one question that now seems to be gaining more significance is the most practical of all questions – if a performance royalty is adopted, how would broadcasters pay for it?

 The recording industry and some Congressional supporters have argued in the past that, if the royalty was adopted, stations could simply raise their advertising rates to get the money to pay for the royalty. While we’ve always questioned that assumption (as, if broadcasters could get more money for their advertising spots, why wouldn’t they be doing so now simply to maximize revenues?), that question is even harder to answer in today’s radio environment. With the current recession, radio is reporting sales declines of as much as 20% from the prior year. Layoffs are hitting stations in almost every market. In this environment, it is difficult to imagine how any significant royalty could be paid by broadcasters without eating into their fundamental ability to serve the public – and perhaps to threaten the very existence of many music-intensive stations. And the structure of the royalty, as proposed in the pending legislation, makes the question of affordability even harder to address.


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