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Sunday
Jun132010

How to solve Royalty Collection Societies


Photo by ajburgess

In Britain, there’s an organisation called PRS for Music. They’re a membership organisation of composers and songwriters, and they collect royalties on behalf of those members, whenever music is performed publicly or broadcast.

And the PRS has reciprocal arrangements with other collection societies world wide - APRA in Australasia, IMRO in Ireland, ASCAP & BMI in the States, etc. So whenever a British composer’s music is played in France, money can return to that composer.

It’s a great system, and it means that people get paid when their creations are used - particularly in a profit-making context (eg: getting played on the radio; used as mood music in a restaurant or bar; performed live in concert; played by a DJ in a nightclub).

But it’s a far from perfect system.

The trouble with Rights Organisations
There is a fundamental problem and it’s a data problem. Accuracy in reporting is the issue. Because with the sheer amount of outlets, opportunities for broadcast and blanket licensing being done, the collection societies have to do an incredible amount of guesswork to try and distribute money fairly.

Radio stations do not report every single song they play, but are periodically sampled. Bars and clubs pay blanket licence fees, but do not typically report every composition that gets played each night of the week.

And so there’s a lot of stuff that simply falls through the cracks and doesn’t get counted - and typically, this disadvantages the people who get very few plays. And I’m not talking about ‘unsuccessful’ or ‘unpopular’ artists - I’m talking about new artists, artists who work in specialist and niche genres of music and, in fact, everyone who’s not in the upper echelons of the music biz (let’s say - for the sake of argument - the top 20% of composers).

Because the fact is, if your music gets played on the radio five times, but only one of those times are counted, the collection society will assume, based on statistical probability, that it was not your song but, let’s say, Elton John’s that got played those other four times.

That is, of course, an oversimplification of the problem - but it neatly describes the net effect.

Estimation and extrapolation hugely favour the already well-represented when you’re working from broad sets of information from the larger bars, radio stations and other outlets, rather than the pinpoint-accurate granular data you’d get if you were able to count every play of every song in every club, pub, bar, workplace, internet radio station, and so on.

Because if you don’t even show up on the radar, you won’t even be factored in when the sample data is used as the basis of dividing up the cash.

PRS wants to be fair
This is not a problem of not caring about the little guy. As membership organisations, royalty collection societies want to help those members, and not just the rich and famous ones (I know people who dispute this presupposition, but let’s assume for the moment that it’s true).

This is a simple matter of the tension between the desire for perfect data reporting, and the perceived cost of increasing existing levels of accuracy.

PRS for Music could actually attain near-perfect reporting accuracy - but they might not have much money left to distribute to their members if they did (actually, I don’t think it’d be nearly as expensive to meaningfully improve their accuracy as they think it would be - but that’s another debate).

So - another solution is required. One that costs no more to administer, but is significantly more egalitarian. I have one in mind - and it’s one that not only helps the overlooked and out-of-pocket composers, but actually proactively improves the music landscape.

The 80/20 solution
Here are the figures:


PRS membership statistics from their website


PRS revenue statistics from their audited financial results [PDF]

To use round numbers, then:

There are 60,000 members of PRS, for whom a total of £600m is collected and shared out.

My proposal is simply this:

Take 20% of the total revenue, and spread it evenly between the bottom 80% of composer members.

The remaining 80% of the money collected then becomes the pool from which PRS can attempt to accurately and fairly distribute according to the records and statistical data that they have.

On the numbers above, this would mean that 48,000 members of PRS would automatically receive a baseline sum of £2,500 in a year. They would then receive a proportion of the remaining money based on airplay, public performance or concerts that had actually been reported to the society.

There’d be several positive effects of this very simple intervention:

1) It would go a small way to close the gap between the incredibly well-represented members - the popstars and television theme tune composers - and those who tend to be under-represented in the statistics: dance music producers, independent bands, contemporary classical composers, independent film soundtrack producers, and other niche music makers;

2) It would provide a very strong incentive for new artists to join the collection society;

3) It would inject small amounts of capital into the independent and marginal music scene. £2,500 is not enough to live on for a year, but it is enough to buy a new guitar amp, fix the touring van, record an EP, shoot a low-budget video, get some professional photography done, pay a decent website developer, commission a string arranger for the album, make t-shirts, print flyers, do some press - or whatever small but career-changing act that not having that money is currently preventing.

In other words, the 80/20 solution not only corrects the problem of a lack of data that exists down the shallow end of the royalties pool, it also goes beyond merely paying composers, and starts investing in new music cultural production.

It’s not fair
The 80/20 solution is not a ‘fair’ method. But it’s not trying to be. This is better than fair. Fair, in this instance, does not mean egalitarian or ‘a level playing field’.

Fair, when it comes to royalty distribution simply means that the people with the most populist works that have the best connections and the most money spent on marketing will necessarily get the most money.

Fair means that innovation and experimentation are neither encouraged nor rewarded. Fair means that the safest, most mainstream and most formulaic music gets the vast majority of the money.

Now, this would still be the case under the 80/20 solution. Don’t forget that of that £600m, £480m is still to be divided up under the old system. Elton John and Phil Collins will not be made paupers under this scheme.

But what it means is that the people who were pretty much guaranteed to get only the smallest of sums (if anything), despite the fact that they might be played in contexts that are invisible to the collection society due to the granularity of the data, can now get money that they deserve.

In other words, this moves it from simply being about paying composers - and makes it also about investing in composition.

And it means that even if a small number of composers end up getting money that they didn’t earn, that money is still going to composers - and it’s going to the composers who need it the most in order to continue and develop what they do.

We’re talking about the ones for whom that £2,500 would make all the difference in the world - both to them and to their fans - and perhaps even the difference that might lift them from the bottom 80% into the top 20%.

An opportunity for cynicism
Where this might all fall down, of course, is if the rights organisations are unduly influenced by their most moneyed and most influential members - the rich songwriters, and in particular, the large publishing companies who are the ones who stand to have their margins topsliced by such a move.

An organisation that wishes to benefit the majority of their members, rather than simply bow to the wishes of the most powerful who are already getting a larger proportion than they probably deserve (and want to hang onto that edge no matter what) would certainly be drawn to consider a proposal such as this.

I happen to think the PRS is such an organisation. I’ve met people from the PRS, and I believe that they do care about all of their members, and not just the ones that make the most money.

But it’d be interesting to find out what the realpolitik of that might be, and how that played out. I’m certainly not holding my breath.

Reader Comments (11)

But wouldn't that encourage musicians (and even non-musicians) to sign up with the collecting society and then, without creating much of anything, simply make 2500 pounds a year?

Sounds like an invitation to leech, but otherwise one of the better ideas I've seen about this problem.

June 13 | Unregistered Commenteryoav

A great read. The US system is even worse and would benefit even more from this.

June 13 | Unregistered CommenterJustin Boland

I agree with yoav, my first thought as I was reading this was ""Sign up for free money". While this sounds like a good way of injecting money into the grass routes of the music industry, there sounds like there's too much room for abuse. I suppose there could be a minimum play amount before they receive the money, but then there would still be those that gets a few plays but doesn't get paid...
I'm not sure what the answer is to be honest, but kudos to you for looking at possible solutions.

June 13 | Unregistered CommenterShaun Letang

Actually, you'd still have to meet the membership criteria - which is as follows.

You must have at least one piece of music that has been:

- broadcast on radio/TV
- used online
- performed live in concert
- otherwise played in public

Also, there's a £10 fee, which gets deducted from your first royalty payment - so if it does mean an upswing in membership, it also means an injection of membership fees to put towards greater accuracy of reporting - which will make things fairer across the board.

June 13 | Registered CommenterAndrew Dubber

a cool idea, but a bit too socialist for my liking. :P

June 13 | Registered CommenterChris Bracco

then again, you did only say 20% of their total revenue...so maybe I could warm up to that notion, hehe.

June 13 | Registered CommenterChris Bracco

Just reposting my original comment on here, would be keen to hear people's thoughts?

I had an idea of how they could improve the accuracy of the sampling process in 2003. I ran a venue for a while and we paid PRS for the blanket license. They “once” sent someone in to sample the music, and I had a few bands ask me to sign their forms to show they had played live in the venue. I studied music technology in 1998 and learned how MCPS and PRS works and collects it’s data. Since then technology in this field has increased although not strictly for the purpose of royalty collection. Shazam for example holds a database of spectrograms of pretty much every song recorded, it analyses then cross references a sample of music and then relays the song and artist back to the sender. Now this is a rather gimmicky use for the information, but with the increase of noise limiting hardware being installed in venues as a matter of health and safety (And almost probably soon to be legislation) there now comes an opportunity to couple the two technologies to inform PRS exactly what music is being played in every venue and moreover how frequently. The technology can also be applied to feeds from all broadcast channels on tv and radio, most of which are now digital. The larger radio stations and BBC for example actually specify every piece of music played but regional and local radio stations are still subject to the current spot sampling procedures. The technology exists to now automatically electronically monitor most commercial broadcast outlets for music and collate the data into a fairer set of figures. The only proviso would be that the venue had an internet connection and “pick up” hardware connected to the service to monitor the output. Most radio stations broadcast over IP now too so those could be directly monitored from the back end of the system. This also creates new possibilities for sampling the internet thus creating more revenue for composers. Once you get round the Big Brother aspect of such a system of course.

An addition to my original post; Such a system would only work for recorded music so live music would still have to be reported back to PRS (Assuming the bands were members)!

June 14 | Unregistered CommenterSound Nomad

I think SESAC might actually do something like this because I did a collaboration with a guy ten years ago on a release that had 100 cassettes made & he got a check for royalties.

20% is a vast amount of money, and I'd immediately ask for some way to justify someone getting £2500 automatically. There are a lot of dormant accounts, people that wrote/released something once but never followed up. But the idea in itself is worth considering. Note that the bigger members - I'm thinking of the very vocal U2 - might resent this sort of automatic distribution.

June 16 | Unregistered CommenterMIchael

PRS has probably something like 15 million musical works in their repertoir. I would guess something between 10-20 per cent of those tracks are the tracks that actually are used, and thus generate income for the rights holders collective collecting society. Broadcast and concert reports will cover probably more than 90-95% of those track plays.
That should give something like 0,5-2 % of works (not rights holders, but works) used that run the risk of not being credited their fair share of the revenue.
I do not see that taking 20% revenue away from all revenue generating works and distributing these moneys to rights holders of works that aren't used helps at all. For many professional song writers, those 20% could well be the amount that actually makes it possible for them to dedicate a career to song writing.

I also have a problem with your samples claim, that the song that is played 5 times but only appears in one sample report, would result in more money to Elton John. The point with sample reports is that musical works appearing in sample reports will also be assumed to be used outside the sample period, and therefore a work appearing one time in a sample report will be assumed tu have been used maybe 5 times in total. Elton John, having been used 100 times in the sample report, will be assumed to have been used 500 times etc.

The problem with sample reporting is that the song figuring only one time, may only have been played that one time although it gets credited with more, while songs having been played several times but always outside a sample report period, will not be credtiad any plays at all.

In the long run, the problem of sample recording will negatively affect those works that are hardly ever played/performed, and that for some strange reason never appear in a sample report, which the work of cours statistically should if it is played a number of times.

Moneywise, the writers of these works theoretically miss out on some quite small potential payouts. In this perspective, the guarantee payout of £2500 or thereabouts to each person registered with a musical work that may have been perfomed only once, seems like a somewhat non-precise solution.

June 21 | Unregistered CommenterHerman

Well, gee, we now have all these computers. And they are real good at computing. So why don't all the PROs simply require ALL THOSE who play our music to REPORT THEIR PLAYLISTS over a computer system ( electronic fingerprinting music already exists ) to the PROs in every country? Oh, but then we might really see what's getting played-- and the BIG BOYS just might get less money. Isn't that what's really going on today? The excuse is always: "Oh, but that would cost money." It is the 21st century, and hey, we got all these computers, it could be done.

March 22 | Unregistered CommenterHEY NOW

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