This course will examine the music industry in the United States, with the unique perspective gained by Vanderbilt University’s location in Nashville, TN. Nashville is a major center of music in the United States, and the music created here has a global reach, particularly in the country, rock, pop, singer-songwriter, and Americana genres. However, students will learn that the basic principles of recording, marketing, copyright, licensing, and live performance are the same, regardless of musical style or genre. The music business is one of the most rapidly changing industries in the US today. It is also an industry filled with contradiction, and media headlines and anecdotal stories often add to the confusion. Here are just a few statements paraphrased from recent news stories: * The music business has collapsed * Demand for music is expanding at the greatest rate in history * Historic recording studios are closing at an alarming rate * More people are making recordings than ever before * Musicians usually lose money touring * Musicians usually make money touring * Major artist pulls songs off streaming services because they don’t pay fairly * Major artist makes a fortune from streaming services * People won’t buy records anymore * Vinyl record sales are soaring This course will attempt to make sense of these seemingly contradictory trends and data, outline the basic structure and mechanisms of today’s music industry, and encourage students to think critically and entrepreneurially about the future of music. Leaders from various areas of the music business will lend their perspectives through in-depth interviews, and footage from a recording session will give learners a behind the scenes look at how a song goes from the spark of an idea hummed into a cell phone to a finished recording. Participants will grapple with questions about art and commerce which are both timeless and crucially important today, and will emerge from this course with tools allowing them to make more informed decisions as creators, promoters, and consumers of music. Course launches February 19, 2016.
Interview: Alison Smith
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From the course by Vanderbilt University
Understanding the Music Business: What is Music Worth?
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From the lesson
Copyright & Publishing
In this module, learners will wade into the complicated world of music copyright and publishing. Interviews with an executive from a performing rights organization and another music school dean with a background in publishing and intellectual property rights will help to decipher the world of publishing- and sound recording-related royalties and the question of public domain. The question of fair payment to songwriters is one of the most hotly contested issues in the music industry today, and you will think critically about how value is assigned to compositions in different media environments. What is a song worth?
Meet the Instructors
Jen GundermanAssistant Professor of Musicology
Blair School of Music
[MUSIC]
I'm here today with Alison Smith, who is the senior vice president of BMI in charge
of operations, distribution, and administration.
She's based in New York.
We were very lucky to get her while she was passing through town on business, but
she also oversees teams in Los Angeles and in Nashville.
She's been recognized for her work by Billboard Magazine and
the Nashville Business Journal.
Thank you so much, Allison, for sharing your time today.
>> Well, thank you for having me, I'm happy to be here.
>> BMI is a performing arts organization that represents over 700,000 writers and
publishers who have composed or written ten and a half million plus musical works,
which are performed all over the globe at any moment of the day.
And it is part of BMI's job to make sure that all of those composers are paid for
all of their songs everywhere.
>> As best we can.
[LAUGH] >> [LAUGH] So
this process is sort of mind-boggling to me, and I think a lot of our learners and
people in general, and I'm hoping that you can break it down for us a little bit.
First of all, who does BMI collect money from?
>> Okay, BMI collects money from
any place that you can imagine where music is publicly performed.
So, you could start with radio, television, cable TV,
bars, restaurants, airlines, Sirius XM,
satellite radio, and the Internet services that we all know so
much about now from YouTube to Pandora to Spotify.
>> So when it comes to these different venues,
how does BMI determine how much money is owed to your clients?
>> Well, for the most part they are negotiated rates.
We have a licensing department that has the role
of going to each of the user's or user groups, to collect those fees.
And they negotiate with the users, and
come up with the fees that are overseen by the consent decree.
We have to have, we have categories of users, so
we work with cable TV is a category, radio is a category in and of itself.
But we have the licensing department that does that and
determines those rates by negotiation.
>> So I'm imagining, for example, that a television station that has many millions
of viewers is going to pay much higher rate for the songs that they use on their
programming than, for example, local club or restaurant.
>> For the most part, that is true.
>> And is it somehow based on numbers of listeners or
can you dig into detail a little bit on some of that?
>> Sure, for a venue, so to speak, you can look at it.
And we have these licenses online, so they are readily accessible to business owners.
But for a club, it would be, do they have live music?
Do they have recorded music?
Are they small or large?
What is the venue capacity?
That sort of thing.
For a cable network, it might be for a percentage of revenue or
another type of negotiated rate, a per subscriber rate, potentially.
So it really runs the gamut of different types of formulaic equations.
Again, I would stress the same user types are treated exactly the same.
That's why we have the form licenses, so
a small Internet site could go online to BMI.com and see what they need
in terms of how to license their music as they start their business.
>> So when these fees are collected by BMI,
then what is the process like, how do you determine which of your writers,
which of your publishers get the money that you've collected on their behalf.
>> Well the ones that have the performances are the ones that get
the money.
>> But we, again, post on BMI.com all of
the practices that we use in royalty calculations.
So those calculations, for the most part, are done on a per play basis.
If you have a play on radio, if it's a large radio station in New York City,
you might get a higher rate of payment than you would for
a smaller station in a small town.
And so we have weighting formulas that are published.
We have economists in house that assist us in those valuations.
So for each different category, similarly to as I explained about
how the licensing is done, there is a different royalty rate.
And BMI is all about valuing music.
So we look to properly value the music not only on the licensing side but
also on the distribution side.
So we may introduce bonuses for certain categories.
If you have a hit song,
you might get a bit more money than if you have a song that is not a hit.
In the most basic sense.
>> You mentioned already a little bit about the technology that is used to make
all these calculations.
And I know that you've really been on the cutting edge with a lot of the changes in
technology that BMI uses.
You've been known for your work in technology, so
I was hoping you could tell us a little bit about that system, I guess, and
maybe how it's changed since you've worked at BMI or what you think that
learners would be interested in knowing about the databases or
number crunching that goes on [LAUGH] >> [LAUGH] Well,
what's interesting is that on a personal note, I've been at BMI 30 years.
So when I started at BMI, we collected from radio and
television and a small amount from what we call general licensing
venues, like the bars and the restaurants, and then international revenue.
And then along came something called HBO and MTV.
And then we had to look at that and say well, how do we intake that information?
So for traditional media like radio, for example, we do capture and
use third parties to provide us with performance information.
So we actually get census information.
Meaning 24/7, what is played on a radio station?
And bring that into our system.
And then for television, it's a little bit different,
in that you have to have what's called a music cue sheet.
And a cue sheet would indicate all of the instances of music use
in a television program or a film.
Then we match that to the performance data that comes in,
that comes from what is played on that TV station or that cable network.
And then if you look at the Internet, which added literally
trillions of performances to our systems, we've had to,
definitely, over the years upgrade the systems,
we have had to write algorithms to do matching.
And we're constantly trying to be on the cutting edge of technology to put
all of that data through systems, or they call it big data now,
and put all that through our systems and make the calculations and.
Be on time and accurate with our royalty payments.
[MUSIC]
>> There are a lot of people in the industry right now who are optimistic that
the data ends advances in technology, will help to make what has been
a kind of confusing process from maybe an outsider's point of view,
more transparent, and more streamlined.
I mean, are you optimistic that we're moving in the right direction
in terms of those things?
>> Absolutely,
I think that transparency is a word that's being tossed about a lot now.
BMI has always felt like that we are transparent in what we do.
We appreciate the dialogue between the songwriters and
publishers that we represent, as to how they would like to see for
example things displayed on their statements.
Do they want more detail, less detail?
There's a lot of talk about using identifiers,
whether they are industry wide identifiers, such as the ISRC,
which is known as the International Standard Recording Code.
Or the ISWC, which is an International Standard Work Code for the songs.
So one is recording, one is song.
>> Wow!
>> And trying to look at marrying all that information together,
to again do the best possible job, and I think that's worldwide what is happening.
All of the PROs that I work with across the globe if you will,
as well as music publishers.
And the users of music are looking at this data and
trying to figure out the best way to make it as simple
a process as is possible to get people paid.
>> I read an article recently, I think we're talking about the same thing that
was saying that one of the challenges is making sure that the metadata I guess is
what you're talking about, the two different categories of metadata.
Tags the correct people with all of this information floating around that somehow
this track that I had a cowrite on,
is being used in a movie in Croatia, or whatever.
Somehow my name travels with that tune to Croatia, or whatever, and then back to me.
What would you say to a person who,
I've heard spokespeople from streaming services say,
well, we just can't figure out who to pay.
And that's why there's all this money sort of growing in escrow accounts unpaid to
writers, because we just don't know whose money it is.
>> Well I'd say it's not for lack of trying.
I think that, again, and I'll speak for BMI, but I think it may hold true for
others, is that metadata and accurate metadata is key.
Meaning, who wrote the song?
Who published the song?
What is their percent of ownership?
All of that type information is key and critical.
And who recorded the song?
And it's a little bit different for TV and film,
because usually you'll have a single composer for a musical score, if you will.
But there is a network that we use in the worldwide society group,
that is called the CIS-Net, which shares data as between societies.
And music publishers will feed data to their local society like BMI and
Ascap in the US and CISAC.
And then you have other societies across the world like the PRS,
for music in UK, where they get information from their members.
And so, hopefully, what happens is that as all those things happen
you end up with the ability to have that information,
like you said, as a songwriter, travel with your work.
And that is available, it's available, we make our repertoire available online.
And the matching sometimes is difficult, and sometimes you will have conflicts.
You might have one publisher claiming a little more than maybe it,
well certainly they thought they had that piece if that's what they're claiming.
But you can have conflicts and the Internet companies sometimes will say,
we need a bit more information, enable to make our payments, and
I think every organization is trying to work together to make that
information as readily available as is possible.
>> The audience for this course is going to be international, or is international.
And so I wonder if you could say a little bit more about the relationships that US
based PROs have with their international, sort of sister organizations,
and how, you mentioned a little bit about how you worked together.
But I was hoping you could elaborate on that.
>> Well we work together very closely.
There is an organization called CISAC, C-I-S-A-C,
which encompasses all of the rights organizations throughout the world, and
BMI and the other US PROs play a big part in that organization.
And we speak daily to our sister societies,
with respect to what's happening in their territories.
We speak to them with respect to data.
Obviously, data exchange is critical.
And we have international department, at BMI that has an IT section to it,
as well as a section that does outreach and relations with the societies.
And then the group that I work with looks out for the money coming in.
Or we may go over there and
say, go over to another society and say well, you didn't pay us for
this, would you please make sure that that gets adjusted and paid for.
>> Right, I actually had an experience where that happened once.
>> Did you?
>> Yeah, [LAUGH] I did.
>> And did you get your money?
>> We did, in fact, in one lecture I talk about it.
Out of the blue we got a check for my husband from an international
country, who they had not been paying him correctly, and
his PRO found out about it and got him paid.
>> Well, that's what we hoped to hear.
>> [LAUGH] >> [LAUGH] It sometimes takes a little bit
longer to make adjustments if necessary, for overseas performances.
>> Yeah.
>> But we do have very strong relationships with the almost 100
societies that we deal with, so it's a matter of making sure we know
what is being performed, and it's a global world now.
It used to be just local US and local UK,
and now you got the European Union, where they're all going
through competition, and it's a new world now, it really is.
>> Yeah, exciting I imagine for you.
>> Very exciting.
>> Yeah. [LAUGH]
>> Well, and exciting also for
songwriters and for people whose music now is being
performed in places they never dreamed it would be.
And you could get a following in a country because you had an online exploitation or
somebody saw you on YouTube.
That you never though about before.
>> That's true.
I want to ask you a little bit about media headlines and songwriting and royalties.
I think that even a person who doesn't know very much about the music
business right now, might have caught some of the conflicting headlines about,
songwriters aren't being paid fairly, or this one feels that something's unfair, or
that one says no it's not, you made a fortune.
Can you explain to the average listener,
what is this conflict that's happening right now with payment to songwriters?
Why are some people feeling, I don't know, abused?
[LAUGH] >> [LAUGH] Well, I think that, again,
going back to trying to get the fairest pay for
the play is really the bottom line here.
>> Mm-hm.
>> And the songwriters and
music publishers that we represent deserve to be paid fairly.
And so what our role is, is to go out and negotiate,
as we talked about earlier, with the people who are using their music.
And the headlines most recently have been about some of
the internet streaming services not paying high enough fees for
songwriters and music publishers, for the exploitation of their usages.
And BMI in fact did have a rate court case against one of those,
Pandora, and we prevailed and got a higher rate.
It is now on appeal, however, so we don't know the end specifically yet.
>> Right.
>> But, we believe that we've got to fight to get those rates up
because of the fact that a lot of the other types of compensation,
namely mechanical royalties for record sales or
downloads, those are going down as streaming goes up.
>> Mm-hm. >> And so in an effort really to capture
fair value, we and others in our business, publishers, other PROs,
are really trying to make sure that we can get fair compensation.
>> I feel very fortunate to be sitting here with you right now because I know
that you are a person who has been going to Washington D.C.
talking to the Department of Justice about some of the regulations that govern
the practices of PROs and I wanted to ask you about some of those issues.
Specifically, I wanted to ask you, or I hope that you could help us lay out,
first of all, some of these rules that govern PROs.
Specifically, the consent decrees that you work under.
Let's begin by, if you could, explaining what the consent decree is and
why it was put into place in the first place.
>> Okay, well BMI and the United States government have an agreement,
if you will, that is overseen by the Department of Justice that is
called a consent decree, and it basically governs the way we do business.
It governs the way we work with licensees on the one hand, and
how we work with the songwriters and publishers.
As in, do we have to publish rates?
Things like that, how long can their contracts be?
And then under what mechanism our rates are set if there
is a disagreement so to speak with a user of music.
And so the consent decree, and also ASCAP is under a consent decree.
>> Mm-hm.
They were put in place years, and years, and years ago, but
they came about as a result of when you have a lot of songwriters and
publishers coming together that create bargaining power so to speak.
>> Right. >> That is large.
>> Yes. >> The government sometimes steps in and
says, we want to make sure that there is not an unwieldy market power going on.
>> Hanging on the trust.
>> They were, yes exactly.
[MUSIC]
So are there other organizations in the United States that are not governed by
a consent decree?
>> Yes, you have actually two in the US right now
that are not governed by consent decree and are our competitors.
And one of them is SESAC, S-E-S-A-C, and the other is GMR,
which is a relatively new entrant to the market called Global Music Rights.
And they do not have to operate under the same constraints that BMI and
ASCAP do, yet they are direct competitors to us.
>> So how would you like to see the consent decree amended?
>> Well BMI, on behalf of its writers and publishers,
has gone to the Department of Justice and
we have three main asks of them to change the consent decree.
The first is to allow what we call digital withdrawal for
publishers who wish to directly license outside of the PRO networks
to internet services, to what we call digital services.
That's the first ask, because they feel like that they can
possibly get higher rates outside of the PRO network.
>> And if I'm not mistaken, this came about, or this ask came about, because
some publishers were threatening to pull catalogues if they didn't receive better
rates, and then there was a court ruling that said, no, you're all in or all out.
Is that [CROSSTALK]?
>> Right, that was a fun time.
>> [SOUND] >> Yes, you actually, and
I'm going to preface this by saying that writers and
publishers always have the right to directly license to a user.
So that is something that's part of the consent decree actually,
is that they can say I wish to directly license here.
What happened a couple of years ago was that some publishers decided that
they wanted to actually withdraw their catalogs from the societies,
namely ASCAP and BMI, and license those works directly to users.
And they wanted to be able to say, I'm taking these out,
these songs, out of the societies and
I'm going to go directly licensed to certain users of music to see what I can
get in a free market outside of the consent decree, if you will.
And they did do it, and that was widely reported in the press, and
then what happened after that was you mentioned the all in all out.
The court rulings in both the BMI and the ASCAP rate courts,
even though they were a little bit different,
they had a similar effect that the publisher had to be either all
in the society, meaning for all usages of music, or all out,
meaning they had to actually terminate their agreements and
license all users, and outside of the PROs.
>> Nobody wanted that.
>> And that yes, I don't think that's what anyone ever intended.
>> Right, right.
So this ask then, for the permission to withdraw digital royalties is your way,
I guess, of continuing to be able to work with your clients but
have them be able to negotiate their digital royalties separately?
>> Yes, that is exactly what that is.
They want for us to continue to license other usages that we discussed earlier,
the bars, the restaurants, the venues, the TV stations, the radio stations,
all of that, so.
>> Right, because setting up your own method of gathering all that royalty
money I think would be hard to build from scratch.
>> I think it would be.
[LAUGH] >> [LAUGH]
>> Speaking from experience I think it
would be.
>> Yeah.
So what are some of the other amendments or asks that you've gone to the DOJ with?
>> Well, we're also asking for the concept of what's called bundled rights,
and right now BMI can only license the performance right.
>> Right.
>> And we are looking to expand that into being able to license
what are called bundled, or multiple rights,
namely the mechanical, and potentially microsyncs or
volume synchronization usages for online services.
And so we have asked for that for
the reasons that really the marketplace wants that.
That you've heard the term probably and your listeners here probably have as well,
that one stop shop, the ease of licensing.
>> Right. >> And right now
you have to go to a PRO to get a performance license,
you have to go to a publisher to get mechanical in sync.
>> Mm-hm.
>> And so, BMI thinks that we should be able to
really bundle those rights and move forward with that.
>> Well, and that would put you in the same category as some of your competitors
who are moving towards you know collecting those rights, I think, as well already.
>> That's absolutely correct.
>> So, interesting.
[MUSIC]
And what's the third ask from the DOJ?
>> Well the third ask is to move out of a rate court situation,
which is now that mechanism by which we have to,
if we have a disagreement if you will, on rates with the user of music.
We have to go through a very long process, a very expensive process,
and it has to go before a rate court judge that is appointed.
ASCAP has a rate court judge, BMI has a rate court judge.
>> One person or?
>> Two different people.
>> But two, two single people?
>> Two single people, yes.
>> Right, okay.
>> BMI has it rate court judge in New York, Judge Stanton, and
he rules on all of our rate court issues, if you will.
And, it takes a long time, and it costs a lot of money.
Now I will say also though that litigation is the last thing that BMI likes to do.
>> Mm-hm.
>> We don't like to litigate.
We like to negotiate and come to really a good resolution with licensees,
but sometimes it just doesn't work that way.
And so what we would like to see, is rather than have to continue
down the road of going to rate court and the expense of all of that,
that we would be able to move to binding arbitration in place of the rate court.
So we're waiting to see right now what'll happen in all these.
>> How would that work then?
How would that be different for
everybody involved if it was going to an arbitration model?
>> Well again, this gets into the legalese and
I'm not a lawyer, but I'll answer it in the best way that I possibly can,
in that it's a simpler process, it's a cheaper process, different rules apply.
And so as the lawyers have looked into this, everybody seems to think that,
that is a better way to get these rate court issues,
or the rate disagreements if you will, resolved.
>> Mm-hm.
While you're in the weeds with all of these incredible details and
legal things and you know, just numbers that as I've said
before are mind boggling to the casual learner.
What keeps you motivated to push forward?
>> [LAUGH] Me personally?
>> Yeah.
>> I'm a fan.
>> [LAUGH] >> I love music, and
that's why I'm in this business.
I can't carry a tune, I don't know, but
I love music and I love the creative process.
I've been able to see things happen and people transform.
From bringing in their first song to having it heard for the first
time on the radio, or seeing their first YouTube video and how that all works.
And that's what keeps me going, is that I want to make sure,
and I know that BMI does, to keep it such that the creators
can make a living at doing what they love.
>> Yeah. >> And that right there, if we can't get
them paid for the use of their music by other people and
other people might be making a lot of money, they might not be.
>> Mm-hm.
>> But the song writers, and the composers, and
the publishers deserve their fair piece of this pie as the pie shrinks and grows.
>> Right.
>> It's just really something that I believe in in my heart,
that creators deserve fair compensation.
>> The subtitle for this course is, what is music worth?
And a lot of our conversation today has already been about how value is negotiated
across a lot of different platforms.
And it's really sort of your job to help to push those conversations forward.
And so I just, I guess want to ask you a general question about are you optimistic
that music is valued or will be valued the way it should be as things move forward?
>> I'm always optimistic.
>> Or I wouldn't still be here.
>> Yeah.
>> I think that BMI as an organization,
as I said earlier, has that mission in mind,
and we will do everything in our power to continue
to proffer and parlay that the music has value.
That the songwriters and publishers deserve to be paid fairly.
And that's what we do every day.
And so, yeah, I'm optimistic.
I think it'll be really good in the future.
At least I hope so.
>> Me too.
What do you think that our learners all over the globe can do in their local
communities to best support music and be a person who helps to support songwriters,
performers, local arts communities?
What are the things that you see happening on a local level that people can do?
>> Well, number one, pay for your music.
[LAUGH] Number two, go out and
support your local venues, keep them alive.
Also, when you're called upon to have your voice heard, whether it's by a PRO or
anyone else, make it heard because we're an organization that
represents 750,000 strong in the creative community, and
then you multiply that by other organizations and that's a huge voice.
But if the legislators, the DOJ, the Department of Justice,
the people who are looking at all of this are not hearing from
the people whose interests really are at stake, it's not really right.
I think that advocacy, I think making your voice heard,
is one of the best possible things you can do.
And it's not that hard to do.
>> Mm-hm.
>> Thank you so much.
We've been talking to Allison Smith who's a senior vice president at BMI.
Thank you so much.
>> You're very welcome.
[MUSIC]
>> We've been talking about some of the changes that may be afoot with the rules
regarding PROs, including BMI, and one of the pieces of legislation I'm
interested in getting your take on is the Songwriter Equity Act,
which supporters say would change copyright law to provide a means for
songwriters to receive royalties according to fair market value.
What is your take on this legislation?
>> Well, BMI is very much in favor of the Songwriters Equity Act.
And that is what I was talking about a little bit earlier about advocacy and
how we need to hear your voice.
It would introduce two very simple changes.
And it has to do with rate setting.
And one would be for the PROs to allow
that the rate court judges be able to consider other marketplace rates
that are out there when determining what the rates for
the PROs and their licensees should be.
Currently, that is not the case.
The second part of the SEA has to do with mechanical licensing, i.e.
the reproduction right and how those rates are set.
And it asks for changes there.
And BMI is very supportive of this, along with the other songwriter and
publisher organizations.
>> Media headlines that you see right now, the conversations that are happening about
copyright these days are about song writers, and you hear about pop tunes and
rock tunes and country tunes and that kind of thing,.
But are there things going on with composers of, say,
television, film scores and that kind of thing that we should know about as well?
>> Yeah, I think the good news is that BMI has entered into license agreements with
Netflix, with Hulu and most recently with Amazon.
>> So, similar to the way that song writers are having their income shift
a little bit to online sources of revenue, so are the composers and the studios.
They're seeing some good revenue change, also is about in that arena.
And we're very excited to say that we run all of that data also through our
pipes and make sure that they get, hopefully, fair compensation as well.
[MUSIC]
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