Tag Archives: royalties

The Truth About Foreign Royalties

by Jennifer Garner, AFM In-house Counsel

Recently, the AFM has received a huge number of requests to waive its mandates to collect and distribute foreign royalties on behalf of US recording musicians through AFM & SAG-
AFTRA Intellectual Property Rights Distribution Fund (the Fund). Many of these requests come from agents, publishers, and even some lawyers purporting to have authority to represent musicians in royalty matters. Some requests are in the form of letters ostensibly from individual musicians that are forwarded to us from foreign collecting organizations. These letters are of questionable or obvious inauthenticity. A few musicians have contacted us directly with concerns based on wildly distorted facts and specious legal analyses propounded by their agents. We feel compelled to dispel the myths and correct the misleading representations.

For decades, US recording artists have been wrongfully deprived of royalties collected on their behalf outside of North America due to a fundamental misapplication of the principle of national treatment underlying several international copyright treaties. Some foreign performance rights management organizations (PMOs) in Europe and Spanish-speaking territories unfortunately have been collecting remuneration generated by the broadcasting of music created in the US, but refusing to pay over such remuneration in whole or in part to US musicians. Their primary excuse is that the US is not a signatory to the Rome Convention, which is a 1961 copyright treaty that provides for the cross-border payment of terrestrial broadcast performance royalties. They have maintained the bizarre position that, because the US has no reciprocal performance right in AM/FM radio broadcasts, they are generally entitled to keep the money they collect for broadcasts of US artists’ works in their territories.

There is no sound justification for this position. Nothing in the Rome Convention authorizes or condones the collection of royalties on behalf of artists of any nationality without distributing such royalties to those artists. Collection without distribution is theft. Theft from a nonparty to a convention is still theft.

Consider the practice here in the US. The US Copyright Act provides a digital performance right for performers (arguably more important today than a terrestrial broadcast right) that many European and Spanish-speaking territories are lacking. Pursuant to various copyright conventions to which the US adheres, SoundExchange and the Fund send abroad millions of dollars in digital royalties every year on behalf of featured and nonfeatured artists, despite the fact that the foreign PMOs are unable to reciprocate. We do this because it is morally and legally the right thing to do.

In contrast, the contention that US artists are not entitled to their royalties from abroad, unless a PMO in a Rome Convention country is representing them, is outrageous. The fallacy is one of false choice, namely, that if our artists want any portion of their royalties from abroad, they must pay an inducement to foreign PMOs and agents. Otherwise, they will receive none of their royalties. This is not a “choice.” This is coercion.

Lately, the aggressiveness with which the PMOs and their shills are hustling the right to manage US artists’ foreign royalties—and split the skim—is alarming. And, why now? The PMOs have been collecting and keeping US royalties for decades with relative impunity. What is the urgency to obtain mandates to distribute the money? 

There are perhaps two factors motivating this activity. First, the Beijing Treaty on Audiovisual Performances, adopted in 2012 but not yet in full force, slammed the book shut on the discussion of collection without distribution. The official record of that convention memorializes the principle of “no collection without distribution” as the proper application of national treatment in copyright treaties. The global consensus is unambiguous. Collection without distribution is morally and legally wrong. Moreover, time is up. Noncompliant PMOs should be feeling the pressure to get with the program.

Second, robust lobbying efforts by the AFM and other US stakeholders to obtain a terrestrial broadcast performance right, and Congressional bills like the proposed Fair Play Fair Pay Act, are gaining traction. If and when such legislation is achieved here in the US, the primary excuse maintained by the PMOs for collecting without distributing would be eviscerated. It appears they are attempting to hedge the consequences by obtaining mandates to collect and distribute royalties on behalf of the most celebrated and exhibited musicians in the world, and draw down a lot of money in fees for doing so.

Every agent standing between musicians and their money is picking musicians’ pockets, and every PMO that is withholding money it collects on US content is in flagrant violation of international norms. The AFM is calling on foreign PMOs to release musicians’ foreign royalties without conditions, in accordance with well-settled international principles, instead of extorting valuable rights from musicians, the Federation, the Fund, and SoundExchange.

On a different topic related to the Fund, I am delighted that Stefanie Taub has been appointed as its new chief executive officer. I am confident that new and exciting initiatives under her leadership will benefit all participants.

Judge Explains Why Pandora Should Pay 2.5% of Revenue to BMI

An article appearing in The Hollywood Reporter explains why US District Judge Louis Stanton decided that Pandora should pay 2.5% of its revenue to BMI. The decision came more than two years after publishers attempted to partially withdraw digital rights from BMI in order to get a raise from streaming outlets like Pandora. BMI argued the court for a 2.5% rate based on interim deals that were struck between the publishers and Pandora. In making the decision, Stanton considered Pandora’s $600 million 2014 revenue, and its stance that it hasn’t been profitable due to lack of success on the advertising. He also looked at what music services are paying—Apple 4.6% of revenue, Spotify (2.5%-6.25%) of label costs, and Rhapsody, just under 2.5%—though he admits “Pandora evades neat categorization.” BMI I was also given a “win” in that the license term will be four years, instead of five, to allow re-evaluation of the licensing relationship given the “rapidly changing nature of the online music industry.”

Webcasters Like Pandora Should Pay More for Our Music


On April 29, 2015, I testified before the Copyright Royalty Board (CRB) in Washington, DC, in an effort to boost payments to musicians from digital webcasters like Pandora. The CRB is a three-judge panel that sets rates on the statutory license that covers what webcasters pay for noninteractive distribution. Below is an excerpt from my testimony.

Continue reading

Pandora and BMI

Pandora and BMI Trial Begins

Pandora and BMIIn February Pandora and BMI headed to court in a trial to determine how much Pandora will pay BMI songwriters and publishers. According to The New York Times, recent debates over music royalties with ASCAP and BMI have galvanized musicians and driven the Justice Department to review the regulatory agreements that govern BMI and ASCAP.

Pandora currently pays BMI 1.75% of its revenue, but it wants to reduce that fee to 1.7% to match what radio broadcasters pay for their streams. Pandora contends it is just another form of radio. BMI wants Pandora to raise its rate to 2.5%, arguing that Pandora is a more interactive form of media, and since it has no other programming like news or talk, it makes more extensive use of music than radio stations do.

Also in February, the US Copyright Office released its study, Copyright and the Music Marketplace, with recommendations on how existing music licensing laws should be updated to better reflect how people listen to music today. Among its recommendations were requiring radio stations to pay performance fees and the consolidation of rate-setting activities. Read the study at: copyright.gov/docs/musiclicensingstudy/.

New Business Model = Same Demons

Citing the unfair split of revenues and lack of artistic control, today’s musicians shun the ubiquitous control of yore by the “majors,” and desperately attempt to validate their music by declaring themselves an “indie.” High quality home recordings, self-produced and marketed, are made possible by the technological advances in recent years, along with the promise of untold fortune by distribution through the World Wide Web. “Going viral” no longer means a trip to a physician, but a trip to the bank. Or does it?

Continue reading