Music Publishing & Songwriting

Mark it down in the calendar folks…. we WON this time! Like a team emerging from a five-year losing streak, publishers and songwriters are heaving a sigh of relief, jumping for joy, and for the first time in several years actually looking ahead to the future with some small glimmer of hope. Isn’t it interesting what $100 million can do?

In case you missed the big occasion, last week a federal court judge ruled that AOL, RealNetworks and Yahoo! must pay licensing fees to ASCAP for the streaming of music on their sites.

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I know—the idea of a company having to pay for the use of music shouldn’t really be all that surprising. But over the past several years, creators and publishers have watched whole enterprises emerge, all based on the free use of music. The cyber-gurus told us “information wants to be free”—that the whole idea of copyright is a vestige from another era no longer beneficial to our wired way of life. The theory seems to have been that while a single unlicensed use by a film company or record label would never be tolerated, violations done on a mass scale would force licensors and even the courts to rewrite the old rulebook. Turns out that it just isn’t so or at least not yet.

For now, the digital world is going to have to ante-up and pay the bill, not only for the music they’re using now, but also the music they’ve been using as far back as July 1, 2002. Web-based companies that utilize music-streaming will need to obtain a non-exclusive blanket license, in the same way that radio stations, television stations, bars, restaurants, performing halls and others have for decades, from the performing rights societies, i.e. ASCAP, BMI and SESAC. The fee for the license will be 2.5% of the service’s “music-use-adjusted revenue”. That rather clumsy terminology is short-hand for a formula that takes into account the amount of revenue generated by the business, the advertising and promotional costs for that business, the total number of hours that music is streamed, and the total hours that the web service is used. If you’re trying to do the math at home, don’t bother.

The people that have done the math say the number owed by the Big Three under this decision could be over $100 million. Of course, now that legal precedent has been set, and the courts have established that the basic performance licensing system is appropriate and applicable to these web-based services, it shouldn’t be long before BMI and SESAC step up to get their piece as well. After that, they’ll be moving on to all of the other music-streaming sites. Needless to say, there’s a lot of money in them hills.

The problem is, there may not be as much as there needs to be. Clearly, some of these services, maybe even some of the most prominent, will never be able to cope with the costly invoice now sitting on their desk. Many of them have hardly figured out how to effectively monetize their own businesses. We’ll undoubtedly hear many heart-wrenching stories of financial ruin and laments about how the licensing organizations are choking the business, standing in the way of progress, and violating the American public’s right to unlimited, unfettered, uninterrupted entertainment.

Too bad. Happily, the courts have reaffirmed once again that there really is no free lunch. This is good, since songwriters and publishers have had to pay for their lunch all this time, and will for the foreseeable future. Kudos to ASCAP for fighting the good fight. Credit goes to the court for making the right call. Here’s to a victory that’s all the sweeter for the long road it took to get there. Some things are worth waiting for.

$100 million is one of them.