Not too long ago, I had an opportunity to work on a project alongside a large, big-name consulting firm. Here was an army of highly-educated wunderkids, all who came bearing one hundred questions, but rarely even one conclusive answer. As the project grew longer and longer, and the answers increasingly elusive, I decided that these people were simply not very good consultants. After all, where were the solutions the client needed?

One day, I shared my concerns with a friend, who herself is one of those sought-after, big-name consultants. She smiled. “Ah… they sound like they’re very good at their job,” she said admiringly. “If they accomplish the objective, everyone goes home. Smart consultants never solve a problem. At least, not before they’ve uncovered a new one.”

This came to mind recently, when I saw NMPA President David Israelite’s recent comments about the need for blanket licensing, bravely made in front of the publishing masses at the NMPA annual meeting, and also reiterated in Billboard:

http://www.billboard.biz/bbbiz/industry/publishing/david-israelite-nmpa-president-s-guest-post-1005250672.story

David Israelite

On the face of it, Israelite’s primary point is unassailable. The current system of licensing, particularly in regards to mechanical and synchronization licenses, doesn’t work and must be fixed. Who could dispute it? As Israelite quite honestly points out, after all the legal sturm und drang about YouTube, if Google came to the publishing community tomorrow and completely acquiesced to all demands, offering to pay whatever it took to license the rights they needed, the publishers would be completely incapable of actually doing the licensing necessary. On a legal, practical, and PR level, that doesn’t put the publishers on particularly solid ground.

Especially when it comes to licensing synchronization uses, music publishers have always insisted that the use of a song in “synchronization” with a moving picture (like a video, film, advertisement or game) requires the licensing approval of each owner of the copyright. That’s a number that as recently as the 1980s
meant potentially three or four songwriters and their publishing representatives, but can now often mean up to ten or twelve writers, some with different publishers in each territory of the world, some of whom may control as little as 1 or 2% of the song.

Needless to say, this could require weeks of phone calls and research, and that’s just to find out who controls the necessary rights. After that, the poor music supervisor, film studio, TV producer or advertising agency still has to come up with a sync fee number and legal terms that will satisfy all parties involved—all of whom of course insist on favored nations status with each other. Now multiply all those headaches by several hundred thousand.

Why several hundred thousand? Because in the internet age, that’s the way companies are interested in licensing music. The focus now is not on one specific featured use in a movie or advertisement. It’s not even on ten songs all needing mechanical licenses to appear on an individual album. Rather, services like YouTube, iTunes, Spotify, and others need to license the whole of popular music, en masse, in order to be able to offer the variety and selection that the consumer demands. In that context, one by one is a little impractical. Like having to obtain permission to use each individual word in your novel.

Needless to say, the need for blanket licensing is pretty obvious, particularly to those who spend each day trying to work through the morass of the current system. Historically, music publishers have not stood out for their foresight and boldness. Yet even they will acknowledge that the crisis has arrived, and something has to change.

In the area of mechanical royalties, Israelite suggests an approach that grew out of an attempt to reform the compulsory license section of the US Copyright Act (Section 115). This would provide for a series of mechanical licensing agents (similar to the PRO’s like ASCAP and BMI). Publishers would have the right to choose among the agents, or change agents, but these designated agents would represent the one-stop, or maybe three or four-stops for anyone seeking a mechanical license. Further, these same agents could also license synchronization rights, on a pre-set, “blanket” rate basis. The blanket licenses would cover everyone and everything, eliminate the back and forth negotiation over each individual permission, and hopefully bestow that warm and fuzzy feeling for which blankets are known.

It sounds more efficient for the publishers as well as for the people seeking to license music or to build services around music. And while it certainly takes away some of the possibility of demanding a king’s ransom for that 7.5% share of the classic copyright that you own, the increase in the number of small wins, on a global basis, will probably more than make up for the loss of the occasional jackpot. Not to mention, it might keep folks like YouTube from just tossing in the towel and taking the music without any licensing at all.

So why hasn’t it happened?

As I said up at the top—not everyone loves a problem-solver. If the consultants fix what’s broken, everyone goes home. Likewise, music publishers don’t necessarily want to remove the logjams in the licensing system. Those logjams are largely the reasons publishers exist in the first place. Simplifying a system is rarely good news for the middle-man. And publishers are the ultimate middle-men between songwriters and the people who actually use the music the songwriters create.

If one agent is responsible for issuing all of the mechanical and sync licenses according to a pre-set fee structure for a particular composer’s catalog, why would that composer need a publisher? After all, the agency is presumably already taking some sort of fee for its role in the process. Why would a songwriter also give a publisher a 25% share of the income for the next 15 or 30 years? To do what? In a more precise example—if the whole music licensing world worked in roughly the same way as ASCAP and BMI do with performing rights, would future songwriters have any real need for a publisher?

Skeptical music weasel that I am, I don’t anticipate that the NMPA membership will be rushing out immediately to champion the cause for blanket licensing. Still, realist that I am—it’s probably worthwhile for those in the publishing game to take a glance at the inevitable and ask, in our customarily self-interested way:

What does this mean to us?

Three quick things to ponder, as our livelihood passes before our eyes:

1. Age before beauty.
The older publishing catalogs, particularly those built in the Fifties, Sixties and even Seventies, when you could still manage to obtain a full-publishing share for life of copyright , are looking even better. They won’t be doing deals like that no more.

2. Quantity over quality.
It’s hard to see how a blanket licensing system will not in some way reduce the viability of building a successful business around a few isolated “big copyrights”. While the sync fees may come down for any one individual copyright, the theory is that the money will be made up in volume. It may well be true, but it’s a system that favors the major publishers, who own thousands of licensable songs, rather than a small independent with one classic in the catalog.

3. The end of the paper tiger.
If licensing problems disappear, administration is no longer a service for which songwriters will pay. That means it’s all about advances (as if it weren’t already) and creative services. Songwriters may still need a bank, at least to keep them alive in the early stages of their career. They may also still need someone to help them jump-start their career and keep it moving—pitching songs, setting up collaborations, and finding opportunities for their music. At least, I hope they will.

Otherwise I’m going back to my consulting business.

Follow me on Twitter @EricBeall

    Problem solving IS the problem? I’ve never thought of that angle.

    I find it interesting that time and time again I see ‘quantity’ winning over ‘quality’. Although I can understand both sides of the coin on this topic.

    Thanks for the post.

    Damon Cisneros

    Hey Eric! Thanks for an informative, illuminating post (as always)!

    Here’s something I don’t understand: blanket fees have always seemed to me like a Band Aid; a relatively simplistic solution that attempts to bypass the problem of being unable to correctly measure a myriad tiny revenue streams, by covering them with a ballpark sum that seems appropriate to all sides concerned.

    However, in the era of Sound Exchange, exact play counts and analytic tools which allow even end users (let alone the big guys) access to precise market data, why is the industry still considering ballpark-mentality business models? Isn’t it entirely possible to fairly pay those licensing fees based on precise analytics, rather than throw blankets over the issue?

    At any rate, thanks again for sharing your insights – looking forward to your next post!

    Michael Hazani

    Hi Eric,

    Realistic expectations and candid as usual. That combination is hard to find elsewhere. Still chasing the long tail with a mobile recording studio.

    Thanks!
    Quincy

    I’d be interested to read more about Israelite’s Section 115 Reform idea if you know any online resources.

    Quincy:

    Always great to hear from you. Thanks so much for weighing in and for your long support of the blog!

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