Music publishers: iTunes not paying fair share
Songwriters, composers, and music publishers are making preparations to one day collect performance fees from Apple and other e-tailers for not just traditional music downloads but for downloads of films and TV shows as well. Those downloads contain music after all.
These groups even want compensation for iTunes' 30-second song samples.
In the future, Apple may be required to pay licensing fees to ASCAP and BMI for the downloads of TV shows and films it sells.
(Credit: Apple)At a time when many iTunes shoppers are still fuming over Apple's first-ever increase in song prices, the demands by the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music Inc. (BMI), and other performing-rights groups, would likely lead to more price hikes at iTunes. For many, this would also undoubtedly confirm their perception that those overseeing the music industry are greedy.
For those reasons, composers and songwriters will struggle to sell their case to the public. But these royalty-collection groups say they're at the bottom of the music-sector food chain and aren't trying to gouge anyone. They say their livelihoods are threatened and wonder why movie studios, big recording companies, TV networks, and online retailers are allowed to profit from their work but they aren't.
"We make 9.1 cents off a song sale and that means a whole lot of pennies have to add up before it becomes a bunch of money," said Rick Carnes, president of the Songwriters' Guild of America. "Yesterday, I received a check for 2 cents. I'm not kidding. People think we're making a fortune off the Web, but it's a tiny amount. We need multiple revenue streams or this isn't going to work."
An Apple spokesman declined to comment.
ASCAP and BMI have their sights set on collecting fees from three main areas: downloads of music; downloads of films and TV shows, and 30-second song samples.
In case you don't know the lingo of music licensing, here are some important definitions. When music is performed in public, say at radio stations, restaurants, or sports stadiums, groups such as ASCAP and BMI collect fees and pass them on to composers and songwriters. This is different than a "mechanical" licensing fee, which is paid for the right to record or distribute a song (ASCAP and BMI don't collect mechanical fees).
"In the U.S. while we do get paid a mechanical (licensing fee) from ITunes, we are not getting any performance income from Apple yet," David Renzer, chairman and CEO of Universal Music Publishing Group, said in interview late last month with entertainment-industry publication, Encore. "(On iTunes) you can stream radio, and you can preview (tracks), things that we should be getting paid performance income for.
"Also, if you download a film or TV show," Renzer continued, "there's no performance (payment) and typically there's no mechanical (payment) either."
Taking their case to Congress
Apparently, the music industry can't obtain the fees through negotiations. They have begun lobbying Congress to pass legislation that would require anyone who sells a download to pay a performance fee, according to David Israelite, president and CEO of the National Music Publishers Association.
"If you watch a TV show on broadcast, cable or satellite TV there is a performance fee collected," Israelite said. "But if that same TV show is downloaded over iTunes, there's not. We're arguing that the law needs to be clarified that regardless of the method by which a consumer watches the show there is a performance right."
Israelite acknowledges that the legislative efforts to this point have produced little. And they won't produce a thing if Jonathan Potter gets his way.
Potter is executive director of the Digital Media Association (DiMA), a trade group that represents Web music services and media companies, such as RealNetworks, Pandora, and Apple.
He stresses two points.
First, publishers, composers and songwriters do get paid for music inserted into TV shows and movies. A production company must pay a "synchronization" fee for the right to include a song in any show or film. Then, once the show airs or the film is screened, the music guys will require a separate payment from TV networks or studios for performing the music publicly. Israelite confirmed this.
Critics argue this is double dipping.
Israelite makes no apologies. He says that synchronization and performance fees cover very different rights. To illustrate the point, he says not all composers receive money from TV and films. Say, for example, a TV show licenses a popular tune from singer Aimee Mann or the rock band The Fray. Those acts would likely be paid both sync and performance fees. But the person who writes the little-known background music heard during a fight scene may not see any sync money. That's because traditionally, composers of this kind of production music gave away sync rights in the hope they would make money from performance fees.
"This is really a fight about the future," Israelite said. "As more and more people watch TV or movies over an Internet line as opposed to cable or broadcast signal, then we're going to lose the income of the performance. For people who do production and background music, that's how they make their living."
Potter says he is very sorry for those people. But if their income is drying up--this was the second major point he wanted to make--their troubles are not the fault of iTunes, Amazon, or consumers.
"These guys are afraid that the business model is shifting away from public performances to a model of private performances," Potter said. "This is a turf battle. They are saying, 'The songwriters aren't getting paid.' Baloney. Songwriters are getting paid. They're paid sync rights and (mechanical) rights. They aren't getting paid for the public performance in a download because there is no public performance in a download."
Downloading count as a performance?
Whether downloading a song from the Web should be considered a performance is much contested. So far, the courts have sided with digital media companies.
In 2005, ASCAP entered into a rate-court proceeding to set licensing fees for the music services of Yahoo, AOL, and RealNetworks. A U.S. district judge for the Southern District of New York delivered a blow to composers and songwriters by ruling that downloading music from a Web store was not a music performance. On the other hand, the judge found that streaming music was subject to a performance fee.
"The songwriter gets a performance fee if the song is streamed without the video," Carnes noted. "But if it is downloaded within an audio-visual work like a movie we don't get a performance fee--same song, no money."
ASCAP has appealed the decision and arguments in the case will be heard later this year.
Of all of the efforts to collect performing-rights fees, few will likely be more controversial than trying to charge for 30-second samples. These are the previews iTunes offers so users can test drive a song and hear what they're buying. According to sources close to the company, iTunes has acquired licenses to offer the previews but hasn't paid anything for them. According to Renzer's comments, music publishers want that to change.
Potter from DiMA argues that copyright law protects Apple and music stores from being charged performance fees for in-store sampling.
"They are picking on Apple because they say Apple is making a bundle of money," Potter said. "But these companies should be thrilled that Apple and the other services are selling music and generating millions, maybe tens of millions, in royalties."
Greg Sandoval covers media and digital entertainment for CNET News. He is a former reporter for The Washington Post and the Los Angeles Times. E-mail Greg, or follow him on Twitter at http://twitter.com/sandoCNET. 
They were the ones that refused to license any of their music without being encumbered by DRM, which gave rise to the dominance of the proprietary Microsoft media player and Apple itunes formats. They expected that a proliferation of many different formats would mean that nobody was effectively in control, leaving them free extend their grip over "their" content. But they didn't think for a moment that Apple would dominate so decisively and therefore find themselves in a position to dictate terms to the RIAA.
So now the DRM has gone and been replaced by crack legal teams that seek to criminalize, harass and deny ownership of the music that we have all payed for and also lobby so that their outdated business practices can be enshrined in law.
If the music industry didn't insist on DRM in the first place then the behemoth that is iTunes would probably never have existed. So excuse me if I don't fall for the crocodile tears being shed by the mysterious industry source.
And I'm sorry if megabucks don't end up filtering into the hands of the tiny portion of successful artists, but human beings will still continue to make music, hopefully more worthwhile than this intensively farmed, conveyer belt crap we currently have thrust down our throats. The music "industry" is your biggest enemy right now.
Last I heard, Apple pays the 66% of all revenue from the iTunes store to the copyright holders/administrators. What they do with that is between them and the content creators, not Apple.
Just hearing such obsolete terms as "mechanical", "performance", "sync" gives me the creeps. The whole model of music and video compensation should be rethought or else we risk Hollywood and/or American music become irrelevant in favor of more modern oriented countries or people. (Remember the Tea Parties and trade restrictions from Europe to America, which concluded not in Americas submission, but Europe's ultimate demise in the 19th century after waging to many useless wars).
Let's move forward and start compensating artists at the beginning of the work creation and stop giving them money for corpses (music included in 80's and 90's TV series, Rickroling etc.) If they want to make money, they should create new works, not live on past successes. Nobody else does that and in the end, this money bleeding will ultimately hurt us all.
Remember a famous words attributed to Margaret Thatcher: (just replace <<socialism>> with the RIAA/ASCAP/BMI/SGA):
"The problem with <<socialism>> is that eventually you run out of other people's money [to spend]."
If the artists would band together (no pun intended) constructively, they'd be able to work out something with the successful portal system.
"Hey, I'm engineer and designed and built a bunch of bridges! Where's my 1¢ for every car that's driven over those bridges." Yeah, like that would fly with my boss - I'll get back to work now?
These people are nowhere near poor or poverty. When was the last time someone like Britany Spears, Steven Tyler, or anyone else involved in the business declared bankruptcy. When you live in a house that costs more money than some people even see in their lifetime, you have been paid for your work. No offense, but my money helped you buy a mansion 20 times the size of my own home, the least you could do is allow me to listen to the music bought as I want to and not be billed extra for it.
Unfortunately the people who get the big money, these CEO's, Musicians, and actors are getting rich off of the backs of regular people whom actually handle all of the hard work, "Note many artists don't actually write their own material." Without the prop guys, lighting people, screen writers, etc.... many songs and movies/TV shows would not exist and the Britany Spears of the world would have to get a normal job and live in the suburbs instead of overpriced Beverly Hills.
If this happens, music publishers will gain more money, and the money-mining record companies would not gain any profit. That would keep prices of iTunes songs down, while still allowing publishers to earn their much needed cash.
OTOH, you are right - the importance of record companies has diminished - but power is a hard thing to give up, yanno?
Someone has to promote and distribute the music, unless you expect the musicians to do it themselves.
And "Nobody needs to print music on CDs nowadays; the internet is the only way to go" is just sheer retarded. More people still use physical media than downloads
Add to that music blogs, internet radio and easy, instant access to music downloads, and you have a pretty compelling DIY distribution/promotion system. iTunes, Rhapsody, Microsoft will be just a few of the many distributors. The whole music business will irremediably have to change.
Maybe there are a lot of people buying physical media today, but how long will that last? Better get ready for the future... like the record companies are trying to do now... by freaking out.
But I do agree that the internet is a powerful sales medium and artists should indeed sell their own stuff. Record companies do seem like they're ripping off everyone. Once I read that "$1 per CD goes to the artist, if that" even though the CD can be $15, I was put off by the industry then.
Also within that sale price ($15-25), oh and take into account overseas where they pay $30 a CD and more, the cost to mass produce and distribute the CDs is around 4-5 cents per item at the current volumes. Nothing. Hell, you can go get your own CDs pressed, printed, boxed and put in CD artwork for about a few hundred dollars for around 1000 CDs. That's not even close to volume discount!!!! (That's about $2-$5 a CD....)
So where has all of the money gone for all of these years? Musicians? Producers? Song Writers? Nope.Nope, and Nope! Musician/Performers actually make their money by PHYSICALLY touring and promtional products and commercials and the like, NOT their music! Amazing eh? Look it up.
So, the system has always been broken, and the people who actual make and/or perform the music have to jump through hoops to get paid anything, so what has happened?
The Labels have been caught where they're not needed as much and therefore don't make as much money overall. Well, no way in hell THAT's gonna happen, so.....just start cutting what the "little guys" get paid like the writers. GRREAT IDEA!! Then they can ***** about company X about not getting paid.
Finally, if you got a check for 2 cents, that means the song sucked. Fortunately, the era is here where you get paid for what you produce. If you suck at an art, you don't get paid. If you make something the general public likes, you'll get paid (as long as you rope in your label). Finally, finally I enjoy the change because the media / "artists" / writers are finally getting paid what they're worth. Not a penny more.
This isn't about most of the individual songwriters. It is about large dinosaurs of record companies who are seeing the writing on the wall and are trying to stave it off as much as possible. I doubt that any increases they are asking for will really reach the royalty payments to individual songwriters.
These record companies and distributors have really lost their retail sense. You have to let the public see samples of your goods if you are going to sell them. If they start charging for 30 second song samples, they might as well hang it up.
Prince sued a lady for something pretty similar. She took a home video of her baby dancing to a Prince song in the background of the video. The video wasn't long enough for the whole song, nor could the whole song be heard really, but Prince sued the pants off the lady who posted it on YouTube, saying it violated his this and that and that he was due monies.
yea,they soon gonna charge people for humming songs too..
that's a good one LOL
I like Prince but when will the music industry remember that free publicity actually SELLS music, like the old days. And Prince is old-school, he should KNOW this! For the record, I'm old school too, so that's not an insult. But these days you cannot do ANYTHING without someone wanting cash, geez! I used to trade records and cassettes wtih friends, now technicaly that's "copyright infringement". Good grief!
Apple should show the data, if available, of song sales of people purchasing after listening to preview vs. purchasing after not listening and charge the artist/publisher/organization to have a preview of the song. Put the shoe on the other foot so to speak
So what's the real reason they don't like it? Well I guess it takes away the advantage the larger producers once enjoyed, when you're buying on iTunes the label's size is irrelevant, and they are less likely to sell a whole album (though Apple are trying to make them more attractive). It seems they don't really want to work WITH Apple, they want to cut Apple out of the process, what I don't think they quite understand is Apple are making it easy to legally buy music, if the labels succeed and each open their own store, finding music will be much harder (do you know which label your favourite band is signed to?) This can only lead to fewer legal digital purchases (and probably more piracy).
This is seriously double dipping. When a network airs something, or the radio plays something the consumer is an uncounted audience capturing 'free-to-air' signals who's cost is paid for via advertising. This performance fee is a fixed value as it is impossible to count how many people are tuned in at airtime
When we download something via iTunes it is like going to the store and buying a DVD or CD, and is countable through inventory management, the brick-and-mortar store and iTunes costs are covered by mark-up on the product. The fees to the music industry are attached to the PRODUCT which is measurable by how many of them were sold.
Streaming a sample of something should be considered the exact same thing as a network advertising "this Thursday on Grey's Anatomy". Does the network pay royalties on how many times they advertise an upcoming show? I would imagine not as they are trying to get as many viewers as possible to watch that time-slot in order to charge a higher premium on advertising during that show.
Maybe they'd like to charge car audio manufacturers a performance fee for every time someone pushes the "scan" button that switches stations every 10 seconds to help a driver find something appealing while not smashing into a pole.
They are already double dipping by charging internet radio stations, who have less listeners, more than they are charging free-to-air radio stations because internet streams can be counted. I don't see why their greed would stop there.
@dirtykid--Remember one thing. The time that a TV station uses to promote their shows, is missed $$ from other companies that would be advertising their wares. Otherwise, this 30 second royalty (if it were to be implemented) non-sense crosses a line that we will never see again because no one will know where it starts, since we don't know when to stop.
As somebody who has worked at a TV station for quite awhile, it's not what you just wrote at all. You see, the FCC mandates we only sell five minutes per half-hour of programming. The other stuff, like promos, station IDs, newbriefs, and PSAs (i.e. Energy Hogs) are "must-airs" or we'll get fined after an audit. We file quarterly tax returns and the IRS gives the company back the monies spent per slot we "volunteered" for the PSAs. The promos we eat the costs on, but still have to air these, as there is a format mandate we have to follow. In the end, we only have ten slots to sell, because the shows we syndicate have their own "commercials" attached, and these shows are called barter spots, as they give us the show for free for us to air. That cuts our five minutes to 2.5 and less slots to sell. If it's a network show, we get only 2 minutes. One minute at the top of a show, one minute at the end.
Why can't the music industry accept that ADVERTISING COSTS MONEY and get on with their lives... Didn't apple have to pay someone to make the 30 second clip? Do they not also pay the bandwidth used while we were downloading/streaming it? Maybe Apple should charge the music industry for those costs incurred :D
iTunes, who gets a more immediate, and direct correlation with their ads, has to cover similar costs (splicing or cutting clips, bandwidth, and analysis) also has to pay a broadcast license for having the ability to raise the sales of a band or song that might otherwise have gone unnoticed. How is that fair?
Every business save the music industry has managed to understand the symbiotic relationship between spending money on advertising (or for a better word LOOSING money), and increasing revenue on overall sales via brand recognition and product visibility. The music prefers to call it stealing when their product is reaching critical mass, while other industries call it 'a phenomenon'.
When other industries collapse they reinvent themselves, trim the fat, and even change direction. The entertainment industry cries to big brother for new regulations (read DMCA), accuses all of it's customers of stealing, and sues single mothers $220 000 for sharing 24 songs (lest we forget Jammie Thomas)!
They missed the boat on digital content out of fear of a new non-physical product that someone might make a copy of, so now they are going down kicking screaming rather than reviewing where they went wrong and correcting it. The music industry will continue, but will likely do so under new leadership (by the artists, of the artists, for the artists), with much less restrictive policies and politics. And with less fat-cats in skyscraper office taking the biggest cut, music selection will likely improve, as the bands nobody but radio stations and studios like make less in sales...
I would charge exactly the same amount that anyone thinks they should be paid to allow potential customers to listen to these samples so that they can make an informed purchase decision about whether they want to buy the song.
Problem solved. ;)
(On iTunes), you can stream radio, and you can preview tracks, things that we should be getting paid performance income for.'"
--David Renzer, CEO Universal Music Publishing Group
They are being paid; By the originator of the programing. Apple is merely broadcasting the signal. The station on the other end is paying the royalties. No programing originates from Apple.
This would be like charging every radio manufacture a performance fee for every radio they make.
Besides, why is Apple being targeted? There must be a 100 web applications, including from Microsoft, Live365, Real Networks, and others that "host" internet streaming, or broadcasting radio. What next charging elevator manufactures performance fees for the elevator music?
Still, this shows the ignorance of the the people at the "top" and how disconnected they are with culture and people.
To ask the consumer to pay to listen to an ad is plain commercial suicide.
So of course they're trying to extort a behind-the-scenes fee that leaves everything intact but gouges Apple.
iTunes is the nation's largest music retailer--and the record companies have already tried to destroy them by offering Amazon et. al. DRM free music while denying it to Apple.
Tthey need iTunes FAR more than it needs them.
Had they not propped up Amazon first with the imbalance, iTunes would have an even larger share of the market. But as it stands, we have people who HATE iTMS, blame APPLE for DRM, etc. and refuse to buy from there because they still believe that they must have an iPod to play the music, when as you state, this isn't true. Thank the labels for this, as if Apple had their way, there never would have been DRM in the first place at iTMS.
Music companies complain that music sales are down overall. Blame iTunes. Blame LimeWire and the Pirates. Don't blame MTV for not airing music videos at the right times. Don't blame the music companies for releasing the same stuff for, wow, almost a decade now without change. (BTW, MTV is lucky to have 1000 viewers at any given time.) Ergo, nobody is really buying music (teens just download the MP3 and don't care or want to care about it being "stealing" because everybody is literally doing it amongst them), and the music companies can't make any money.
TV networks complain that ratings are down. They claim they don't have the capital to spend on well-written, well-acted shows. Blame BitTorrent and the Pirates. Blame iTunes. Blame video games. Blame Internet. Don't blame them for putting "reality" shows on every channel, cable or network, and repeating these shows 1,000,000 a days with marathons and such. People can't find what they want to really watch, to they go to Hulu, they go to iTunes, they go to TV-on-DVD, they go to Xbox 360/PS3 services. With a lack of ratings, sponsors don't want to buy airtime, ergo, less money for the network. Well, let's see . . . put all original programming on the networks and delegate cable to the original niche and rerun channels they used to be until 2000? Wow, what a concept! The past has the answers for success of TV!
This is what happens when businessmen run the industries who have no love for the product.
So you can imagine, with the issues already put forward by Mattman704 and BtmnHatesRbn how the above would excaserbate the situation.
It'd be interesting to see how they determine if downloading a song is a performance. If I listen to the song alone in my apartment or via my iPod or Zune earbuds, is that considered a performance? I think not but I'm sure the publishers disagree.
Mandatory licensing, transparent and simple fee structure, take it or leave it. Someone needs to draft a counter to their legislation and get the debate out in the open. Otherwise, the music underground stays underground. What, you think I still buy CDs?
I'm telling you, the day that most songs on iTunes are over 99¢ is the day that iTunes is dead and piracy will spike, and the music industry is at such a death grip with iTunes, Amazon and Walmart, that if they raise their prices at all, their insuring collapse.
An entire song is 38 minutes, they sell it for .99 cents, so 30 seconds would be? Wow a whole 0.013 pennies... Great now they can get that house in the Bahamas like they always wanted, oh wait they have to give 50% to you because you think you deserve a cut you greedy music companies.
I hope they loose the case and Pandora can stream all they want because their service rulez the galaxy, and Apple at least made it simple enough that relatively noob users can download music and sync it to their iPod.
I'm not saying they don't deserve anything, but they certainly do not deserve so much because of the way they are...
And no, 30 seconds would not do justice to their typical song lengths. :)
Personally, most industries actually PAY to advertise - here, ASCAP is demanding a reverse of that... kinda stupid, don't you think?
Well, there is one that is 28 mins that I grabbed just within a second of searching. Really good song too. Many DT songs are 10mins+.
As I have been saying for years, one of the best ways to make more money would be to actually produce high quality content. Right now they produce an endless barrage of music that sounds the same except for the decreasing sound quality.
Many record companys are allready saving big bucks, in other words increasing profit by not physically printing CDs and artwork because of selling songs in e-tailers. Why not share a litle bit more of that profit with these guys.
No wonder the record industry is so screwed up. Those greedy A*holes!
Makes me want to get everything in midi format =\
The RIAA isn't a government agency and isn't entitled to taxes collected through the IRS by Congress if there's a tax on blank recording mediums. Also, why would the RIAA get monies for DVD and VHS formats, and those are primarily formats for videos and not music.
I know what you want is to punish the RIAA, but opening your mouth and spewing buttbreath on the facts isn't helping, and makes you sound extremely ignorant. Check up on how things work. There isn't any law in the USC to tax blank recording media, and such a tax is a state-by-state issue under Amendment 10 of the Constitution.
In all seriousness though, that 2 cents multiplies awful quickly when you're talking about millions of 30-second song snippets being played daily.
- by thelemurking September 17, 2009 6:19 AM PDT
- Oh come on now... I believe Apple pays the record labels right? Shouldn't these people be going after the record labels for their money? iTunes is a distributor... the labels are the ones who always screw the aritsts!
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