Happy customers are paying customers and what better way to encourage happiness than a little music. But if you get what you pay for, then shouldn’t a shopkeeper pay for music?
BMI whole-heartedly agrees. They emerged as a way to collect royalties from radio stations, but they also assess payments from bars, restaurants, bowling alleys, stores and others that might play an iPod or a radio, use a CD player or a karaoke machine, or feed a jukebox during the course of business. BMI and its peers organize permission to play music by selling each of these businesses licenses. For every dollar they collect, they disburse eighty-seven cents in the form of royalty payments to artists. If the dulcet tones of the latest tween sensation sweetens the atmosphere, encourages people to linger, and sells a few more hair-clips, then perhaps it is worth the money. The shopkeeper is happy. The artist is happy. But is the right artist happy?
BMI knows that music is valuable. They know to whom it is valuable. But they don’t necessarily know who is delivering the value. Radio stations have playlists. They can be publicly monitored for accuracy. But what the local wine bar or Italian restaurant plays isn’t. Instead, BMI applies statistical analysis to predict what’s playing on those iPods and cd-players, and it’s based on what they know from the local radio stations. It seems like a reasonable approach. Use local radio play to predict what people listen to locally, but it belies the reason why one might play a cd or use an ipod.
Shopkeepers don’t play ipods or cd’s because they want to replicate the radio’s playlist. They play them because they want to replace the radio’s playlist. Not only are the advertisements tedious and distracting, few stations stray from the bland, hit-based formats of classic rock, urban, hot and light adult contemporary, among others. It’s no wonder that many businesses want to introduce and curate their own mix of artists and entertainers to delight and entice their customers. If they want to take the extra step of licensing the music, however, BMI won’t remunerate the relevant artists. Instead, it will fall back on the statistical samples from local radio playlists, and rather than support the artists specifically responsible for enhancing the business owner’s experience, the same bland hits from the radio receive the credit and the royalties. BMI enriches major artists at the expense of smaller artists.
BMI has an incentive to benefit major artists disproportionately. While a small act has no market power, a major act does. Justin Bieber and his label, for example, could presumably threaten to shift from BMI to ASCAP, and the shift would materially impact BMI’s finances. A defection from one major artist might lead to defections from others, and with the loss of scale, the thirteen cents of each dollar designated for operating expenses might increase to fourteen cents or fifteen cents. BMI has correspondingly organized itself to find ways to sell more licenses, drive more revenue to hit-making acts, and shift more wealth to major artists. If it’s at the expense of smaller acts, no matter.
One might suggest that surveillance would provide transparency and lead to a more equitable distribution. BMI could provide a better accounting of playtime for any particular song or artist. If they start counting, then they may find more dispersion among acts represented than anticipated in unsupervised settings, such as restaurants, bars, bowling alleys. Better counting might lead to an adjusted distribution, shifting the balance toward smaller acts. But if it impacts Justin Bieber and his label, they may choose to raise prices, so they can maintain or increase revenue. Rather than redistributing the same volume of revenue, BMI can either raise prices for their licensees or maintain the same distribution as before, perhaps increasing the amount designated for Bieber and his label, just to keep them happy. Surveillance, aside from its intrusiveness, doesn’t necessarily solve for the market power of the large acts.
Album sales plummeted from 45.4m in a week in December 2000 to 5.7m in a week in May 2009 and 4.9m in a week in May 2010. Soundscan’s data suggests that 2010 album sales will be the lowest on record. With digital track sales in the neighborhood of 20-25 million a week, even if each song equated an album, the combined sales-figures pale in comparison with December 2000’s rate.
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6 October 2010 at 8:52 am
Jerry Walter
“With no relief in sight, BMI will experience more pressure to raise revenue for labels and artists. ”
Your statement pasted above is just wrong. What you fail to understand is that BMI doesn’t raise money for record labels. Album sales have nothing to do with BMI’s revenues. BMI’s revenues for public performances of music are paid to songwriters and music publishers. Even recording artists are not compensated by BMI unless they are songwriters owning copyrights. Furthermore, BMI already tracks performances in the top 300 concert tours each quarter, which includes many club and small venue performances. In the near future, even the songwriters who perform in the smallest venues will be compensated. Of course, since radio and TV pay the highest performance licensing fees to BMI, those songwriters whose music is played by broadcasters will always receive a much larger piece of the royalty pie. The small venues make up only a small fraction of the revenue BMI collects. BMI’s royalty distribution is much more equitable than you think.
6 October 2010 at 10:23 am
stilltitled
Thanks for dropping by, Jerry.
I’m happy to adjust the statement that you take issue with and remove the word “labels.” To the extent that they are also publishers or otherwise eligible for royalties, would make the statement true according to your criteria, but if you feel that there is sufficient ambiguity, I am happy to simplify the statement to contain only the word “artists.”
No doubt, BMI and other entities like it provide an important, though challenging, service. This post benefits from your intimacy with its operations and details on future plans. Clearly radio-play and concerts constitute the traditional and most substantial components of the revenue BMI collects, and it makes sense intuitively that small venues, such as bars, bowling alleys and others playing recorded or broadcast music represent the minority. It would be very surprising to see evidence to the contrary, but perhaps the future plans that you intimate might reverse that balance. I wouldn’t want to speculate, either way, but I would be interested in your perspective.
BMI has the good fortune to incorporate sophisticated supervision techniques for both radio-play and large-venues. These make for a rich and transparent record of the use of copyrighted material, collection of revenue and disbursement of royalties. Unfortunately, as is commonly understood, these tools are unavailable for similar application in the numerous bars, bowling alleys, and others playing recorded and broadcast music. BMI understandably employs statistical techniques in the interest of an equitable distribution of royalties. Regardless of how effective these are, however, all would agree that the market would benefit from the same transparency as is available within the core market, especially considering the market structure and period of transition in which we find ourselves. But circumstances as they are, this capacity appears to be unavailable at present. Though it would only cover the minority of the revenue collected by BMI, it would certainly bolster BMI’s reputation for an equitable distribution of royalties.
Separately, if this is the same Jerry Walter as has appeared elsewhere on this subject, your participation in comment-threads throughout the internet, is pervasive and impressive. Kudos to you and your efforts. The comments are helpful and informative. I didn’t realize that the disbursement rate declined from 88% to 87% of revenues collected since December 21st, 2009.
Thanks again for coming by