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.

The permissioned performances bundled and sold by BMI to any given business promise a solution to dismal sales. With no relief in sight, BMI will experience more pressure to raise revenue for labels and artists. BMI representatives have a compelling service, but it’s the bundle that makes it powerful. Its power derives as much from the large acts as the multitude of smaller acts, and the sheer volume of small acts contribute to BMI’s overall strength. Whether BMI’s efforts ultimately reflect a fair distribution of revenue is another matter.
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