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In Debate Over Compensation, Songwriter Equity Act Is Off-Key | Commentary

There’s ample reason to view the recently introduced Songwriter Equity Act with a healthy dose of cynicism.

First and foremost, a key provision of the legislation seeks to raise the cost of doing business for online music stores and on-demand streaming services at a time when both music platforms are engaged in a fierce battle with pirate websites that provide access to unauthorized content for free.

In addition, in a bit of self-dealing, the legislation proposes to eliminate a provision in the Copyright Act regarding the admissibility of evidence in federal “rate court” proceedings. Even though, a little more than a decade ago, the very same provision was enacted entirely at the request of representatives of the songwriter community, over the objections of digital radio service providers.

In addition to these shortcomings, the Songwriter Equity Act also provides a forum for certain interests to distort the true universe of songwriter and publisher compensation and the flow of music royalties throughout the modern music industry.

For their creative efforts, songwriters are primarily compensated in two ways: with performance and mechanical royalties. Mechanical royalties, for the most part, are paid when a recording of a song is sold — typically in the form of a CD or music download. Performance royalties, in comparison, are generated when a recording of a song is streamed by your favorite online music service provider — or when it’s played on AM/FM, cable or satellite radio. Performance royalties are also generated and paid to songwriters when their music is played in bars and restaurants, by cable and television networks, concert venues — and even by online video distributors such as Netflix.

The sum of these performance royalties can add up rather quickly. In fact, a recent New York Times article reported that BMI — a leading intermediary that collects performance royalties on behalf of about 45 percent of the nation’s songwriters — took in a record high of $944 million in revenues last year; a figure representing a 5 percent increase over 2012 receipts. The nation’s other leading performance rights organization, ASCAP, reported similar revenues and growth during the 2012-2013 period.

Despite these impressive figures, a handful of representatives of the songwriting community have recently taken issue with the current performance royalty system. In a recent Wall Street Journal editorial, for example, it was pointed out how over the course of a three month period in 2012 Linda Perry — a well-known songwriter — was only paid $349.16 in performance royalties after a popular Internet radio service provider streamed her composition (the song “Beautiful”) more than 12 million times.

Important details omitted from the editorial are rather striking. For example, the editorial fails to mention that around the same time that Perry received payment for the streaming of her composition, a payment of roughly the same amount was given to her music publisher who shares a contractual ownership in the composition — and who likely paid Perry a hefty advance for the privilege to collect that money.

The article also fails to acknowledge that prior to receiving her 50 percent share of the net royalties — the entire payment from the service was first funneled through an intermediary acting on Perry’s behalf that retained an industry average of 11 to 13 percent of the entire payment — prior to channeling the remaining balance to Perry and her publisher.

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