- Tuesday, Apr. 5, 2016
To Whom It May Concern,
There’s been lots of chatter lately about shrinking revenues for artists and creators in the music industry, but there’s one segment of this issue that hasn’t been mentioned at all. For some reason, performance royalties for music in advertising has always been the little stepchild of the music royalty world.
Fifteen years ago, I noticed this stepchild status as a niche business opportunity, and started my company, Manage Ad Music. That’s right -- a company solely focused on publishing and administration of performance royalties for music in commercials. We work on behalf of advertising agencies, music production companies, production music libraries, with the largest number of our clients being composers.
Revenue streams familiar to advertising music folks include:
● production fees for an original piece of music on a 30-second spot with a national brand [range: $20,000-$30,000];
● sync licensing fees for music from production music libraries for that same national spot [range from $2,000-$10,000]; and
● sync licensing fees for recorded music of a band or artist [range $1,000 to $1,000,000+, depending on artist’s cred].
As some music publishers and composers know, performance royalty revenues in the advertising market segment can be significant.
However, most publishers, labels and sync agencies rarely pay attention to the backend revenue that comes from performance royalties for advertising. This is vital revenue for the composers who write the music. It can also offer serious revenue for the music production companies, production music libraries, advertising agencies, and publishers who own the music.
So what kind of dollars are we talking here?
Top-earning commercials airing frequently on national broadcast TV earn quarterly as much as $15,000 in performance royalties. We’ve even seen national radio pay upwards of $3,000 per quarter for a popular spot.
These numbers are the high end of scale, but even regional, local, and not-so-frequently airing TV and radio commercials generate notable income at varying levels. Plus, contrary to popular opinion, local and regional performances of advertising can be very lucrative due to playing far more frequently.
Every little bit counts these days. Which brings me to the crux of my concern: Digital. Little bits. Everybody’s favorite whipping post.
We’ve all heard how standard digital performances generate a lot less money amongst the various revenue streams than broadcast TV and terrestrial radio.
For example, the opening theme to a popular Fox TV show generated $108 in performance royalties for 7,986 online occurrences (that is actually a high-end payout). By comparison, that same show generated a royalty payout of $5,727 for 1,166 TV occurrences.
Admittedly, we’re mixing apples with oranges because some of the TV occurrences were on national cable systems, which means each occurrence counts for many geographical markets. But you get my drift.
In the case of performance royalties for music in digital commercials, the payouts are minuscule. (BMI doesn’t pay on digital ads at all.)
While the current number of views for advertising on digital platforms doesn’t yet match broadcast TV and terrestrial radio, rightsholders should still be compensated for those performances.
Each year for several years, we’ve seen double-digit growth in spending for digital advertising performances, and in 2015 a decrease in spending for TV.
Per Deloitte’s 2015 “Digital Democracy Survey,” overall digital viewing of media has already surpassed traditional TV viewing.
Why, oh why then aren’t the Performing Rights Organizations (PROs) doing their jobs?
Let’s get specific.
This article is not a rant about YouTube. It’s about the myriad digital platforms where commercials play (a large majority of which play on YouTube).
YouTube is one of the few digital platforms where ASCAP and BMI are saying they are not going to pay advertising royalties.
There are stakeholders (composers, publishers, content producers) who are cashing in on YouTube. But that cash is coming primarily from ad revenue sharing, and not performance royalties.
In fact, ASCAP has taken the position that YouTube has direct licenses with advertisers for ad music performances, and therefore ASCAP has no obligation to pay performance royalties to composers and publishers for these performances.
ASCAP, BMI and SESAC have also told us that paying digital ad music royalties is “difficult” because they don’t have access to a large portion of the performance data.
In the case of YouTube, the PROs claim they aren’t getting any performance data for performances of 30 seconds or less -- which is the vast majority of advertising performances.
Currently, YouTube’s ContentID rights management system doesn’t even “detect” those everpresent ads that run before, during and after video content (affectionately known as pre-roll, mid-roll, and post-roll).
Yet how are composers, publishers, and artists to know if YouTube’s claim of direct licenses is true?
In our research-deep work as music royalty administrators, we have yet to see or hear of any direct licenses between brands or ad agencies, nor have we seen any composer Music Rights Agreements which give up their non-dramatic public performance rights via the PROs.
The music world is swirling in new paradigms. It is imperative that each of us impacted by these new dynamics be in conversation to ensure the integrity of these new paradigms.
That means every composer and publisher with music playing in commercials needs to contact their PROs and make clear they still want PROs to collect their performance royalties for all digital performances.
Lest music performance royalties as we know them disappear forever.