It Is Time for Performance Royalty Reform – Soundstr is Here

Last week, my company took a monumental step toward protecting the rights of musical artists and writers, by acquiring Soundstr, technology that, in a nutshell, will help reduce music licensing costs in bars, restaurants, radio stations, and many more businesses, and will in turn also help increase the number of businesses who are licensed.  This has been a passion project for me for some time, driven from personal experiences and my almost lifelong desire to help musicians.  This is the story of the more recent events.

About two years ago, I had simply had enough.

It seemed like every other day, my venue was getting calls, letters or even visits from every single one of the three major US PROs – performing rights organizations.  The message was clear:  agree to a “blanket license” and pay a large sum of money every year to each of the three major PROs, or face a potential copyright lawsuit claiming tens of thousands of dollars in damages.  As many bar and restaurants will tell you, this is a heavy-handed tactic that has been literally going on for years, and scares the hell out of most owners and even puts some out of business (yea, that helps musicians).  But unlike many of my fellow bar or restaurant owners, I’ve been working in the music industry for a long time, and had a good bit of knowledge about rights management, through my work with DiscLive.  So the first question I asked these folks was “how do you know what songs are being played on a nightly basis, and how do I know that the money I am paying actually goes to the artists and writers that deserve it?”  The answer was always “that’s not my department,” or something along the lines of “we have a formula that calculates that.”  In other words, they have absolutely no clue.

And that’s not good enough.

As I learned, there is and was no way for the PROs to truly know what is being played in these businesses, so they just go for the throat and demand a blanket license, which means that the business must license that PRO’s entire catalog in the off chance that a work under their stead is played.  As noted, this is already a huge issue with business owners, and several organizations such as the Fairness in Music Licensing Coalition, to which my company VNUE is aligned, are working to change this.  An even bigger issue, I learned, is that artists that I personally know and associate with have not been paid for public performances of their work.

At. All.

So, already frustrated about the repeated calls and harassment by these organizations, I used my technology and process engineering background, wrote a patent for a system to solve this problem, filed it with the USPTO, and set about starting to publicly evangelize the need for a change, all while working on the technology design for our solution.  Along the way, I was introduced to the FMLC (above), and in turn, they introduced me to Soundstr.

Soundstr is a Cincinnati-based startup company that was started by Eron Bucciarelli-Tieger, who gained notoriety by being a founding member of platinum selling band Hawthorne Heights.  Amazingly, much like I had approached this issue from frustration of how my venue was being harassed, Eron had approached this same problem from a different angle – from that of the artist – and had in fact already come up with some nifty devices that go in venues to track music plays.  He found out he was not being paid from his public performances.  And, frustrated from the “non-answers” he was getting, he also decided to do something about it.

Call it an alignment of the stars, or possibly a burgeoning rocket sled that cannot be stopped, but after several months of work, Soundstr is now part of the VNUE family, and we are about to seriously blast off with a combination of the Soundsr Pulse™, pictured below, and the additional system designs and processes in our patents.

image-placeholder-title

Soundstr Pulse™

And all of this gets me very excited.  Not because this is going to be ridiculously big – and it will – but moreover because I know that we are about to inject a massive change into an industry that hasn’t budged in 50+ years.  In fact, the basic “general licensing” model has been around since 1847!  According to research conducted by Soundstr, in that year, French composer Ernest Bourget, along with other composers, witnessed their music being used without compensation in a popular cafe.  They successfully sued and won a royalty settlement.  In 1851 they founded SACEM, the world’s first PRO.  In 1914, one of the first big American PROs was founded, ASCAP.

Now there is no question that PROs do a good thing, by helping to protect artists rights.  However, there is a lot of murky accounting that no one really knows about and a big part of that involves general licensing royalties ($3B globally by the way).  Remember – this is what the PROs charge for playing music in music venues, bars, nightclubs, coffee shops, etc.  And this needs to be updated to 21st Century standards.

Here is a great example of the problem.  It stems from the main issue that if the song is not being actively played on the radio and/or the artist is not in the top touring artists list as published by several industry trades, the songwriters and artists won’t get a royalty for their music being played in a venue or business (again, murky algorithm alert).  Soundstr recently conducted a small study to highlight the problem.  They surveyed 12 businesses over a two week period, to see what music was being played and identified almost 3000 songs.  They compared that data to Nielsen radio charts for the same time period.  Only 19% of the music being played in the venue was actually getting any radio airplay at all (this is also not weighted data, mind you).

This means for the whopping 81% of the music being played in the businesses, the songwriters and artists were not being compensated.  And some of these were big artists.

Study

The problem extends further too, into radio itself.  Most stations are not actively monitored, and some PROs only take a small sample of data every quarter to justify the blanket license fee that is paid by the station to the PROs.  This fee can be up to 3-4% of the stations gross revenue – a huge figure in some cases (as in five figures or more).  The issue is that without knowledge of exactly what music is played, combined with the exact percentages of each song controlled by the PROs, it is highly likely that the PROs are charging for music they may not control and therefore justifying a higher rate to each station.  This is particularly true in the case of new, innovative PROs popping up taking market share away from the more established ones.

And, like the problem with venues, these fees are not properly applied to the songwriters and artists who deserve it, and stations are in some cases vastly overcharged.  We recently signed our first radio deal, and expect to roll out in July.

To be clear, our goal at VNUE is not to go to war with the PROs, but rather, introduce technology that will provide a much needed end-to-end transparent solution to this problem.  In turn, the goal will be to reduce operating costs for the PROs, reduce licensing costs to venues, businesses, radio stations, etc., and further, by having a lower price point based on actual usage rather than a blanket fee, encourage more businesses to become licensed.  And most importantly, ensure that the proper writers and artists are being paid.

It can be estimated that probably only about 20-30% of applicable businesses are properly licensed, even though the PROs typically claim more market share.  What that means is that there is a huge amount of revenue out there for songwriters and artists, just waiting to be tapped.  Our solutions will help to drive this additional revenue, and hopefully, remove the antiquated method of threatening lawsuits to become properly licensed.

In theory, Soundstr should be treated like a utility model – just like the gas, electric or water, which is a pay-per-use system.  Music is intellectual property and if it is a service, it must be paid for – fairly, and the same way: on a per-use basis.  But those who create it MUST be compensated, and there MUST be transparency.

So if any of you musicians or writers are reading this, keep this in mind:  If you have a song that was once on the radio, or popular enough for other bands to cover it, guess what?  You probably aren’t being paid.  Even if you have songs that play on the radio frequently, there is a good chance you are not getting paid.  Do you think the writers of “Mustang Sally,” notably probably one of the most covered songs ever, are getting paid properly?  Probably not.  But we don’t know for sure, because there is zero transparency.

To facilitate real change, you musos need to be vocal about this problem, because even with our technology, and our evangelism, this is going to be a mountain to move.  We must move it together.

You will be seeing a lot more of Eron and I in the coming months, as we continue our quest to get that mountain on the move, and I hope to hear your voices add to the chorus.

For more information about the Soundstr tech, and how it could help you as a musician or a venue/business owner, you may email “contact” @ “vnue” dot com.

Graphic source:  Soundstr

 

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