These groups are very important to the music business because they connect people who make music with people who use that music. They make sure that artists get paid fairly for their work.
In the past few years, there have been big changes in the music world. Streaming music online has changed how we listen to music, and PROs have had to change with the times quickly. Plus, innovative platforms like Royalty Exchange have also come on the scene to give songwriters and producers more ways to make money from their work.
This article will take the mystery out of PROs by explaining what they do, why they're important, and how they're changing in the digital world. We'll talk about the most important groups in the field and how they affect both people who make music and people who listen to it. You will fully grasp how PROs keep the music business going and why they are important to everyone in it by the end.
What are PROs?
Performance Rights Organizations (PROs) are very important to the music business because they connect people who make music with people who listen to it. Let's learn more about what they do, why they exist, and what kinds of rights they oversee.
PROs fulfil various important roles:
Purpose and Function
Professional organizations (PROs) make sure that songwriters, composers, and music producers get paid fairly when their music is played in public. This includes shows on the radio, TV, streaming services, live venues, and even in places of business like shops and restaurants.
PROs fulfil various important roles:
- Licensing: Businesses and groups that want to use music in public can get rights from them. This makes it easier for people who use music to get a license that covers a lot of songs without having to negotiate with each individual rights holder.
- Royalty collection: PROs collect fees from licensees based on how much they use their music. The income that will be given to people who own the rights will come from these fees.
- Monitoring and tracking: PROs keep track of where and when music is played in a number of different ways. To do this, they look at radio and TV playlists, use digital fingerprints for streaming services, and collect setlists from live shows.
- Royalty distribution: PROs give royalties to their members based on the information they gather. Factors like the number of plays, the type of use, and the license fees received can make the distribution formulas very complicated.
- Advocacy: PROs often fight for the rights of music artists at the legislative and policy levels, making sure that they get paid fairly in a digital world that is always changing.
Types of Rights Managed by PROs
Public performance rights are the main responsibility of PROs, but it's crucial to understand how these relate to other types of music rights as well:
Public Performance Rights
This is what PROs are all about. These rights cover any public performance of a piece of music, whether it's live or on tape. Among these are:
- Broadcasts on radio and television
- Live shows in public places
- Music played in stores
- Online sites that stream videos
Mechanical Rights
These rights don't usually belong to PROs, but it's important to know that they allow the copying of a musical work, like on CDs or digital files. PROs may work with mechanical rights organizations in specific areas.
Synchronization Rights
These rights cover how music is used in movies, TV shows, and ads. PROs don't actually handle sync rights, but they do get paid performance royalties when synced material is aired or streamed.
Digital Performance Rights
As digital streaming has become more popular, some PROs have added collecting digital performance royalties to their list of services. However, in some countries, like the US, this job is managed by different organizations.
How PROs Works
Performance Rights Organizations (PROs) are very important to the music business because they handle the complicated process of receiving and giving out royalties for public performances of musical works.
For creators, it ensures they can maximize their earnings and understand their rights. For users, it helps them comply with copyright laws and support the music ecosystem.
As the music industry continues to evolve, particularly with the growth of digital platforms, PROs are adapting their methods to ensure fair compensation for creators in an increasingly complex landscape.
To understand how PROs help both music artists and users, let's look into how they work in more detail.
Royalty Collection Process
Royalty collection is an important part of the music business because it makes sure that artists and people who own the rights to their work get paid for using their work. Here are the main parts of this process, such as the types of acts that are included and the ways that music usage is tracked.
Types of Performances Covered
PROs get paid royalties for a lot of different kinds of public acts, such as
- Radio shows (on the air, on satellite, and on the internet)
- TV shows (including ads and music played in the background)
- Live shows in places like bars, restaurants, music halls, and more
- Streaming services (you can connect with them or not)
- Music playing in the background in places like shops, gyms, hotels, and more
- Digital record players
- Hold music on telephone systems
When artists sell records or digital downloads, they usually don't get paid royalties for the mechanical rights. The same goes for when artists use music in movies, TV shows, or commercials. These are usually taken care of by different groups or publishers themselves.
Methods of Tracking Music Usage
PROs use a mix of traditional ways and modern technology to keep track of how music is used:
- Digital fingerprinting: This technology looks at sound waves to figure out what songs are being played on the radio, TV, and online services.
- Cue sheets: TV networks and movie studios give detailed lists of the songs they use in their shows.
- Live performance reports: Setlists for concerts and other live events are sent in by venues and acts.
- Sampling: Statistical sampling can be used by PROs to get an idea of how much music is played in smaller settings or places that aren't checked as often.
- Reports made by users: Some PROs let members report their own acts, which is useful for smaller events or venues.
Licensing
Licensing is very important because it makes sure that people who own the music rights get paid when their work is used. Performing Rights Organizations (PROs) offer several types of licenses to accommodate different music users:
- Blanket licenses: These allow licensees to use any music in the PRO's repertoire for a flat fee or percentage of revenue.
- Per-program licenses: Typically used by TV stations, these cover music used in specific programs.
- Per-segment licenses: Similar to per-program licenses but designed for radio stations.
- Venue-specific licenses: Tailored for live music venues, restaurants, and other businesses.
- Digital service provider licenses: Customized for streaming platforms and other digital music services.
Any entity that publicly performs copyrighted music needs a license from a PRO. This includes:
- Radio and TV stations
- Streaming services
- Live music venues (concert halls, bars, restaurants)
- Retail businesses playing background music
- Hotels and resorts
- Fitness centers and gyms
- Event organizers (for conferences, weddings, etc.)
- Digital jukebox operators
- On-hold music services
Distribution of Royalties
The distribution of royalties is a crucial process that ensures songwriters, composers, and publishers receive fair compensation for the use of their musical works. This complex system involves careful calculation and timely payments to rights holders.
How Royalties Are Calculated
The calculation of royalties is a complex process that varies between PROs but generally involves:
- Performance frequency: The number of times a song is played or performed.
- Audience reach: The size of the audience for each performance (e.g., radio station listenership, venue capacity).
- License fees collected: The total amount of money collected from licensees.
- PRO-specific formulas: Each PRO has its own algorithm for weighing various factors.
For example, ASCAP uses a system called "credits" to calculate royalties. Each performance is assigned a certain number of credits based on factors like the type of license, audience size, and time of day. The total credits for all performances are then used to determine each member's share of the collected royalties.
Payment Frequency and Methods
PROs typically distribute royalties on a quarterly basis, although some offer more frequent payments for certain types of performances or high-earning members. Payment methods include:
- Direct deposit to bank accounts
- Physical checks mailed to members
- Electronic payment systems (e.g., PayPal)
The vast majority of PROs give their members thorough statements that explain where their royalties come from and how they were calculated. Some PROs, like BMI, give their users access to online portals where they can see real-time data and analytics about their earnings.
The time between when a show happens and when royalties are paid can be quite long.
Usually, it takes between 6 and 18 months. This is because it takes time to gather and process performance data, get paid by partners, and figure out how to distribute royalties.
Key PROs in the Industry
Performance Rights Organizations (PROs) are essential entities in the music industry that collect and distribute royalties to songwriters, composers, and publishers when their music is played publicly. This section will explore the major PROs in the United States and some notable international organizations.
Major PROs in the United States
In the United States, there are three main PROs that handle the important task of collecting and distributing royalties for songwriters, composers, and publishers. Let's take a look at each one:
ASCAP (American Society of Composers, Authors, and Publishers)
ASCAP, founded in 1914, is one of the oldest and largest PROs in the United States. It represents over 960,000 members and manages more than 19 million musical works. ASCAP continues to be known for its strong advocacy for songwriters' rights and its financial performance.
Key features of ASCAP:
- Non-profit organization
- Delivered record-breaking financial results in 2023 with $1.737 billion in revenues, up 14.1% from the prior year
- $1.592 billion available for distribution to members in 2023, an increase of 14.7% over the prior year
- Provides detailed performance data through its Member Access portal
BMI (Broadcast Music, Inc.)
Established in 1939, BMI remains one of the largest PROs in the United States. It was initially created to offer an alternative to ASCAP and to represent genres like country, jazz, and rock & roll that were underrepresented at the time.
Key features of BMI:
- Non-profit organization
- Free membership for songwriters and composers
- Known for its BMI Awards, recognizing top-performing songs in various genres
SESAC (Society of European Stage Authors and Composers)
Despite its name, SESAC is an American PRO founded in 1930. It's the smallest of the three major U.S. PROs but has grown significantly in recent years. SESAC is unique in that it's a for-profit organization and operates on an invitation-only membership basis.
Key features of SESAC:
- For-profit organization
- Invitation-only membership (no public application process)
- Owned by private equity firm Blackstone
- Has expanded globally and acquired 11 companies over the last eight years
- Now operates as a "scaled, global, multi-line music infrastructure company"
SESAC has diversified its business model, with performing rights now accounting for about 60% of its revenue, church music resources for 20%, and audiovisual music and sonic branding for 13%.
Notable International PROs
While the U.S. has three major PROs, many countries have a single national PRO. Some notable international PROs include:
- PRS for Music (UK): Represents over 170,000 songwriters, composers, and music publishers. In 2023, PRS collected a record £1.08 billion in revenues and distributed £943.6 million in royalties.
- SOCAN (Canada): Now represents over 190,000 members. SOCAN collected $523 million in total royalties in 2023, distributing $442 million to music creators and publishers.
- GEMA (Germany): Represents over 85,000 members in Germany and over 2 million copyright owners worldwide. GEMA recently held its 2024 General Assembly, focusing on electing new Supervisory Board members.
- SACEM (France): One of the world's oldest copyright societies, founded in 1851. In 2023, SACEM collected €1.49 billion and distributed more than €1.23 billion to its members.
Conclusion
The music industry is changing fast, but Performing Rights Organizations (PROs) are still very important. They protect musicians and make sure they get paid fairly for their work. Even though new technology and changing markets create challenges, PROs are adapting and staying crucial in helping the music world thrive.
At the same time, new platforms are popping up that work alongside PROs. For example, Royalty Exchange is the premier marketplace where musicians can sell parts of their royalty rights to investors. This gives musicians another way to make money from their music while still owning the rights to it. It shows how the industry is finding new ways to do things and gives creators more choices in managing their income and elevating their careers.
Looking ahead, we'll likely see traditional PROs and platforms like Royalty Exchange working together to shape how music rights are managed. This brings both challenges and opportunities for artists, but ultimately gives them more control over their finances. On Royalty Exchange you can sign up as an investor and search through thousands of music catalog listings that include producer and songwriter royalties to some of the biggest songs of the past few decades. Discover why song royalties are one of the best investments to grow your wealth in 2024.
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In this changing world, PROs will keep playing a key role by adjusting their services to meet musicians' changing needs and helping ensure a stable future for the music industry.
