Sony/ATV set to ditch licensing firms over streaming dollars

Richard Morgan NY POST.com 10/12/14

The No. 1 music publisher has decided to go it alone in the battle to boost digital royalties paid to songwriters.

Sony/ATV Music Publishing — whose catalog includes Beatles classics along with Taylor Swift’s current chart toppers — plans to dump the industry’s oldest and biggest performance-rights organizations by the end of the year, The Post has learned.

Bypassing BMI and ASCAP, which collect royalties for songwriters when their tunes are played on the radio, streamed online or piped into a store, would allow Sony/ATV to negotiate directly with services such as Pandora, Spotify and YouTube.

Songwriters complain that BMI and ASCAP are bound by outdated government rules that result in paltry royalties from digital outlets. The pain is especially acute as CD sales and digital downloads are in decline, while streaming services are the only area of growth.

In July, Sony/ATV Chief Executive Martin Bandier, in a letter to his songwriters, warned that he might withdraw from ASCAP and BMI so he could better fight for higher streaming royalties.

Sony/ATV already tried a partial pullout from the professional-rights organizations, forcing companies like Pandora to negotiate directly for a license to stream music.

Pandora sued, arguing that music publishers couldn’t make partial withdrawals from BMI and ASCAP, which are bound by decades-old consent decrees with the Department of Justice that determine royalty rates.

The federal courts agreed: Either the publisher’s entire catalog of licensable songs remained with the licensing groups or none did.

Sony/ATV has appealed the courts’ all-or-nothing rule and is imploring the DOJ to review consent decrees it considers antiquated.

As a result of the court rulings, the royalty rate Pandora pays Sony/ATV reverted to the 1.85 percent by decree from the 5 percent that Sony/ATV exacted through direct negotiations.

No. 2 publisher Universal Music Publishing Group is also anxious to enter into direct negotiations over digital rights. But sources close to the company say it’s more willing to wait out both of Sony/ATV’s appeals.

Sony/ATV, however, isn’t nearly as patient.

In his July letter, Bandier cautioned that “because the DOJ and legal process is not fully within our control, we may have no alternative but to take all of our rights out of ASCAP and BMI.”

A withdrawal would saddle Sony/ATV with significant administrative responsibilities historically handled by BMI and ASCAP. It would likely cripple the licensing groups as well.

But a source claims the $230 million BMI and ASCAP kept for themselves last year — after distributing $1.7 billion to songwriters, composers and publishers — suggests plenty of room for cost-cutting.

Sony/ATV could replace them with a much leaner operation, the source said, saving tens of millions a year. And at least half of those savings could also be repatriated to the Sony/ATV songwriters that BMI and ASCAP once served.

While Sony/ATV wouldn’t confirm that it is pulling out of the licensing groups, it acknowledged the option is on the table.

Calling it a done deal “would be very premature,” a Sony/ATV spokesman said.

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