New Venture Seeks Higher Royalties for Songwriters

BEN SISARO nyTimes.com 10/29/14

Smokey Robinson, the Eagles, Bruno Mars, John Lennon and Megadeth would not seem to have much in common.
But they are among the famous names attached to a new music publishing venture led by Irving Azoff, the former chairman of Live Nation Entertainment, that is the latest challenge to the $2 billion market for performing rights dominated by Ascap and BMI. The company, Global Music Rights, is part of Azoff MSG Entertainment, a joint venture established last year with the Madison Square Garden Company.
The management of performing rights — how royalties are paid when songs are played on the radio, streamed online or performed in public — has been a steady part of the music business for a century. But lately the field has been primed for disruption by advances in technology and a series of lawsuits over how songs are licensed to online services like Pandora.
Ascap and BMI, which represent more than 95 percent of the songs available in the United States, are governed by decades-old regulatory agreements with the Justice Department that restrict how they negotiate with outlets that use music. Recently some big music publishers have complained that these rules lead to low royalty rates, and threatened to leave Ascap and BMI if regulatory changes were not made.

Irving Azoff, who represents acts like the Eagles, Van Halen and Fleetwood Mac, leads the company, Global Music Rights.

For the last year, Mr. Azoff — a longtime artist manager who represents acts like the Eagles, Van Halen and Fleetwood Mac — has quietly been building a rival by controlling the catalogs of a handful of superstar songwriters. Those include members of Journey, Foreigner, Fleetwood Mac and Soundgarden, as well as current hit makers like Pharrell Williams, Ryan Tedder, Benny Blanco and the country songwriter Shane McAnally, and the estates of Lennon and Ira Gershwin.
“I vowed when I started this company that I was going to take care of artists,” Mr. Azoff said in response to questions about the company. “So I tried to identify places where I felt that artists were not getting a fair deal, and the performance rights area jumped out at me. It was a place where I felt I could help our writers.”
Global Music Rights has lured clients with the promise that it can wring royalties that are as much as 30 percent higher from radio stations and online outlets than they can get through Ascap or BMI, according to three people with knowledge of the negotiations who spoke on the condition of anonymity.
On Monday, the Madison Square Garden Company — which has committed $175 million in backing to Azoff MSG Entertainment — said it wouldconsider splitting itself into two companies, one for its sports properties and the other for entertainment. MSG declined to comment about the future of Mr. Azoff’s venture. But if MSG is split, Azoff MSG Entertainment is expected to remain part of the entertainment unit.
The hunt for performing royalties has become a priority for musicians as sales of CDs and downloads decline. The National Music Publishers’ Association said in June that while the publishing business in the United States generates $2.2 billion a year in revenue, another $2.3 billion is lost because of “outdated copyright law and government regulations.”
On the other side of the issue, Pandora, radio broadcasters and others argue that the regulation is necessary to prevent anticompetitive behavior in the music industry and to keep music licensing costs from being burdensome.
Global Music Rights is not subject to the same regulations as Ascap and BMI, which gives it far greater control in negotiations, including the ability to refuse permission to its songs. (Another privately owned performing rights group, Sesac, is also exempt from that regulation.) Ascap and BMI, on the other hand, offer so-called blanket licenses covering everything in their catalogs, and they cannot turn down a request for music by an outlet.
Pandora, which pays music publishers about one-twelfth what it pays record labels, has become a popular target for complaints from songwriters. Randy Grimmett, a former Ascap executive now at Global Music Rights, said a hit song with around 40 million plays on Pandora would collect just $2,200 in publishing royalties under the Ascap-BMI system.
Mr. Azoff’s venture is expected to demand higher rates from radio stations and online music services and not adopt some Ascap and BMI practices like the payment of bonuses for high-charting songs, which can reward current hits at the expense of other songs.
“What Irving did was look at what songwriters were earning historically and offer them a premium,” said Barry M. Massarsky, an economist who specializes in music publishing and is not affiliated with Global Music Rights. “He believes he can carve out a higher value for those songs from radio and pay less in administration fees, so that ultimately the songs would make more money than they have from Ascap or BMI.”
Most of the songs by Global Music Rights clients are covered under licensing agreements that were made while those writers were still at Ascap or BMI. But those agreements will begin to expire over the next several years, which could result in many popular songs disappearing from online services or even radio stations if new deals are not made.
Pandora declined to comment, and William Velez, the executive director of the Radio Music License Committee, which negotiates on behalf of radio stations, said his group had only had early “exploratory discussions” with Mr. Azoff’s company.
When asked about former BMI songwriters now affiliating with Global Music Rights, Michael O’Neill, the president of BMI, said in a statement that his organization stood by its methods.
“We believe that the departure of certain affiliates for such new organizations is driven not by any concern with this methodology,” Mr. O’Neill added, “but, rather, by the latitude that these unregulated organizations have to address the needs of the modern rights marketplace

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