30 MusicWeek 20.09.13 REPORT ROYALTY COLLECTION
“Over the last 20 years the number of options for rights-holders’ royalty collection has dramatically changed and I believe it’s for the better” CHRIS MEEHAN, SENTRIC
Just because there are more potential partners in
a market, of course, doesn’t mean they’re all up to scratch. Premier Muzik’s Olivieri warns that rights- holders still need to be discerning about who they choose to manage their royalty collection – especially when it comes to the complexities of administering neighbouring rights. “We have seen many ‘Johnny Come Latelies’, thinking it would be a simple task to collect royalties and get some easy money. It’s not,” he argues. “There is so much work to do and it must be done daily and repetitively without fail and not just once each quarter. Rights-holders release many songs with many different versions, and all of this needs to be properly linked. “The difference between song copyrights and
neighbouring rights are not always clear,” he explains. “Once a song copyright is registered, generally the information is the same worldwide at the society level. This would be despite the many various remixes and versions that are released. In neighbouring rights, all versions need to be linked to the-rights holders. This is a major task that needs to be nurtured each day. We do this each day, again and again - hence our company motto, ‘Experience Is Everything’.”
‘CONTRACTS MUST BECOME SIMPLER’ There’s a strong consensus between those in the royalty collection business that more can be done on a broad, top line level to make the flow of revenue to rights-holders quicker, easier and more accurate. “First on the list of changes has to be simpler
and more standardised contracts,” says Premier Musik’s Olivieri. “These have become more complicated as lawyers have tried to grapple with new technologies by drafting ever more granular agreements, which in practice make it harder for administration departments to translate into their royalty and copyright systems. This leads to inaccuracies and inefficiency.
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“The most important change needed is for us to build a global repertoire database to support this trend towards cross-border licensing” ROBERT ASHCROFT, PRS FOR MUSIC
“Next is the need for a single global rights
repository so that everyone is using the same data. Lastly, more investment into technology and software by the industry as a whole is needed.” That ‘single global rights repository’ is something that has been very much on the agenda for some time now, and PRS for Music especially has made some moves towards more international integration between territories. In June, it formed what was billed as a major collaboration with STIM in Sweden and GEMA in Germany with the hope of
simplifying both national and pan-European licensing and processing. “The most important change needed is for us to
‘build a global repertoire database in order to support this trend towards cross-border licensing,” PRS’ Robert Ashcroft tells Music Week. “We also need to make joint investments in back office processing systems to enable us to handle efficiently the forthcoming increase in transactions, which could well amount to trillions of music usages per annum in the near future.” BMI, which was founded in 1939, is the largest
music rights organisation in the US, with offices in New York, Nashville, Los Angeles and London, amongst others. It represents more than 7.5 million musical works created and owned by more than 600,000 songwriters, composers and music publishers. BMI SVP, corporate strategy, new media, and communications, Richard Conlon,
UNDERSTANDING THE IMPORTANCE OF ROYALTY AUDITS: ‘TIMING IS HUGELY IMPORTANT - AS ARE RELATIONSHIPS’
Prager and Fenton LLP offers royalty audits on behalf of rights-holders whether they be recording artists, songwriters, record companies, publishers, producers or managers. The audits include royalty tracking aimed at identifying income that has not been reported to clients as well as verifying whether income that has been reported has been calculated in accordance with the relevant agreement. “A royalty audit is normally a contractual right and may therefore be subject to certain restrictions, depending
on the wording of the relevant clause within the agreement,” says Prager and Fenton LLP’s Austin Jacobs (pictured inset). “The main challenges that we encounter are two-fold. Firstly, a large amount of digital income is now being reported by the source (i.e. the digital music service provider) as a lump sum, whether this be in the form of an advance or guarantee payment or a payment made under a blanket license. Our challenge is to ensure that an appropriate share of this income is allocated to our client’s copyrights. Issues arise due to the fact that sophisticated royalty accounting systems are required in order to break these payments down between what may be an extremely large number of copyrights. However, the
challenge we face is in dealing with corporate policies relating to this type of income and the lack of a clear audit trail leading back to the source of the payment. “Once we have identified specific income that is missing, our other main challenge is ensuring that this income flows through to our client in a timely manner. In order to identify the point within the reporting chain at which the blockage has occurred, and then to clear that blockage, often requires the co-operation of several individuals and entities. Due to the work pressures placed on royalty departments within many organisations, a certain amount of prioritising must take place. At times, it can therefore require a degree of tenacity to ensure that our client’s issues are focused upon.” Jacobs advises rights-holders to ensure that agreements under which royalties are paid
are appropriately drafted so that they share in all the income streams that arise as a result of new methods of exploitation. “They should also ensure that they give appropriate consideration to the exercising of their audit right,” he adds. “The timing of an audit can be very important as the period that may be covered will
be restricted if the agreement states that the rights-holder has a limited period in which to dispute an accounting. The rights-holder should also bear in mind that the audit is likely to be settled far more quickly if there is an ongoing relationship between the parties. It is much better, therefore, to exercise the audit right before an agreement has expired.”
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