By: Joseph Kathmann
Last week, a major event went down in the music industry. SESAC, the third-largest performing rights organization, or PRO, in the country, purchased Harry Fox Agency, the country's only distributor of mechanical royalties. Isn't that amazing? Did I just blow your mind? I know. It's hard not to be blown away by that news. Well, for those of you who have no idea what I just said, I'll fill you in. So SESAC (what that stands for is outdated so don't worry about it) is one of three performing rights organizations in the great US of A. What does that mean? Well, a PRO is what gets songwriters paid. They are the distributors of royalties, or what a songwriter lives off of as he/she tries to makes a living. So why do songwriters exist? Well, many major pop and country artists today do not write their own music. They simply perform it. This practice is so widespread that Taylor Swift makes a big deal out of the fact that she's also her own songwriter. The practice also dates back to the dawn of modern music. Elvis? He was a performer, not a songwriter. The Rolling Stones manager famously locked Keith Richards and Mick Jagger in a room until they came out with an original song, "As Tears Go By," and wrote their own music ever since. There's a lot of money to be had in being a songwriter, which is why many make a (somewhat) comfortable living doing it.
Next up, what's a mechanical royalty? A mechanical royalty is a the royalty a songwriter gets from every album sold. Right now, when you buy Brad Paisley's hit single "Whiskey Lullaby," songwriter Jon Randall gets a mechanical royalty for it. When you buy Paisley's album Mud on the Tires, Randall will get another mechanical royalty for that song and any other song he wrote on the album. There's a bit more to it than that, but that's a rough summary of what a mechanical royalty is.
So, now that you know what everything means, is it a big deal to you yet that SESAC bought Harry Fox Agency? No? Well, here's why it matters: up until now, Harry Fox Agency was the sole distributor of mechanical royalties. They kept the royalties the exact same for every songwriter and artist, regardless of what PRO they belonged to, (there are three in the US, remember, and every selling artist and songwriter in the country is a member of one of them) and everything went by smoothly. That is, until the Internet came along.
The dawn of streaming services, both for music (Spotify) and TV shows, (Netflix) and piracy has thrown mechanical royalties for a major loop. Time after time we see a songwriter come out and say they made only $2,700 in songwriting royalties off a song streamed 43 million times on Pandora. We see songwriters complain about laughably minuscule royalties on their music in TV shows that's streamed on Netflix. iTunes has been targeted for not distributing royalties properly. The numbers are wildly inconsistent, and songwriters are struggling to even make a poor living off of these small royalty checks nowadays. In an attempt to combat this, the other two PROs, ASCAP and BMI, (both have more songwriters in their memberships than SESAC) have been lobbying Congress recently to allow them to distribute mechanical royalties (and other royalties, but we won't get into that). They are doing this in an attempt to make themselves look more appealing for incoming songwriters who are trying to decide which PRO to join, while also benefiting these songwriters by distributing higher/more thorough mechanical royalties in the process. The problem with this is that ASCAP and BMI are publicly traded companies; they are reigned in by government laws, many of which were put in place before anyone had even heard of the word "internet." The rumor had long been that had ASCAP and BMI successfully convinced Congress to allow them to get into the mechanical royalty business, SESAC, a privately-owned company, would purchase Harry Fox Agency to compete with ASCAP and BMI. Well, even though ASCAP and BMI have yet to convince Congress to let them in on the mechanical royalties game, SESAC went ahead and purchased Harry Fox Agency to get a head-start on the other two PROs.
So, now that I bored you with a lot of music industry drama, here's the question that matters. Why should you care? After all you don't care about songwriters, you just want good music right? Well, that's exactly it. Without Mark Ronson, there is no "Uptown Funk." Without Pharrell, there is no "Blurred Lines." Without Leonard Cohen, there is no "Hallelujah." Without Albert Hammond, there is no "One Moment in Time." The songwriter is a pivotal part of the creative process, and nowadays they are treated with little to no respect. After all, Beyoncé has more money than she knows what to do with, so why should we care about where the money goes. Well, because there are thousands of talented songwriters vying to get their music heard. Vying just to make a living doing what they love. Julie Keltonic is a songwriter (and a member of SESAC) who has made a living writing Christian music. "I see so many insanely talented writers turning away from their calling, and perusing other industries in the name of survival," she says. "We need people advocating for writers."
That's what SESAC is hoping to do by purchasing Harry Fox Agency. Many songwriters have never seen a check from Harry Fox Agency-mechanical royalties always get sent to the PRO and publishers first before being distributed to the songwriter-but with SESAC's acquisition, many songwriters within the PRO will likely see an increase in mechanical royalties in time. This acquisition also puts additional pressure on Congress to allow ASCAP and BMI to distribute mechanical royalties as well. Additional competition = higher royalties for songwriters. Higher royalties for songwriters = better songs written as fewer talented songwriters are discouraged by a lack of money in the industry. Better songs written = better music you get to listen to! Better music is always good, right? While this acquisition will not fix all the problems within the music industry, (not by a long shot, but that's for another conversation) it's definitely a mighty good place to start. "I look forward to seeing how [SESAC] implements new ideas to make licensing more valuable for writers and publishers," Keltonic says. "I trust the people at SESAC to continue their good work with their new acquisition."
http://www.musicrow.com/wp-content/uploads/2015/07/sesac-hfa.jpg (SESAC, HFA photo)
http://img.gawkerassets.com/img/18iwgcfj83c3gpng/original.png (Spotify logo)
http://assets.rollingstone.com/assets/images/story/exclusive-book-excerpt-leonard-cohen-writes-hallelujah-in-the-holy-or-the-broken-20121203/leonardcohen-624x420-1354563972.jpg (Leonard Cohen photo)