What are your predictions for the impact on library music?

[Music1234]

@ UpFromTheSkies – Wow! amazing that they need 3 more weeks to catch up.

@ jdt9517 – Royalties are paid based on advertising revenue TV networks collect. Ad revenue will decline for NCAA, NBA, NHL, GOLF, all sports events that never happened, but new ad revenue is coming in from different advertisers who can thrive in this market – essential items, food, soap, tooth paste, TP, cleaning products, insurance, financial services. I can even make a case for computer products and tech products (I need to order ink cartridges for example, or a new 2 terrabyte hard drive) . People will still need to buy certain items. Home Delivery services will grow. Restaurants and fast food still need to drive pick up orders in. They will all have to quickly develop COVID 19 ad campaigns and buy ad time on TV networks. Broadcast Music “performance’ royalties always come from advertisers who pay TV networks to advertise.

[jdt9517]

@Music1234. I don’t disagree with you. This is the piece I don’t know. Is there an agreement between PRO and Old Reliable TV Network (or composers) that says that for every $1.00 of “advertising revenue TV networks collect” the composer gets X percent? If there is, my concern is not justified. My concern is if the PRO’s can unilaterally set (or reset) the composer percentage in their discretion.

So, if PRO gets $100 of advertising revenue and has been paying the composer $20, can the PRO say “times are tough, we are changing what we are paying you” and start giving the composer $15 of the $100?

[Music1234]

You figures for what we earn, compared to what the 30 second spot sells for are way off. PRO’s just get paid one lump sum annual blanket license fee from every TV network so the Network can obtain the rights to use the music in that PRO’s catalog.

Here is what advertisers pay for 30 second spots on prime time shows:

https://adage.com/article/news/tv-ad-pricing-chart/305899

I have no idea what ASCAP will do, but they should pay based on what is being broadcast or “performed” on TV.
That should not change. I do feel bad for the artists who rely on live concerts, theme parks, retail playlists and so on, but at the end of the day, we all make a choice as to how we want to participate in the music. We hear chose to focus on Music for tv, ads, films, internet and social media. That is our angle and we should not get a pay cut because touring artists are out of work. It’s kind of like saying Amazon fullfillment center workers should get a pay cut because Macy’s and the Gap had to close their stores and furlough their workers.

Let’s not speculate. The PRO’s will handle this, the way they handle it, and they probably won’t be transparent about it.

[jdt9517]

I have no idea what ASCAP will do, but they should pay based on what is being broadcast or “performed” on TV.

The PRO’s will no doubt do so. They only pay on performances now.

I come from the legal and accounting world. So I am approaching it more like one of those bean counters the PRO’s employ.

The PRO’s all have fixed costs that are not going to change much despite the fall in revenue. The identical performance that paid $20 last year (or $100 or $1000) will necessarily be less this year.

BMI touted last year that they paid out 85% of their revenue in royalties. Roughly, it was $1.3 billion in revenue and $1.1 billion in payouts. That means BMI has about $200 million in operating costs. All the PRO’s are warning significant reductions in revenue. So, let’s say BMI’s revenue falls 30% to $900 million. It’s costs will fall a little but not a lot. The costs may go down to $175 million. Making that assumption the money available for payouts will fall from $1.1 billion to $725 million – or 35%. Are there going to be 35% less performances? Probably not.

Also, under that model BMI will only be paying 80% of its revenue in royalties.

If the lawyers and accountants have their way with it, there will probably be an across the board cut of X% on all performances to bring it in to the lower revenue number.. That doesn’t mean that the royalty reductions will be the same as the percentage reduction in total revenue. There will be less performances to pay too.

Given the above, my best guess is that royalty payments year over year on the identical performance will drop about 10%.

[Music1234]

The PRO’s all have fixed costs that are not going to change much despite the fall in revenue.

A great deal of those “fixed costs” are salaries to staff. I put that in quotes because salaries really are not fixed costs. I also do not share your point of view that Revenue from TV networks is down. In fact, I have to argue that it very well may be up! Every American in the world is home watching TV and companies are still buying ads on TV networks with even larger audiences watching news 24/7. I see dozens of TV spots every day. These spots are not being sold for free.

The revenue decline is going to come from sources we do not participate in – Restaurants, bars, hotels, theme parks, live concert venues, stadiums, sports events. I have never received a royalty for any of these mediums because typically they play popular music, not production music. I agree, revenue may drop 30% because of this, but if our TV, advertising, and social media/ youtube production music does not service, nor participate in these revenue streams, are you saying we must take a hit with everyone else? Will ASCAP staff and board members get pay cuts for their contributions?

Not to be insensitive…I feel horrible for so many musicians who will lose a lot of money by not performing live gigs in rock, blues, jazz clubs, weddings, corporate parties and events, street festivals, concert venues, etc…. but the reality is that kind of work does not produce back end performance royalties. Additionally, radio still is rolling along so why would that revenue stream dry up for PRO’s? TV Network fees to PRO’s will be the only game in town for PRO’s in 2020. Are you implying that all of us TV writers will have to share that TV network revenue stream with pop artists and touring artists who will not get a chance to tour this year and have their songs played in restaurants, bars, theme parks, sports arenas, etc. etc…?

[LAwriter]

I basically agree with music1234 – people watching TV and the revenue from that specific music use will / should be up.

BUT – I have no doubts that our PRO’s will use the situation to “spin” the numbers to their particular view of who should get paid what. Make no mistake, a good portion of the TV broadcast royalties will be headed towards indie hipster songwriters who have been decimated.

[jdt9517]

“are you saying we must take a hit with everyone else? Will ASCAP staff and board members get pay cuts for their contributions?”

Unfortunately, yes. The hit will come in two forms. Those with the reductions in performances will be most directly hit. The indies, for example, may see a 50% reduction in performances. They’ll get hit hard.

Our side will see the reduction based upon my more complex analysis. Maybe 10%. The same number of identical performances year over year will yield less royalties this year.

You are right about salaries, etc. That’s why I deducted about $25 million in costs. A lot of the positions will be essential to their operations. Probably about 40 – 50% of their costs are salaries. So maybe $80 – 100 million total. Can they furlough more than 25-35% of their workforce and still operate? That’s a question they surely are working on right now.

I doubt the senior officers will get pay cuts. However, in their defense, it is times like these that they are working the hardest.

I don’t disagree with you that certain sectors such as TV may not be hit, or hit as hard, as other sectors. However, our PRO’s have made clear that their revenue is going down. I have to believe them. A vast majority of their revenues are from blanket license agreements. Some licensees will pay while others will falter. With the decrease in revenues, there is a smaller pot to pay out royalties for performances.

I suspect that the royalties earned for performances of two quarters ago is paid with current revenue, not revenue from 2019. So, these past performances are going to be affected by current drop in revenues. Also, I know nothing that says if PRO gets paid A, PRO must pay composer B. Rather, payment from PRO to composer is a moving target.

You mentioned radio as one of your examples. This is how I think it will work. Radio’s primary revenue is advertising. The radio station pays PRO its blanket license based upon the size of the market and advertisers.. Advertisers are now coming to the radio stations and complaining that they can’t pay their advertising bills because they have been shut down or sales are way off, etc. The radio station negotiates with the advertiser reducing the fee, holding off collection, or letting the advertiser go. In turn, the radio stations are going to the PRO’s (along with all their other creditors) and telling the PRO’s they can’t pay their license fees. The PRO’s are likely in negotiations with these stations (which are probably most to all of them) as we speak. The amount of spins will stay the same, but the payment per spin to the PRO will go down.

TV- how many Carnival Cruises or United Airlines advertisements have you seen lately? The Sandals resort in the Bahamas which was storming our airwaves is non-existent right now. Marriott and Hilton ads ran consistently. No more. How many baseball ads? None, If these advertisers cannot pay the station, the station does not have the money to pay the PRO, much less their rent, salaries and utilities.

I noticed that My Pillow ads have increased – probably because Mike Lindell received a great deal on the now open advertising time.

So, there is smaller pot of revenue feeding a smaller pot of performances. How is it divided up?

Ultimately, a straight line approach will probably be used. It’s the most apolitical. There will be an across the board cut in payment on a per performance basis.

It’s a great unknown right now. We’re riding down the first hill of the biggest roller coaster we have ever ridden. I don’t think I wanted a ticket to ride this one.

[Music1234]

I agree with your analysis about advertising bills not getting paid to TV networks and radio stations. Yes, there is no reason for Hilton, Sandals, UAL, American Airlines, etc….to advertise now. But, there is a great reason for Proctor and Gamble, Kellogg’s, Amazon, Costco, Wal Mart, ATT, Verizon, CVS Pharmacy, Walgreens, pharma, medicine, T Mobile, UPS, FEDEX, and packaged food products to advertise. Some companies are making money hand over fist – Amazon, Wal Mart, Costco, all grocery stores, for example

I recently landed a cereal spot and it’s airing heavily on National and Cable TV….It will be very interesting to see what that pays out in performance royalties.

I am skeptical about your theory of PRO’s using current revenue to pay current royalty distributions. I have to believe that monies (blanket network license fees) are collected 90 to 180 days in advance and then they sit on the money (while it earns interest) then they pay us based on broadcast usage reports. Otherwise, why would they delay payment by 2 qtrs or 180 days? BMI and SESAC paid us properly recently. There were no shenanigans with this March and April distribution and I am surprised ASCAP needs 3 more weeks to pay. I bet they take the 3 weeks to re-assess, and cut payouts. I met face to face with SESAC one year ago and asked where they get their revenue from and they said “TV Networks each pay us one large blanket license fee”.

So yes, while ad revenue is lost from hotels, airlines, casinos, sandals, cruise lines, etc….PG, Wal Mart, Costco, Kelloggs, General Mills, Amazon, Whole Foods, Unilever, Kimberly Clark,Home Depot, Lowes, Medicine, Pharma, CVS, Walgreens, Health Care, financial services, insurance co’s, Phone Companies, and Utilities will all step up and buy TV ads. Anyway, this article predicts a 12% drop in 2020 which is not so bad:

https://variety.com/2020/tv/news/traditional-media-ad-sales-coronavirus-magna-1203546258/

[jdt9517]

BTW, congratulations on your win of the Raisin Bran commercial! That’s great to have it.

I agree with you that while some advertisers are dropping out, others will take their place.

As far as royalty payments, it will be based upon the overall drop of the ad revenue. I, like you, do not believe that content will fall off, at least for back end. It’s kinda like radio spins. However, (based upon your article) there will be a 12% drop in revenue. That means the TV type purchasers will be buying the same amount of content, but can only pay 88% of what they paid last year. Likely, those licensees will get their license fees reduced in a similar amount. So, assuming that the PRO’s can reduce their fixed costs in a similar dollar amount, royalties would go down 12% year over year on a per performance basis. That’s not including the complications the indies will create in the calculations.

I hope the PRO’s were not investing the money for the earlier quarters. The markets are down about 30% right now since the beginning of March Of course, this could explain why BMI paid its March payment and ASCAP is holding on to the April payment. They are dealing in hundreds of millions of dollars in royalties each quarter. Hundreds of millions cannot be moved quickly in the markets. BMI would have been moving its money for March right about the time of the market peak. ASCAP would have started moving its April money a week or two ago – after the drop. If that royalty money was in the markets, the execs are in the pews right now praying for a comeback. Otherwise, in a couple of weeks, they will be explaining to the composers where their money went. I hope that’s not the case.

[UpFromTheSkies]

Hot off the presses…
Dear ASCAP Members:
In a parallel universe, last week would have been the week that we held our ASCAP Annual Meeting during the 2020 ASCAP Experience event in Los Angeles. We would have reported that ASCAP had historic high revenues and distributions for 2019 and celebrated all of the amazing accomplishments of our ASCAP songwriter, composer and publisher members.

Instead, we are all facing the devastating consequences of COVID-19, which has hit all of us personally. It is rare to talk to someone who does not know someone suffering with this virus. Many of us have already lost loved ones, friends and colleagues and we have all lost members of our ASCAP community. While health and safety are our first priorities, we also take seriously our duty to ensure that you continue to receive a steady flow of royalties so that you can pay your bills and feed your families.

I have received a number of inquiries about how this crisis will impact ASCAP distributions. While there are many unknowns at this time, I would like to take this opportunity to explain what we can about how the negative economic impact of this virus will impact your ASCAP distributions.

First, it is important to understand that ASCAP distributions are made on a “cash basis” (the money we collect in a quarter is paid out that same quarter, less the costs of operation) as opposed to an “accrual basis” (money collected would be held and paid out two or three quarters later). In other words, we calculate distributions based on current revenues, not past revenues. In normal times, this is a great benefit to ASCAP members as you receive your money faster. During this crisis, as we see more and more of our licensees who pay us start to feel the impact of the economic downturn, this translates into less revenue for ASCAP and less money available for distributions for our members. We have already been contacted by numerous licensees who are attempting to pay less, pay late or not pay at all.

While you will receive your distributions from ASCAP during this health and financial crisis, we can no longer provide you with a date certain in advance of each distribution. The reason for this is that our licensing revenue will become increasingly variable as businesses remain closed, and the advertising market which drives revenues from television, radio and cable continues to be negatively impacted. Every category of ASCAP collections will be negatively impacted, including television, cable, radio, airlines, hotels, bars, grills and restaurants. While everyone is streaming music and movies at home, not everyone in this country will be able to afford a subscription to entertainment services and that shift will impact revenue. Twenty five percent of ASCAP revenues comes from outside the United States and COVID-19 hit many of those territories before it hit the US, so the ASCAP revenue impact will be global.

We will make key distribution funding decisions later than usual once we have knowable facts of our revenue collections each calendar month and each quarter. What this means for you as a writer or publisher member is that your distributions may be delayed as compared to last year. For example, the ASCAP writer distribution was previously scheduled for April 6, 2020 and now it will be paid on April 28, 2020. This is because we had to go through a collection cycle of March 31/April 1 payment due dates to determine accurate cash flow before finalizing the funding pool and processing hundreds of thousands of distribution files for payment processing services. Some of the vendor services we use to process and pay the distributions have also been materially impacted by COVID-19, so there is a domino impact that we are constantly navigating in terms of ensuring business continuity. The good news is that as a result of the delay, the April 28 writer distribution will be fully funded as we had originally anticipated.

I know that much of this is not good news, and you have already been bombarded with bad news every day for weeks, but I think it is important that we are all prepared for the future and we try to limit the number of surprises.

For those of us who work at ASCAP, our duty is to ensure that ASCAP survives to serve the next generation of creators and publishers. While things are tough right now, I remind myself that ASCAP has survived two world wars and several economic crises, so we stand on the shoulders of our predecessors to successfully fight through this pandemic. ASCAP and our ASCAP members are worth fighting for, and on behalf of all ASCAP employees, I promise you that we will do whatever it takes to fight for ASCAP and fight for you.

Thank you for your loyalty and your ASCAP membership.

[Pat]

I believe staff should be able to work from home.

[Music1234]

Key takeaways:

1. ASCAP calculates distributions based on current revenues, not past revenues. – crazy because we are supposed to be paid for performances that occurred July 1 through October 30, 2019

2. We can no longer provide you with a date certain in advance of each distribution. – Why? The entire world is working from home with computers and software. Major TV networks are broadcasting live TV from home.

3. Our licensing revenue will become increasingly variable as businesses remain closed, and the advertising market which drives revenues from television, radio and cable continues to be negatively impacted. – Variety anticipates a 12% decline in ad revenue in 2020, all of us TV and ad writers do not participate in the bar, restaurant, retail store, hotel, airlines, concert venue, theme park revenue stream. So I see this as ASCAP borrowing money from TV writers, to pay songwriters and touring artists/ bands.

4. While everyone is streaming music and movies at home, not everyone in this country will be able to afford a subscription to entertainment services and that shift will impact revenue. – We were only getting paid fractions of pennies from streaming anyway so how is this even relevant for TV writers?

5. For those of us who work at ASCAP, our duty is to ensure that ASCAP survives to serve the next generation of creators and publishers. – BMI and SESAC have not sent letters worrying about “survival”. Sure, hotels, airlines, bars, restaurants, theme parks, concert venues, clubs, retail stores, etc…will not pay what they paid in 2019, but I still do not see total destruction to TV networks ability to generate meaningful advertising revenue.

I just have to wonder if ASCAP management had a ton of money invested in stock equities this first qtr 2020.

[LAwriter]

5. For those of us who work at ASCAP, our duty is to ensure that ASCAP survives to EXPLOIT the next generation of creators and publishers.

Fixed that for you…. 🙂 🙂

[MichaelL]

Perhaps it’s worth noting that instead of paying late, BMI actually paid writers a few days early in March to help us deal with Covid. We’ll see what happens in June.

[Music1234]

Wow! What a contrast between these two PRO’s. Indeed BMI has planned better and I like their accounting approach much better. I am astonished that ASCAP pays Q3, 2019 royalties with Q 1, 2020 revenue (cash basis). BMI clearly does not do this. They are not going to pay late, and are being 100% honest as to how only bars, concerts, clubs, hotels, etc. etc….businesses we do NOT participate in at all from aroyalty earning perspective, is where the revenue decline will come from. The other positive is that streaming revenue is up for them. I see this as great news below. ASCAP clearly was up to something with the money they took in. Hmmmm…. were they invested in the SP 500 and caught totally off guard? I can totally see their New York Lawyers/ consultants/ accountants/ and financial folks taking that kind of risk which caused the delay.

Dear BMI Songwriters, Composers & Publishers,

I hope you and your loved ones are staying safe and healthy. Here at BMI, we’re continuing to ensure that we can deliver your royalty payments efficiently, accurately, and on time, as always. To that end, I’m writing today to reassure you that while BMI expects to feel the effects of the COVID-19 crisis like everybody else in the industry, our goal is to minimize its financial impact on you.

As I’ve already shared, BMI’s royalty distributions will not be affected by the pandemic in the near future. However, we do anticipate an impact in January 2021, when today’s performances and corresponding licensing dollars (2nd quarter 2020) will be reflected in your royalty distributions. While you may see a lower distribution that quarter than you might typically receive under ordinary circumstances, given BMI’s business model, we have the time and ability to plan for this outcome. We’re taking a number of steps to mitigate the situation.

First, we’re expecting retroactive payments from BMI’s recent settlement with the Radio Industry. Since it benefits all of us that radio remains a strong and vital platform for your music, we will be working with radio stations over the coming months to help them spread out their settlement fees owed to BMI. Not only will this help lessen the impact of COVID-19 on their business, but it also allows us to spread those payments out and deliver them to you beginning in early 2021.

Secondly, we’re seeing growth in domestic revenue generated from subscription streaming services that feature TV shows, movies and music. As more and more people are following the recommendations and staying home, they are turning to indoor entertainment and that is translating to increases in viewers and listeners. Keep in mind that thanks to the diversification of BMI’s revenue portfolio, 30% of BMI’s domestic revenue now comes from digital sources.

We expect that both of these avenues, Radio and Digital, will help offset some of the current downturn in areas like General Licensing, where concerts, bars, restaurants, gyms, hotels and other local businesses are taking a hit, as well as International income, which is being impacted by COVID-19 shutdowns.

So, while we will see an impact to our revenue and your royalties, we hope it assures you to know that we anticipate BMI’s Fiscal Year 2021 will be similar to BMI’s revenues and distributions from 2019, which was a record-setting year for us at the time. We’re also taking steps to ensure that our expenses for FY 2021 are in keeping with 2019 levels. We’ve already put cost-cutting measures in place to get us to that number.

As you know, we sent out our March royalty distribution early this year to offer you a small measure of comfort, and while the next distribution is scheduled for June 19, we’re aiming once again to send it out slightly earlier. Please know that we do not expect any delays in your royalty distributions going forward.

We hope that this advance notice of what’s to come is helpful and that you also take the time to plan and prepare.

Together, we will be ready for this and manage through. What truly inspires me and all the people working at BMI during this challenging time is how creative and resilient all of you are, and I know that we will come through this stronger than before.

Be well,

Mike O’Neill
President and CEO
BMI

[Author]

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