What are your predictions for the impact on library music?

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  • #34544 Reply
    jdt9517
    Participant

    I think the reduction in payment of royalties will be immediate. While we are paid in arrears by two quarters (at least for BMI), the PRO’s are experiencing the reduction of revenue now. I anticipate that there will be new formulas created where the royalty payments for 2019 4th quarter and maybe 2020 1st quarter will go down dramatically. (We generally have no control how much the PRO pays us per performance)

    The temporary closing of the economy is going to have dramatic effect for a very long time. Even if it reopens in May, its going to take several years to recover. So many small businesses are being forced to close their doors. In many cases, the closures will be permanent.

    Our music is used primarily for entertainment purposes – whether it is for sports, movies, TV, or video games. Also, in much of the entertainment, music is optional. As we learned in the TV/Film strike in the 1980’s, music is expendable in production.

    Until people can get back to work and pay all their arrearages on mortgages and other obligations, entertainment is going to be low on their list. So, entertainment type business will be slow to recover and get back to full production. Since music is not a necessary item, less will be used. The use of music will climb somewhat more slowly than the entertainment companies themselves as they continue to try to cut costs.

    It’s going to be a long road back.

    #34545 Reply
    uniqueplace
    Participant

    You made a great point regarding how PROs are going to handle the crisis even on very close royalty payments..

    We will need to be very attentive.
    IMO, we will start to see declines in next payment in april / may / june. Depending on which PRO you’re in.
    I’m talking here about a very known european PRO and I’m 100% sure payment will decrease from June/July.

    Simply because as a result of home-working, employees of the PROs will be less efficient.Figures will go down probably even for airings that happened in 2019. This is clearly not fair, but it’s the way PROs get the money. each TV channels have to pay before the royalty payment, and you can be sure that a lot of tv channels are suddenly going to have cash flow problems and use covid19 as an excuse.

    For 2020 airings, as you said, some of the cue sheets from TV channels are going to be delayed, those same TV channels will use the lockdown excuse to not fill the necessary cue sheets in time for the royalty payments.

    As a side-effect, PROs will fix that in 2021 royalty payments by not asking for the late cue sheets because it would take too much time to include in their data system and make the subsequent royalty payments delayed so I guess in 2021 we’ll get a part of the payments based not on the veracity of the airings but on some general guessing. Some composers will win, some will lose.
    PROs are like swiss watch, well organised. But, a small little unfortunate event and they get disorganised for 2 years.

    So, be careful regarding your very next royalty payments, compare the figures with last year statements, be very precise because by experience I strongly feel we’ll get screwed

    #34546 Reply
    Music1234
    Participant

    We probably should stop giving ideas to PRO’s as to how they will reduce payments to TV composers. The loss in Revenue will mainly be theme parks, hotels, restaurants, live concerts, stadiums, bars, retail.

    TV writers should NOT (in theory) be that grossly impacted. Yes, live sports is gone, but 24 hour news and tv spots still march forward. Re-runs still march forward. YOUTUBE videos will still march forward. My TUNESAT detections are not slowing up much and to my surprise, the direct licensing markets still remain OK so far….3 to 4 weeks into this crisis.

    The musicians that will be hit should be those focusing on pop songs that play in bars, restaurants, theme pars, retail…and then they perform live at concert venues and log their set lists at PRO’s.

    When you follow the money, the money starts with advertisers who buy ads on TV networks. TV Networks collect all their money by selling ad time. Everyone is watching TV these days because everyone is home. The TV is literally on from wake up to bed time in my home. I am still seeing lots of re-runs and ads and of course talk shows and live news. These TV networks still have to pay our PRO’s a percentage of the advertising revenue they collect. Then our PRO’s pay TV writers from that pool of money. So if we are fortunate enough to have music on reality reruns, etc….In theory, the performance royalties should hold up.

    If the pool of money the PRO’s collect becomes “democratized” and distributed to those who are not performing live in concert…well then that is a problem. I just landed a Raisin Bran cereal ad that has 500 air dates in just 3 days, I really would not be happy if I get short changed due to “democratization” of royalty distributions. Because everyone is at home eating, food ads are going to really pick up in April. Food, soap, TP, medicine, insurance and financial services are the only game in town. Airlines, Hotels, Vacations, Cruise Ships, Apparel are essentially out of business.

    #34548 Reply
    jdt9517
    Participant

    @Music1234- What will be interesting over the next few months is how the PRO’s will calculate the royalty payments. I would not be surprised that for 20 performances that paid $20 six months ago, the same 20 performances will pay less moving forward. I don’t think it is so much “democratization”, it’s just the reality that the PRO’s have less revenue today than they did six months ago. The royalties will be adjusted to match current revenue streams.

    Where I am going is whether the royalty paid is based upon the revenue received for the past performance, or is it based upon another criteria. In other words, is payment based upon an immovable percentage, or do they have discretion in adjusting the percentage after the fact. That’s something I don’t know. However, I suspect the latter.

    #34549 Reply
    UpFromTheSkies
    Participant

    I spoke to my rep at ASCAP, and she told me to expect to receive this month’s distribution by April 26th. She also emphasized “full payout” this month; no change.

    #34550 Reply
    Music1234
    Participant

    @ 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.

    #34551 Reply
    jdt9517
    Participant

    @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?

    #34552 Reply
    Music1234
    Participant

    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.

    #34554 Reply
    jdt9517
    Participant

    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%.

    #34555 Reply
    Music1234
    Participant

    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…?

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