Business News Deals Labels & Publishers

Kobalt buys a collecting society

By | Published on Tuesday 9 June 2015


While everyone was looking towards San Francisco for Apple’s big music announcement yesterday, Kobalt had a pretty big announcement of its own.

And while we’ve always been cautious of jumping on the Kobalt hype-train – however great the firm’s technology for tracking music rights may be – this move could be truly revolutionary when it comes to digital licensing.

Basically, Kobalt has bought its own collecting society. It actually bought what was originally the American Mechanical Rights Association a while back, but yesterday it announced that the new look American Music Rights Association was open for business.

Kobalt calls the acquisition of AMRA “the most exciting step” in its bid to revolutionise the way in which music rights – and especially song rights – are licensed, with top man Willard Ahdritz telling CMU that the move was a crucial step in completing the journey he began over a decade ago.

One of the challenges for the music publishers in the digital domain has been working out where the collecting societies fit into the mix. Whereas the labels have mainly licensed digital directly, and therefore circumvented the collective licensing system entirely, it’s not so easy for the publishers to do the same.

Partly because the more complicated nature of copyright ownership in songs makes the collective approach more attractive. Partly because songwriters have traditionally received some of their income directly from their societies, even when they are signed to a publisher. And partly because, in Europe at least, the societies, rather than the publishers, control some of elements of the copyright.

But there are issues with just running everything through the societies. First, collective licensing is subject to extra regulation reducing the bargaining power of the songwriters and publishers. Second, collecting societies traditionally only licensed services in their home territories, but most digital services need multi-territory licenses. And thirdly, many societies have legacy structures that don’t necessarily make them the most efficient machines for processing millions of tiny micro-payments.

In Europe, the big publishers have tried to tackle this issue by forming joint ventures with key collecting societies and then offering direct multi-territory licenses for their repertoire in partnership. Indeed, Kobalt had such a joint venture with Swedish society STIM.

But the AMRA venture takes this to a whole new level, setting out to offer global licenses. Both publishers and songwriters in the society will then be paid direct, though, presumably, by taking over an existing society already linked into the global collective licensing framework, AMRA hopes to be able to send songwriter royalties back through the local society system too, wherever songwriters choose to remain with their existing performing rights organisations.

Aside from the global focus, the new AMRA will license in Kobalt’s technology, and therefore boast all the efficient data processing and transparent royalty calculations that the music rights firm has made such a big deal about in recent years.

While you have sensed that at least some of Ahdritz’s past criticism of the traditional music rights administration process has been aimed at the collecting societies – even though he’s never named names – the Kobalt chief insisted to CMU yesterday that the existing collecting management organisations remained important, but at a local level. Single territory licensees would continue to deal with their local societies, he says, but multi-territory operations, so all the big digital players, could now deal with a new kind of rights body.

Although the new AMRA provides Kobalt with a very useful vehicle for licensing its own catalogue of owned and administered works to digital players, the society is open to other publishers too. Ahdritz was very keen to stress that AMRA, although owned by Kobalt, is a totally autonomous entity, with PricewaterhouseCoopers hired to ensure that is so. And the always bullish Kobalt boss mused that he wouldn’t be surprised if the major publishers took an interest in his newest venture.

Quite how quickly other publishers will embrace a society that is ultimately controlled by a rival – however autonomously it may be run – remains to be seen. But AMRA makes the Kobalt business all the more innovative, and will certainly put further pressure on the conventional collecting societies to up their game on multi-territory licensing and efficient royalty collection and distribution.