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Universal Music Publishing to withdraw digital rights for collective licensing system in US

By | Published on Monday 4 February 2013

Universal Music Publishing

The US publishing sector looks set to move away from collective licensing in the digital domain following the news that Universal Music Publishing is planning to follow Sony/ATV/EMI’s lead and do direct deals with streaming services.

The ways in which music rights owners have licensed ad-funded and subscription-based digital music services has varied from territory to territory ever since deals started to be done a decade ago. Though, in the main, the owners of song copyrights, ie the publishers, have primarily licensed such services via blanket licence deals negotiated by their collecting societies.

Meanwhile the owners of sound recording copyrights, ie the labels, have generally chosen to licence directly, or via distributors or aggregators, rather than through their collecting organisations (though some public performance rights bodies do licence Pandora-style ‘interactive radio’ set ups).

However, some publishing rights have been licensed to digital services directly in some markets, and in the US there seems to be a new agenda to move everything in that direction, especially amongst the bigger rights owners, who generally have more to gain from direct deals, because they can use their size to leverage a more favourable deal.

The US wing of EMI Music Publishing was the first American publisher to withdraw some of its rights from the collective licensing system in the digital domain, and recently Sony/ATV – which now owns the EMI publishing business of course – started to do the same, most notably striking up a direct deal with Pandora which most reckon will secure the Sony publisher a bigger cut of the royalties available for song rights from the streaming company.

And now, according to Billboard, Universal Music Publishing has notified the two biggest song rights collecting organisations in the US – ASCAP and BMI – that it will no longer require them to negotiate digital deals on its behalf, with the change coming into effect later this year.

Universal’s publishing chief Zach Horowitz told Billboard: “In order to ensure that our songwriters are fairly compensated, we believe the best approach is for us to negotiate directly with these services. For that reason we notified both ASCAP and BMI at the end of last year that we will be withdrawing our digital rights for controlled catalogues at the earliest opportunity. With ASCAP, this will be effective 1 Jul 2013. With BMI we are still working out the effective date”.

It’s not clear if the other major publisher, Warner/Chappell, is considering a similar move, though it is thought BMG Chrysalis, one of the bigger independent publishers, is thinking about doing more direct deals with digital operators. Whether any of these companies start to withdraw from the collecting licensing system outside the US also remains to be seen.

Whether rights owners should licence digital services collectively, as they generally do with radio, tour promoters and other forms of public performance, has been a hot debate in recent years.

While big rights owners are probably most attracted to direct deals because they often result in higher royalty payments and upfront advances (utilising the threat “well, you try launching your service without our catalogue), there are other advantages to direct deals: labels and artists can retain vetoes over certain tracks, in theory multi-territory licences are easier to negotiate (most collecting societies only licence in their home market, though with some exceptions in Europe), and rights owners can circumvent those collecting societies around the world that are either inept or corrupt (or both).

Though the advantage of collective licensing is that in each territory a digital operator need only do two or three deals to licence pretty much all music, the lack of upfront mega-advances means innovative but cash-strapped start-ups aren’t automatically blocked from the market and, assuming a society distributes royalties accurately and fairly (which, admittedly, not all do), then it’s fairer for smaller rights owners – ie people are more successful if they write or release music that gets played a lot, rather than if they managed to negotiate a better advance or per-play rate at the outset.

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