House Judiciary Committee Asks Copyright Office to Examine PROs, Citing ‘Difficult to Assess’ Royalty Distributions

The House Judiciary Committee has sent a letter to the Register of Copyrights, Shira Perlmutter, requesting an examination of “concerns” and “emerging issues” related to performing rights organizations (PROs).

In the letter, signed by the committee’s chairmen Rep. Jim Jordan and Rep. Darrell Issa as well as member Rep. Scott Fitzgerald, two particular areas of concern are addressed: the “proliferation” of new PROs and the lack of transparency about the distribution of general licensing revenue.

The letter, obtained by Billboard, notes the latter issue is of particular importance to independent artists and smaller publishers. “It is difficult to assess how efficiently PROs are distributing general licensing revenue based on publicly available data,” the letter reads. “For example, it is difficult to determine how accurately lesser known and independent artists as well as smaller publishers are being compensated compared to widely popular artists and major publishers.”

Concerns around transparency at the PROs are not new. The National Music Publishers’ Association, the trade organization representing music publishers, has spoken publicly about it, as have a number of individual songwriters and publishers over the years. These concerns grew last year after BMI, one of the largest PROs in the country, switched its business model from non-profit to for-profit and was acquired by private equity firm New Mountain Capital.

At the end of BMI’s fiscal year 2022, Billboard reported that “for the first time ever, it hardly contains any financial information.”

“I believe that you have a fundamental right to know what it costs you to use a particular collection society now I will tell you that ASCAP gives you a pretty close look at what it costs not exactly, but they give you a pretty close ballpark,” said NMPA CEO and president David Israelite at an Association of Independent Music Publishers’ Meeting in February. “BMI at the end of the last fiscal year we didn’t get that information.”

The letter states that it “request[s] that the Office examine how the various PROs currently gather information from live music venues, music services, and other general licensees about public performance; the level of information currently provided by PROs to the public; whether any gaps or discrepancies occur in royalty distribution; what technological and business practices exist or could be developed to improve the current system; the extent to which the current distribution practices are the result of existing legal and regulatory constraints; and potential recommendations for policymakers.”

The “proliferation” of PROs is a newer concern. Around the world, most countries typically have one PRO for local writers and publishers to join. In the U.S., it works differently. For over a hundred years, ASCAP and BMI have been the primary choices for a songwriter or publisher looking to collect performance royalties in the United States, but there is also the option to go with SESAC instead, a smaller but still important player in the U.S. PRO landscape, which has been around for almost as long.

Since its founding in 2013, Global Music Rights (GMR), a for-profit PRO founded by industry veteran Irving Azoff, has become a heavyweight in the space as well. GMR business model is to focus on a smaller roster of only the top tier of songwriters and then charging a premium to the bars, venues, shops and theaters that wanted to play them. Because their roster includes major artists including Bruce Springsteen, Billie Eilish, Drake, and more, the GMR blanket license became immediately important for licensees to have, no matter the cost.

In 2017, a fifth U.S.-based PRO emerged. AllTrack was founded by media investor and former SESAC-board member Hayden Bower and is designed to focus on indie creators with a tech-forward approach. This year, AllTrack became the fourth U.S. PRO to be accepted by the International Confederation of Socities of Authors and Composers (CISAC), along with ASCAP, BMI and SESAC.

“Licensees [like bars, restaurants and small businesses] have reported receiving demands for royalties from new entities claiming to represent songwriters… Licensees are concerned that the proliferation of PROs represents an ever-present danger of infringement allegations and potential litigation risk from new and unknown sources,” the letter states.

“We request that the USCO examine the increased costs and burdens imposed on licensees for paying an ever-increasing number of PROs, factors that may be contributing to the proliferation of new PROs, and recommendations on how to improve clarity and certainty for licensees,” it continues.

Perlmutter and the Copyright Office cannot make any specific changes to the way PROs work today, but often letters like this are sent in hopes that it will draw attention to particular issues or become the predicate for a hearing or draft bill.