Published on January 8th, 2010 | by Hugh Hession3
Performing rights organizations 2 – how does BMI and ASCAP calculate payouts?
If you recall in the first post of this series, I talked about that nifty little formula that ASCAP and BMI like to use to calculate earnings (BTW: if you stumbled upon this article and don’t have a clear understanding of how PRO’s work, it’s worth taking the time to go back and read the the first post of this series to get a better perspective).
The crazy aspect of these PRO’s, is that most people in the industry don’t fully understand how PRO’s calculate the payouts. It’s a bit arcane.
To enhance my point, here is a video featuring Wallace Collins; an entertainment lawyer from New York. (courtesy of artistshousemusic.org). Go to 1:00, where Mr. Collins talks about the calculation of royalties by the PRO’s.
And to think you thought that only your boss had it out for you
ASCAP and BMI use surveys as an indication of what songs are being performed (please see my first post of this series for the definition of “performance”). Both measure performance through radio station logs, television cue sheets, ring tone providers, major concert data etc. and random sample data.
The Nifty (and confusing) little formula
Fun, huh? ASCAP converts performances that show up on their surveys into what they term credits. These credits are then converted into a dollar amount.
How they derive the numbers for the above formula to calculate credits is anyone’s guess. For example, ASCAP describes the licensee weight as the factor which reflects the license fee paid by a station (or group of stations) and the number of hours included in the appropriate survey.
At this point, they have to turn these credits into money and divvy up the proceeds based upon what each writer and publisher should receive.
According to ASCAP, they are advised of the correct shares to be paid when members submit Title Registrations. Then, after they get this number, they multiply it by the credit value to get your royalty! The credit value is what each individual credit is worth (what the…).
Bottom line is this:
Your ability to get paid by ASCAP are through these factors:
- HOW the music is used “feature, theme, background, etc.”
- WHERE the music is performed “network or local television, radio, cable, etc.”
- HOW much the licensee pays
- TIME OF DAY of the performance “with respect to television and cable”
- The general licensing allocation applied to radio and television performances
Pay particular attention to “how much the licensee pays.” The number of times a licensee is sampled is directly correlated to the dollar amount paid for a license.
Which brings me to PRO little known fact #1
Yep, here is the catch. As an independent or unsigned artist, you won’t receive much, if any performance rights money from ASCAP or BMI because their payouts are tied to how much a licensee pays. This means that the majority of funds go to major artists who are being played on commercial radio and the television networks because these licensees are going to be paying the biggest chunk of the fees.
and….PRO little known fact #2
Unless you are on a top grossing tour, you typically will not get paid for performing your songs (or others who perform your songs) in a club or venue. The reason is that ASCAP and BMI give general licenses to the gazillions of small venues which covers any song played in a particular establishment. Simply put, small venues are not monitored for individual play. Both PRO’s typically focus on the top 200 grossing tours and the corresponding venues.
Note: As of March 2012, BMI has set up a way for performing music artists to report on the venues they play and get paid. It is known as BMI Live.
And still one more…PRO little known fact #3
You would think that PRO’s would find a way to divide the general license fees collected to independent artists playing in clubs. Instead, these fees go to broadcast feature performances on radio and television.
This from BMI’s website:
BMI may choose an appropriate surrogate, such as radio or television performances, for the distribution of the (general) fees. In such a case, general licensing revenue serves to increase the rates payable for other performance types which we determine are representative of the universe of performances of music used in general licensing categories.
So what about BMI? Well, they are bit more discrete in the way they divide the money, however BMI still weighs performances. Additionally, BMI builds in many different bonuses to their payout structure including:
- The Hit Song Bonus. This bonus pays out more based on hit song status. Basically, any song that gets played over 95,000 times in a quarter slides into this category. Guess what licensing fund this normally comes out of? Yep…the general fund.
- The Standards Bonus. These are songs that have been previously been released and have had a long run on radio. A good example of this are classic rock songs (The Eagles, James Taylor, Pink Floyd). To get this bonus, a song has to be played 2.5 million times since its release and 15,000 times in a quarter.
- Super Usage Payment. This bonus is usually tied to television. It comprises the continuous performance of songs with a duration of one minute or greater.
- The Music Payment Bonus. Television theme songs with a combined 2000 quarterly network performances are eligible.
Other issues in regard to PRO payouts
ASCAP and BMI do not pay equally for the same chart placement. According to Star Tracks by Larry Wacholtz; It is highly dependent upon the genre of music, the way the charts of compiled, the time of year, methodology and competition. For example, some hit songs receive more airplay than others.
Also, record companies have historically shipped millions of copies of new releases from their superstar acts to retail, and account for them as being sold. Thus, an artist could reach platinum status without getting much airplay and accordingly, limited PRO income.
With all this information about how unrealistic it is for an independent artist to get paid, why is it worth signing up to a PRO? There are few advantages which I’ll cover in the next post of this series, however you never know when your break is going to come. There are a variety of outlets in which songs can be used – not just on your CD. As an artist, it is in your best interest to capitalize on every opportunity available for your songs. And who knows? One day you may get a nice check. There is no sense limiting a potential funding stream for the performance of your songs.