How PROs Collect & Distribute Royalties (Part.1)

Authors, composers and publishers have the right, but not the obligation, to register with Performing Rights Organizations (a.k.a Collection Societies, internationally) for the collection of royalties.
The primary function of PROs is the intermediation between copyright holders and entities who wish to use their music publicly (ex. a business establishment that broadcasts background music).

They can take the role of your lobbyist, your “agents”, and most importantly, your royalty collectors.

Main ways that royalties are collected and distributed

Pay per Play: when there is enough analytical information, the society has the option to pay-per-play, that is, actually pay royalties due for every single time a song is used.

For example, Soundreef, a European PRO, supplies the users of music with technologies that track what is actually played in stores as background music. The playlist data is then used to analytically and fairly divide royalties among members.

Sample: when there is no control over what the users of blanket licenses play, it becomes logically impossible to accurately determine the exact play-count of such vast repertoire (think of all the retail stores and restaurants in the US alone and how they choose to broadcast).

For example, let’s say a Bob’s Store pays his local PRO a blanket license for the right to play music to create a nice environment for his clients. He then fills his iPod with thousands of tracks to play in his store. Because the PRO in this example does not have a way to accurately track what Bob has in his iPod or how many times he plays each song, they must resort to sampling. In layman’s terms, this PRO will request some information from a small sample of the market regarding playlists and scheduling and then plug that into the formula that the PRO deems fair. This formula tells them how to split the royalties among its members.

Clearly, this strategy can become a problem particularly for non-mainstream musicians, who although may have a strong niche, local or cult following, may get overlooked by the PRO’s sampling and/or chosen formula. Some will get what they actually deserve, some might get more, some will get less, and some won’t get any at all. Why? Because the PRO does not have (or doesn’t want to have) the capability to calculate royalty distribution accurately.

Guest post by Bibi Nucci from Soundreef.com. Soundreef is a PRO that manages royalties from background music broadcasted in Europe for artists around the globe. They offer right holders from all over the world free membership and transparent-analytical distribution.