Nov 20, 2017 slush
The question asked in the headline is legitimate, knowing that Collective Management Organizations (CMOs) were created decades, if not centuries ago, and aim at collecting revenues from music rights everywhere music is publicly played. For quite a long time, this meant collecting from TV, radio, cinema, phonograms, concerts, venues, nightclubs, etc., which mainly are national and local enterprises, operating on a given territory with clear boundaries. At that time, having national societies collecting on a national scope, and distributing the money to its members or to foreign societies via reciprocal agreements, seemed like the adequate system – though perfectible, as criticisms on transparency have shown.
The big shift operated with the explosion of internet could have questioned the relevance of CMOs. Indeed, why would a global service have to deal with plenty of national societies and face slow, cumbersome processes? That’s a question many asked themselves, and a myriad of private businesses popped up in recent years claiming they would be much more effective and fast in collecting royalties for songwriters from digital services worldwide. That’s forgetting the essence of CMOs: they are not-for-profit organizations, and not only do they represent authors’ rights, they are the authors, managed by them through their Executive Boards, monitored and controlled by them through their Supervisory Boards. Who can defend authors rights better than authors themselves?
Still, the collective licensing system needed to be redesigned to face the new challenges brought by the digital era, such as the explosion of music consumption with volumes of data to process growing exponentially, and the democratization of new usages to monitor, such as User Generated Contents or remixes.
In response to the need of licensing global services on a multi-territory basis in Europe, the move came from lawmakers with a European Commission recommendation that led to the creation of licensing hubs to deliver and handle pan-European authorizations for Digital Service Providers (DSPs). Two of them are currently operating in Europe: ICE, the alliance of PRS (UK), GEMA (Germany) and STIM (Sweden); and Armonia, the alliance of SACEM (France and Luxembourg), SGAE (Spain) and SIAE (Italy) founded in 2013, and joined since by SABAM (Belgium), Artisjus (Hungary), SUISA (Switzerland), SPA (Portugal) and AKM (Austria). Armonia acts as a one-stop-shop for digital services, providing a single agreement to license the repertoires of its nine societies and their three international mandates (Universal Music Publishing, SOCAN and Wixen Publishing) representing 13 million musical works and covering up to 131 territories worldwide.
This process saves time and costs for both the licensees and the licensors: instead of negotiating on a territory-by-territory basis, YouTube, Deezer, Google Play, 7digital, Recisio and more chose to go for a pan-European license with Armonia. On the back office side as well, processes are simplified for DSPs since Armonia has a common system with a unique CRM handled by our neutral third-party provider BMAT, which is the single point of delivery for the DSPs’ digital sales reports.
There are two main reasons for that. The first is that Armonia offers the same value for all the repertoires it represents. The agreement with a DSP is based on a single negotiation on rates and tariffs. This means that so-called “small repertoires” that are said to be less performing abroad, are valued at the same tariffs than a well-performing repertoire and this impacts the whole value chain. Moreover, rates negotiated by CMOs on digital plays are increasing year-on-year. The second is that collective societies grouping into hubs achieve economies of scale when it comes to DSP sales reports processing thanks to a common back office system where costs are shared.
That’s a very important point, because when new digital services arise and generate low music consumption, it often costs more to put in place the system and pipelines to process their sales reports, than the money the sales reports actually generate. So when a CMO doesn’t have the resources to process them, or when a private royalty collector doesn’t see the financial interest to do so, no money is made for the authors. Hubs allow CMOs to license services even if they may collect very little money from them, but in the end they collect royalties wherever they can. And when you add the sums, the result is compelling: the value of money distributed by some CMOs to their members over the last ten years has been multiplied by 100.
To remain relevant, collective societies understood the importance of co-operations among them, and their future strongly depends on the success of such initiatives. Not only on the licensing side, but also on the technical and technological aspects, to address collectively the challenges the industry is facing right now regarding the crazy volumes of data to process, the identification or works, the matching of sound recordings (ISRC codes) with publishing data (ISWCs codes) or transparency with blockchain technology. Common initiatives are flourishing lately with the ASCAP/BMI joint song database plan, the SACEM/PRS/ASCAP blockchain project, the R&D initiative of the Nordic music copyright societies “Polaris Future Lab”, ASCAP/PRS/STIM partnership with Swedish startup Auddly, among other examples. At the Armonia level, our common back office system is cleaning and enriching metadata at a speed of two gigabytes per minute and deals with big data, processing about 0.5 TB of data in hundred of files each month.
As for the transparency debate, the issue is being addressed since CMOs are constrained to comply with ever stricter legislations, such as the European Union directive 2014/26/UE currently being transposed, that has strengthened controlling policies and transparency obligations at core. Ultimately, the goal of alliances such as Armonia is to unite CMOs’ extensive music business experience with innovative technologies in order to provide a better exploitation and identification of works, to increase the volume, the variety and the veracity of the works processed, and to improve the transparency and the speed of the financial streams in order to ensure a fair compensation for everyone.
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