Earn from It

Collection Societies

Whether a composer/songwriter is self-published, or has a publishing deal, the money paid by third parties for the use of a composition is almost invariably gathered in the first instance by collection societies. Most countries which have copyright legislation also have at least one organisation responsible for granting licenses to use music and, in turn, for distributing revenues to the appropriate rights holders.

In Germany, one society [GEMA] is responsible for collecting all the different publishing royalties, while in the US three organisations, ASCAP, BMI and SESAC, compete with each other to collect performance royalties.

In the UK there are several organisations, which are responsible for collecting different types of royalties. The key societies in terms of publishing are ‘PRS’ and MCPS, although musicians who play on sound recordings released by a record company will also benefit from royalties collected by PPL (Phonographic Performance Limited). Moreover, composers/songwriters who own the copyright to a music video will receive royalties from VPL (Video Performance Limited).

In order for the societies to be able to collect on a composition, the song must first be registered, which in turn requires the composer, and/or the music publishing company administering the composition(s), to become a member of the societies. Writers pay a one-off fee of £100 to join PRS, while membership as a publisher costs £400. MCPS charges both composers and publishers alike, £50 for life. Joining PPL and VPL is free of charge.

Throughout the world, collection societies are interlinked by reciprocal agreements. This means that in their own territory, they collect on behalf of their foreign counterparts. Therefore, if a member of PRS and/or MCPS has a piece of music used in Spain, the royalty will be collected by SGAE, which passes the money onto PRS and/or MCPS, after deducting a commission. By the same system, a Spanish composer/songwriter who has a piece of music used in the UK, will see the British societies collect the royalty in the first instance, before passing it on to SGAE.

In the UK, publishing royalties are collected by MCPS and PRS. Since 1997 they have worked together as the MCPS-PRS Alliance and, in some areas of music online, they offer a joint licence.

PPL collects on behalf of the record companies and musicians who played on a sound recording, while its sister organisation VPL (Video Performance Limited) is responsible for distributing income derived from licences granted to TV channels broadcasting music videos.

Details of the key UK organisations are listed below:

PRS (Performing Right Society) www.mcps-prs-alliance.co.uk

Wherever music is played in a public place, the premises concerned have to buy a licence from the PRS. Regardless of whether it is a hairdressing salon with a CD player, a large concert venue hosting a gig or a multiplex cinema, all are legally obliged to pay a fee. Moreover, radio and television stations also have to buy a licence.

PRS distributes the money it collects to its members, who can be either composers/songwriters or music publishing companies who administer the compositions of their signed writers.

A wide variety of tariffs exist. How much is charged depends on such factors as where music is being played, the size of the audience and, with live performances, the type of event. Moreover, the charge can vary from a simple annual fee to a formula which takes into consideration factors such as the number of tickets sold.

With large broadcasters such as the BBC and Virgin Radio, as well as medium-to-large concert venues, PRS is able to account for every composition played or performed. In the case of the former, a census system operates which logs every play. In the case of medium-to-large venues hosting a rock/pop concert, PRS charges 3% of the gross ticket receipts, deducts its commission and subsequently pays the composer. Classical concerts, free events, theatre performances and variety shows, are all governed by other tariffs, but the revenue collected is also paid out at a specified time.

Where smaller venues and concerts are concerned, as with smaller radio and television stations, a different system exists for distributing revenue to composers and publishers. Although all such businesses must also pay for a PRS licence, they are not monitored continuously. Instead, all the compositions used on a given number of sample days are noted.

With small venues, PRS has introduced a system which allows composers to claim revenues if they have performed more than ten gigs within a given time frame, thereby providing the possibility of getting some revenue.

Unfortunately, this is not the case with smaller TV and radio stations. In simple terms, if a station is sampled for one day only, and a song is played once on that particular day, then it will be treated as though it has been aired 365 times and payment will be distributed accordingly. However, even if a piece of music is used repeatedly for several months, unless it was aired on the sample day, the copyright holder will not receive any payment.

It is worth bearing this in mind when dealing with parties who claim that the use of music on TV or radio will automatically lead to PRS royalties. Unless it is a large network, such as the BBC or Virgin, getting paid via the sample system is simply a matter of luck.

Critics argue that this favours established composers/songwriters, as they are more likely to have their work played on any given day. PRS aims to reduce the reliance on samples but must also balance the cost of collecting against what it costs to administer and distribute revenues.

Using samples to monitori smaller premises such as shops, is deemed to be so uneconomic that statistics garnered from the use of music in other environments are used as a basis upon which to distribute the income.

MCPS (Mechanical Copyright Protection Society) www.mcps-prs-alliance.co.uk

Mechanical royalties are due wherever music is copied, which usually means where it is featured on a physical soundcarrier such as a CD, DVD, vinyl record or cassette. Moreover, if music is sold as part of another device, such as a mobile phone, then a licence must also be obtained from MCPS.

How much is paid depends on whether music is the principal purpose of the product and if it is to be sold or given away as part of a promotion [eg a free CD with a magazine or newspaper].

A key source of mechanical royalties is the sale of CD albums. The rate is set at 8.5% of the undiscounted dealer price. If an album costs a record shop £8 to buy wholesale, then the mechanical royalty will be £0.68. MCPS deducts an administration charge for collecting on behalf of the composer/writer.

It is important to note that the royalties paid vary depending on the country. For example, in the US the mechanical royalties tend to be lower than in the UK.

Moreover, in some countries such as Germany they are collected by the same society responsible for performance royalties.

In instances where the composer/songwriter is a member of MCPS and is self-releasing an album of their own work, an application can be made for exemption from mechanical royalties. This prevents a situation arising whereby MCPS ends up collecting from the ultimate recipient of the royalties.

MCPS-PRS Alliance www.mcps-prs-alliance.co.uk

In order to simplify the process of online users incorporating music into their sites, the MCPS-PRS Alliance grants joint licences for certain types of use. These include the Joint Online License, covering medium to-large-scale services such as internet TV and radio; Limited Online Exploitation License, for smaller internet broadcasters and non-commercial organizations, generating under £3,000 per year in revenue; Joint MCPS-PRS Ringback Agreement, which covers songs being played before a person answers their phone.

For larger sites offering general entertainment content, but where music is not the main focus, a General Entertainment On Demand licence is being developed, which is due to be introduced in 2008.

Revenue generated by licences costing over £20,000 per year is distributed using software, which matches tracks to those held on the MCPS-PRS database. PRS estimates that over 90% of tracks are accounted for, with staff aiming to trace the most popular of the tracks, which do not appear on the database.

As is the case with smaller terrestrial and digital TV and radio stations, compositions played by online broadcasters under a certain size, are sampled.

How MCPS and PRS split the revenues from joint licences varies according to the use. For example, with download services 75% goes to MCPS and 25% to PRS, while the split is the opposite with internet broadcasts. If more than one type of service is being provided by the online user, then a 50/50 split applies.

In some cases online music use cannot be covered by a joint licence. These include online advertising, background music on a webpage and sites using music to encourage people to buy a certain product or service.

Details of how to gain permission for this type of use, can be found on the MCP-PRS Aliance website.

PPL (Phonographic Performance Limited) www.ppluk.com

Like PRS, Phonographic Performance Limited (PPL) collects from television, radio and internet broadcasters, as well as pubs, clubs, shops and other premises. However, its role is to distribute the licence revenue for the use of sound recordings, as opposed to the composition. Sound recordings are subject to a separate copyright from publishing rights, and last for a period of 50 years following the date of recording, Publishing royalties last for 70 years following the death of the composer/songwriter.

When composers/songwriters play on a recording of their work, or own the label which releases the compositions, they will be entitled to royalties. Although PPL does not charge a fee to join, membership is necessary for it to collect money for the use of a composition.

The record company releasing a piece of music is required to register the recording electronically with the 'Catco' system and provide details of those musicicans who played on the recording. Once this has been done, PPL divides the royalties for a composition’s use. The record company receives 50%, and those who performed on the recording, split the remaining 50%. How the latter is shared out is based on a formula which takes into consideration the contribution a musician made to the recording. For example a lead guitarist is likely to be deemed a ‘featured performer’ while a triangle player will generally be regarded as a 'non-featured performer'.

PPL is able to account for all plays used on TV channels, as well as all BBC radio and 80 commercial stations. However, when it comes to distributing the money generated from clubs/discos, jukeboxes and pubs, the society shares out the revenue based on a mixture of tracks played on radio and information used to compile dance music charts. Revenue generated for playing background music is shared out based on a sample provided by ten background music suppliers.

PPL has reciprocal agreements in 22 territories, including the US, India, Canada, Japan and most Western European countries. Members can request that the organisation also collects abroad on their behalf.

VPL (Video Performance Limited) www.vpluk.com

VPL grants licences to television broadcasters as well as clubs, bars and other premises showing music videos. The recipient of the royalties is the copyright holder of the video clip. In the UK this is usually the record company which has produced the music video. Therefore, if a composer/songwriter owns the record company releasing their material, or the artist has produced their own clip, VPL can collect those royalties.

If this is the case, then it is important to join before the video is made available, because royalties can only be collected from the date of joining. Membership is free.