Unwind the enigmatic realm of royalty collecting organisations to boost your revenue potential. Discover the origins and mechanisms behind these elusive entities that shape the music royalty landscape.
In the second part of our new blog series ‘SHOW ME THE MONEY’, we raise the lid on royalty collection societies – what they are, how they work and how you can maximise your collections.
What is a Collection Society?
Organisations known as collection societies perform the functions of safeguarding, recording, authorising, and receiving payment for the use of their members’ creative works. Put simply, whenever a musical work is played, they ensure that the artist, songwriters and rights holders are paid fairly (or something to this effect).
These payments are made in the form of royalties which can be hard to track. To gain a better understanding of the different royalties artists, songwriters and rights holders can expect to earn when they commercialise their work, check out our latest published guide on royalties.
Due to the complexity of royalty tracking, artists and performers typically become members of multiple collection societies in order to rely on them to ensure they are paid rightfully for their works’ usage.
What are the Different Types of Collecting Societies?
The most well-known royalty collecting organisations are Performing Rights Organisations (PROs) which collect performance royalties. These are involved when a musical work is publicly played or performed live. It’s important to note that when a piece of music is streamed on a Digital Service Provider (DSP), also known as a streaming platform, that is considered a public performance if the listener is not the owner of that song.
If artists don’t register as a member of a PRO, they will not be entitled to receive performing royalties. In the UK, the PRS for Music Limited is composed of two business arms, the Mechanical-Copyright Protection Society (MCPS) and the Performing Rights Society (PRS). The latter focuses on collecting revenues from performance royalties and ensures songwriters, composers, and music publishers are correctly compensated for their works’ public performances.
To join PRS and have their performance royalties covered, creators need to pay a one-time fee of approximately £100. This means it’s only worthwhile to join if creators are sure their performance rights income overpasses this value. Some thresholds can help artists determine whether it is worth joining, such as having their music played approximately three times on BBC Radio 1, as well as 150 plays on a local/regional radio station, or 200 plays on an MTV Music Channel, among other metrics.
Creators do not need to have a publisher to sign up for a PRO; they can just do it themselves on their website with minimal hassle. However, they must keep their membership updated and their musical works correctly registered as they’ll receive their respective payments through the bank account they provided in their PRO membership application.
This brings us to Collective Management Organisations (CMOs), which, unlike PROs, collect both performance and mechanical royalties. These royalties are generated whenever a song is reproduced in any form, such as when a CD is purchased, the song is downloaded on iTunes, or when the song is streamed on a streaming platform. However, organisations must fulfil specific requirements to be considered one, namely:
- To be owned by the creators it collects royalties for;
- To be accepting of any artist willing to join;
- To be recognised by law to operate as a CMO.
Some companies that do not comply with the requirements to become a CMO operate as a Mechanical Rights Organisations (MRO), collecting only mechanical royalties. They are more prevalent in regions without CMOs, pushing artists, performers, and music rightsholders to join both PROs and MROs for the full collection of their royalties. Additionally, there are also Rights Administrator Entities (RAEs) which also collect mechanical royalties, but, contrary to the previously mentioned organisations, these are for-profit, selective of the artists, performers and music rightsholders they represent, and do not need legal permission to operate.
One example of a RAE is Music Reports (MRI), an American company that issues music licences, collects and distributes royalties to rightsholders, and provides accurate and independent industry data and reports to its clients. On the other hand, The Mechanical Licensing Collective (The MLC) is an American MRO, initially created by the Music Modernization Act (MMA) and designed by the US Copyright Office (USCO). The MLC focuses on tracking and collecting mechanical royalties generated by Digital Service Providers (DSPs) like Spotify, Apple Music, Amazon Music, and Tidal. Some lesser-known streaming platforms that collect royalty revenues for rightsholders are Slacker, Audiomack, and Hoopla/Midwest Tape.
In February 2021, The MLC collected a historical milestone of $424 million in royalties from a total of 20 DSPs. Additionally, it’s established that music publishers must pay at least 50% of unmatched historical royalties from The MLC to their signed songwriters, benefiting these often neglected music stakeholders.
Take a look at the table below to see which organisations in Europe and other regions collect performance, mechanical and other royalties.
It is worth noting that royalty collections may differ regionally, and our guide represents only a general outline of royalty-collecting organisations worldwide. If you’re an artist or songwriter, make sure you understand the royalty landscape in your own region, as some specificities may apply.
What is the history behind royalty collecting organisations?
It all started with the Copyright Act of 1842, which protected music compositions in the UK. Later, in 1914, the Performing Rights Society was founded to protect live performances. That same year, the American Society of Composers, Authors and Publishers (ASCAP) was also founded in the United States. Similar organisations began to emerge, covering multiple territories from the mid-20th century onwards, such as SESAC and BMI.
Throughout the years, these organisations have been occasionally under public scrutiny for their controversial practices. In 1996, ASCAP allegedly threatened the Girl Scouts of the USA for singing campfire songs. After a huge backlash ASCAP dropped these demands even though they still managed to collect fees from 16 camps.
Lastly, having signed with the right organisations does not guarantee that artists will receive all royalties they are entitled to without any difficulties. This is because many regional collection societies are extremely outdated and lack technology and human resources to effectively spot every time a music recording or composition is played. Moreover, certain organisations can take a considerable amount of time at licensing sound recordings/compositions, leading often to missed opportunities, such as on film or TV sync.