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Licensing Online Music : ASCAP

One of our current labs projects deals with streaming music online.  During our research into setting up a proper streaming media service we stumbled upon something that is almost as complex as the technology platforms that make this online audio work.   Music licensing.

If you are planning to do online streaming you need to think about licensing.  It can account for up to HALF of your expenses.   If you are conducting any sort of “public performance”, and the agencies consider streaming audio across the Internet a public performance, you must have a license.

To get started you need to speak to ALL of the FOUR licensing agencies:  SoundExchange, SESAC, ASCAP, and BMI.

In part 1 of our 4-part series we will take a brief look at the ASCAP license maze.

ASCAP Licensing

Here is the quote from ASCAP on public licensing:

A public performance is one that occurs either in a public place where people gather (other than a small circle of a family or social acquaintances). A public performance is also one that is transmitted to the public, for example, radio or TV broadcasts, and via the Internet.

ASCAP

The American Society of Composers, Authors, and Publishers
www.ascap.com

ASCAP represents 8.5 million songs and collects the “pay to play” licenses for these people.

Step 1: Select Your License Category

ASCAP has several license categories available including:

  • General
  • Television
  • Cable & Satellite
  • Radio
  • New Media & Internet
For our online endeavors the New Media & Internet category is most appropriate though there are enough gray areas that this may not always be the case.

Step 2: Select Your License Type

Now that we’ve selected the general license category we need to select the right license type.  There are THREE options here:
  • Non-Interactive Services
  • Interactive Services
  • Multiple Sites and Services
Which license depends on the type of service.  If users can select the songs being played you must have an Interactive Services license or Multiple Site license.   Regardless of the license type you choose you will always select from one of two ways to “count their money”: by service revenue (who much you make) or by service sessions (how many visitors you have).

Non-Interactive Services

Users cannot interact with the music stream.
Minimum Fee: $280.00 annually.

Interactive Services

Users interact with the music stream.
Minimum Fee: $340.00 annually. 

Multi-Site

This is a custom blended rate that is negotiated with ASCAP.

Step 3: Select Your Rate Schedule

OK, you’ve selected your license category and your license type, now you need to select your rate schedule:

Rate Schedule “A”

The broadest rate schedule is geared toward music-intensive services.  Your business must qualify for these rates based on total service revenue and/or service sessions.   The lowest of the thee rates.

Rate Schedule “B”

For diverse content beyond music (news, live broadcasts, etc.) .  Fee is revenue based and adjusted to count ONLY music revenue.     Must be able to track music-only plays on the station.

Rate Schedule “C”

Like schedule B, the license fee is based on revenue generated from music only and even further refines this model down to paying ONLY for ASCAP members.  This requires extremely accurate reporting of music plays to identify not just that you played music but you know the artists & title and can compare it to the ASAP members list.

Summary

As noted in the sidebar commentary, licensing music can be quite complex.   This is only one of the FOUR agencies you need to deal with.   Look for our follow up articles on the other three agencies to be published soon.

Sidebar Commentary

In an effort to stem the erosion of their extremely profitable music licenses that were lost when music CDs went the way of the dodo bird, the industry has managed to form a byzantine maze of license contracts backed by US Government legislation thanks to years of lobbying.    To keep it “fun”, there are dozens of license models that have evolved at EACH agency in order to protect the long-standing traditional broadcast radio allies while levying the maximum possible fees on Internet broadcasters.   There are also several license agencies involved, each vying for a piece of the same pie; and inevitably double-dipping forcing online broadcasters to pay 2 or 3x  for the same music play.

The system of music licensing is overly complex due primarily to what we view as corporate greed on behalf of the royalty and licensing agencies.   We are all for artists being paid.  We encourage that. We want that.   But the numbers don’t lie, the licensing agencies that claim to be acting on behalf of “the artists and record labels” leave very little at the end of the day to give back to the artists even after charging 3x for the same song play.   The general consensus is that less than 10% of the revenue generated by licensing actually ends up in the hands of the original artist.