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Should the music industry be able to negotiate royalty payments?

Most people, from California to the East Coast, know that the music industry relies on a series of contracts and agreements between individuals and companies that not only establish the responsibilities for each party, but determine how people will be paid for their work as well. It's a part of the industry where if any one of its moving pieces isn't working right, it can impact a number of people.

Take for example royalty accounting. As maintained by entertainment law, many individuals within the music industry continually receive payments long after a song or album has been released to consumers. Called royalties, these usage-based payments are distributed according to the terms of a license agreement, which gives a licensor the right to use a piece of intellectual property. But as was pointed out by a recent article in Bloomberg Businessweek, there is no standard for these agreements across the industry.

When digital music companies such as Pandora and YouTube host a song, album or music video, they sign a license agreement that establishes what will be paid to singers, songwriters, publishers and music companies. This is often done through ASCAP and BMI, two organizations that currently handle royalty payments. But the amount paid is not the same across the board. Current numbers suggest that YouTube pays as much as 50 percent of its music revenue to songwriters where as Pandora pays a mere 4 percent. This hasn't set well with many in the industry who feel that current laws prohibit them from playing hardball and negotiating fairer compensation for songwriters.

In an effort to address this issue and perhaps jump start change in the industry, the Justice Department has opened up a public comment period that will give people within the industry a chance to voice their concerns. Depending on strong opinion within the industry, the Justice Department may consider putting an end to government-mandated royalty rates. This would give publishing groups a chance to negotiate better royalty rates, which could mean more money for songwriters in the end.

Source: Bloomberg Businessweek, "Opening Pandora's Royalties Box Will Turn Songwriters Against Singers," Joshua Brustein, June 5, 2014

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