Moses Avalon is one of the nation’s leading music-business consultants and artists’-rights advocates and is the author of a top-selling music business reference, Confessions of a Record Producer. More of his articles can be found at www.mosesavalon.com.
In Part I of this three-part series, I addressed the key question: Should you bother to join either PRO? Part II dealt with the fallacy of ASCAP and BMI’s self-postulated “nonprofit” status BS and the PR they spread at trade shows as to why this makes them better than SESAC. Here in Part III, we’re getting to the bottom line: Who pays more?
But first…
Let me start by making one thing perfectly clear: Even though this entire three-part series has been about vetting the sales pitches, organizational structures, and payment methods of the two main US-based performing-rights organizations (PROs), ASCAP and BMI, the economic viability of the writers of popular music would be endangered, and the music business in general would suffer, without them.
The PROs, aside from collecting money for writers and publishers, also support the music community by giving grants to charities and helping writers get loans and receive healthcare benefits. They also go to great lengths to ensure that writers get paid their share of royalties, even if a writer is un-recouped with his or her publisher. These services have an important impact on our community and deserve recognition and consideration. But you can read more about these good deeds on their websites (here and here).
Here’s what you wont read…
Who pays more?
When it comes to up-front money, BMI has been known, on rare occasions, to offer non-recoupable advances (called “guarantees”) to superstars, whereas ASCAP is emphatic that it will not ever give advances, because it claims that its internal policies won’t allow it. However, it is no secret that it has, in fact, given recoupable advances in the multiple millions of dollars to several of its superstar writers.
So on the advance side of the argument, BMI wins, hands down.
The case for who pays more when it comes to dispersants, however, is where it gets amusing. Reps from both PROs make the claim that they pay the same as the other. However, this is about as truthy as the public policies regarding advances. There are myriad songwriting teams where each member was signed to a different PRO, yet their checks for the same song in the same pay period were very different. The fact that this happens with some degree of frequency begs the question: How can any discrepancies occur between them if they are, as commonly referred to, like Coke and Pepsi, and function identically?
There are two factors that help explain the why their payments can be so different:
1. How much does the PRO actually spend to collect your money?
2. What method does the PRO use to calculate what it owes you?
We covered the first point in the first two parts of our series (part I / part II), so let’s look at the second point listed above. To do that, we have to look at the PROs’ “pooling system.”
What’s that floating in the pool? Is it my money?
After ASCAP and BMI collect all of their money (about $900 million a year, respectively), each applies its own proprietary slice-‘n’-dice formula for paying members. Explained in very general terms: ASCAP’s method segregates the money into individual accounts, or “pools,” for each source (radio, TV, stadiums, etc.), and then applies a crediting formula that splits up the pool to each member in that pool. BMI, on the other hand, mixes all of the money from the various sources into a master pool first, and then applies a personal crediting code, assigned privately to each member, to figure on their share of the entire pool.
To assume that this seemingly small distinction makes little difference is a huge mistake, as you’ll see.
To illustrate this, let’s turn the pooling system into a “canteen” analogy. A canteen holds a finite amount of water — let’s say 900 million sips. So naturally, since there is a finite amount of water in the canteen, if some people are going to get a few sips more, it will be at the expense of people who are going to get a few sips less. This seems fair. If you earned more credits (read: more public performances), you should get more sips. But in reality, instead of one credit for one sip, it works more like this: the more sips from the canteen that you take, the more credits you earn — to take a separate big gulp.
Kinda like that old cartoon joke, “One for you, one for me. Two for you, and…one-two for me. Three for you, and…one-two-three for me.”
And in fact, this is standard practice in the ASCAP/BMI pooling system. The rich get richer, faster, because they earn more bonus credits towards a larger share of a finite pool of cash. However, each system has its own separate and distinct ways of earning credits, depending on different factors, as I’ll show you now.
So who gets more sips?
The first factor is loyalty: ASCAP’s formulas don’t factor into your history with them. They don’t care how long you’ve been an ASCAP member — 10 years or 10 months. Their system is purely based on number of credits earned in that exact pay period. Its applied Johnny Cochran-esque philosophy:
If you got a hit, you get a split — whereas BMI’s math tends to favor its successful writers who are time honored. The longer that your music is earning money for BMI, the more credits you earn. So with BMI, the applied philosophy looks more like:
If you’re new to the game, your check might be lame but…
If you once had a hit, you can still get a split.
And so veteran writers in BMI’s pooling system get bonus credits, despite not writing a new hit in years, at the expense of newbies with current hits.
The second factor is the type of music you write. And here it is more like what George Orwell wrote in his classic book, Animal Farm: “All credits are equal, but some are more equal than others.” (I changed it a little bit.)
The discrimination in ASCAP’s pooling system is eyebrow-raising and has been written about extensively on other sites. In my research, a former ASCAP exec admitted to me that a pop song with vocals played on top-40 stations will pay about eight times more than say, the Star Wars theme, a non-vocal composition, played exactly the same amount of times on exactly the same stations because they are in different pools, and the vocals pool earns credits in an 8:1 ratio over most other pools.
To help compensate for injustices in their systems, ASCAP and BMI both give away several million each year in awards to members who have “distinguished” themselves but who didn’t show up in that year’s surveys (read: are in tight with the board).
Decisions, decisions, decisions
It should be obvious by now that the often-used analogy of Coke vs. Pepsi to describe the two main PROs in the US is not an appropriate one. In fairness, though, neither ASCAP nor BMI does anything to discourage the analogy. It keeps the public from focusing on their differences and distracts us from looking too closely at their mutual competitor, SESAC, the other PRO. (RC Cola?)
Which PRO you choose to join is an important decision, worth more consideration than a casual coin flip, or worse, basing it on which rep got to you first with a drink ticket or an invitation to play at a showcase. The right choice for you may ultimately boil down to a few considerations, some of which are outlined above. (By the way, we do special consultations to help clients make this decision. Shameless plug. Click here to E-mail me.)
Based on some inside sources, here are some simplified, general guidelines for your consideration:
- If you plan to be earning money from pop songs on the radio, you may prefer ASCAP.
- If you plan to be earning money from copyrights that are instrumental soundtracks in films, TV, or Broadway musicals, you may prefer BMI.
Ironically, these guidelines are often the opposite of what many reps and “informed” people will tell you (especially BMI). Here are a couple more:
- If you have a fluke hit (that has vocals) and don’t plan on following up with a songwriting career, ASCAP might be the way to go.
- But if you’re in this for the long haul and plan on many hits, especially ones that don’t have vocal performances, BMI’s system my be kinder to you.
Conclusion and a personal note
I have tried to avoid favoring either ASCAP or BMI in this post. But I would like the reader to note that in verifying my facts for what you have just read, representatives of ASCAP, knowing that I was going to write something sobering, were forthcoming and cooperative. I wish I could have said the same for BMI, whose only response was to forward me a press release. That might be a factor in your consideration as well.
Only time will tell if ASCAP and BMI will grow more powerful, or if they will outgrow their usefulness, or be outmoded by “direct licensing” technologies. But of this, I am sure:
You can see from reading the three parts to this series that these two companies compete rather fiercely. As digital broadcasting and other new performance mediums evolve over the next decade, their collection potential will approach the tens of billions per year. I can’t wait to see how competitive things get for the “societies” then. I, for one, I plan to keep a front-row seat, with popcorn and drink in hand.
Coke, anyone?
If you found this post helpful in making some decisions about which PRO to join (and when) and you want more info to take your music career to the next level, please consider purchasing a copy of my latest book, 100 Answers to 50 Questions on the Music Business.