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The Mechanical and Performance Royalty Game and the African Licensing Ecosystem

By Unique Oliver.

Business, Advertising, Marketing, Entrepreneurship.
Oyemaja, The Mechanical and Performance Royalty Game and the African Licensing Ecosystem

Since Digital music consumption overtook physical consumption in West Africa in 2013, there has been a rapid growth in recorded music revenue most especially in the past five years with Caller Ring Back Tone and Streaming dominating the recorded music revenue. Unfortunately, the music publishing revenue side of the business is yet to benefit from the impact of an increase in mobile consumption and internet penetration despite the revenue opportunities available. In this article I explained the need for a quick transition from the outdated traditional model to the digital model that accommodates accurate metadata ingestion, non-exclusivity with the CMOs to give room for direct licensing, Publishing Partnerships across digital exploitation sources and most importantly remittance to the rightholders at the pro rata basis.

Last week the US Copyright Royalty Board (CRB) decided to uphold the 15.1% mechanical streaming rates (The rates streaming platforms are to pay songwriters and composers from the master owner). Prior to 2018, this rate was at 10.5%. This increase is indeed very significant to the business of Publishing and Licensing because as the Serviceable Obtainable Market (SOM) for the streaming business increases the more revenue for songwriters and composers(called Producers on the master side) increases. Where will the 15.1% be deducted from? The 15.1% will be deducted from the Total Content Costs. Total Content Costs according to Law Insider “ shall mean each and all of the types of consideration comprising Revenue that are paid or payable to the Licensor of sound recording rights and/or the Licensor of mechanical rights in connection with a Licensed Service or Licensed” It simply means from the 100% accruable to a master owner, 15.1% will be paid as publishing royalties. It’s good to see the framework being implemented and the National Music Publishers Association representing American music publishers and their songwriting partners are also targeting an increase to 22% - 26% for next term (2023 - 2027). This is a remarkable progress being made here which begs the question, Is there a system for Mechanical and Performance License in Africa?

Looking at the existing framework of the Mechanical and Performance Royalty system in Africa, it’s easy to claim such forms of license and royalties exist on paper and there is no actual enforcement nor remittance to right holders. The issues faced by the Collecting Societies particularly in West Africa have indeed affected the royalties flow to right holders, hence the myth that performance and mechanical license and royalties remittance does not exist in Africa.

Performance License is simply granting the right to publicly play or perform a song while Mechanical License is simply granting the right to reproduce a song on a sound recording. The traditional ways of exploiting this form of license(Performance and Mechanical) includes playing music at event centers, clubs, inflight, radio, via mechanical piano-rolls etc but with digital evolution such exploitation now involves digital downloads,Streaming Platforms, social media and other digital service providers.

The Collective Management Organization is vested with the responsibility of issuing blanket licenses and remitting the royalties to right holders. After gaining Independence, Nigeria switched from having the UK Performing Right Society (PRS) as the sole collecting society to having indigenous collecting agencies like the Giwa Agency in 1970, then MCSN which dominated the 80s until the loggerhead with PERON, the proposed collecting society by PMAN which never got the license to operate after reasonable efforts were made towards its establishment. In the 90s, we also had the PMRS as well who made significant effort particularly in collection of royalties from Radio stations and more recently COSON whose license got revoked a few years ago after among other things the loggerheads with MPAN on the General Distribution model for Royalties collection. Similar disputes exist in other African territories like Kenya and Ghana as a result of collection of royalties without remittance to rightholders.

With the CMOs holding so much power it’s fair to say that there will still be problem with royalties collection and remittance except there is a quick transition to the digital model that accommodates accurate metadata ingestion, non-exclusivity to give room for direct licensing, publishing partnerships across digital exploitation sources as the current traditional exploitation model is filled with so much problems from the users to the rightholders. A good case study is the General distribution practice which involve all members of a collecting society receiving the same amount of music royalties yearly.

What could be the Status Quo?

We do need to wait for a replay of what happened to global music revenue in 1999 which saw the heavy reduction in CD revenues which is yet to come up or a replay of Covid that saw musicians unable to go on tour or perform at events before there can be serious focus on the significant sources of income from music publishing. Five interesting trends that can shape the active exploitation of music which gives room for remittance of royalties to songwriters and composers include:

1. Social Media Platforms:

Social media is the new Public, hence music played on the platform is the new public performance. Tiktok a few years ago had a licensing deal covering over 58 territories in the African Continent through Southern African Music Rights Organisation (SAMRO) and Composers Authors and Publishers Association (CAPASSO). There is a need for more licensing deals across other social media platforms which ensures usage of music leads to payment of royalties. Roles like Publishing Partnerships and Licensing Solutions should be prominent with focus on the African Market. Lastly, with a direct licensing approach as opposed to blanket licensing, Publishers and Labels will be able to negotiate directly for use for the use of music on the platform.

2. Video Platforms:

A cue sheet is a document that contains the metadata of all music used in a visual project. The use of cue sheets has never been so pivotal as it is now with diverse delivery platforms for visual projects ranging from cinemas, SVODS, TVODS and other Video delivery Formats. With accurate ingestion of cue sheet data, royalties will be remitted to rightholders via Publishers and CMOs (Collective Management Organisation).A good case study of the success of this system is the Royalty Premium Payment Plan introduced by ASCAP (The American Society of Composers, Authors and Publishers) which ensures that ASCAP composers, songwriters and music publishers are eligible for premium bonus payments for the top streamed shows and movies on OTT(Over the Top) platforms. What this means in a nutshell is when there is a hit show on OTT streaming services e.g Squid Game on Netfilix, Composers and Songwriters affiliated with ASCAP will be eligible for bonus payments(in addition to sync fees and regular performance royalties) from ASCAP but this cannot be done without the ingestion of the Cue Sheet with the Collecting Societies.

3. Music Streaming Platforms:

While streaming platforms have been paying performance and mechanical royalties the major problem has always been metadata tracking to ensure royalties are remitted. With split points being negotiated on time, works being ingested on time it makes the process easier for DSPs to pay out royalties with the assurance it will get to the rightholders.

4. Gaming Platforms:

There is an interesting boom in gaming in Africa. According to Newzoo, a games analytics company, gamers in sub-Saharan Africa increased to 186 million in 2021 from 77 million in 2015. It’s also interesting to see Facebook and Netflix actively including games to their platform. There is a need to ensure music used on gaming platforms is well compensated for and not just a buyout. With Roblox and Twitch reaching a good settlement with National Music Publishers' Association, the time is here for strategic placement of music on these platforms in return for royalties.

5. The Metaverse:

The metaverse is no longer the future but the present. With Music platforms “soundtracking” various districts in the metaverse the time to provide background and foreground music in the metaverse is now and it is quite exciting and worthy of exploration. With Licensing partnerships for the use of pre-cleared music, venues in the metaverse will have access to commercial music and music from Africa should not be left out.

Originally published by Unique Oliver on LinkedIn

Reach Unique Oliver on LinkedIn.

Oyemaja Executives.


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