US Copyright Office launches inquiry into performance rights organizations

The United States Copyright Office (USCO) has launched an inquiry into performance rights organizations in the US, in an effort to answer “questions related to the increase in the number of PROs and the licensing revenue distribution practices of PROs.”

The USCO launched a call for written submissions from the public about the PROs in response to a letter sent by members of the House Judiciary Committee to the Copyright Office last September.

The letter expressed concerns about the number of PROs in the US and the difficulties many businesses face in licensing music, given the need to sign blanket licensing agreements with numerous collections organizations.

It also raised questions about PROs’ transparency amid concerns from some artists and songwriters that royalties may be unfairly paid or that they may be losing money due to high administrative fees.

The letter from US House Reps. Jim Jordan, Darrell Issa, and Scott Fitzgerald, all Republicans, said that brick-and-mortar businesses that play music publicly, such as restaurants, bars, stores, hotels, and music venues, “have reported receiving demands for royalties from new entities claiming to represent songwriters, and threatening litigation if the demands are not met.”

It adds: “Considering that the possibility of substantial statutory copyright damages poses an existential risk for most bars, restaurants, and other small businesses, many feel compelled to pay these entities on top of what they already pay for blanket licenses from the traditional PROs.”

The USCO counts six PROs in the US: ASCAP, SESAC, and BMI, the “traditional” PROs operating in the US, along with three relatively new organizations – Global Music Rights (GMR), PRO Music Rights, and AllTracks – all of which were founded in the past 12 years.

That stands in contrast to most other countries, which either have a single PRO collecting songwriters’ and publishers’ royalties or have a coordinating body that works with the country’s multiple PROs to ensure licensees are fully covered.

“[Venues] have reported receiving demands for royalties from new entities claiming to represent songwriters, and threatening litigation if the demands are not met.”

Letter from House Judiciary Committee representatives to the USCO

While ASCAP, the oldest and among the largest of the US PROs, is a non-profit, the others operate as for-profit entities. In a sign that royalty collections are becoming big business, BMI converted to a for-profit model in 2022, and in 2023, it was acquired by private equity firm New Mountain Capital.

Ahead of the completion of that acquisition, BMI announced that it would reduce the percentage of its collections that would flow through to rights holders from 90% to 85%.

Another sign that PROs are becoming big business came last year when private equity firm Hellman & Friedman took a stake in Irving Azoff’s GMR, which valued the royalty collecting org at $3.3 billion.

Beyond the uncertainty faced by businesses that aren’t sure if they have all the licenses they need to play their music selections, there is also a question regarding transparency and fairness in royalty collections and payouts.

“It is difficult to assess how efficiently PROs are distributing general licensing revenue based on publicly available data,” the House representatives’ letter to the USCO stated.

This includes “how accurately lesser known and independent artists as well as smaller publishers are being compensated compared to widely popular artists and major publishers,” the letter added.

Part of the problem appears to be that, as for-profit entities, PROs need to keep some of their finances under wraps “for competitive reasons,” as the USCO put it.

BMI’s shift to a for-profit model offers an example of that. In 2023, after BMI’s switch, Billboard reported that “for the first time ever,” BMI’s financial report for the previous year “hardly contains any financial information.”

That’s a concern that even prominent industry groups have raised. Last year, David Israelite, President and CEO of the National Music Publishers Association (NMPA), said that while non-profit ASCAP “gives you a pretty close look at what it costs” to administer royalties, “we didn’t get that information” from BMI.

The USCO has set a deadline of April 11, 2025, for written submissions for its inquiry into PROs. Written replies to submissions will be accepted until May 27, 2025.Music Business Worldwide