Question

• ASCAP's "randomly" tapes some 60,000 hours of radio airplay as the basis for distributing hundreds of millions of dollars and has been challenged as having too much inherent error; that it is not provable that is it indeed a fair and just way to compensate copyright owners for use of their work. For example; currently, the percentage of fees paid by public broadcasting stations is somewhere between 5.8% and 6.3% (depending on whom you ask), yet the sampling system only samples these stations 690 hours per year, which divided into 1500 stations comes to 27 minutes per year per station, or about 4.5 seconds a day, and slightly more than 1.1% of the 60,000 hours. The system is clearly topheavy and greatly favors the few who get heavy airplay.
  
• The "random" system used to determine who gets how much money is of course not random, and it has been determined that the more money a licensee pays per year to ASCAP for their license, the more likely it is that they will be surveyed, and the more that a sampled performance is "weighted" when the time comes to pay out the money. ASCAP calls this the "follow the dollar" principle. Airplay on big radio stations is worth more to the copyright owners than airplay on small ones. Presumably the highly secretive Arbitron company's ratings of radio station market shares are used as the guidelines for determining license rates.
  
• ASCAP's policies and the rates charged to copyright users are determined by its 12-member board of directors, who are elected by the general membership. Votes cast in their elections are weighted according to the amount of money paid to that member that year; If you did not receive royalty money from ASCAP last year, you cannot vote this year. Because of this, it is unlikely that changes to make sure smaller writers and publishers get a fair share will come from within ASCAP.

How is this fair? What changes would you propose be made to try to infuse more equitable distribution into the system?

Answer 1

The American Society of Composers, Authors and Publishers is a bridge to easily connect the creators of content, specifically, music and lyrics, and the users of this content, i.e., radio broadcasters, television broadcasters, live concerts and other media. The users, i.r. the licensees pay a fee to ASCAP so that they can adhere to the copyright law while at the same time use the music created by the many artists and composers who are members of ASCAP. As per "The ASCAP Advantage", a document published by ASCAP, almost 88% of fees collected is distributed among the members and it claims that it is the highest distribution ratio in the US.

The above passage, makes the following allegations:

1- The sample considered for the radio broadcasts is very small, almost microscopic as ASCAP ends up surveying only about 4.5 seconds of airplay a day.

2- ASCAP surveys those radio stations more which pay a higher licensing fees to ASCAP.

3- All the members of ASCAP are not treated equally. Those who earn more royalty have a greater say, considering they are able to vote to elect the 12 member board.

As is given in the case, only about 6% of fees is generated from public broadcasting stations. The remaining is collected from other media like live performances, cable TV, etc. ASCAP needs to spend money to survey media in order to garner as much royalty for its members as possible. In order to maximize payout to members it has to optimize expenditure of the operating expenses and spend it on the more lucrative media. This reason also suffices for the second allegation. Though it is not the best solution, it certainly appears to benefit a significant majority of the members.

ASCAP is able to attract licensees based on the members it has under its tutelage. Any potential licensee will purchase a license to get access to music which is popular. New artists can piggy back on the popularity of more prominent artists by virtue of their ASCAP membership. The Network effect comes into play here, as newer artists benefit because of the popularity of the more prominent members.

The ASCAP could take the following steps to be more equitable:

1- Define a certain minimum royalty for all its members who have been a member for a certain period eg at least 3 years.

2- Members should be able to select which media and the region of the country ASCAP should track for them in order to maximize their royalty. For example, a country singer from Indiana might select pubs and bars in the mid West because he believes that most of his/her singers are concentrated in that region.

3- ASCAP could create products for new artists which commits to the artist that his /her content will be actively promoted and any royalty earned by virtue of this promotion is divided between the artist and ASCAP.