David Israelite (NMPA): 'I am optimistic about publishing'

In this interview with Emmanuel Legrand, the President and CEO of the Washington, DC-based National Music Publishers' Association, David Israelite, talks about the impact of the Covid-19 crisis on music publishers, recent deals and settlements such as the ones with TikTok or Peloton, the soon-to-be-launched Mechanical Licensing Collective, which should revolutionise the way mechanical royalties are licensed and paid in the US, the review of the ASCAP and BMI consent decrees by the Department of Justice, the CRB rates determination, and the on-going battles to get platforms such as Triller and Twitch licensed for the use of music. This is an edited version of an interview with Synchtank. The full version can be found here.

Let’s start with the State of the Union. What information do you get from your members about navigating Covid?
David Israelite: We’re very concerned about the financial impact of Covid. We only track revenue on a calendar year basis at NMPA, so we won’t get any of the 2020 data until early 2021. But obviously we are collecting anecdotal evidence and there are some clear signs that there is going to be a hit. The question is how big it will be. A lot of the pain is going to be spread out and felt in the future because of the nature of how publishing pays out. Areas that we are particularly concerned about include models that rely on advertising revenue, such as radio and free-to-the-consumer models. We are concerned about general licensing. We are hopeful that subscription revenue is going to be strong as more people feel the need to have a music subscription service. Because the dominant model is subscription-based and not purchase-based, there are actually some benefits as long as people keep their subscriptions. We think there will be strong revenue from that. Another big area of concern is the shut-down of production of movies, television shows and commercials with all the synchronisation money. We won’t know that for some time. But one of the good things about music publishing is that we are a diversified industry with lots of different income streams.

Where do you see growth areas for music publishing in the years to come?
I am actually optimistic about publishing. Obviously we are experiencing the recession from Covid, but overall I think the future is very bright for publishing and songwriting. In the mechanical space, I think we are going to see continued growth in subscription revenue, and it’s going to have a multiplier effect. On the synchronisation side, I think that we are going to see continued growth in social media applications. Through a combination of licensing deals and enforcement actions, you’re going to see a big growth in that area. Those two things combined, I think, could lead to some good growth numbers once we get out of this recession period.

Can you elaborate a little bit more on the TikTok agreement?
Sure, it was two things. Number one, it was a settlement looking backwards and there was a very generous settlement pool that was offered to publishers for music that was not licensed. Then, it was also a looking forward two-year licensing deal. Which again had a generous compensation pool for publishers in exchange for a license going forward for that period. Once that is established, we expect it will be a continuing string as long as the company is in existence. So it was two parts, both of which had significant revenue pools for publishers.

Can you confirm to [Amazon founder and CEO] Jeff Bezos that [Amazon-owned] Twitch is not licensed?
[Laughter] Yes, I can confirm to him that Twitch is not properly licensed across all of its platforms and I can tell you that it is at the very top of our list that we are looking at in terms of how best to proceed with regards to its lack of licensing.

And what about Triller?
Triller is a competitor of TikTok that is mostly unlicensed and I think that, similar to TikTok, Triller is going to have to figure out a way to settle for the past and license for the future, otherwise we’re going to find ourselves in conflict.

Isn’t it interesting that 20 years after Napster, the music industry is still facing the same situation?
It is. It’s incredible that more tech companies haven’t learned the lesson that it’s easier to ask for permission than forgiveness. It’s inexplicable.

Another example where you had to intervene was with Peloton and eventually you prevailed. Can you give more details about that settlement?
Sure. Peloton is a great example of when a company decides to own the mistakes that it’s made and commit itself to being a good business partner. We were able to reach an agreement about how to address the past and with that we were very excited to then partner looking forward because the in-home fitness industry is an enormous source of potential new revenue, especially during COVID. While in public gyms you maybe are limited to just the public performance revenue, which is quite small, once you start producing programming that has music synchronised to it, there’s tremendous value for songwriters and publishers.



Let’s talk about the CRB rate appeal from Spotify, Amazon, and a couple of other platforms, excluding Apple. The appeals courts seems to have gone against your wishes and sent everybody back to the CRB for more discussions. In your comments after the court decision you seemed optimistic. Do you still feel the same now?
I think a lot of people misunderstood what the appellate court did and jumped to conclusions about it. It gets very legal and very technical but at a high level, what the appellate court did was remand back to the CRB a couple of issues which the CRB is now going to have to address. It doesn’t mean that anything has been changed about the ultimate decision. What it means is that the CRB has to address the concerns that were raised by the appellate court on two particular issues. One of which is the second prong of the three prong test about what we call the uncapped TCC. The second issue had to do with the definition of bundling, which is when you marry a music service with a non-music product, and how you charge for the music product. Again, it doesn’t mean that either of the decisions are going to go away. Ultimately, it means that the CRB has to do some work and address those concerns. The most important issue from the previous CRB decision was the 44% rate increase which was the first prong of the three part test and as long as that prong stays intact, these other issues will be much less important.

The irony is that you are sitting side by side with the Spotifys of this world in the MLC. There’s something that doesn’t seem consistent in their relationship with the songwriting and publishing community.
It’s complicated, but I think it’s probably no different than when you have countries that have tensions or conflicts between them and yet there are other areas where there still is interaction between them. We may be in a cold war environment with China, but we still do some trade with them that benefits both countries. I think that the MLC is kind of like the trade in that analogy where we’re definitely in conflict with Spotify and Amazon. They have declared war on songwriters, but at the same time we made a deal to build this MLC with their money and we’ll be professional about it, while at the same time we will defend ourselves against their attacks over what they pay songwriters.

What’s your assessment about what’s been done so far with the MLC? Is it on track?
Yes, I think that [The MLC CEO] Kris Ahrend and his team are doing a fantastic job under difficult circumstances to stay on schedule. I think that people will quickly forget the benefits that were achieved from the MMA, so it’s worth reminding them that this entire infrastructure is being built and funded 100% by the digital companies, which means that songwriters will no longer pay a commission for their mechanical distributions. It’s the first place in the world where a society will collect money and distribute a hundred cents on every dollar, and that the database that is being built will be public. It will be the first public transparent database in the world and in the history of music rights and, again, 100% of that cost being funded by the digital services. So this is all going on with their money and at the same time that we’re fighting over rates, but the MLC is doing a great job and it’s going to be ready to open on January 1st per the law’s mandate.

Do you understand why some people were skeptical when HFA was chosen as the lead vendor when it comes to data? [HFA used to be owned by the NMPA before it was sold to SESAC in 2015, and had been criticised for the quality of its database.]
Oh sure, I think that when the MLC made its decision over choosing a vendor, it was in a difficult position in that I don’t think anybody felt that anyone did a good job with matching. I think the consensus was that while HFA is certainly not perfect, using HFA’s structure as a starting point was going to be better than trying to create a system from the ground up with nothing. What’s different about the MLC from what HFA or MRI or anyone else has done, is that the database that will be the authoritative roadmap of how to pay people is public. It’s transparent.

Another issue is the ASCAP and BMI consent decrees, which are currently being reviewed by the DoJ. Do you think things are going to change?
On the consent decrees, the Department of Justice held a virtual workshop a little over a month ago. We were very pleased that we got to fully participate and make our case for selective withdrawals, and now we’re just waiting for the DoJ to decide how it wants to proceed. I suspect that we’ll have a decision before re-election and we’re optimistic about what might change in the decrees to give more freedoms to songwriters and publishers.