SoundExchange is completing its long-rumored acquisition of CMRRA, the Canadian Musical Reproduction Rights Agency, in a move that brings the capabilities of multiple rights licensing and collections on behalf of both labels and publishers under one roof.
SoundExchange is a U.S. agency created by Congress to collect master recording performance royalties for labels and artists for digital radio transmissions. CMRRA is a Canadian mechanical licensing agency that, like the Harry Fox Agency in the U.S., licenses songs to labels for the reproduction of music on CDs, vinyl and digital downloads, and collects royalties for them on behalf of publishers and songwriters.
The CMRRA team, led by the organization's president Caroline Rioux, is expected to remain in place and continue to work out of its Toronto office. In order to make the acquisition, SoundExchange created the subsidiary SXWorks to house CMRRA, and SoundExchange president and CEO Michael Huppe will serve as chairman.
As the digital marketplace expands, many believe that the bundling of multi-rights licensing across multiple territories will evolve. In anticipation of those changes, various kinds of collection rights agencies are making moves to position themselves for that day's arrival. Besides SoundExchange, SESAC, the Society of European Stage Authors and Composers, has acquired HFA; Rumblefish, which specializes in YouTube monetization; and Christian Copyright Licensing International, which handles copyrights for churches and worship music. Similarly, SOCAN, the Society of Composers, Authors and Music Publishers of Canada, has acquired Audiam and MediaNet.
In addition to expanded opportunities, the deal creates synergies between the two operations -- and potential savings. According to the announcement, the two agencies will integrate and streamline the administration and distribution of sound recording and music publishing royalties.
"We have a simple, yet ambitious goal: to maximize the value of music for all creators -- for musical works and recordings alike -- wherever their work is used," Huppe said in a statement. "The acquisition of CMRRA helps us increase efficiencies while also extending service to the publishing sector. This exciting partnership builds on CMRRA's great relationships with music publishers and licensees, its long record of accomplishment and its stellar reputation."
The SoundExchange database has 30 million recordings with reams of metadata appended, while CMRRA's database has 20 million songs in it, with the plan to eventually link the songs to the recordings, which will facilitate licensing and insure correct payments when music is used, according to SoundExchange's chief external affairs officer Richard Conlon.
"The board initiated its search for a strategic partner for CMRRA nearly a year ago," said Gary Furniss, chair of the current CMRRA board of directors and president of Sony/ATV Music Publishing Canada. "The board was committed to finding a firm with the right mix of music industry know-how and a culture of digital entrepreneurship. SoundExchange fit the bill. Additionally, the opportunity for data collaboration will inevitably increase the speed, efficiency and accuracy of royalty payments for everyone."
Last year, Sound Exchange paid out $884 million to rights holders, while sources say that CMRRA collected about $45 million. While terms of the deal were not disclosed, Billboard estimates that SoundExchange paid anywhere from one-third to one-half of the $17 million SESAC paid to buy the Harry Fox Agency, which is believed to be two to three times larger than CMRRA.
In order to acquire CMRRA, the SoundExchange board had to approve the agency spending revenue it collected from its expanded offering behind administering and collecting on statutory rights from digital radio. With many digital services now seeking direct licenses and foregoing statutory rights, SoundExchange now administers such deals on behalf of the services and labels. Moreover, SoundExchange is administering the pre-1972 recordings royalty payment settlement between Sirius and the major labels and ABKCO. Those sources of revenue were used to make the acquisition, according to Conlon.
Despite the synergies and opportunities created by the acquisition, there is a potential conflict of interest that initially had some publishers worried. Since CMRRA, like other interested parties, plays a role in helping the Copyright Board of Canada set licensing rates, some publishers were worried that the label-dominated SoundExchange board of directors would interfere with CMRRA's ability to effectively lobby for higher rates.
SoundExchange's Conlon admits that was a concern of the CMRRA board as well, which is comprised of music publishers. That's why CMRRA itself will not play a role going forward in those negotiations, and instead an independent committee of publishers will be formed to perform that role on behalf of publishers, songwriters and CMRRA.
"We were looking for a partner that shares our vision and philosophy of service to the music publishing community," Rioux said in a statement. "With SoundExchange, we will not only continue to deliver on our mission to maximize the value of the reproduction right in Canada and meet our clients' needs to quality and low service fees, we will also be able to develop new services domestically and beyond."
