The BandBay Royalty Formula

An ALTERNATIVE approach…..
As the international survey shows, there are various possibilities. There is no one formula that will suit all territories, nor one formula that will suit all broadcasters or record companies perfectly.
What is proposed below is a formula which is based on “meritocracy” principles, and which postulates a willingness amongst all parties to establish an agreed formula. Let us call it The BandBay Formula.
It is designed, firstly to produce a fair and reasonable valuation of music/sound recording/broadcasting, as well as cater for a resolution for all the royalty disputes, present and likely.

The BandBay Formula has the following premises:
* Listenership attracts advertising;
* Music has a value in attracting listeners;
* So do many other factors;
* There are 4 interests in valuing the music component which all have to be taken into account:
radio station/ record company/ performer/ composer;
* A once-and-for-all solution is desirable;
*Differentiating a value between recording/composition/performance is impossible. They are best agreed as equal;
* The benefit (to record company, performer and composer) of broadcasting cannot be ignored;
* An agreed royalty rate is preferable and more likely to endure (and avoid altered behaviour) than an imposed rate;
* If the royalty rate is fair and reasonable the parties can/will likely agree;
* If all parties participate in all value (as opposed to empirical) assessments it is more likely to be perceived as, and therefore be, fair and reasonable;
* Composer royalties are payable on all compositions (ie those still in copyright) but sound recording and performer royalties are payable only on ‘protected’ sound recordings/performances.


Firstly, we address the sides of sound recording and performer:

* For sound recordings/performers the formula is this:

X x Y (1) x Z x .67 = A

X = the value of music
Y (1) = the percentage of music usage of copyright protected works
Z = net (actual) advertising revenue
A = the royalty.

Okay, you say, that’s all very well – but what is the ‘value of music’? Patience please…

* For composers, the formula is this:

X x Y (2) x Z = B – A

Y (2) = the percentage of music played where compositions are still in copyright
B = the royalty (from which A is deducted).

How to get to “X” follows simple meritocracy principles.

* All factors generating listenership and advertising revenue are identified: music; dj/host; news/traffic; programming mix; sales team; etc. (These will be factor “n”);
* The value to the music industry of broadcast is included as one of the “n” factors;
* Each of the 4 parties attributes a value out of 10 to each factor;
* These values are then reduced to the average of the attributed values;
* Where factors are likely to be biased they can be preliminarily averaged. For example, the value of music to broadcasters is likely to be given a higher “n” value by the music industry and a lower “n” value by the broadcasters. So the music industry’s “n” values are first averaged, and then combined with the radio industry “n” value to produce the “n” data value with which to go forward.
* Then all factors “n” are totalled, as a denominator for the music data value numerator.
* The resulting percentage is the “X” factor!!.


Here is a hypothetical example to demonstrate how The BandBay Formula works.
Let us assume the following are the agreed “n” factors, and the numerical value is their averaged values once all have input their valuation.

Music: 5/10
DJ/Host: 7/10
Style of show: 5/10
Program mix: 6/10
News/weather/traffic: 3/10
Sales team: 6/10
Value of broadcasting to music industry: 5/10

Now follow closely:

*The total of “n” values = 37; and,
*”Music” has 5/37 relative value = 13.51%. (Obviously, the more “n” factors there are, the lower the relative percentage of each factor. Well that is only fair is it not?)

*If music usage for the given radio station is 50% of broadcast time, the ‘force’ of the music factor becomes halved ie. 13.51 x 50% = 6.76%. This will be the X factor, for all music, in applying the formula to that station.
*Accepting that the sound recording value is one third, it means = 6.76 x 33% = 2.25% of Net Ad Revenue is payable to sound recording copyright owners.
*If music usage for a given radio station is 20% of broadcast time, the ‘force’ of the music factor is only one/fifth, and so on.

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