RightsFLow: NYC’s Mechanical Animals of Music Licensing

April 28, 2010 by  

THE FLATIRON DISTRICT, MANHATTAN: Who gives you the right? If you’re a label, artist or music service of some sort, it just may be RightsFlow.

rightsflow_icon_web3This NYC company was born in the bedroom of President/CEO Patrick Sullivan in 2007, and less than three years later stands as a fast-growing player in the digital music landscape. Seeing a need for streamlined mechanical licensing and royalty reporting, the company has quickly entered into license agreements with thousands of publishers who wanted an easier way to collect on the mechanical license monies that are owed to them.

On the other side of the coin, bands, record labels and distributors got a more efficient path to mechanical rights — so putting a cover song on iTunes, streaming a compilation album, or ringing up a Ramones ringtone would speed up.

SonicScoop hooked up with Scott Sellwood, their Senior Vice President and General Counsel, to get the down low on RightsFlow. A rockin’ guitarist as well as an international litigator, Sellwood can see exactly how licensing locks into the big picture.

Q: Why is a company like RightsFlow needed today?

A: Because obtaining publishing licensing in the US is such a challenge. You can go get the master rights from a few large record label conglomerates, but when you need to actually get the rights to the musical work underlying all those masters, you’re dealing with thousands of publishers.

Someone was needed in the market to provide access to all of those publishers. In short, that’s what we do. And we developed some technology that automates the process, making it a question of technology rather than person power.

So whether you’re a label, or a music service looking for rights to music that you put up on iTunes, someone like us is needed to get those licenses to play it. Once you have those licenses, you need to account for and pay those royalties, which requires an accounting department. A lot of indie labels just don’t have the resources.

So we’ll pay the publishers in accordance with their needs and specifications. Some want the royalty report on Excel, for example, some want it in another format. Everyone wants it in a certain way, and we automate the process soup-to-nuts.

Why is this lawyer smiling? Scott Sellwood, Sr. VP/General Counsel of RightsFlow

Why is this lawyer smiling? Scott Sellwood, Sr. VP/General Counsel of RightsFlow

Q: Mechanicals aren’t something you hear that much about, but they’re obviously important to RightsFlow. Why is mastery of mechanical licensing so important now?

A: My personal opinion is that publishing is one aspect of the music industry that can’t be downsized. The music industry is based on copyrights, and the musical work is already underlying the master recording. To grow the industry, especially in the digital space, we need to find ways to clear the mechanical rights as quickly and efficiently as possible so there can be more music online, and therefore more consumers purchasing music online. We want to grow the pot. I think that mechanical licensing is a crucial, crucial component.

Q: Interesting. So is that why RightsFlow was an attractive company for you to come and work for, with your background?

A: I’ve paid the bills over the last decade as a lawyer. And with my long history as a touring artist, it seemed to be the perfect interface between exciting legal issues — cutting edge legal problems — and a chance for me to maintain my connections with the indie music and artists.

And the concept of a crew of musicians forming a company to pay songwriters — what could be better? I got the spirit of it immediately, and I’m thrilled to be a part of it.

Q: So let’s drill down a little. What companies do you target for partnerships – why would a publisher like The Royalty Network, who you recently connected with for instance, partner with RightsFlow?

A: The Royalty Network is a publishing administrator. They’re content owners. We spend a lot of time doing outreach to publishers, letting them know who we are, and letting them know if they tell us what songs they administer, it’s a lot easier for us to pay them. We represent around 10,000 indie record labels, as well as a number of online music services, and they are accruing royalties with the intent of paying songwriters.

For someone like The Royalty Network, who I think is a forward-thinking royalty administrator, if they come to us it makes it easy for them to license their content and get paid faster. It just makes the payment process so much faster. It’s pretty simple.

Q: Sounds simple to us, as well. So what are your challenges in signing up publishing partners?

A: On the publisher side, it’s our job to educate them. We let them know who we are, let them know we probably have accruals for them, and that our clients are often trying desperately to pay them. We pay 100% of the publishing royalties to the publishers, and our clients pay us to find and pay publishers.

We want to be the glue, the company that’s able to connect the record companies and other people who use content, to the publishers and the people who provide content.

Q: So, does this mean RightsFlow also works with boutique music companies, representing artists to ads and film? What interest would a music house like that have in RightsFlow, if any?

A: Well, we do some synch licensing for that type of work. It’s not our core business. We used to do a lot of that, but synch licensing is very complicated, and very difficult to scale.

Instead, we found that mechanical licensing is a need in the market, and something we can scale with the technology.

Q: Next question: Do independent artists only need to work with RightsFlow if they’re doing cover songs? Explain why an artist should know about you.

A: It can be expensive hiring layers, or spending your own time to find publishers and clear cover songs. That’s why we launched our Limelight service as a direct consumer service.rightsflow_limelight_banner_small

Anyone can come to us, pay $15, and get a license. It’s just that simple. We didn’t want to offer our services only to distributors who need 1,000,000 licenses — we also wanted assist an artist who just needs one license.

So for someone who wants to distribute a cover song they’ve recorded, all they need is Limelight. With little networking or launch, it’s really caught on. We’ve found indie labels who control their content are using the service when one of there artists tacks on a cover song at the end of one a record.

Q: OK, so a few years ago I obtained a mechanical license for a cover of “Secret Separation” by the Fixx through the Harry Fox Agency and their online service. Why would someone use RightsFlow and/or Limelight instead of Harry Fox?

A: Harry Fox can issue mechanical licenses for the publishers that they represent. We license through Harry Fox, as well, but also handle licensing for the thousands of publishers that don’t license through Harry Fox.

Q: What are the ongoing developments in the outside world that most affect your business i.e. Web technologies, legislation, the Harry Fox Agency, etc…?

A: That’s a great question. We have to keep tabs on everything. We’re involved in the pending negotiations between the publishers and the American Association of Independent Music (A2IM), which is the RIAA for indie labels. We’re also involved in the copyright register’s efforts to reform the regulations for compulsory licensing – those have been negotiations between all of the trade groups. Those are the things we have to keep track of.

At the end of 2008, the royalty rates were set for streaming – per-pay royalty rates for an interactive stream – and everyone is trying to figure out how best to calculate those royalty rates. We’re working with our clients to help figure out how to best pay publishers those royalties. There’s a lot of moving parts – but it’s a lot of fun.

Q: Oui, that’s what I call ‘Grownup Fun’! Do you think being an NYC-based business help your overall business model?

A: It’s the hub of music. All the major labels are here, so many independent labels are here, so much American music is coming out of Brooklyn and NYC. Just being in a centralized location makes all facets of business easier — we have a number of European clients, and being in NYC give us access to the international market. It’s an exciting, vibrant place — I’m not sure we could do what we’re doing in Chicago. – David Weiss