The Bank of ASCAP: Interest-Free Loans, But Not Just for the Rich

By • March 2, 2009

In this economy, every composer and songwriter is watching their dollars. Royalty income is more important than ever, and this places an even greater level of responsibility and accountability on those who collect and distribute our royalty earnings. Given today’s economic realities, I believe it’s time that ASCAP open up their secret “advance” program that has historically provided interest-free loans to wealthier, more successful composers and songwriters with catalogs the society decides are “important”, and make this program available to all members with current royalty income.

After all, since these interest-free loans are financed by all ASCAP members, why should only the most successful composers and songwriters have the right to access and benefit from this financial program, especially in today’s economic environment?

This program, which ASCAP refuses to talk about publicly, provides substantial royalty advances in the form of interest-free loans to members whose catalogs ASCAP staff determine are important to ASCAP. There are no published rules for this program, and no disclosure or information for members about this program on the ASCAP website. In the composer world, composer agents typically negotiate these advances on behalf of their clients, and can collect 10% commission for doing so. According to industry sources, the amounts involved are well into six-figures, and in a few rare cases, over $1 million.

Regular ASCAP members who are in financial need and search the ASCAP website for royalty loans will only find mention of ASCAP’s deal with USAlliance bank where members can apply for consumer loans and the bank will “consider” their royalty income. ASCAP also has been known to make “hardship” advances in cases of extreme financial trouble, but the program I’m referring to here provides substantial cash advances to wealthy composers and songwriters whose situation is anything but a hardship.

I’m not denying the need for ASCAP to remain competitive with BMI and SESAC, and if ASCAP wants to take a chunk of our royalty income and offer it to a major composer or songwriter as an interest-free loan to entice them to join ASCAP (or remain as members, since members cannot resign if they have outstanding advances), fine. But if member-owned ASCAP is going to be in the business of making interest-free loans to selected members, let’s open up that program, establish some published guidelines as to who is and isn’t eligible, and introduce some accountability and transparency to this program. Secret programs that arbitrarily distribute money earned by others with no published guidelines are simply too prone to abuse, and are inappropriate for a member-owned organization that distributes three quarters of a billion dollars of member’s money every year, dwarfing many commercial banks.

Some positive steps ASCAP can take in this regard include:

* Establishing and publishing guidelines on qualifying for these interest-free loans and how members can apply for and receive these loans.

* Making the eligibility requirements not dependent in any way on personal relationships with ASCAP staff or Board members, therefore removing any possibility of favoritism from the loan approval process.

* Creating appropriate confidentiality procedures to protect any personal financial information provided by loan applicants.

* Disclosing to members the total amount outstanding in these interest-free loans, since it is the entire membership who is financing these loans.

The last item is particularly important – disclosing how much of our money has been used to finance interest-free loans to other members. If we as ASCAP members are going to finance loans to other members, we have a right to know how much of our money is going to these members, just as taxpayers have a right to know how much of their money is being spent to provide loans to troubled banks, etc. I’m not saying we should be told names and amounts of loan recipients, but we do have a right to know overall how much money has been deducted from the royalty distribution pool in order to finance these loans to selected members.

Given the worsening economic climate and increasing financial pressure we all face in a world where the availability of regular bank loans is shrinking fast, it’s time for the ASCAP Board to move quickly to open up this program to the membership and establish a fair and even playing field regarding who is given these interest-free loans. If ASCAP is going to be in the business of giving out interest-free loans to members, it’s only fair that all members, not just the rich and most successful, should have the opportunity to qualify for this important member benefit since all members are financing these loans. And if it’s competition with BMI that ASCAP is concerned about, I cannot think of a more attractive financial benefit to offer members and potential members given today’s economy.

Comments

By Angelo Natalie on March 3rd, 2009 at 10:41 am

Great idea! And good points.

When I saw your title I got all excited, thinking it was already a reality.

By harry Hawkins on March 5th, 2009 at 10:08 am

Whoa you had me going for a minute, I was looking for an application. I think a lot of members still would not get any loans.

By Chris on March 5th, 2009 at 11:46 am

Am I the only one that thinks this sounds more like the kind of rationale that got us into this whole economic mess in the first place? Living beyond ones current means and borrowing from the future to finance what we want now…is this NOT ringing a bell for anyone? Then please go get yourself a newspaper (while they still exist), or visit any news website and take a few minutes and please read. If fairness is really the issue here, then I suggest a campaign to end this practice entirely is a better tack. Forget for the moment all the daunting practical aspects instituting such a policy would create and I can think of many, it just seems to me to be the least well thought out proposal you have made. Sure, all of us would like to get our money as early as possible but borrowing against future earnings is surely recipe for disaster. Look no further than the banking sector, or the federal government to see how problematic this can be. Then add to that the possible mismanagement of money from the people that get the loans…OK so you’ve got your loan for $xxxx dollars in your hot hands right now….so now you pay your current debts, bills, get yourself a way cool Mac and then what?…assuming for the moment you are required to pay back your loan before you receive another dime from ASCAP what are you supposed to live on in the mean time? So now do you find yourself cash strapped all over again-simply at a later date? My opinion is this is not a good idea at all. First and foremost it completely changes the mandate of a PRO from a collection agency to a lending institution, something I don’t think ASCAP is equipped to handle on a large scale. And secondly, if we learn anything from the “economic meltdown” it should be to live within our means and live in the now. Institutions which deal with lots of money, like ASCAP, should continue doing what they now how to do. Asking them to take on the large scale responsibility of lending and becoming a “bank” is surely asking for trouble down the road with a whole host of unintended consequences, most of them probably not good consequences.

By Mark Northam on March 5th, 2009 at 3:11 pm

Good points, Chris. Certainly ASCAP turning into a bank for all members is not practical, but my point is that these special interest-free loans should not be reserved just for the rich & famous, especially since they’re financed by all ASCAP members. If the program is to be offered to a limited group of members, then publish the rules and create a level playing field for this, rather than handpicking “favorites” to offer this money to.

By Chris on March 5th, 2009 at 8:31 pm

Mark, I certainly agree with you that cherry picking interest free loans for the already rich and/or famous seems inappropriate and unethical. It seems appropriate that any money loaned to anyone should benefit the membership as a whole through interest payed by the borrower. Even if there is a high likelihood that future residuals will likely guarantee the pay back of the loan, it would seem in this day and age we can take nothing as an absolute certainty when it comes to the business of money. I would agree that the practice should be stopped outright. I am curious if this is something unique to ASCAP or is also practiced by BMI and SESAC. I admit to being totally in the dark about that.

By Rick Austin on May 3rd, 2009 at 4:47 pm

LOVE the article…Its time to open the secret ASCAP doors and offer us some accountability (sounds familiar, huh?). Im tired of these random amounts given to us who have TV cues listed as background and also tired of the vocal weighting and all the secrecy. ENOUGH IS ENOUGH…Bravo for writing this…

Now, on to the Cue Sheets…hmmmmm

By Thufyl on May 8th, 2009 at 3:26 am

Dear Sir,
As I am in need of interest free loan for establishing an institution here in India, I need specific details regarding loan sanctioned for an institution (School). The Institution will offer quality education to the rural population of India, who often ignored for those.
Kindly do the needfull.
Regards

By Peter Wetzler on September 2nd, 2009 at 4:33 am

I also got suckered in by the title thinking ASCAP had something BMI didn’t. I’m a BMI member who just mortgaged his royalties via BMI to US Bank for 2 years to help me through a slow period. I’ll end up paying over a grand to borrow 12K and I couldn’t help but wonder why BMI doesn’t just make the loan directly and add a nominal administrative fee.

By Shahnawaj Khan on April 24th, 2010 at 3:02 am

Respected Sir
I am telling you that i am a Government Employee.I want to buy a Home in Delhi.So kindley provide me Intrest Free home Loan.I will be provide you the Documents.