What's The Impact of SESAC Buying Harry Fox (HFA)?

It's been almost two months since SESAC, Inc. announced its acquisition of the Harry Fox Agency (HFA). The deal, which merges the largest U.S. mechanical rights licensing association with the smallest U.S. performance rights organization, still needs approval by the membership of the National Music Publisher Association.

HFA has always been in the business of licensing and collecting mechanical royalties for each time a record is sold, downloaded or streamed. At one time, that meant when a physical record album was sold. Today, we usually think in terms of when a track is downloaded.

SESAC is the smallest of three public performance rights organizations in the United States. Songwriters and music publishers are members of SESAC. When you hear a song played on the radio or in a club, a public performance royalty is paid to SESAC (or ASCAP or BMI - the two other performance rights organizations).  In turn, SESAC pays a performance royalty to the songwriter and music publisher.

In the U.S., the mechanical rights collection agencies and the public performance organizations have always been separate, until now. SESAC's acquisition of HFA begins to replicate they way mechanical and performance rights have been licensed for years throughout most of Europe.

New media companies that provide streaming and locker services should be rejoicing. The merger should streamline some of the right's clearance processes. Services like Spotify, and the now defunct Grooveshark, provide music to consumers in a way that triggers both a mechanical royalty and a public performance royalty. The merger would allow for some one-stop shopping when it comes to music clearance.

We may also see an uptick in music publishers joining SESAC so the publisher can benefit from centralized licensing. The publisher would still be responsible for issuing other licenses, such as synchronization and print.