Making Royalty Collections More Efficient: Turning Pennies Into Dollars

After a decade of losses, we’ve seen the music industry forced to look for revenue in new places and in different ways.
December 19, 2016

During the heyday of the 80s, the music industry was rolling in so much money it could afford to leave some on the table… which it often did. Forget about the wasteful spending practices. We’re talking about lax accounting and inefficient collection solutions.

There were so many dollars coming in, they didn’t bother paying attention to the pennies

Well, as we all know those days are gone. And after a decade of losses from its traditional revenue stream (sales), we’ve seen the music industry forced to look for revenue in new places and in different ways. In the absence of dollars, the pennies now matter.

For instance, once upon a time labels didn’t demand payment to air or stream music videos. They simply gave them away and wrote it off as a promotional effort. Today, that’s no longer the case.

There’s a similar effort underway now to collect money for radio airplay as well through the Fair Play, Fair Pay bill working its way through Congress. (Today, only satellite and Internet radio outlets pay recording artists for using their music in the U.S. Traditional radio only pays the songwriter.)

But even more interesting than legislation are the new business models and technological innovation emerging to make royalty collections more expansive and efficient.

On the business side, alternatives to the traditional PRO organizations have sprung up in an attempt to demand larger payments for songwriters than those operating under the Consent Decree compulsory licensing scheme. One such entity, Irving Azoff’s Global Music Rights, has done just that, and is embroiled in a well-publicized litigation battle with the radio industry as a result.

(Last month, the Radio Music Licensing Committee filed suit against GMR, claiming anti-trust practices for demanding substantially higher fees for the artists in its catalog. GMR fired back with its own lawsuit, accusing RMLC of anti-competitive practices.)

While those battles continue, there are glimmers of less contentious progress. The National Music Publishers Association last week unveiled a deal with longtime adversary YouTube to better identify and compensate songwriters and publishers for their share of so-called “orphaned” music streamed on the popular video hosting platform.

YouTube has been accused of not making enough of an effort to identify who is owed royalties for music streamed on the system, and simply holding onto the money this music makes rather than distributing it. This deal allows rightsholders to claim their work from a list of songs that YouTube can’t identify ownership of for direct payment.

Additionally, any royalties collected for songs without proper ownership claims will be distributed to participating publishers based on their market share, and other factors.

These big moves come atop dozens of smaller efforts taking place to make the collection and distribution of royalties more efficient, leveraging a combination of new technology and old-fashioned common sense.

The RightsTech Project is working with the Commerce Department’s Internet Policy Task Force to develop standards, interoperability, and cross-industry collaboration to better identify rights owned and pave the path towards easier and quicker payment.

There’s also the developing dotblockchainmusic project, seeking to embed both rights ownership and usage permissions into digital files themselves. And as previously noted, the tech startup community has also turned its attention to rights efficiency efforts after a decade of focusing primarily on fan-facing innovations.

For rightsholders and those investing in music rights, these are welcome developments. Patching the leaks in the music industry’s money flow is long overdue and desperately needed. It’s unfortunate it took a decade of digital disruption to jump-start this process.

But now that it’s here we’re looking forward to additional efforts designed to put more money in artists’ pockets.

Photo credit: tao_zhyn via VisualHunt / CC BY

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