The music industry’s $2.5 billion royalty payment problem

The world of music licensing is hard to understand. Not because the matter is difficult, but because the system is littered with inefficiencies, complex rules and all sorts of legal hassle that undermines the lives of musicians and copyright owners all over the world. One of the problems that can arise is when royalties get trapped in the “black box”. It is extremely frustrating and morally unjust because you worked hard on a song, but you are not getting all of the money you are entitled to.

What are black box royalties?

Royalties, in its most basic form, are payments for the right to use one’s intellectual property. Black box royalties are essentially unclaimed royalties which, for some reason, can’t be traced and therefore paid out by a collection society. This can be due to a ton of reasons: bad data attached to a song, discrepancies between foreign laws, performance rights organizations (PROs) not being able to find the copyright owner, companies not cooperating and so on. The global value of these black box royalties is hard to determine and estimates vary greatly. The value is estimated to be at least $2.5 billion.
If a copyright holder can’t be found, he is referred to as a “lost” writer and subsequently isn’t compensated through royalties. This can happen when for example an American songwriter sells their music internationally but isn’t signed to a publishing company with representation abroad. If the royalties remain unclaimed, funds are disbursed to the PRO’s local members per their market share.

So, where is this $2.5 billion going?

Mostly, the money is paid by radio stations or on-demand music streaming services to various PROs, after which it lands in a black box. And we’re not talking about a few dollars here. We’re talking about hundreds of millions of dollars sitting in an account, that can be used how you want. Often the money is waiting to be put into play by various companies. The money is used to supply loans to generate dividend to cover the company’s running costs. It’s basically free money.

The underlying problem and how to solve it

In some cases, rights owners simply don’t claim the funds. But more often than not, data is just bad or incomplete, making it difficult to match a royalty with the copyright owner. The underlying problem is that PROs are seldomly transparent and frequently retard efforts to clean up data.
This can be solved through various approaches. One of them is by using in-venue music recognition technology. Software recognizes the track, producer and all the other data required to successfully pay the royalties. This improves the quality of data that’s reported to PROs. No more incomplete or bad data means less money stuck in the black box. In the end, this would result in copyright owners getting their fair share of the pie.

By using MySoundsafe it is completely transparent who produced a song: the proof of ownership is immutable and logged safely using blockchain technology. If the data is correct, it should be much easier for PROs to match a royalty with the copyright owner. On top of that, you possess proof of creation of your song, which is logged forever using a timestamp. No more plagiarism claims for you 😉

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Kunstenbond Ntb licentieovereenkomst uitgangspunten sessieovereenkomst
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