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#MusicBusinessMonday: About Direct License ‘Black Box’ Royalties And Music Publishing Administrators

(Author’s Note 07/08/2019 10:33 AM PST: An industry associate of mine who is an independent music publishing industry leader and activist/advocate, as well as the owner of a small music publishing administration company, reached out to me to express his concern that my blog post paints all music publishing administrators in a bad light. He explained that entering into direct licenses is common practice for all publishers — including full-fledged publishers that own or co-own copyrights, as opposed to just handling administration like pub admins do — and not just pub admins. I know that. He felt that pub admins are being unfairly singled out in my blog post. As I explained to him, that is not my intent. I have many blog posts of opinions, analyses, criticisms, praises and reviews of many sectors and companies of the music industry. It is my role as a music creators’ rights advocate and watchdog, if you will, to raise awareness about these issues and practices, and educate music creators on their rights and business. This particular blog piece is not about small pub admin shops, like the one he operates, that has an overage of a few thousand dollars at the end of the year from direct deals, but rather the nature and effect of some of the large “catchall” pub admin services aggregating hundreds of thousands to millions of copyrights and the potential voluminous black boxes that direct licenses can accrue for their bottomline. These are some of the issues that we are asked about at TuneRegistry when speaking with songwriters who have or are considering switching to self-administration or to supplement the efforts of their existing large pub admin. Calling out provisions, or lack thereof, in contracts that songwiters may not be aware of, and which ultimately impacts their income, regardless of if it’s a small shop or goliath, is fair industry criticism. But, for clarity, this piece is in direct response to recent inquiries we’ve received at TuneRegistry regarding some of the popular catchall pub admin services on the market and not small pub admin businesses)

In this particular case, I get that he may take offense when the criticism may extend to parties that are not acting malicious — and I’m not saying that the big players are acting malicious anyway, but rather this issue is a fact of the deal that songwriters sign and should be aware of — and want to be presented in a fair light. So, to that end, I’ll update the post and my socials.

A music publishing administrator’s (“pub admins”) job is to register your musical works with CMOs/PROs/MROs in the territories for which you’ve hired them to represent your administration rights and to collect your royalties, prepare and remit income statements and payments to you. However, some pub admins go a step or two further and issue or enter into direct licensing agreements with companies on behalf of the compositions that it represents, such as direct performance licenses for startup social music apps or a blanket license for background music services.

The right to enter into direct licenses may be included in your contract with the pub admin. In this case, you will have explicitly granted the pub admin the right to license your songs, without asking permission per license, to third parties. In some direct deals, companies give advances or negotiate minimum guarantees to be paid to publishers. These advances and minimum guarantees are deducted from the actual earned royalties that are calculated from the usage of songs by the licensed service. However, in the event that there is an overage (meaning, the total volume of usage does not equal or exceed the advance or minimum guarantee) the difference between the overage and the actual earned royalties is the unallocated “black box” royalties.

It is important that these monies flow to the songwriters that the pub admin represent (less an appropriate commission) as the license fees were paid against the licensed catalog of songs, regardless of actual usage.

Surprisingly, although pub admins that ask songwriters to grant them the explicit right to direct license the songwriter’s songs, many pub admins do not have or do not communicate their policy for distributing unallocated “black box” royalties that stem from these direct licenses. And some cases, they just keep the black box royalties as miscellaneous income.

What’s in your contract? Talk you your pub admin about direct license black box royalties.

2021 Prediction: The United States Music Publishing Market Continues To Grow And Fragment, Creating More Silos For Unpaid “Black Box” Royalties — DIY Musicians Hit The Hardest

As the U.S. music publishing industry grows (in terms of revenue, volume of copyrights, and number of income participants), the rights administration and licensing sector becomes ever-more fragmented; giving way to cracks in its foundation through which royalties fall into the so-called “black box” — the industry name for the unmatched and unpaid royalties earned against unidentified works or unidentified or unreachable income participants that accrue in escrow only to be later forfeited and disbursed to entities to which the funds do not belong; primarily major music conglomerates and those acquiring catalogs of copyrights to expand their market share position.

Black Box Royalties Myths, Common Misconceptions Debunked at Music Biz 2018

united states music publishing market music licensing rights administration royalty ecosystem

A picture of a white board illustrating the growth and fragmentation of the US Music Publishing Market, specifically the music licensing and royalty ecosystem, drawn during Dae Bogan’s lecture in his class, “Music Industry Entrepreneurship and Innovation” at the UCLA Herb Alpert School of Music, Winter Quarter 2019

In 1909, when the first federal copyright law that protected music creators and rights-holders was enacted, there were no massive music rights organizations as we’ve come to know them today. Although unions had existed — the American Federation of Musicians was founded 13 years earlier in 1896, but focused more on work conditions than collective bargaining, as it does today — ASCAP was formed in 1914 to license the performing rights of composers, authors, and publishers.

Fast forward to 2021 when the newly formed Mechanical Licensing Collective will issue its first blanket digital streaming mechanical license to the likes of Spotify, Google, and Apple. There will be over a dozen music rights and royalty collection organizations issuing thousands of licenses, administering millions of pieces of copyrights, and processing billions of micro-penny transactions.

Here Are 10 Ways That The Music Licensing Collective (MLC) Can Set The Bar As A Collective Licensing Organization In The 21st Century

The music licensing and royalty ecosystem in 1909: Individual music composers, aristocrats who financed or commissioned works, and sheet music publishers.

The music licensing and royalty ecosystem in 2021: Traditional non-profit and private music rights organizations (ASCAP, BMI, SESAC, Global Music Rights, PRO Music Rights, SoundExchange, Mechanical Licensing Collective), royalty funds (AFM & SAG-AFTRA Intellectual Property Rights Distribution Fund, Alliance for Artists and Record Labels, Film Musician’s Secondary Market Fund, Sound Recording Special Payments Fund), unions engaged in collective bargaining (SAG-AFTRA, American Federation of Musicians), licensing clearing houses and agents (e.g. Music Reports, Harry Fox Agency).

If I wrote a popular commercial song that is exploited to the fullest extent — released on a commercial recording; performed live in concert; licensed for use in film or television; placed in a commercial; earns viral success on user generated content platforms and social music apps; covered many times; embodied in a music video; lyrics printed and sold on merchandise; used for a live broadcast sporting event; added to Spotify and Apple playlists where it takes off; picked up on terrestrial, Internet, satellite, and cable radio; etc. — I would need to ensure that my work is registered at all of the places where the royalties earned from the uses I’ve described are paid; the music licensing and royalty ecosystem. If I do not, then my royalties will leak into the black box.

The black box is estimated at over $2 billion — and growing — of which much of it is due to independent music creators, small music rights-holders, and the estates of deceased authors and performers who do not have the access, power, know-how or market share to navigate the web of black boxes; for which there are many.

Songwriters Are Owed Nearly $2B In Unclaimed Royalties!!! — Maybe More — I’ve Been Saying This For Some Time Now (Against Pushback), But Finally The Press Has Confirmed It

When entities charged with maintaining these black boxes distribute the funds in market share distributions, the major labels and publishers win and the independent and DIY creators lose. It is unfair and unethical. But what are we going to do about it?

Some artists, knowing that they do not know exactly how this all works, have found creative business ways to “make up” for potential lost royalties. But for the rest — the majority — of DIY musicians, they’re generally left out of the discussion and left to fend for themselves, even when they think they’re doing everything right.

What Can The Socioeconomic Context Of The Culture From Which Hip-Hop Is Derived Tell Us About How The Biggest Genre In The World Gets The Shitty End Of The Royalty Stick?

As the industry charges forward with new energy fueled by the growth of music streaming, we have to consider how the continued fragmentation of the music licensing ecosystem affects the most vulnerable — DIY musicians. Major labels have direct deals with DSPs and digital services that pay them advances and account to and pay them royalties. DIY musicians rely on music rights organizations, who are often disproportionately influenced by the majors, to handle these things for them.

Do So-called Music Advocacy Groups Avoid Deeper Discussions On Black Box Royalties To Appease Their Major Members?

I founded TuneRegistry to help DIY musicians be their own advocate, to demystify the music licensing and royalty ecosystem by aggregating the fragmented world of rights administration into one economical platform. To this end, our team has helped hundreds of small to medium-sized music rights-holders and DIY musicians unlock thousands of dollars in new found royalties and to register their works to ensure that they are identified and accounted to in the future. Not all music rights organization have joined our network, but we will continue to advocate and fight for the rights and entitlements of DIY music creators as long as we can.

Introducing, The American Society for Collective Rights Licensing (ASCRL) — The Organization That Wants To Help Visual Artists Collect Their Unclaimed ‘Black Box” Royalties

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ASCRL homepage. Featured photo © Neil Zlozower

As many of you know, I’ve researched and have written extensively about unclaimed music royalties held in escrow or so-called “black boxes,” which are monies owed to music creators and rights-holders (and founded RoyaltyClaim to address this issue). Today, I want to draw your attention to a similar matter in the world of visual art (e.g. photography, illustration, stills, text design).

eugene-mopsikThis morning I had the pleasure of speaking with Eugene Mopsik, the CEO of the American Society of Collective Rights Licensing (ASCRL). A successful corporate /industrial photographer with over 32 years of experience, Eugene was previously the Executive Director of the American Society of Media Photographers (ASMP).

Eugene and I talked about issues related to the representation and rights of visual artists and the monetization of their works outside of the United States. He and his co-founders of ASCRL are working to help visual artists claim their fair share of royalties that have long gone to the publishers of visual works.

Similar to musical works (aka compositions or songs) that earn mechanical royalties when the work is reproduced, visual works, in many cases, earn reprographic royalties. Whereas mechanical royalties outside of the U.S. are collected by mechanical rights organizations (MROs) in territories under the MRO’s jurisdiction, reprographic royalties are collected by reprographic rights organizations (RROs) in territories under the RRO’s jurisdication. And, much like the complex web of legal and regulatory issues that makes it challenging for songwriters to collect their ex-U.S. mechanical royalties, similar limitations make it challenging for visual artists to collect their ex-U.S. reprographic royalties.

Antitrust laws has made it difficult to form a collective licensing body. Consequently, the U.S. does not have a local RRO to enter into reciprocal agreements with foreign RROs for the purpose of passing through ex-U.S. reprographic royalties to be paid to U.S. visual artists. Once again, this is similar to the absence of a U.S. MRO for songwriters. Notably, however, the U.S. has made an exception for the collective licensing of performance rights in musical works.

Since 1914, songwriters and composers have been able to join a performance rights organization (PRO) for the collective licensing of performance rights and payment of performance royalties. In the United States, the American Society of Composers, Authors and Publishers (ASCAP), Broadcast Music Inc. (BMI), SESAC, and Global Music Rights (GMR) are PROs that represent the performance rights of songwriters and publishers.

Currently, when reprographic royalties are earned outside of the United States, they are collected by RROs. RROs then distributes royalties to the publishers of visual works and authors of visual works (visual artists) who’ve joined the RRO. The RRO passes reprographic royalties for works due to members of foreign RROs to the RRO in the respective territory. In cases where the publishers or authors of works are unknown or if the author is an unrepresented U.S. visual artist, royalties are held in escrow and eventually distributed by market share to publishers. In the latter, royalties that are fairly owed to U.S. visual artists are being distributed to publishers. This is what the American Society of Collective Rights Licensing aims to address.

Joining ASCRL is free. Members can submit their works and use the ASCRL claiming portal to claim their entitlements and unlock unclaimed royalties. To learn more about ASCRL or to begin the process of joining, visit http://www.ascrl.org.

Music Business Association To Host Webinar On Black Box Royalties Presented By Dae Bogan

music business association

Music Business Association will host Dae Bogan’s webinar on black box royalties on Thursday, October 26th at 11am PDT / 2pm EST. Open to all.

Description: The global music licensing ecosystem is ripe with inefficiencies, complexities and legal mumbo-jumbo that affects the livelihood of music creators and copyright owners when royalties become trapped. The idea of not being paid when your music earns royalties is frustrating. Some would even call it highway robbery! But there are some practical solutions that every interested party in music royalties can put to use immediately to ensure that your music industry administration operations get you paid. This webinar will demystify so-called “Black Box” royalties and demonstrate how rights-holders can leverage technology to combat this global issue.

Register at https://register.gotowebinar.com/register/5742451649783265539

Do So-called Music Advocacy Groups Avoid Deeper Discussions On Black Box Royalties To Appease Their Major Members?

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Over the last few weeks I’ve come to consider the notion that some of the biggest so-called “advocacy” groups for music creators censor their discussions on black box royalties due to the top-heavy makeup of their membership.

I’m Working On A Side Project Addressing ‘Black Box’ Royalties

I feel that some directors avoid, or lighten, their criticism of major labels and publishers, at the expense of their independent and DIY members, because representatives of the majors sit on the boards of these organizations. They have deep pockets for annual gifts and dues, and a non-profit can’t afford to see those dwindle.
In my presentation on the state of unclaimed royalties and music licenses at the Music Industry Research Association’s first inaugural MIRA Conference earlier this month, I presented several arguments of how black box royalties manifest. This included cash advances paid to music companies by digital service providers that go unattributed to their artists at the end of the contract term. What I didn’t include are the distribution of unattributed royalties to major publishers, by market share, from music rights organizations.

[Preview] The State of Unclaimed Royalties and Music Licenses in the United States (7)
Major labels and publishers cannibalize most distributions of black box royalties in an unfair and imbalanced manner. It is my belief (and feel free to correct me if I am wrong) that the majors have the resources and manpower to do a better job of registering their works and claiming their earnings. It is my opinion, based on my work through TuneRegistry — a music and rights metadata management platform for the independent music community — that the independent sector have the most difficult time in this respect; especially the DIY segment, which is all but blacklisted from being represented in these secret imbalanced conversations and distributions.

But who should be the outspoken opponents of these types of distributions? The advocacy groups? When “watch dogs” should be shining the light in every dark corner of the royalty vault, some of these groups tend to prefer dim conversations regarding black box royalties and how those funds are cannibalized by their major members.

This is why I believe A2IM (American Association of Independent Music) and AIMP (Association of Independent Music Publishers), despite my concern for how the music industry categorizes independents, is a great thing overall for DIY musicians.

DIY musicians need to do a better job of joining and navigating the worlds of trade associations. After all, they are their own record label and music publisher.

Lead Photo by Jonny Clow on Unsplash

I’m Working On A Side Project Addressing ‘Black Box’ Royalties

music_and_money_by_bobvogler

As of this writing, there are currently 116,133 verifiable* payments owed to music creators and rights-holders that are sitting in unclaimed/undistributed royalties escrow accounts (referred to as “Black Box” funds**) in the United States.

The actual number of individual payments owed is likely closer to or exceeds 1 Million, however the actual number is unknown because the administrator(s) of some of the biggest Black Box funds have not made public their list of payees to whom they owe royalties.

Unfortunately, due to the statute of limitations on these funds many of these payments expire. Every month payees unknowingly forfeit their rights to these payments and the interest in the royalties revert back to the administrator. This happens because the payee does not contact the administrator of the fund to claim their royalties. Granted, most payees are unaware that these payments are waiting for them because the administrator is unable to reach the payee for various reasons.

It has been estimated that the global “Black Box” royalties could be in the billions of dollars owed to music creators and rights-holders.

Imagine working somewhere and then you do not receive a paycheck because the HR department does not have your new address. Not a perfect analogy, but not receiving monies that you’ve earned as a result of your hard work seems unfair.

THIS IS A HUGE PROBLEM

So, I am happy to announce that I am working on a side project called Royalty Claim. Royalty Claim will attempt to work with as many of these administrators to aggregate their databases of millions of records of unclaimed/undistributed royalties and make that information available to the public. There are other services and insight that we will offer through Royalty Claim to help educate music creators and rights-holders on Black Box funds and how to limit/prevent their earnings from falling victim to the broken global music licensing ecosystem (such as taking control of your music catalog with TuneRegistry).

Want to get updates on the Royalty Claim project and be the first to know when we have something to reveal? Sign-up for our email list at www.RoyaltyClaim.com.

Also, follow @RoyaltyClaim on Twitter.

* These 116,133 payments are specifically verifiable because the list of payee names can be gathered from several databases.
** I am currently aware of over 30 funds and sub funds being managed in the United States. However, there are definitely many more that are “private”.

ETLA, The Research Institute Of The Finnish Economy, Publishes Report On State Of Digital Music Infrastructure – Calls For Transparency And Addresses “Black Box” Issues

etla-digital-music-industry-background-synthesis

I had the honor of being interviewed by researcher and author, Derek Sellin, for his industry report “Digital Music Industry – Background Synthesis” for ETLA Working Papers No. 48, published by Elinkeinoelaman Tutkimuslaitos – The Research Institute of the Finnish Economy.

Black boxes materialize for many reasons, including but not limited to: the inability to identify rights holders despite payments made for the use of their compositions; the lengthy time required for filing domestic and ultimately international copyrights, often begun only when a recording is actually released; multiple claims for the same rights exceeding 100% of ownership, resulting in indefinite disputes; international collaborations with less than all creators asserting their rights; international legal inconsistencies regarding what type of performances result in payments (most visible in the fact that radio play does not generate royalties for recording artists in the United States); and the slow and often manual processes to report usage and clear payments under international reciprocal agreements. – Dae Bogan

You can download the report at https://www.etla.fi/en/publications/digital-music-industry-background-synthesis/.

About ETLA
The Research Institute of the Finnish Economy (Etla) is engaged in applied economic research with emphasis on topics that are important from the Finnish point of view. The main focus is on issues that relate to productivity and drivers of its growth, to the functioning of the labour market, as well as to challenges in maintaining a balanced macro economy including sound public finances. Etla monitors economic development, compiles forecasts as well as assesses economic policy and comments on it.

Etla is a private non-profit organisation. Its operations are backed by the supporting association, the members of which comprise the Confederation of Finnish Industries and the Confederation of Finnish Industry and Employers (TT) Fund. The funding from the background organisations covers more than a third of the institute’s budget and forms a solid base for its operations. Read more.

Introduction to Music Royalties Forensics (North America – USA & CAN)

Introduction to Music Royalties Forensics (North America)

Price: $90
Duration: 1 hour 30 minutes
Order: Click here to purchase.

 

Course Overview

Every day, millions of music streams, downloads, digital transmissions, public performances, and broadcasts generate tens of thousands of dollars in unclaimed royalties. To date, the estimated pool of unclaimed royalties exceeds $2 billion.

These royalties are often due to independent music creators, heirs and beneficiaries, and legacy artists. After a period of time, these unclaimed royalties accrue in escrow accounts around the world only to be disbursed by market share to the major labels and publishers leaving the indies, to which much of the money belongs, underrepresented and unaccounted to. Music royalties forensics is the process of searching for, identifying, and claiming these royalties. This course is an introduction to the art and science of finding and unlocking unclaimed royalties.

Your instructor, Dae Bogan, is a music rights and royalties tech entrepreneur (original founder of music rights administration platform, TuneRegistry, and the world’s first search engine of unclaimed royalties and music licenses, RoyaltyClaim), music creators’ rights advocate, and lecturer of music industry entrepreneurship at UCLA Herb Alpert School of Music. He has written about black box royalties extensively on his blog DaeBoganMusic.com. He has helped hundreds of music creators and rights-holders find and unlock hundreds of thousands of dollars in unpaid music royalties from around the world. And his research on the state of unclaimed music royalties was used by US Congressional Budget Office in its analysis of the Music Modernization Act of 2018.

 

Learning Objectives

  1. What are your rights, entitlements, and income participations as a music creator and/or rights-holder?
  2. What are the most common royalty streams generated from a variety of music usage types and where do those royalties flow?
  3. How are music royalties allocated and distributed by music rights organizations?
  4. What are niche funds and sub-funds that often generate unmatched so-called “black box” royalties and how do you check for your records?
  5. How to track music usage to leverage usage and detection reports to reconcile or audit royalty statements?
  6. What are some tools and resources to help you search for, identify, and claim unclaimed royalties and music licenses?
  7. What are the requirements to properly setup to be accounted to and paid royalties from previously unaffiliated sources going forward?
  8. What are some tips for managing your music rights affiliations?
  9. What are some tips for preparing your music rights and royalties for beneficiaries?

Live Online Workshop: Introduction to Music Royalties Forensics (May 18th and May 19th)

Workshop Flier

About Me: I am a music rights and royalties tech entrepreneur (original founder of music rights administration platform, TuneRegistry, and the world’s first search engine of unclaimed royalties and music licenses, RoyaltyClaim), music creators’ rights advocate, and lecturer of music industry entrepreneurship at UCLA Herb Alpert School of Music. I have helped hundreds of music creators and rightsholders find and unlock hundreds of thousands of dollars in unpaid music royalties from around the world. And my research on the state of unclaimed music royalties was used by US Congressional Budget Office in its analysis of the Music Modernization Act of 2018.

 

9 Questions – 90 Minutes – $90

The 9 questions this workshop will answer:

  1. What are your rights, entitlements, and income participations as a music creator and/or rights-holder?
  2. What are the most common royalty streams generated from a variety of music usage types and where do those royalties flow?
  3. How are music royalties allocated and distributed by music rights organizations?
  4. What are niche funds and sub-funds that often generate unmatched so-called “black box” royalties and how do you check for your records?
  5. How to track music usage to leverage usage and detection reports to reconcile or audit royalty statements?
  6. What are some tools and resources to help you search for, identify, and claim unclaimed royalties and music licenses?
  7. What are the requirements to properly setup to be accounted to and paid royalties from previously unaffiliated sources going forward?
  8. What are some tips for managing your music rights affiliations?
  9. What are some tips for preparing your music rights and royalties for beneficiaries?

REGISTER

Register for Sat. May 18th @ 9am PST

Register for Sun. May 19th @ 9am PST

Register for Mon. May 20th @ 9am PST

If you can’t make either dates, register anyway to receive the full replay video.

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