How Blockchain And Cryptocurrency Can Speed Up Spotify International Publishing Royalty Payments To US Songwriters
There’s been a lot of talk about applications of blockchain technology and cryptocurrency payments in the music industry. In fact, there isn’t a single major music industry conference that doesn’t dedicate some programming to related topics. There are several projects and startups currently underway to address licensing, discovery, attribution, remuneration and more with blockchain, smart contracts, and cryptocurrency.
For those of us who aren’t blockchain developers, simply keeping up with the many applications of blockchain in the music industry is the closest we’ll get actually knowing how this all (could) works.
I’ve been thinking about how blockchain and cryptocurrency could speed up the process of paying U.S. songwriters, who wait upwards of 1.5 years to get paid for the use of their songs on Spotify outside the U.S.
The current state of the flow of international publishing income to U.S. Independent Songwriters who own their publishing and use traditional publishing administrators to collect in the U.S. is quite depressing.
As an example, Tommy released a song on Spotify in January 2018. In the United Kingdom, the song earned $100 “publisher share” Spotify UK digital public performance royalties.
Here’s the breakdown:
START: $100 “publisher share” of Spotify UK digital performance royalties in January 2018.
1. PRS collects Tommy’s publishing income in the UK ($100) in January 2018.
2. PRS retains 10% admin fee and remits the balance ($90) to ASCAP in October 2018.
3. ASCAP retains 12% admin fee and remits the balance ($79.20) to the Publishing Administrator in February 2019.
4. Publishing Administrator retains 20% admin fee and pays Tommy ($63.36) in July 2019.
END: Tommy is paid $63.36 for his Spotify UK “publisher share” income (earned $100) after waiting 1.5 years and experiencing a reduction of 37% of his royalties. Imagine $1,000 reduced to $633.60 or $10,000 reduced to $6,336.00.
Had Spotify used blockchain technology to dynamically identify Tommy as the rightsholder in his song and paid him instantly at the close of the month with cryptocurrency, Tommy would have already spent his $100 on studio time!
I shared my thoughts on music business for Hip-Hop producers in this piece by Cherie Hu for Pitchfork:
“The way many of these companies are trying to match and verify their data? Hundreds of emails,” says Dae Bogan, founder and CEO of TuneRegistry, a rights management platform for indie artists. “Many labels are still using old software and systems to manage their digital catalog, and their rights department is different from the one responsible for metadata, which is different from the one responsible for collecting royalties. There’s a lot of bureaucracy involved.”
Read the full piece here.
It is always a pleasure contributing to Bobby Owsinski’s books and podcasts. Get your copy of “The Music Businesss Advice Book: 150 Immediately Useful Tips From The Pros” in Amazon.
Dae Bogan Included In Bobby Owsinski’s ‘The Music Business Advice Book: 150 Immediately Useful Tips from the Pros’
Bobby Owsinski is one of the music industry’s greats. His ability to curate music industry knowledge into easy-to-ready texts across his over 20 books has helped thousands of music creators and music industry professionals in their careers. I’ve had the pleasure of being on Bobby’s podcast, Inner Circle, and participating on several music conference panels with Bobby. He is truly an inspiration. In fact, it was partially my participation in the making of his book “Music 4.0: A Survival Guide for Making Music in the Internet Age” that inspired me to write my first, very short, ebook “The DIY Musician’s Starter Guide To Being Your Own Label & Publisher.”
I am honored, once again, to have been included in Bobby’s latest book, “The Music Business Advice Book: 150 Immediately Useful Tips from the Pros,” available on Amazon.
About the book:
The music business can prove to be a difficult career road when you’re first starting out, but it can be traveled a lot easier with some helpful guidance from a pro who’s willing to share a few hard-earned hints. The Music Advice Book is a compilation of the pearls of experience from 130 top music pros from various segments of the industry who have previously shared their most important tips on Bobby Owsinski’s Inner Circle Podcast over the course of almost 5 years.
These 150 tips cover everything from following your passion, learning to network, and working well with your musical team, to owning your own content and even figuring out how much to charge for your services. Also included are even some useful music production words of wisdom, as well as the indispensable “10 Rules Of Networking.”
The insights in The Music Business Advice Book are essential for those new to the music industry but valuable to seasoned pros as well.
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
Over the last few years, I’ve been researching and sounding the alarm on the growing problem of unclaimed music royalties or so-called “black box” royalties.
I’ve estimated the value of the collective black box to be nearly or above $2B. I’ve presented research, have written extensively and have spoken publicly about this problem, which disproportionately affect independent and legacy songwriters.
Despite my fanfare, industry insiders and stakeholders have shrugged or have blatantly called my estimates a gross overstatement and have held that unclaimed royalties are at best a few hundreds of thousands of dollars and mostly owed to “long-tail artists” who do not quite understand how the music industry works. This is a very myopic, company-focused view. These talking heads tend to speak from their position of administering one right for some music licensees. My estimates are looking at multiple rights administered by multiple entities, which would make the collective black box exponentially greater than the escrow account of a single entity.
Yesterday, Variety published an article on the Music Modernization Act where a very important fact was tucked away on a single sentence in a paragraph near the end of the piece:
The DSPs are holding some $1.5 billion in unmatched mechanical royalties. If the MMA passes, that money would be passed through to the MLC which would match it to the songwriters and publishers. [bold and underline added for emphasis]
$1.5B of royalties (I still believe this number is higher) is sitting in, probably, interest-bearing escrow accounts while songwriters and small-to-medium sized music rights holders struggle to understand how and why.
Last year I founded RoyaltyClaim, the world’s first search engine of unclaimed music royalties and licenses, which has recently been acquired by Made In Memphis Entertainment. We’ve helped DIY musicians and rights-holders identify thousands of unclaimed entitlements in just a few months, with one paricular music producer uncovering nearly $150k in unclaimed royalties due to him.
The problem is huge. The system is not transparent. And the people in charge could do a better job communicating these things to rights-holders.
I’ve been on many panels at music industry conferences where I’ve maintained my position that DIY musicians and small-to-medium sized rights-holders are owed hundreds of millions of dollars, if not several billion, and often my co-panelists have taken a position that my claims are sensational and overstated.
When those on the panel talk about black box we are talking about the aggregate of unclaimed royalties that occur because of any number of factors,’ and not just limited to one service or one collection society, explained moderator Dae Bogan, CEO of TuneRegistry.”
Read the Variety article here.
Check out my commentary on black box royalties here.
ICYMI, here’s a wonderful piece by Vickie Nauman on the notion of coexisting music ecosystems. I think it offers a fresh and nuanced look at how elements and traces of overlapping music industries — what Nauman calls Music Industry 1.0, Music Industry 2.0, and Music Industry 3.0 — shape our experiences as music industry professionals and consumers.
Have a read and lets discuss in the comments.
The music industry careens fast down the highway, stacked high with cargo and shiny objects. Think of the old CD business as the flat bed, the current digital industry as its loosely tethered, bulky freight, and artist-driven initiatives as sparkly crates hitched on top. Failed startups litter the rearview mirror. Yet all are tied together in a zigzag of relationships and common building blocks.
In practical terms, we’ve got three different music industries operating simultaneously.
Continue reading here.
“‘When those on the panel talk about black box we are talking about the aggregate of unclaimed royalties that occur because of any number of factors,’ and not just limited to one service or one collection society, explained moderator Dae Bogan, CEO of TuneRegistry.” via Billboard.
Read the full piece here: https://www.billboard.com/articles/business/8456271/black-box-royalties-myths-panel-music-biz-2018
Today, the Music Modernization Act has passed the U.S. House of Representatives with a unanimous 415 – 0 vote (16 reps abstained from voting at all).
The mega bill — which consists of a bundle of Titles that were previously independently proposed bills — will change the way in which musical works are licensed by digital service providers and provide a safe harbor for infringement under a blanket licensing mechanism (Title One – Musical Works Modernization Act); it will bring recordings made before 1972 under federal copyright protection (Title Two – Compensating Legacy Artists for their Songs, Service, and Important Contributions to Society Act or CLASSICS Act); and it will codify an allocation of digital radio royalties to music producers and sound engineers (Title Three – Allocation for Music Producers Act or AMP Act).
On its surface the MMA sounds amazing, when summarized this way.
Accordingly, the passing of the MMA in the House was widely praised by executives from the most recognizable U.S. music rights organizations and trade associations (e.g. NMPA, RIAA, DiMA).
However, there remains many uncertainties in the language of the bill presenting an opportunity for the Senate to course correct before the bill becomes a law that would take over 20 years to improve, again (the Digital Millennium Copyright Act was the last piece of legislation impacting the music business — it was enacted in 1998).
So, what could the Senate do to make the bill more fair to the tens of thousands of music creators who are not represented (or underrepresented) by the industry sponsors of this bill? Well, there’s at least five issues that can be addressed immediately:
- Ban the practice of distributing by market share unclaimed royalties that rightfully belong to DIY musicians and songwriters.
- Mandate that record companies provide complete and accurate (at the time of release) publishing information for each track within the metadata delivered to distributors/aggregators, and that the latter provides that information to DSPs.
- Do not expunge all past copyright infringement claims, only future claims upon the date of the enactment of the law.
- Maintain a representative MLC board of 50% publishers and 50% songwriters (with at least 1 unsigned songwriter on the board (e.g. Chance the Rapper)) as opposed to the BS 10 publishers, 4 songwriters (who’ll likely come from the major publishers anyway) that has been written in the bill.
- Respect the Berne Convention by not disregarding the musical works of non-US songwriters who have not (and will not) register each of their songs with the USCO or MLC.
How else could the MMA be improved? Or do you feel that it is fair enough? Let’s discuss in the comments.
I Was Interviewed By The Congressional Budget Office Regarding The Music Modernization Act, And Now I’m Even More Concerned For DIY Musicians
I just spent the last hour giving a copyright law and music publishing crash course to a Principal Analyst at the Congressional Budget Office who’s tasked with determining the economic impact of the revised Music Modernization Act (which, by the way, now includes the Musical Works Modernization Act (which is an update to the originally proposed MMA, affecting songwriters and publishers), AMP Act (affecting producers and engineers) and CLASSICS Act (affecting recording artists of Pre-1972 records)) on states, DSPs and music creators.
He emailed me yesterday and asked to speak with me about the magnitude of the unclaimed royalties market, although we ended up discussing much more than that. Apparently he had discovered a presentation that I gave at the Music Industry Research Association’s MIRA Conference last year titled “The State of Unclaimed Royalties and Music Licenses in the United States.”
At the top of the one hour call he began by stating that he’s had to learn copyright and music publishing in 2 days (2 days!!!). The guy who’s going to contribute to a recommendation to Congress that will impact whether or not 3 different bills will be enacted and change our copyright law has spent only 2 days learning about the complex web of regulations and customs that govern an entire industry and its millions of constituents. I guess this is how legislation is vetted; economically.
The good news is he had a lot of great questions and had did a significant amount of research prior to our call. To be fair, I meet plenty of music industry professionals who have (or at least demonstrate) less knowledge of what’s going on in the world of music rights administration and music publishing than this gentleman; and they’ve spent years in the industry! It is refreshing to know that the government does inquiry with non-lobbyist from time to time when considering the impact of proposed legislation.
At any rate, he was open to hearing my advocacy on behalf of music creators (specifically songwriters, music producers, and recording artists of Pre-1972 records) as well as my substantiated opposition to some features of the revised MMA (generally those features that would disproportionately benefit music licensees (primarily, DSPs) and major publishers while leaving DIY music creators to fend for themselves).
[This paragraph was omitted on 4/20/2018 as a result of a clarification that I received for Title 3 of the MMA]
Another issue I have is with the ownership of the unclaimed mechanical royalties fund(s). The Musical Works Modernization Act (Title 1 of the MMA) would, for the first time, codify the existence of a mechanical royalties black box in the United States. The current US Copyright Act does not give copyright owners a right to earn or collect mechanical royalties if their musical works are not registered with the US Copyright Office.
After the NOI has been filed, it is then the copyright owner’s responsibility to become aware of and locate the NOI, and then take action in order to receive mechanical royalties. The law states, “To be entitled to receive royalties under a compulsory license, the copyright owner must be identified in the registration or other public records of the Copyright Office.” (17 USC 115(c)(1))The law also makes it clear that the licensee is not required to pay mechanical royalties until after the copyright owner has been identified. “The owner is entitled to royalties for phonorecords made and distributed after being so identified…” (17 USC 115(c)(1)) What’s worse, the law does not require the licensee to pay retroactively for mechanical royalties earned before the copyright owner is identified. “…but is not entitled to recover for any phonorecords previously made and distributed.” (17 USC 115(c)(1))
However, intermediaries (e.g. Harry Fox Agency, Music Reports, Loudr) that process NOIs (Notice of Intent to Obtain a Compulsory Mechanical License) on behalf of their DSP clients do encourage their clients to set aside unattributed mechanical royalties into an escrow account (the so-called “black box”). The royalties sit there until the copyright owner raises his/her/their hand to collect the earnings or until the entity decides to disburse or absorb the uncollected funds.
Generally, this is a “good faith” policy.
Now, since the MMA will codify the black box as a matter of law, this private sector matter will become a government matter. The question, then, is will federal government or state governments have the right to maintain the unclaimed royalties black box?
Currently, unclaimed property laws enable states to receive and hold unclaimed property (such as money) when the property owner can not be reached. For example, California’s Unclaimed Property Law requires corporations, businesses, associations, financial institutions, and insurance companies (referred to as “Holders”) to annually report and deliver property to the California State Controller’s Office after there has been no activity on the account or contact with the owner for a period of time specified in the law – generally (3) three years or more. I’ve had a few refunds from services that I used and cancelled when I moved from one place to another. I did not provide the service with a forwarding address, so my refund became unclaimed property and ended up with the California State Controller. By searching the CSC’s database, I was able to find and then claim the property (pictured below).
If your property goes unclaimed too long (each state has their own statute of limitations), the state has the right to liquidate the property (e.g. sale an unclaimed vehicle) and absorb proceeds as miscellaneous revenue to the state’s budget [lawyers, correct me in the comments if I’m wrong].
Because states unintentionally (benefit of the doubt) benefits from unclaimed property, I could see states with significant music industries (e.g. California (Los Angeles), New York (Greater New York City), Tennessee (Nashville), Georgia (Atlanta)) suing the federal government or the Mechanical Licensing Collective (the entity that would be granted under the MMA to administer a new blanket licensing system along with a centralized database of musical and sound recording copyrights to match works with usage reports submitted by digital services) over the right to collect unclaimed royalties, especially if the black box is hundreds of millions of dollars (which I believe it is).
There are many other issues that I have with the MMA such as the proposed formation, structure (especially the imbalance of representation on its board where there would be 10 publishers and only 4 songwriters (why not 7/7?)), and governance of the MLC and similar unclaimed royalties issues related to the CLASSICS Act; among other issues. I’d be happy to discuss, but this post is already yuge!
In a word, I am all here for improving royalty rates, ensuring the fair treatment of music copyrights and moving towards a more equitable representation of music creators. However, the MMA is not quite there yet and passing it as-is, with all of its ambiguity, would be a shame. I don’t know if the music industry will have another shot to make this kind of update to the Copyright Act in the next 20 plus years (the Digital Millennium Copyright Act of 1998 was the last significant update).
We should probably get it right — now.
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