Why United States Music Creators Earn Fewer Royalty Streams
This post was originally written for and published on Tradiio’s blog.
Did you know that music creators in the United States earn fewer royalty streams than their international counterparts?
In the United States, there is no national performance right in sound recordings. The US Copyright Act sets out several rights for compositions (songs), such as the right to reproduce and distribute compositions in phonorecords, but thanks to a combination of outdated rules and tough opposition from lobbying organizations that represent broadcasters, the law does not include a performance right for sound recordings.
This means that whenever a recording is performed on AM/FM radio in the US, broadcasters are not required to pay artists or record companies any royalties from the advertisements revenue that they earn on the back of those performances. Considering that there are over 15,000 radio stations across the US performing hundreds of thousands of plays of music each week, US music creators and labels are potentially missing out on millions of dollars in royalties.
Virtually all other developed nations outside of the US have a performance right in sound recordings, which is known as neighbouring rights. When a US artist’s recording is performed on BBC in the UK, it earns neighbouring rights royalties for the US artist.
The fact that recordings earn royalties outside of the US is good news, right? Not so much.
Because the US does not have a national performance right in sound recordings (no neighbouring right), no recording earns these royalties. This includes recordings by artists from countries that do recognize neighbouring rights. So yeah, insert your favorite European band who gets high rotation on US radio.
As a result, the countries who do recognize neighbouring rights do not send the neighbouring rights royalties generated from the performance of recordings by US artists in their territory back to any of the US music rights organizations. They keep it or distribute it to the artists and labels in their territory.
Generally speaking, most indie artists who earn neighbouring rights royalties outside of the US will never see this royalty stream unless the US government makes a change to copyright law. Although there are some small companies who try to capture neighbouring rights royalties on behalf of US music creators, they tend to focus on a select roster of more established artists, leaving up-and-coming indie artists with no support.
So what now?
Well, now that you know US artists earn less royalty streams from their music than their international counterparts, it is really important to maximize the royalty streams that they do earn.
Many independent artists miss out on royalties that their music does earn because they do not properly register their songs, recordings, and releases with the various music rights organizations and licensing agencies who collect and distribute royalties. This is understandable, as it can be a pain to keep up with the many different registration processes across a number of organizations (ASCAP, BMI, SESAC, Music Reports, Harry Fox Agency, SoundExchange, the Alliance for Artists and Record Companies, and more). It can be burdensome, time consuming, and often confusing to properly register a complete album. However, missing just one registration or filing registrations late can result in lost royalties, or even disputes over ownership.
This is where TuneRegistry steps in to help.
TuneRegistry is an all-in-one music rights and metadata management platform for the independent music community. Easily organize and store your song details, recording metadata, credits and ownership splits, and release information in your TuneRegistry account. It’s your robust music catalog manager that’s accessible online, so you don’t have to worry about tracking down emails, storing through documents in various desktop and cloud folders, losing collaborator contact information, or any of the other messy issues that most indie artists face.
TuneRegistry is your one-stop source for keeping your music catalog in check.
The advantage of TuneRegistry over other catalog management systems is that we’ve integrated the registrations process directly to ASCAP, BMI, SESAC, Music Reports, SoundExchange, and many more. Save time, reduce errors, and unlock royalties with our integrated registrations module. We make it super easy to get your music registrations to the organizations and data services who need it.
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TuneRegistry presents “Rights & Metadata in the Evolving Digital Music Space” http://schedule.sxsw.com/events/PP62361
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ETLA, The Research Institute Of The Finnish Economy, Publishes Report On State Of Digital Music Infrastructure – Calls For Transparency And Addresses “Black Box” Issues
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.
The Elephant In The Room: Unclaimed / Undistributed Royalties
In the United States, there are several “unclaimed / undistributed royalties” funds held by music rights organizations. These funds collectively consist of tens of millions of dollars in undistributed earnings generated by the use of music within the greater music industry, from legislative appropriations imposed on manufacturers of audio home recording media, and from agreements with foreign entities.
Some of the organizations (SoundExchange, AFM & SAG-AFTRA Intellectual Property Rights Distribution Fund, Film Musicians Secondary Markets Fund, Live Television Videotape Supplemental Market Fund, and although this is not royalties per say, the US Copyright Office has a Section 115 NOIs Filing database that can be used to track down missing mechanical royalties) have created public databases so that music creators can search to see if they have royalties sitting in these funds. However, the biggest funds do not have public databases and often music creators can not be reached by any of these funds to be notified that they have unclaimed royalties.
I am working on a side project called RoyaltyClaim.com to address this issue of unclaimed / undistributed royalties. The goal is to get each of these funds to join the RoyaltyClaim.com Disclosure Program and to encourage them to submit very basic information to us on a periodic basis regarding the income participants who are due royalties. We will then aggregate these disclosures and maintain one searchable public database accessible for free by music creators and income participants.
By aggregating these lists of unclaimed / undistributed royalties information, we can aid income participants — including songwriters, recording artists, publishers, labels, musicians, background vocalists, composers, and beneficiaries (in the event of musician parents or spousals who passed away, but their music still generates royalties) — in locating and claiming their monies.
If you are a music creator, you should signup at RoyaltyClaim.com to be notified of our launch. We are currently in conversations with the various funds to get them to cooperate and help creators and their families.
Major Labels Sue Music Tech Startup Aurous In First Week Of Launch
Here we go again. Music Business Worldwide reports that “The RIAA — on behalf of UMG, Sony Music Entertainment, Warner Bros. Records, Atlantic and Capitol Records — has today filed a lawsuit against Aurous and its founder Andrew Sampson for what it calls ‘willful and egregious copyright infringement’.”
The music app, being called the “the new Grooveshark” (Grooveshark shut down earlier this year after similar lawsuits was filed against the company), just launched in public Alpha this week.
Aurous’ founder, Andrew Sampson, maintains that the website is a search engine that enables Internet users to search BitTorrent networks to find and stream content. However, the RIAA argues that the website directly targets recorded music from overseas pirate sites, effectively enabling consumers to infringe on the copyrights of record labels.
Whether Sampson intended on his platform to illegally access and stream recorded music or if he truly believed he built a legitimate consumer app detached from piracy, like many other uninformed tech developers out there, he has been caught in what could be a very expensive and crushing legal battle informed by copyright law.
I spend a great deal of time consulting with entrepreneurs who have cool ideas to develop new music apps, services, and platforms. However, the challenge that many of them face is having a limited understanding of the music publishing and recording landscape, from the perspective of a music tech startup. With the help of a music industry professional, founders gain insight on where products and services may infringe on the intellectual property rights of others. I’ve helped numerous startup entrepreneurs create products, formulate business models, and deliver value, all while respecting and complying with the intellectual property rights of third-party rights owners.
Read more about this story at Music Business Worldwide.
On Katy Perry’s ‘Prism’ Lackluster Sales And The Luxury Commodity That Is The Album
“The album is dying in front of our eyes,” says music analyst and critic Bob Lefsetz. He asks, “what kind of screwed up world do we live in where Katy Perry’s new album Prism sells only 287,000 copies in its debut?” and answers, “One in which everybody’s interested in the single, and no one’s got time to sit and hear your hour-plus statement.” Read More…
Digital Music: Can Streaming Save Music Sales?
In Sweden, South Korea, Norway, and Finland, more music is streamed than downloaded. In fact, 91% of music income in Sweden comes from streaming (that’s because Spotify is a Swedish company that was founded in Sweden). With the launch of iTunes Radio and the anticipated launch of a YouTube streaming service, we wonder, “can streaming save music sales?” See what this piece by Maddy Savage of BBC News has to say about that.
Demystifying The Music Industry: What’s The Difference Between ASCAP/BMI/SESAC and SoundExchange?
I received an email this morning from a reader who had read my piece, “Demystifying The Music Industry: What’s This About Public Performance Rights?.” He asked, “If SoundExchange was designated by the Library of Congress as the sole PRO to administer public performance licenses and also collect public performances fees for Sound Recording Company Owners, then why do artists still utilize the services provided by the other 3 US PROs (ASCAP / BMI / SESAC) – is [SoundExchange] not sufficient by itself?”
A lot of indie artists are confused about the difference between ASCAP, BMI, SESAC and SoundExchange. I’ll attempt to break down the most important differences between these groups and elaborate towards the end about other considerations and other royalty collection entities. Feel free to comment with any questions (or corrections). Read More…
NMPA Sues Fullscreen: Easy Fix
The National Music Publishers Association has sued Fullscreen, Inc. for the monetization of YouTube channels containing thousands of videos with thousands of copyrighted music covered or synched. The way I see it, Fullscreen has 1 of 2 options to resolve this (which I believe will be handled out of court via a nice settlement):
- Enter into an agreement with NMPA to make sure royalties are flowing to publishers through Harry Fox Agency (the same thing YouTube did last year upon suit from NMPA)
- Enter into direct synch and mechanical license deals with publishers and record companies, like it has already done with Universal Music Publishing earlier this year.
The consequence of both fixes will be a reduction in ad revenue it generates from the over 15,000 YouTube channels with which Fullscreen has monetization agreements.
Read the piece in LA Times.
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