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.
Dae Bogan will join Shanna Jade (Director of Brand Strategy, Stem) and Rob Weitzner (Head of North America, The state51 Music Group) on the panel “Future of Rights Technology” on Wednesday, June 20th at A2IM (American Association of Independent Music) Indie Week conference taking place at the Clemente Soto Velez Cultural and Educational Center in New York. The panel will be moderated by Anna Siegal, SVP FUGA North America.
For more details, visit https://a2im.org/event/a2im-indie-week-2018/
“‘The MMA gives a digital service like Spotify or Amazon a more convenient way of licensing songs,’ Dae Bogan, founder of music management platform TuneRegistry and a longtime music rights advocate and executive, explains. ‘And it opens a potential windfall of income to legacy artists who were left out of the digital boom.’ But Bogan adds that the legislation doesn’t come close to fixing all, or even most, of the problems in music royalties for labels, publishers and musicians; the simplified processes just make it more likely they’ll get the money they’re due.” via RollingStone
“‘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.
Ever since I wrote the article “How To Get A Facebook, Instagram and Oculus Direct License For DIY Musicians & Indie Publishers” for the TuneRegistry blog, musicians who own their publishing have flooded my inbox with questions regarding the Harry Fox Agency Online Account application process.
The Harry Fox Agency represents the reproduction rights in songs for thousands of publishers in the United States and issues millions of direct and complusory mechanical licenses to music users on behalf of its HFA affiliate publisher members. In addition, its Rumblefish division performs an array of licensing and administrative (e.g. royalty accounting) responsibilities for dozens of digital service providers, start-up music apps/websites, and other digital music clients. In a word, HFA issues licenses, collects royalties, and make payments to rights-holders to the tune of hundreds of millions of dollars annually.
An HFA Online Account enables publishing rights-holders who are not eligible to become an HFA affiliate (e.g. DIY musicians) to still receive and enter into some direct licenses for the use of their songs in the products and services of HFA/Rumblefish clients. This includes powerhouses like Spotify, Facebook/Instagram and LyricFind, among many others. Once you’ve entered into a license, you must give HFA a list of your songs with proper metadata. You can remit your catalog of license-ready songs to HFA, and other music rights organizations and rights clearance houses, via directly from within your TuneRegistry account.
Admitingly, I did not go into much detail in the Facebook license blog in regards to how to apply for an HFA Online Account (although, I did include the HFA client services email for additional questions). Having reviewed the application form, I can see how a DIY musician could become confused. The form was designed for publishers and administrators, so a DIY musician who wears the hat as his/her own music publisher may get easily confused.
Download my free ebook, The DIY Musician’s Starter Guide To Being Your Own Label & Publisher here.
To aid in providing clarity to DIY musicians, I have written instructions for each question/field on the application form in the order as it appears. This should clarify the questions that I often receive regarding the application form.
[Note: In writing this article, I sought feedback from John Raso, VP of Client Services at Harry Fox Agency, who verified and approved my field instructions/comments and added his own notes as needed. Where applicable, I have included additional notes from John below.]
Form completion instructions for an HFA Online Account publisher application for DIY musicians who own and control their publishing and do not have a publishing deal or an applicable publishing administration deal:
1. Publisher Name: If you have a publisher or have hired a publishing administrator, stop here. Your publisher should be handling licensing with HFA. You can contact your publishing representative for clarification. If you do not have a publisher, then enter your publishing entity name as used with ASCAP, BMI, or SESAC. If you have not created a publishing company and joined ASCAP, BMI, or SESAC enter your full legal name.
2. HFA Account P#: Skip, unless you’ve received correspondence from HFA with an HFA Account P#.
3. Administrator Title: Enter “Self” if you are representing yourself. Enter the title of your representative if you’re giving them authority to oversee your HFA Online Account (e.g “Manager”, “Attorney”).
4. Administrator Name: Enter your full legal name if you are representing yourself or enter the full name of your authorized representative who will be overseeing your HFA Online Account. This is just who should be contacted aout your catalog.
5. Administrator Mailing Address: Enter the contact information of the individual identified in #4. Where should HFA mail things to?
6. Administrator Settings: This is where much of the confusion arises. Here are some scenarios:
- If you are applying as an individual self-published songwriter with no publishing entity, then select “Individual/Sole proprietor”, enter your tax ID (SSN or ITIN), and enter the name that should appear on tax documents (generally, your legal name).
- If you are applying as an individual self-published songwriter who has hired a publishing administrator, then you should not complete this application in the first place. Contact your publishing administrator.
- If you are applying as an individual self-published songwriter who has setup a business entity for the purpose of administering your own publishing with ASCAP, BMI, or SESAC and you have input this publishing entity in #1, then select the business entity structure that you have setup to form your company. For example, if your entity is a Limited Liability Company, then select “Limited Liability Company”. If it is a DBA, then select “Individual/Sole proprietor.” Enter the tax ID for the entity (this may be your personal SSN/ITIN if you are a sole proprietor or it may be your EIN if you’ve applied for one with the IRS for your LLC, Corporation, or Partnership). Enter the name on tax return that matches the entity type that you’ve selected.
- Note from John Raso, VP of Client Services at HFA: “We run the tax ID and payee name provided (“Name on Tax Return”) against the IRS database. If it doesn’t match, we cannot pay this person (or we will get fined). We hold any royalties until we get a proper name/tax ID match (we reach out several times a year to people we are holding royalties for this reason).“
For additional questions or to check on the status of an HFA application, contact email@example.com.
Was this article helpful? I am considering writing more like it for other music rights organizations’ application processes. Let me know in the comments.
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.
In an era of ever-changing revenue streams, how can musicians make sure they receive the royalties they are entitled to? One of the most commonly litigated issues in lawsuits filed on behalf of musicians concerns artists not being compensated for their work. Join us for a lively discussion featuring advice for musicians (and those representing them) from top legal minds Bill Colitre and Eric Bjorgum, and cautionary tales from songwriter/recording artist Tommy Victor, of the rock bands Prong and Danzig.
A. Eric Bjorgum, Karish & Bjorgum, PC
William B. Colitre, Esq., Music Reports
Tommy Victor, Prong and Danzig
Dae Bogan, TuneRegistry and Royalty Claim
Meghan Moroney, Meghan M. Moroney, Esq.
Registration: 11:45 a.m. – 12:30 p.m.
Program: 12:30 – 1:30 p.m.
1 Hour of General CLE Credit
Parking is complimentary.
CLE+ Cardholders with Meal Free ELIP Section Members $55.00 LACBA Members $70.00 All Others $105.00 Law Students $35.00
*CLE+ Members can purchase the meal below for an additional $45.00.
REGISTRATION CODE – 102417ELI
There’s been a lot of talk lately about music royalties; those pesky micro-pennies that add up to something worth fighting over after millions and billions of streams.
With the music industry seeing revenue growth powered by streaming, coupled with shrinking per-stream royalty rates caused by a combination of horrible statutory royalties, unsustainable subscription models, and more content than ever before splitting up the pie, music royalties have never been more scrutinized in modern music history, IMO.
In the United States alone, there are several legislative measures being proposed that directly address music royalties — Fair Play Fair Pay Act (artist royalties), Songwriter Equity Act (songwriter royalties), AMP Act (music producer royalties), CLASSICS Act (legacy artist royalties) — with powerful proponents (music rights organizations, music creators’ rights advocacy groups, and music industry trade associations) and even more power opponents (digital media and Internet company coalitions, broadcaster lobbying organizations, and in some cases, DSPs themselves) on both sides.
Nevertheless, this is an interesting time for music royalties.
Technologists and music licensing experts have come together to create a variety of offerings to music creators and rightsholders to help them exploit their music royalties. Whether you want to find unpaid royalties, get a loan against future royalties, sell your royalties or allow music fans to invest in your music royalties, there’s a platform for that.
Here’s a (not quite) definitive guide of music royalties tools and services (A-Z):
FIND & CLAIM UNPAID MUSIC ROYALTIES
- Paperchain (Revenue Share) – Enriching the music supply chain. Paperchain solves the problem of unpaid royalties in the music industry. Paperchain empowers music copyright owners with products and services to solve the problem of unpaid royalties.
- Royalty Claim (Free/Subscription) – Search, Find, and Claim Millions of Unclaimed Royalties and Music Licenses. The Royalty Claim Platform is powered by data made available through the ongoing research of the Royalty Claim Initiative, its researchers and data scientists, and valued music industry partners.
GET ADVANCES & LOANS AGAINST FUTURE MUSIC ROYALTIES
- Sound Royalties (Flexible Repayments Terms) – Next-generation royalty financing. Retain your music rights. Keep your royalties.
- Lyric Financial (Flexible Repayment Terms) – Advances, Loans, and Financial Solutions for the Music Industry
- Royalty Advance Funding (Interest Loan) – Royalty Advance Funding has funded hundreds of established music royalty earners including songwriters, composers, publishers, producers, and their successors.
SELL, BUY OR INVEST IN MUSIC ROYALTIES
- Royalty Exchange (Ownership & Dividends) – Your online marketplace for buying and selling royalties.
- SongVest (Dividends) – The Stock Market of Music. For the first time ever, both investors and fans can own and get paid by the music that they love.
- Perdiem (Dividends) – Investment platform for creatives. Start your own record label and build your brand in music.
- June 2019
- May 2019
- April 2019
- March 2019
- January 2019
- December 2018
- November 2018
- October 2018
- September 2018
- August 2018
- July 2018
- June 2018
- May 2018
- April 2018
- March 2018
- February 2018
- January 2018
- December 2017
- November 2017
- October 2017
- September 2017
- August 2017
- July 2017
- June 2017
- May 2017
- April 2017
- March 2017
- February 2017
- January 2017
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016
- February 2016
- December 2015
- November 2015
- October 2015
- September 2015
- August 2015
- July 2015
- June 2015
- May 2015
- April 2015
- March 2015
- February 2015
- January 2015
- November 2014
- October 2014
- September 2014
- August 2014
- July 2014
- June 2014
- May 2014
- April 2014
- March 2014
- February 2014
- January 2014
- December 2013
- November 2013
- October 2013
- September 2013
- August 2013
- July 2013
- February 2013
- January 2013
- September 2012
- August 2012