Where are the missing song royalties?

The following MBW op-ed comes from the CEO of the Music Managers’ Forum (MMF), Annabella Coldrick (pictured). Since its inception in 1992, the MMF has worked to educate, inform and represent UK managers. The organization’s membership currently stands at almost 700 managers based in the UK with global businesses and a wider network of over 2,700 managers in the US.

If there’s been one constant in the music business over the past decade, it’s been recurring complaints from songwriters that they are not receiving fair compensation for use of their work online.

In 2019, such views have become even more pronounced with ferocious debates around Article 13 (now 17) and the proposed changes to European copyright law, as well as the controversies stirred in the US following appeals by Amazon, Google, Pandora and Spotify to royalty rates set by the Copyright Royalty Board (CRB).

However you look at it, and whoever you talk to, everyone comes to the same conclusion: songwriters are getting a raw deal.

Yet proportionately, the percentage of publishing revenue collected on a stream is considerably greater than the ratio collected on physical sales. With CD consumption stalling and audiences embracing streaming and subscription services en masse, songwriters should be in clover. Something, it seems, is going very, very awry.

“We estimate that British writers are potentially left unpaid tens of millions of pounds each year, with the situation particularly pronounced for upcoming and non-mainstream writers.”

While there are clear failings in the digital economy for songwriters, it has also become clear that the industry itself, and its arcane licensing practices, should also assume a significant portion of responsibility. Quite frankly, if the global music publishing business were a house, its plumbing would be the leakiest, most bizarre, inefficient and complicated imaginable. The research indicates that it’s here, within the structures of the industry, that a huge proportion of value is leaking away.

How much value? That’s still unclear. But we estimate that British writers are potentially left unpaid tens of millions of pounds each year, with the situation particularly pronounced for upcoming and non-mainstream writers.

From personal experience, I can see the dilemma close at hand: my husband, as a sideline, writes and records his own music, and self-releases through a distributor to Spotify, Apple, Deezer and other DSPs.

For a DIY artist, this kind of setup is empowering. However, if his record royalties were hitched to a speeding Bullet Train, his songwriting revenues appear to be stuck on an ancient handcar, trundling slowly down the track. After two years of releasing music, his digital music publishing is still seemingly stuck between stations, yet to arrive home.

My husband’s digital song royalties are a microcosm of a much wider problem, which is why the MMF board commissioned CMU’s Chris Cooke to research the music publishing ecosystem – to map out how publishing revenues flow from streaming services to publishers and CMOs, to understand where value is being lost or deducted, and to establish why it can take several years for a songwriter to receive payment. [This research is included in the MMF’s new $ong Royalties Guide, part of its Dissecting The Digital Dollar series.]

What Chris uncovered was a mess of complexities – what he defines as ‘royalty chains’ – with the performing and mechanical rights of songwriters frequently flowing through a succession of collecting societies, hubs, publishers and sub-publishers.

Even under a relatively straightforward scenario, where a track is composed by a single UK writer and streamed only in their home territory, the result will be three different royalty payments over differing time periods – triggering a statement from PRS for the composer’s performing rights, and then separate reports from their publisher for performing rights and mechanical rights.

Throw in the involvement of local overseas collection societies and sub-publishers, plus a multitude of writer splits, and the royalty chains get ever more complex.

That’s before we get to data disputes – which might stop the royalty flow completely – and deductions (many international societies extract a fee to fund ‘cultural diversity’) and unmatched or unattributable distributions. The latter end up in the notorious ‘Black Box’.

If unclaimed, this money is typically distributed on the basis of publisher market share. It’s therefore no wonder that payments can be delayed by 2-3 years, and no wonder that songwriters are up in arms. Incredibly, it is estimated that more than 20% of song streaming royalties globally may go missing, unmatched or severely delayed through this system.

PRS for Music recently announced that UK songwriters and composers generated a record £746m in music royalties in 2018. However, after costs increased by 8.8%, the overall revenues paid to songwriter and composer members actually decreased by 0.2% to £603.6m. At the end of 2019, PRS have also announced that admin fees will be increasing significantly.

It must be acknowledged that PRS now processes over 11 trillion uses of music per year. But the question still burns: how much more could songwriters have been paid if global royalty chains were overhauled and revenues were allocated more efficiently? How can we reduce admin payments to intermediaries?

At the very least, it is imperative that songwriters (and their managers and accountants) can have easy access to the data and information that can help them understand their own royalty chains.

Also, it should be mentioned that there are many initiatives currently attempting to make the system fit for purpose. Through their joint venture, ICE, PRS for Music, STIM and GEMA have built what they describe as ‘the world’s first integrated music copyright, licensing and processing hub’, looking to bring efficiencies to data processing and issue more direct licences at a regional level. Elsewhere, SongTrust is helping DIY songwriters collect royalties at source, while AMRA (owned by Kobalt) is moving towards global licensing for leading songwriters as a new society.

Undoubtedly there will be other potential solutions. However, fixing this issue feels increasingly like solving a Chinese Puzzle. Rather than searching for silver bullets, we need an urgent and wide-ranging plan of action – led by songwriters and their managers, alongside music publishers, PROs, DSPs and others in the industry.

What needs to happen now?

Laying down the gauntlet, Annabella and the MMF suggest the following areas as an immediate priority:

 1. Shine a light on global royalty chains

Given the complexities of the global digital licensing landscape,
it has become too onerous and expensive for all but the most successful songwriters to track and trace their royalty chains.

This needs to change. Collecting societies and music publishers must embrace transparency and move towards making data freely available as standard practice.

2. Reveal the disputes

Music publishers and PROs currently control the flow of data and information, and therefore are the first to see data clashes or disputes. It is unacceptable that they sit on these issues.

3. Shorten the chains by embracing global licensing

If you were starting from scratch, no-one would invent the current territorial licensing framework for online streaming. It is the byproduct of default, not design – and built upon reciprocal partnerships from an analogue era. As well as efforts to disentangle current practices, there must also be a shift towards global licensing of songwriters’ repertoire.

4. Speed up the flow of payments

It frequently takes writers years to receive song royalties. Thisis completely unacceptable. Even in the current environment, we should be setting goals that writers get paid, at an absolute minimum, within nine months of their compositions being played.

5. Reduce Black Box collections and distribute unattributed revenues fairly

In theory, unattributed digital revenues should not even exist. There should be no ‘Black Box’ for streaming. But, there is – and it is filled mostly with royalties owed to smaller writers and publishers towards the end of the long tail. The current ‘reverse Robin Hood’ system, whereby unclaimed ‘Black Box’ monies are distributed on the basis of market share is therefore untenable. We need greater incentives for these royalties to be identified – and for societies to take a more proactive approach to locating IP owners.

6. Campaign for change

Finally, we need songwriters, managers and accountants to push their publisher and collecting society partners to actively and urgently address these issues and spotlight those who are making positive changes to ensure that the growth of the industry is equitably shared by all. That conversation began at The Great Escape, but the clock is ticking. For the sake of our entire business, we need chains to be broken and songwriter revenues to be set free.

This article originally appeared in the latest (Q2 2019) issue of MBW’s premium quarterly publication, Music Business UK (pictured), which is out now.

MBUK is available via an annual subscription through here.

All physical subscribers will receive a complimentary digital edition with each issue.Music Business Worldwide

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