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Royalty Claim - [Preview] The State of Unclaimed Royalties and Music Licenses in the United States


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This presentation was given by Royalty Claim's Founder and Chief Researcher, Dae Bogan, at the Music Industry Research Associations first inaugural MIRA Conference at the UCLA Luskin Conference Center on August 11th, 2017.

Published in: Data & Analytics
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Royalty Claim - [Preview] The State of Unclaimed Royalties and Music Licenses in the United States

  1. 1. [Preview] The State of Unclaimed Royalties and Music Licenses in the United States Highlights from ongoing research of the Royalty Claim Initiative Dae Bogan, MIA Founder & Chief Researcher, Royalty Claim Presented at MIRA Conference, August 11th, 2017 © Dae Bogan Music, LLC d/b/a Royalty Claim
  2. 2. What is the “Black Box”? Answer’ish: A black box is an escrow fund in which music royalties are held due to an organization’s inability to attribute the royalties earned to the appropriate payee.
  3. 3. 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 [terrestrial] 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. “ “ Sellin, Derek & Seppälä, Timo (6.2.2017). “Digital Music Industry – Background Synthesis”. ETLA Working Papers No 48. (Page 7 - Interview with Dae Bogan) Generally...
  4. 4. EXAMPLE 1: General Licenses Thousands of businesses, restaurants, coffee shops, malls/shopping centers, bars and nightclubs, colleges and universities, etc. pay license fees for blanket public performance licenses from US PROs to play the PRO’s full catalog of compositions without reporting back to the PRO the specific compositions performed. License Fees General License and grant of right to PRO’s full catalog Unattributed blanket license royalties are technically black box until the royalties are distributed based on unfair market share distributions that often disregard emerging and legacy artists.
  5. 5. EXAMPLE 2: Unattributed cash advances paid to music companies. DSP pays Label an advance. Label gives DSP access to its catalog. DSP provides Label usage reports Label attributes usage to its artists and pays artists based on their record agreement. When the DSP agreement expires, the unattributed portion of the advance is retained by the Label.
  6. 6. United States Collection Societies EXAMPLE 3: International consequence of United States’ limits on sound recording rights Composition Royalties Foreign Local Artist Sound Recording royalties for US artists and copyright owners enter the black boxes of Foreign Collection Societies because the US does not recognize a public performance right in sound recordings.* Foreign Collection Society Foreign Radio Broadcaster License fees for Compositions License fees for Sound Recordings Composition Royalties Composition Royalties Sound Recording Royalties US Artist *The US does recognize a digital performance right in sound recordings and through SoundExchange, royalties are collected for this type of use. US Artist Sound Recording Royalties
  7. 7. $????????? The collective Global Black Box has been estimated to be valued between $1 billion and $3 billion with as much as $100 million in streaming mechanical royalties trapped in the black boxes of various interactive streaming services.
  8. 8. Speaking of Streaming Services... ...a review of mass filings of “address unknown” Section 115 NOIs
  9. 9. Quick Background: ● Interactive streaming services generally obtain sound recordings from record labels, distributors, and aggregators. ● Often, the metadata received by services include track and release information (artist and label), but omit information regarding the underlying composition (publishers and songwriters; copyright owners) ● US copyright law requires a service to obtain licenses for both the master sound recording (obtained from label/distributor/aggregator) and the underlying composition (difficult to obtain if copyright owner(s) are unknown). ● The Copyright Act provides a provision -- Section 115 -- for obtaining a compulsory mechanical license in the event a prospective licensee cannot locate the copyright owner. ● In 2016 the Copyright Office implemented a solution and guidance for electronically filing Notice of Intentions (NOIs) under the Section 115 provision for the purpose of obtaining the compulsory license. ● As a result interactive services have mass filed millions of “address unknown” or “copyright owner unknown” NOIs on the Copyright Office that must be discovered by the copyright owners in order for the copyright owner to unlock mechanical royalties that may become due to them from the interactive service.
  10. 10. Section 115 NOI Mass Filing Stats - Licensees ● Amazon Digital Services LLC ● Audio & Video Labs, Inc. (Sound Drop / CD Baby) ● CMH Records Inc. ● Google, Inc. ● Guvera USA, Inc. ● iHeartCommunications, Inc. ● Microsoft Corporation ● Muzak, LLC ● Pandora Media, Inc. ● PK Interactive LLC (DistroKid) ● re:discover, Inc. (Loudr) ● Real Gone Music, LLC ● Spotify USA Inc. ● The, Inc ● The Recording Academy Only 15 digital music services have utilized the mass filing method.
  11. 11. Section 115 NOI Mass Filing Stats - Usage “Digital music services paid the US Copyright Office $1,842,719 to file 16,066,073 NOIs in the first half of 2017.” - Dae Bogan, Royalty Claim
  12. 12. Section 115 NOI Mass Filing Stats - Royalties “The deferred mechanical royalty obligation for one stream per NOI would be about $3k for ad-supported and $10k for premium.” - Dae Bogan, Royalty Claim
  13. 13. Section 115 NOI Mass Filing Stats - Filings
  14. 14. Section 115 NOI Mass Filing Stats - Fees
  15. 15. What happens when payees are identified, but are still not paid?
  16. 16. Unclaimed Royalty Funds: Over 30 funds and sub-funds in the United States alone
  17. 17. Unclaimed Royalty Funds: Over 30 funds and sub-funds in the United States
  18. 18. Unclaimed Royalty Funds: Over 30 funds and sub-funds in the United States
  19. 19. Unclaimed Royalty Funds: Over 30 funds and sub-funds in the United States
  20. 20. Next... ● Tackle International Black Boxes - There are hundreds of unattributed royalties Black Boxes around the world. Capturing data from the source will empower DIY musicians and rightsholders to go after their entitlements. ● Quantify Unclaimed Royalty Funds - Calculate marketplace/consumption data and reported royalty rates to forecast the true value of payee-identified, but unclaimed royalty funds (or encourage fund administrators to provide this data). ● “Connect” more partners to Royalty Claim to provide efficiency and transparency to copyright owners.
  21. 21. Dae Bogan, MIA Founder & Chief Researcher