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US Streaming Mechanicals Black Box Royalties Data Research - Paperchain

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Original music industry research presented at the 2018 Copyright & Technology Conference at Fordham Law School in New York City.

Published in: Technology

US Streaming Mechanicals Black Box Royalties Data Research - Paperchain

  1. 1. Daniel Dewar, Founder paperchain.io Black Box Royalties Data Research
  2. 2. 2
  3. 3. Background NOI data analysis Survey insights
  4. 4. ● Sound engineer / sound designer ● Data / analytics (“Datalicious”) ● Paperchain About me 4
  5. 5. ● Blockchain! ● We had a solution without fully understanding the problem How did Paperchain get here? 5
  6. 6. ● Black box royalties ● In particular, Notice of Intention (NOI) filings to the US Copyright Office (USCO) The problem — unpaid royalties 6
  7. 7. Mechanical licenses & royalties
  8. 8. BEYONCE feat. SEAN PAUL “BABY BOY” 8
  9. 9. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION 9
  10. 10. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION Reproduction & Distribution 10
  11. 11. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION Reproduction & Distribution Composition Rightsholders Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Hattis Music Group Irving Music 11
  12. 12. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION Reproduction & Distribution Composition Rightsholders Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Hattis Music Group Irving Music Public Performance 12
  13. 13. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION Reproduction & Distribution Composition Rightsholders Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Hattis Music Group Irving Music Public Performance ASCAP Writers Sean C. Carter Sean Hennares Beyoncé Gisselle Knowles Scott Spencer Storch Robert G. Waller ASCAP Publishers Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. 13
  14. 14. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION Reproduction & Distribution Composition Rightsholders Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Hattis Music Group Irving Music Public Performance ASCAP Writers Sean C. Carter Sean Hennares Beyoncé Gisselle Knowles Scott Spencer Storch Robert G. Waller ASCAP Publishers Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp.BMI Writers Kamozi Ini BMI Publishers Hattis Music Group Irving Music 14
  15. 15. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION Reproduction & Distribution Composition Rightsholders Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Hattis Music Group Irving Music Public Performance ASCAP Writers Sean C. Carter Sean Hennares Beyoncé Gisselle Knowles Scott Spencer Storch Robert G. Waller ASCAP Publishers Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp.BMI Writers Kamozi Ini BMI Publishers Hattis Music Group Irving Music 15
  16. 16. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION Reproduction & Distribution Composition Rightsholders Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Hattis Music Group Irving Music Public Performance ASCAP Writers Sean C. Carter Sean Hennares Beyoncé Gisselle Knowles Scott Spencer Storch Robert G. Waller ASCAP Publishers Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Master Use Subscription interactive Digital Audio Transmission BMI Writers Kamozi Ini BMI Publishers Hattis Music Group Irving Music 16
  17. 17. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION Reproduction & Distribution Composition Rightsholders Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Hattis Music Group Irving Music Public Performance ASCAP Writers Sean C. Carter Sean Hennares Beyoncé Gisselle Knowles Scott Spencer Storch Robert G. Waller ASCAP Publishers Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Master Use Subscription interactive Digital Audio Transmission Columbia Records Beyoncé, Sean Paul BMI Writers Kamozi Ini BMI Publishers Hattis Music Group Irving Music 17
  18. 18. ● Royalties paid to songwriter every time their composition is reproduced ● Includes streaming Mechanical royalties 18
  19. 19. BEYONCE feat. SEAN PAUL “BABY BOY” MUSICAL COMPOSITION Reproduction & Distribution Composition Rightsholders Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Hattis Music Group Irving Music Public Performance ASCAP Writers Sean C. Carter Sean Hennares Beyoncé Gisselle Knowles Scott Spencer Storch Robert G. Waller ASCAP Publishers Beyoncé Publishing Black Owned Musik Carter Boys Music Hitco South Lil Lulu Publishing Notting Dale Songs Reservoir Media Music Universal Music Corp. Master Use Subscription interactive Digital Audio Transmission Columbia Records Beyoncé, Sean Paul BMI Writers Kamozi Ini BMI Publishers Hattis Music Group Irving Music Mechanical royalties 19
  20. 20. ● Notice of Intention (NOI) ● Compulsory license to use catalog ● Permission of rights owner not required prior to exploitation ● The “streaming mechanical” Section 115 of US Copyright Act 20
  21. 21. ● Digital service providers (DSPs) pay direct to publishers or to licensing intermediary ● Fees are determined by Copyright Royalty Board “Streaming mechanicals” 21
  22. 22. ● Secure licenses for works to be used by service providers ● Collect royalties from DSPs and pay to publishers Mechanical licensing agents 22
  23. 23. ● Licensee must file NOI to rights owner within 30 days of licensing catalog ● If author or copyright owner unidentified, NOI must be filed to USCO NOI obligations 23
  24. 24. ● Harry Fox Agency — ● Music Reports — ● Loudr — ● NOI — who files for who? 24
  25. 25. ● DSPs may exploit the works ● DSPs pay monthly mechanical royalties to the licensing agent, who forwards to publisher ● Except where author or rights owner unknown, monies held by licensing agent ● This is the black box for streaming mechanicals Once the NOI is filed 25
  26. 26. Black boxes in multiple locations Sound recordings Unidentified performers Unidentified master owners Cinematograhic films Unidentified performers Unidentified master owners Music and literary works Unidentified publishers Unidentified authors, composers, arrangers (remixers and adaptors) Unnotified works Rights Organizations Unmatched usage 26
  27. 27. ● Typically across the music industry black box money may sit in escrow for 3-7 years ● At end of escrow period, monies are distributed based on market share Market share distribution 27
  28. 28. Quantifying “unknown” NOIs
  29. 29. ● April 2016 — USCO allowed for digital filings of NOIs ● NOI filings made publicly available NOI digital filings 29
  30. 30. ● The current fee is $75 per NOI plus $10 per group of 1-100 additional titles. ● For example, the fee for an NOI that includes 118 nondramatic musical works would be $95 (Title 1=$75; Titles 2-101=$10; Titles 102-118=$10) Cost of filing NOIs 30
  31. 31. DSPs spend $8m-$12m each on NOIs per year
  32. 32. Digital filings to US Copyright Office 32
  33. 33. ● Licensee information ● Authorizing entity ● Information About Each Nondramatic Musical Work Embodied or Intended to be Embodied in Phonorecords Made Under the Compulsory License What data is included? Information About Each Nondramatic Musical Work Embodied or Intended to be Embodied in Phonorecords Made Under the Compulsory License N. Title [201.18(d)(1)(v)(A )] O. Author(s) (if known) [201.18(d)(1)(v)(B )] P. Copyright Owner (if known) [201.18(d)(1)(v)(C )] Q. Types of Phonorecord Configurations (already made, if any, and expected to be made) [201.18(d)(1)( v)(D)] R. Expected Date of Initial Distribution of Phonorecor ds (already made, if any, or expected to be made) [201.18(d)(1 )(v)(E)] S. Principal Artist or Group (engaged or expected to be engaged in rendering performances fixed on phonorecords already made, if any, or expected to be made) [201.18(d)(1)(v)(F) ] T. Catalog Number(s) (used or expected to be used on phonorecords already made, if any, or expected to be made) [201.18(d)(1)(v)( G)] U. Label Name(s) (used or expected to be used on phonorecords already made, if any, or expected to be made) [201.18(d)(1)(v)( G)] V. Date(s) of Manufactur e (for phonorecor ds already made, if any) [201.18(d)(1 )(v)(H)] 33
  34. 34. Problem #1 - NOI filings are useless in format made available
  35. 35. ● Wrote a script to download, unzip, parse and index in a searchable database What did we do? 35
  36. 36. 36
  37. 37. 37
  38. 38. 38
  39. 39. 51, 069, 514 NOIS have been filed
  40. 40. Higher number of artists, greater representation of titles Universal Music Naxos Warner The Orchard Tunecore Columbia Sony Music 40
  41. 41. ● Human input error ● Character recognition errors (non-Latin characters) ● Inconsistencies in naming conventions (“featuring”, “feat.”) ● Record-Composition matching ● Publishing information not delivered Why are owners unidentified? 41
  42. 42. Problem #2 - Filings to USCO are static
  43. 43. ● Spotify sued multiple times ● HFA did not have the all of the relevant licenses, and were unable to properly clear and file the NOIs within the filing period ● Apple Music suit filed, relates to work distributed by CD Baby Legal ramifications 43
  44. 44. ● Spotify vs Ferrick case proposed settlement of $43m ● Wixen Publishing suit ($1.6bn) ● Bluewater Music Services Corp ● $150,000 per infringed work Assigning a value to filed NOIs 44
  45. 45. ● Difficult to quantify ● DSPs are filing full catalogs as a catch-all, regardless of whether genuine author or copyright owner is unknown ● Need to determine which filings fall outside the filing period requirements Assigning a value to filed NOIs 45
  46. 46. ● Spotify vs Ferrick case proposed settlement of $43m ● Wixen Publishing suit ($1.6bn) ● Bluewater Music Services Corp ● $150,000 per infringed work Assigning a value 46
  47. 47. Global royalty black box revenue worth $2.5bn
  48. 48. NOI black box royalties worth $50m-$300m
  49. 49. ● Reforms section 115 Compulsory license ● Creates Mechanical Licensing Collective (MLC) to administer blanket license Music Modernization Act (2017) 49
  50. 50. The National Music Publishers’ Association (NMPA), The Recording Industry Association of America (RIAA), American Association of Independent Music (A2IM), the Recording Academy, the Nashville Songwriters Association International (NSAI), the Songwriters of North America (SONA), The American Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music Inc. (BMI), the Production Music Association (PMA), the Church Music Publishers Association (CMPA), the Music Publishers Association (MPA), the Council of Music Creators (CMC), the Society of Composers and Lyricists (SCL), MusicAnswers, the American Federation of Musicians (AFM), SAG-AFTRA, the Association of Independent Music Publishers (AIMP), SoundExchange, SX Works, the Administrators of Gospel Music (AGM), the Content Creators Coalition and the Music Managers Forum U.S Music Modernization Act Support 50
  51. 51. Black box is a sensitive topic
  52. 52. ● From market share distribution? ● From being able to monetize catalog without permission of, or notifying, rights owner before exploiting works? ● From continuing the practice of black box royalties? Who benefits... 52
  53. 53. ● Given society revenues, shouldn’t technical deficiencies have been solved? ● This has only been compounded with advent of streaming Why do they exist when... 53
  54. 54. Streaming dominates royalties https://medium.com/@RIAA/the-state-of-music-mid-way-through-2017-7e90cad298f9 54
  55. 55. ● 2bn+ streams per day ● 1 terabyte + data ● 20,000+ new tracks added every day ● Millions of “data events” per second https://labs.spotify.com/2017/10/16/big-data-processing-at-spotify-the-road-to-scio-part-1/ Spotify alone generates... 55
  56. 56. ● CISAC organizations connect to CIS-NET centralized database ● Yet they still have conflicts A central database, but not really 56
  57. 57. Problem #3 - Multiple databases of rights information - Who has authority? - Who has access?
  58. 58. Industry survey
  59. 59. Who responded? 59
  60. 60. Majority of respondents aware of unidentified or unattributed royalties 60
  61. 61. Awareness of existing lawsuits against service providers 61
  62. 62. Causes behind infringements that led to lawsuits 62
  63. 63. Aware of instances of missing royalties due to being unidentified 63
  64. 64. Majority of respondents do not know where to check 64
  65. 65. Majority of respondents do not know how to claim 65
  66. 66. Aware of vendors offering services 66
  67. 67. What drives more awareness? Awareness of current missing royalties lawsuits 25.23% Incorrect Right Owner Identification is Urgent 21.80% Knowledge on where to check 15.15% Knowledge on how to claim 14.19% Incorrect Right Owner Identification to be solved 11.85% Awareness of Vendors 7.43% Need for a recording composition DB 2.31% Knowledge of case of missing royalties 2.06% 67
  68. 68. Causes of black box royalties 68
  69. 69. Most challenging aspect of royalty collection 69
  70. 70. Nearly 40% of respondents think black boxes are worth more than $1bn 70
  71. 71. Majority of respondents agree on a centralized database 71
  72. 72. But large disagreement on who should fund and administer 72
  73. 73. Recap
  74. 74. Problems with existing setup Publicly available NOI filings are useless in current format 74
  75. 75. Problems with existing setup 75 Publicly available NOI filings are useless in current format Filings to USCO are static references
  76. 76. Problems with existing setup For validation - multiple databases with conflicting authority 76 Filings to USCO are static references Publicly available NOI filings are useless in current format
  77. 77. Problems with existing setup Multiple databases with conflicting authority 77 Filings to USCO are static references Publicly available NOI filings are useless in current format Lack of interoperability between databases (API integrations, CWR - DDEX) with no validation capability Inability for recording industry to deliver publishing information to distributors/DSPs Record-Composition matching Lack of transparency in usage/accounting data shared with writers and artists Lack of single registration point for works with global territories Legacy software interfaces that are cumbersome for writers and artists to use
  78. 78. Solutions in play ● Publicly available lookup tool (SX-Works) ● Music Modernization Act (US) ● Joint PRO efforts to address authority issues in databases 78
  79. 79. ● Startups looking at emerging technology & new development standards to address issues of scale and matching ● Some don’t make sense in current music system, but do in a new system ● Most of them prioritize interoperability New companies, old problems 79
  80. 80. Be curious about new teams 80
  81. 81. ● Centralization of database/information is something the PROs will want to own and control ● Startups will circumnavigate supply chain and legacy companies if change isn’t fast enough What do I think will happen? 81
  82. 82. Questions dan@paperchain.io @danielkdewar www.paperchain.io

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