PRO Payments and Revenue Transparency

by Paul Gelsomine

Is The “Black Box” Getting Bigger?

A composer’s business lies in their body of work, which they try to exploit to the best of their ability. By necessity, composers are entrepreneurs. Still, in today’s environment, music is used in a haphazard way, often making it an onerous expedition to receive PRO payments for some performances. In this data-driven day and age, many think that royalties should reach composers faster and be easier to digitally detect. But getting hold of royalties does not appear to be an easy task.

A 2015 Berklee College of Music report found that between 20 and 50 percent of royalties do not make it to their rightful owners. It seems that there is still a considerable amount of cash being left on the table at all levels in the digital age. Meanwhile, with turbulence in the industry, many composers are trying to balance the desire to create music with the need for economic returns on their skills.

Business Is Booming

From PROs to streaming services, many companies claim that record numbers of payments are being dispersed to their members and content providers. But it feels like the music industry is in mass turmoil, since a lot of the cash generated is not falling into the proper hands.

ABI Research forecasts 191 million paying streaming subscribers by 2018. Yet, the very concept of streaming is still a contentious topic in the media in 2016!

What about those TV performances that have been accumulating for years on end? It seems like spotting these performances is quite a challenging exercise for PROs. Almost unanimously throughout the industry, bad data is perceived as one of the largest factors.

My PRO asks me to supply them with the data. They want airdates, country of performance, and other necessary information to try and locate these missing performances. It all makes sense, but I have always thought that this burden should fall on the PRO collection and detection system. To the contrary, the truth is that many performances are never located for one reason or another. My TuneSat account reports that my music is all over the TV world.

Global Nightmares

 I started wondering why I cannot depend on my PRO to give me a more transparent view of where my works are being exploited and by whom. I’m not convinced that they can, with the current mechanisms in place today. Whatever happens to float through their system gets paid out, but the royalties on performances that are lost in limbo without proper identification remain undistributed.

After decades of being able to effortlessly track listeners at a couple of national radio stations and TV channels per country, or being able to physically count royalties based on the number of CDs and vinyl records sold, PROs are presently faced with a involute global nightmare. DATA!

How do they know who is using whose music on today’s numerous niche digital broadcasts, TV channels, YouTube channels, streaming platforms, and mobile apps, not to mention what the future holds in the way of accessibility?  How are they to know where and when the works of their registered composers, publishers, and recording artists are being played, legitimately or illegally, in order to chase after the royalties? These issues, and payment delays, are largely due to antiquated performance-tracking techniques and a lack of a global database of rights ownership.

When it comes to production music and TV, which has been my main interest for the last decade or so, cue sheets have always seemed partially useless, in a sense. They sometimes contain wrong information, as they are subject to being hastily filled out.  Let’s face it—it’s not exactly the sexiest area of the production workplace. After all of the work submitting the cue sheets, which aren’t filled out by themselves, they don’t always provide the PRO with all of the necessary information needed to accurately pay out royalties anyway—airdates, territory, and other useful data. A lot of info slips through the cracks, which results in declining returns.

We don’t use cue sheets here in Europe, to my knowledge— from what I can gather, they seem to be an American phenomenon—and that might even make things worse. I don’t know; it’s hard to say.

TuneSat informs me of all the detections they make of my music, and the data seems to be easy for them to acquire, but it never seems to jive with my PRO statements. It leaves me to wonder why royalty tracking for the PROs seem to flow like molasses uphill. I would like to believe that the evolution of technology should not only be viewed as a disruptive necessity, but also as a provider of efficiency to a trade on which content creators are dependent.

There is a belief that part of the problem is the fact that there is no standard system in place for transparent and accurate royalty accounting and detections. Many different services report to PROs, or right holders, in multiple formats, at will, or not at all, resulting in gross inefficiencies. This contributes to an unstable foundation on top of which the music industry is precariously perched—consequently leaving right holders with a lack of visibility into how their assets are being used.

The Technology Exists

 Implementation is neither impossible nor unprecedented. Technology can track every stream in real time around the world. For example, Kobalt Music Group, an independent rights management and publishing company, has the kind of platform where they can watch their cash in real time. There are no doubt others who rely on technology and data to help keep an eye on performances. In a world where data is readily available and micro-payments can be tracked, some form of accountability is a predetermined assumption. However, sharing this info downstream seems to be an issue.

I can receive a confirmation from American Express that my credit card was recently used for an Uber taxi ride I ordered, almost instantaneously after paying for it—before I even reach my hotel from the airport. Financial institutions have the technology in place to support this coordination, and they deal with large amounts of money and data also, but it seems to work. I don’t remember ever having to call my bank as much as I have been talking to my PRO over the last several years concerning missing funds.

Clearly, there seems to be some solid tracking solutions out there. Why is it not feasible for my PRO to detect my music performances worldwide with some degree of accuracy? Any way you look at it, it seems that there isn’t a solid system for linking usage to ownership, and there are no financial incentives for anyone involved to find the rightful owners for the loads of royalty revenue beyond the reach of composers.

The general consensus is that we need an additional set of standard identifiers attached to our music, and this does seem to be a fair assumption. The global marketplace needs detailed data to work efficiently. Some suggest that universal identifiers would help out considerably in defining who is entitled to payment. The increasingly prevalent understanding is that bad data is a problem, and the data just doesn’t seem to be flowing everywhere the music is.

Revenue Streams Go With The Flow

The reasons why so much revenue fails to trickle down to composers in the current business environment are as varied as the services and royalty types that generate music income in the first place. There seems to be a growing number of go-betweens that collect the money, and theoretically pass it on to the right holders. This presents another opportunity for some of that revenue to lose its way.

Another source of funds for the “black box” stems from differences in international copyright laws, which result in license fees being collected abroad for domestic sound recordings. This revenue usually ends up with foreign sources, which pass the money along to local artists. It is largely agreed that the lack of technology adaptation for the back end of the music industry is appalling and slows down the whole process of collection and payment.

It seems logical that there should be an industry-standard format for up-to-date information about the various types of music revenues that exist, so artists, composers, and publishers can in effect monitor their royalties online in the way that average consumers track their bank accounts. The general consensus is that a decentralized database of global copyright ownership details would aid in this mission. Proper metadata management is becoming an important part of every type of workflow. However, there are no financial incentives to implement this on a global scale. In theory, technology could provide a decentralized, open, and transparent system to track, manage, and identify usage data, but the practicality of industry-wide adoption of any solution still seems to be somewhat of an elephant in the room.

The current system for detecting performances once made sense, but within today’s evolving marketplace, the inefficiencies are massive.  Coupled with a lack of standardized regulations, the result has been complete and utter chaos in the economics of licensing, catalog use, performance reporting, royalty payments, and song identification. All of which, of course, contain serious problems, which have provided waning yields. The current situation has too many “black boxes,” and it has become too easy for companies—and PROs—to sit on money because they cannot determine whom to pay.

The international system of accountability is even more convoluted. PROs have reciprocal licensing agreements with performance societies around the globe to avoid these so-called “black box” royalties. The process requires a local PRO to collect royalties, extract their fee, and distribute the remainder to the songwriter’s domestic PRO. The domestic PRO then extracts its fee before that remainder finally reaches the songwriter and publisher. This process can take from one to three years. PROs employ a royalty policy that favors old forms of mass media music distribution over newer, technologically advanced ones.

What Everyone Seems To Be Saying

 Music consumption is at an all-time high. Composers and artists all over the world are producing great music and connectivity has reached astounding heights on a global scale. The biggest hurdle now is to efficiently enable innovation in the collection and distribution of revenue back to creators from the various forms of usage.  However, PROs don’t seem well equipped to maximize this innovation.  The economics and value chain of right holders and service providers that are needed to bring a music catalog to life is now a potpourri of technical platforms and data sets created irregularly, and none seem to be designed for today’s global usage or needs.

The music industry pie is satisfactorily large enough that technology companies and content companies can and eventually will work together to improve the flow of data and the process of identification. It would benefit all involved parties and help make the music industry more robust, bringing value back to music in the long run. It is largely agreed, though, that a crucial step toward realizing this goal would be the creation of a comprehensive rights database, ideally one that serves everyone on a global scale. An open, transparent and fully indexed catalog, similar to ISRC for sound recordings or ISWC for musical compositions, would be the easiest method to attribute appropriate royalty payments to the appropriate right holders, simplifying the job of finding those missing links.

A catalog would be a step in the right direction toward building a new music economy that pays right holders fairly and in a timely fashion. Although it has been hard to implement, it seems an increase in transparency will only triumph if everyone in the value chain participates. This has not happened yet.

Hope For The Future

 The growth of the Internet has presented the industry with tremendous opportunities, at the same time exerting great pressure on the industry. The Internet has begot an explosion of data. This data needs to be processed so that revenues can be properly appropriated to right holders for the use of their creative works as quickly as possible.  In addition, an irregular copyright system exists across the globe, with different infrastructure set-ups for collective rights management organizations, which have evolved awkwardly in different territories in recent years.

Metadata is perhaps one of the largest challenges that the industry faces right now. The industry as a whole is just not getting metadata right at the moment.  Many feel that the music industry needs to adapt quickly to evolve in this new market, considering all of the money left on the table.

An updated model would be the foundation on which a new stage of the music industry could stand. Technology through tracked digital ownership could help shape the future for music creators, enabling greater transparency in usage, and restoring value to music.