20-50% of Royalties Never Reach the Artist, Study Finds…

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Artists aren’t sometimes getting screwed in the digital era.  According to the latest research, they are systematically and routinely missing as much as half of their royalties on an ongoing basis.  “Unfortunately, the adage ‘follow the money’ leads only to a dense thicket of micropayments and ‘black boxes’ where relationships among rights, royalties, processes, and participants, in the eyes of many, are deliberately obscured or, at best, have become hopelessly complex and outdated,” notes a just-released report from Rethink Music, an initiative of Berklee’s Institute for Creative Entrepreneurship.  “Payable events—performances, recordings, publications—occur, but the resulting payments that trickle back to recording artists, writers, and producers are based on a series of outdated frameworks, technologies, formulas, and methods that are demonstrably unable to keep pace with the state of music creation and consumption today.”

“It is estimated that anywhere from 20-50 percent of music payments don’t make it to their rightful owners.”

But that’s only the amount that’s supposed to be paid.  The report, Fair Music: Transparency and Money Flows in the Music Industry, pointed to a giant pile of money that is intentionally squirreled away in private deals, all of which are legal.  That would explain why Sony Music pressured The Verge to pulldown its contract with Spotify, that is, before it went completely viral.  “As a result of the many unique, and often legally private, financial relationships that exist between artists, authors, record labels, and publishers, our window into the revenue earned by musicians from their compositions, performances, and recordings is obscured,” the report continues.

“While that portion of the global recorded music sales, subscriptions, and synchronization fees that might be initially attributable as recording artist “revenue” could be as much as $3 billion (using an admittedly rough method for approximation), of the $15 billion in global, recorded music revenue reported by the IFPI for 2014, only a small portion of this money beyond the initial recording advances paid ultimately makes its way to the artist as ongoing revenue.”

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This is a rathole that gets dirtier the further you go down.  While Rethink pulled some punches on notoriously shady groups like SoundExchange, they also pointed to an institutionalized system of complicated dysfunction.  “Along with the emergence of digital services and issues surrounding their business models have come numerous worthy questions about the transparency of payouts,” the report continues.   “In a world where data is readily available and micro-payments can be tracked, accountability should be a foregone conclusion. However, the industry has yet to require services and intermediaries to provide complete, readable, up-to-date data about music sales and uses in a standard format adopted throughout the value chain.”

“Perhaps this is because the current lack of transparency appears to benefit middlemen, but creators, consumers, and others in the music industry value chain should no longer passively accept this.”

The Rethink report can be downloaded here

Top image by Wonderlane, licensed under Creative Commons 2.0 Generic (CC by 2.o).  ‘Baby Boy diagram pulled from the Rethink/BerkleeICE report.

33 Responses

  1. Summer

    Using a photo of a starving bloody dog was really uncool. Abused animal porn to promote an article about starving artists? Bad comparison. Now verify your humanity.

  2. john

    please change the disgusting picture on this, really no reason for me to have to see this constantly as the headline item.

  3. DogOfTears

    That photo is horrible and should be taken down.

  4. Anonymous

    Paul it’s great that you finally published an actual article, with what looks like actual content.

    But I don’t know, because I’m too busy being disgusted by your decision to exploit a photo of an abused dog to bother actually reading your article.

    I’m off to donate to an animal shelter.

    • Paul Resnikoff

      Hate to break it to you, but your fluffed-up Pomeranian is leading to abuse cases like this. And if you want to go see evidence of that, I’ll put you in touch with one of the top vets in Los Angeles and the country, who sees this link every day.

      • Anonymous

        Are you okay? Like, mentally?

        Do you often assume that people have “fluffed-up Pomeranians”? Are the …. voices telling you that?

        (I’d respond seriously but your comment is just illogical.)

        • Paul Resnikoff

          It’s a reference to the pure-breeding of dogs, and the impact that it has on dogs that do not have homes and often end up killed, abused, or neglected. Look it up.

          • Anonymous

            I think he was asking why you brought up that subject in the first place. Everyone (I assume) understands the reference to inbreeding and the resulting abuse. But why would you raise that in response to that comment? It’s completely irrelevant – which is probably why he said your response is illogical. You might as well have responded with a comment about domestic abuse in Africa – it’s just not on point.

          • soundranger

            Paul, I congratulate you for telling (and showing it) like it is. You can’t take care of the animals if the humans are being treated like….dogs. As a 40+ year participant in what is now euphemistically called “the music industry” I can tell you that the cumulative effect of all this bs is for me to congratulate you for finding the correct image to describe what’s going on out here. The shit part is that with all their “technology” producing a coherent, readable and correct royalty statement at any point along the supply chain should be (actually it is) trivial for labels or (jeez) Apple, spotify, Google et. al. But, hey, why should those effing musicians have it easy.

  5. anon

    you know what would be a more appropriate, relevant and informative image to use? try the graphic created by ReThink further down in the article. the dog picture has no relevance to the topic, try as you might to see it otherwise

  6. The Ghost Of Jerry Garcia

    Hey Paul,

    Not to throw shade at you, but maybe it would have been a little appropriate, if you’re going to use such a graphic, and sensitive image, if you were to include some sort of disclaimer.

    Hell, I don’t know, something along these lines perhaps, ….

    “This disturbing image of this neglected animal is to no way glorify such treatment. It’s merely used to make a comparison to the way recording artists are treated financially by their record companies. There are organizations you can donate financially to help such animals in need, like the ASPCA”

    … then provide some links where readers can actually make a difference to help these abused animals.

    I’m just saying Paul, and I’m NO WAY hating on you 🙂

    • Paul Resnikoff

      What am I disclaiming exactly? I’m making a pretty straight comparison to the way I view the artist in the digital era. I’m starting to think that was an effective move.

  7. Versus

    Please tell more about the “shady” SoundExchange. What are they up to?
    A2IM and others keep pressing the point that everyone should register with SoundExchange. Is it a scam after all?

    • Paul Resnikoff

      Personally, I think Pandora should not be working with SoundExchange. In years past, I’ve dug into their financial statements and found outrageous holding amounts, in the hundreds of millions, all unallocated funds. Then, I searched through the logs of which artists are unmatched, and discovered hundreds of well known artists unmatched.

      Frankly, I’m starting to think I should update those pieces, because I’m starting to think the point isn’t getting across. In this very insightful report from Berklee, Larry Kenswil (formerly of UMG) points to a massive disincentive against cleaning up royalties and distribution to artists. I wonder why SoundExchange can’t figure out how to find some of the biggest artists in the world, and actually pay them? It just doesn’t make sense, yet somehow it’s on artists to register (yet, they have no idea many times that they have to do this). I’ve heard there’s some outreach effort, but how hard are these guys trying?

      Sorry, anytime there’s that much money on the table, it doesn’t smell right. Even worse, you have companies like Pandora paying a giant percentage of royalties, and it never gets distributed back to artists. This is a company that almost went out of business and obeys the rules… yet a very large percentage of what they pay, even a majority, never gets back to the actual rights owner.

      Just sayin’.

  8. Tcookemusik

    The image is appropriate, for me, considering the veracity of the situation. I won’t be registering tracks with a PRO. I wish I could have popular music so that I could dent this bastard of a system. I’m going completely around it. If a show on Netflix wants a track- pay up front deal. Stream, blow me. Point of discovery is the optimum time for the point of sale, like Remi has pronounced, so live, sell your cds, downloads from discovery. The system is a sponge. And I do not see how any of the services companies distributers are adding value. None. Period period period.

  9. Yesha

    I rarely comment but the man was just trying to talk about.music info..to hell with the pic..people in America,”where I am from” are petty as hell…i never even looked at the pic..All I wanted was the info..And people are always commenting off topic..comment on the article, not the damn picture, elementary school kids. The info is what is important not pictures…petty asses…

  10. Anonymous

    Wow now there’s a surprise Willard Ahdritz of Kobalt and their tech industry backers must be pleased they’ve got the findings and report that they paid for….

  11. what?

    You are all hypocrites. The reality is: starving dogs exist. You just don’t want to have to look at them. What should offend you is starving dogs, not a photo of a starving dog. Go donate to a shelter, or take a dog in. Paul is not promoting the starving of dogs. Nor did he starve the dog to take the photo.

    Why are all reality shows are about rich people (even Honey Boo Boo or those Duck guys.) Why do magazine cover feature celebrities? Because the public wants to ignore inconvenient or ugly truths (like the exploitation of artists by both corporations and ‘consumers’ who don’t pay).

  12. asdf

    As the owner of a rescue and frequent donator to animal rights and rescue cases, I gotta say, come on man. Using that photo for an article about “starving/abused” musicians is fucked up. No comparison whatsoever.

  13. RickyLopez

    One of my first jobs (in the early 90s) was to go through lists of unclaimed royalties for my company. Old school style with a stabilo and rule to report back. On my first day I noticed Robert Nestor Marley and loads of various Lennon John versions unclaimed. I doubt if things have changed. Collection agencies are idiots 8%?? pfff

  14. TcookeMusik

    Regarding the image comments: this i not fucking facebook.

  15. hank@nv.net

    Initially I wished to share this article, as I often share DMN articles. The outright stupidity of using that photo of an emaciated dog prevents me from further consideration of so doing. Paul, you do not serve your humanity or credibility well by attempting to defend this indefensible choice. You have fucked up. Period. Own it or change it. Those are your two honorable options. The rest of it is bullshit.

    • Jeff Young

      Please reprint article in an upcoming edition and never ever put such a horrifying photo as a lead in to an important topic.
      My stomach turns each time I looked at that photo. This is unacceptable.

  16. DavidB

    I’m still working my way through the report, but I think I can already say that the DMN headline is a crock. I would love to see some reliable data on the proportion of streaming royalties going to artists, but you won’t find it in this report. If you burrow back from the cited source, it leads at second or third hand to a report commissioned from the accountants Ernst & Young by the French music trade group SNEP. Alas, that report itself does not seem to have been published, and all we have are selected findings leaked to selected media. Moreover, it appears that the findings relate specifically to France, so their applicability to the rest of the world is moot. Without clear information on the scope, methods, and sources of the data, the quoted findings are practically useless.

    • soundranger

      So, you think that these multinational corps (Labels) are doing business any differently than the French findings? Not applicable huh? Thank the French for at least projecting a modicum more concern for artists than what we currently enjoy here in USA! USA! we’re number one! :-/

  17. DavidB

    …and for anyone who wants to explore the matter further, the fullest coverage of the Ernst & Young report, from which the Berklee study claims are ultimately derived, appears to be here: http://www.musicbusinessworldwide.com/artists-get-7-of-streaming-cash-labels-take-46/

    Note especially that according to Ernst & Young, the share of revenue after costs is lower for labels than for artists and/or songwriters. Whether or not this is true (and I have no knowledge on that) it is a far cry from the headline ‘findings’.

  18. Nanci Fletcher

    I have one question. Is the dog ok now? Please show a pic of the dog healed. Thank you.

  19. Marcus

    Why don’t you get a real homeless person? …that would be too much work I guess.