At SXSW recently, SoundExchange was trying to match $1 million in unpaid artist royalties. But the non-profit is holding an unpaid royalty account of more than $200 million, according to documents obtained by Digital Music News and information shared directly by the company. And, given the growth arcs, the amount may be quite a lot more.
According to IRS returns (filed under federal non-profit Form 990), SoundExchange was holding the bag on a 'fund balance' of nearly $260 million by the tail end of 2008. Subsequently, SoundExchange executive Laura Williams told Digital Music News that the figure was closer to $200 million at the beginning of 2009 because of ongoing payouts. The organization could not offer more up-to-date figures, due to 'auditing phase' confidentialities.
The number has been skyrocketing year-over-year, highlighting the problems this organization is facing locating performing artists. At the end of 2007, the outstanding 'fund balance' was roughly $192.7 million, and at the end of 2006, $96.7 million, also according to the filings.
This is happening despite a huge ramp-up in artist outreach. Or perhaps, the swelling account is motivating the increased efforts. Either way, the payout totals themselves have also been growing aggressively. And across the board, formats like simulcast terrestrial stations, satellite radio subscriptions, and apps like Pandora are booming and pushing non-interactive royalty amounts through the roof.
In fact, SoundExchange noted that the amounts paid to artists are growing faster than the growth of the unclaimed pile. For example, 2007 featured an artist payout of $36.2 million, 2008 was $100 million, 2009 was $155.5 million (not yet audited), and the first quarter of 2010 - also unaudited - was $51.7 million.
Williams noted that the ratios are "all well within proportion - just big increases across the board," while also pointing to a huge growth curve for non-interactive radio in the US. "The whole industry is increasing year-over-year. We're just a part of, or more accurately a reflection of, that explosion," Williams relayed.
But more than $200 million sitting there, undistributed? This sounds like a monstrous number, and one that should be drawing some scrutiny. One attorney reviewing the situation noted that "any non-profit carrying more than $200 million on its books has a serious problem," and indeed, it remains unclear if such a massive logjam can be adequately resolved and paid out.
And what about Pandora, a company nearly bankrupted by royalty demands? Earlier, Pandora founder Tim Westergren noted that Pandora accounts for roughly half of the total, non-interactive payout to SoundExchange, a figure confirmed by SoundExchange itself. But Pandora currently carries a major royalty overhang - and variable cost structure - that makes long-term profitability an uncertain bet.
That raises the question: why is Pandora paying such heavy royalties if the money ends up in a holding tank, with large amounts undistributed? In a discussion with Digital Music News, Westergren was unaware of the unpaid royalty total, though he sympathized with the difficulties involved in reaching artists. "I think, and I say this as a musician myself, that musicians need to step up here," Westergren relayed. "I don't think SoundExchange is trying to hold on to money. It's just remarkably hard to get musicians to take the initiative."
(More details now published here.)
Comments Closed
trevor Thursday, May 20, 2010
if you ask me, I think Westergren is playing it cool. He's been getting raked over the coals by SE for years, they almost buried him. it's got to be disappointing to see your own money sitting in some huge account, unpaid, and probably a lot of that will never be matched. just me, or do we need better system than putting companies almost out of business and holding the cash? after all this work on metadata, can't we match better?
CTyankee Thursday, May 20, 2010
Trevor, I think SE has been out there, trying to make artist connections. Bryan Calhoun is clearly on the road a lot, I know this. What, do they have to go to every dive bar and ask for ID's?
No, they shouldn't have to do that - artists are notorious for this sort of thing, so an organization like SE has a really tough problem. Stop worshipping the absent-minded artists who have no business savvy to figure this all out.
Why is it that artists get a free pass on not handling their biz? Would you say to a dentist, "hey dentist, just focus on cleaning teeth and making them sparkle, SoundExchange will try to get you paid on all of the crowns you filled since 1998." Now, I know that doctors are also notorious for not getting their $ straight sometimes, but you see the point?
b Thursday, May 20, 2010
It's good that they have Calhoun, who has indeed been making the rounds, but what took them so long? And ditto with their deals with myspace/cdbaby etc. to get artists registered and paid? They just got around to figuring out these people existed?
SE was content to throw money and PR at rights legislation proposals and efforts like MusicFIRST for *years* while stacking a couple hundred million of money that didn't belong to them in the bank -- but just because they've started sending a guy around to trade shows we're supposed to consider this "doing everything they can to find artists." Yeah, not so much.
At least they're not just keeping the unclaimed money via royalty forefiture, as they used to do. I suppose we should congratulate them for that as well.
dhennessey Thursday, May 20, 2010
Regarding things like MySpace and SE - this all has to do with Active vs Inactive plays. Any radio/web station that determines the playlist is considered Inactive and must pay royalties. Something like MySpace where the listener can decide what is played and what is not is Active.
Because Pandora creates the playlist and won't let the listener skip more than a song or two they are considered Inactive. And they should pay.
Only Inactive plays count in the world of royalities.
dhennessey Thursday, May 20, 2010
Regarding SoundExchange it's not just the "musicians that need to step up". A lot of the problem seems to be the stations that are paying the royalties are not turning in playlists. They think if they just pay the fee they are in compliance but that leaves thousands of artists like myself who ARE taking care of business and being played without the ability to collect the royalties owed to us. Seems SoundExchange can only take the play info from the stations, like ASCAP, BMI, SESAC. Doesn't matter how on top of it I am, I'm still not getting paid monies I could really use. I heard about this via SoundExchange's most recent conference call that they do every quarter. It is free to listen in and ask questions. NARAS was also involved with the last call. They are trying to match monies with artists but without the lists it's damn near impossible. At least they aren't just giving the money away to the majors like ASCAP, BMI, SESAC.
As for Pandora, their problem is
that they are in bed with the Majors now.
thanks!
Debbie
Hennessey
b Friday, May 21, 2010
"I heard about this via SoundExchange's most recent conference call that they do every quarter."
... and SoundExcange has done a very good job of spinning this as the radio's fault - without releasing any hard data to back up that claim.
They gripe about 'bad data' coming in but do nothing to help alleviate the situation. SoundExchange hides their lost artist list under a rock, they don't release any of the tracklisting/play info on the lost tracks/artists they are trying to locate, they provide no services, tools, or data to people trying to clean up and submit 'good' play info. Next time you're on one of those conference calls, ask SoundExchange why they've been able to create a system where all that royalty money flows in without issue, but not the data they say is 'missing', and why this has gone on to the tune of a quarter of a billion dollars.
As someone who works with a lot of radio stations, I can tell you it's a pain to get both that money and data into SoundExchange. But many, many stations do. And they have allocated non-trivial amounts of resources and time to do so. But yet here's $200m+ in a SoundExchange bank account that they can't pay out. With an efficiency rate like that, I'm amazed they manage to point the finger at anyone else and play the blame game with a straight face. And I'm even more amazed when people buy it hook, line, and sinker.
RE: SoundExchange/myspace - different thing entirely. SoundExchange partnered with myspace, reverbnation, cdbaby and a couple others (ilike? sonicbids?) around the start of 2010 specifically to locate and sign up missing artists owed money (because these services have a lot of regsitered artists, their contact info, emails etc.) See this link. Which, again, is good move on their part, but such an overdue, no-brainer thing that should have happened years ago.
dhennessey Friday, May 21, 2010
I'm sure you are coming from your own experience as I am coming from mine. To each his own. Maybe you could ask the questions on the conference call as I have already asked the ones I needed to for now.
Look, I'm no huge fan of any of these guys but I do know my experience with each group and within the industry. I had some info that Paul asked me to share here. I know that as an artist and a business owner it’s my job to be as on top of this stuff as much as humanly possible. If there is something that I can pass on then I do so.
SE has a list of artists that haven't signed up - then the artist needs to do that. If you own a station, you know what you are playing so just submit the list.
If someone wants to have a web or radio station – then you need to pay the royalties and Yes, that should include a performance royalty not just the publishing – hopefully after 80 years Bill HR848 will get through our wonderful House and Senate.
Myspace and other sites have made millions via advertising buy using music for free to drive people to their sites.
Also, if you see my other comment regarding Active and Inactive plays you will see that the SE/MySpace connection is really only about trying to track people down, not about paying for plays. That’s not what the copyright board set SE up to do. That might fall under the HR848 if it were ever passed, but NAB, MySpace and the rest have millions to fight it.
Unfortunately, none of this is a perfect system. Let’s take ASCAP for example, I am very familiar with broadcast radio campaigns that as you probably know ain’t cheap! My songs have been played on radio all over the world and I actually won the New Music Weekly 2004 AC40 Female Artist of the Year, which was chosen by radio people but even with all that I’ve never received a dime from ASCAP because they don’t “poll” i.e. collect playlists from all the broadcast radio stations. Seriously?! There are only approx 1200 broadcast stations in the US and they’ve had about 100 years to get it together.
My point is, let’s just get the facts out there, let people know what is available to them in terms of royalty rights, laws, etc. Artists need to educate themselves as much as possible because very soon it’s going to become very important to them.
automaticjack Saturday, May 22, 2010
dhennesse, SoundExchange has told Wired News that only one tenth of the unpaid royalties are due to a lack of playlist data. See this link.
I did not take part in the SoundExchange phone call, so I do not know what they told participants re: this missing-data percentage. Perhaps you can let us know, as you specifically referred to this as 'a lot of the problem.'
I am genuinely curious as how SoundExchange represented this issue in the phone conference that you took part in - i.e. if that is where you came to believe that a lack of data accounted for the majority of the missing artist payouts (as opposed to the many other issues they mention in the Wired article linked above.)
dhennessey Saturday, May 22, 2010
Thanks for the link on the Wired News article. That's very helpful. It's pretty much what they went over on the call in April in terms of what the hold up is in getting the money to the artists.
I dug out my notes from that call and I did write down some info regarding the "bad data" but in the call they said that bad data was the webcasters not turning in play lists or incomplete info. On my notes they also discussed "back data" which had to do with matching royalties to artists. So we're not relying on my notes and memory here is the link to the webinar:
http://soundexchange.com/2010/04/30/q2y10-webinar-for-artists-–-questions-answers/
there are also answers to all the questions that were sent in.
Hope this helps!
bugpup Thursday, May 20, 2010
While Soundexchange is definitely performing a necessary service as a performing rights organization, their list of artists that are due royalties is from the year 2001- which is inexcusable.
http://soundexchange.com/performer-owner/does-sx-have-money-for-you/unpaid-artists/
Part of knowing there is money waiting for you is knowing that Soundexchange is actually holding money of yours. Since there's been a massive shift to internet streaming and music platforms and the internet has solidified itself as an alternative to radio since 2001. This list should be updated immediately if Soundexchange is to be taken seriously. Another significant question is who is earning the interest on this unpaid royalty money?
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