The IMI 27th Sep 2021

Those with the power to eradicate the music biz black box ‘are looking the other way’

Independent operators are being dealt a bad hand by a system that blindly distributes unallocated royalties from streaming, social media and more according to market share. This company says it can solve the transparency issue – but is this a problem that some would rather not fix?

The fact that millions in mechanical and performance royalties are left at collection societies unallocated every year is no secret.

An issue of flawed metadata, technology and infrastructure, the music business’ ‘black box’ has almost been accepted as ‘just one of those things’.

But the issue was one that returned to the top of the agenda during the peak of the coronavirus, when Ivors Academy CEO Graham Davies called for black box cash from streaming to be put into a hardship fund for musicians facing financial crisis.

Arguably the biggest problem with the black box is that its contents are eventually distributed by societies based on market share.

As Davies put it in March 2020: “This means millions of pounds will presently go to those who are reporting massive profits and huge margins from streaming.”

(Davies was underlining the estimated 20-30% of streaming royalties left behind, but this isn’t just a streaming problem – it’s the same across TV, radio, social media, YouTube and live performance…)

There’s good reason, then, for independent operators to feel more passionate about this issue than their major counterparts. Hence why, at the start of September, AIM announced a deal with SonicData, that would enable indie operators to use the company’s SonicKey digital watermarking technology, which provides real-time monitoring and data collection across 500 European broadcasters.

According to SonicData, its SonicKey watermarking (rather than fingerprinting) tech enables all music to be uniquely identifiable, referenceable and trackable with 100% accuracy to any version, stream, edit, cut, language, performance or distributed copy across broadcast, social media, video sharing and in-venue use. Something the company says current fingerprinting cannot replicate.

And, by the way, this is a new standard of watermarking, according to SonicData, one that doesn’t have the problems of yesteryear such as audible artefacts or otherwise being relatively easy to remove.

The mission is to arm rights-holders with the data they need to cross reference their royalty statements with confidence and get what they’re owed.

In theory.

The IMI recently sat down with SonicData Chairman Kelly Summer. He suggested that, while the black box issue is easy to fix, it’s not necessarily simple.

“The interesting thing is that this is something that the industry knows about,” he said. “But the people who can change things easily are looking the other way…”

Who are the biggest offenders when it comes to this issue?

Kelly Summer: There are lots of issues around this. There’s the issue of metadata being inaccurate, there are issues of monitoring on a regular basis… I won’t talk about specific countries at the moment – we’re speaking to 26, so it could be any one of them – but in some cases they get information from regional radio stations for two days’ play of the month. So, if your record track plays on those two days, you’re happy. If you’re track plays on one of the other 28 days, you get nothing. Seriously!

Is that an infrastructure problem?

KS: Technology is an issue. The music industry is using technology that is good, there’s no question about that, but it’s fairly expensive to use, so monitoring everything becomes a bit of an issue of cost. Although, I don’t think it should be because collection societies take something like $3.5 billion out of the industry every year for their running costs.

Also, the technology that they use isn’t 100%. If you go to any one of the fingerprinting companies – and fingerprinting is the only thing that’s used in the industry today – not one will say that they’re 100% because they can’t be. So it’s the technology they use, the cost of the technology, the will to actually change things… There’s a whole mess of issues.

I think everyone’s probably an offender, quite frankly. Does everyone know that their metadata is correct? Do the collection societies use the right technology? Do they monitor everything? I think it’s ridiculous that we as an industry aren’t monitoring every single output.

And remember the black box issue isn’t just about radio and TV, it’s social as well. TikTok, Twitter, Twitch, YouTube… It’s not going to the right people and I guarantee you it’s not the right amount of money. If you look back at how much TikTok paid in royalties compared with their revenues, it’s absolutely obscene. If it wasn’t for music, there would be no TikTok.

What I can’t understand is why the industry, as a uniform body, doesn’t go to the social media companies, and other transgressors, and say, ‘We have the tech, we have the ability to know all the content you play. We need to have full transparency.’

My background is video games. When I started working with SonicData, I did a massive amount of due diligence on the music industry from a detection and recognition perspective. I just couldn’t believe how antiquated and how blasé people are about reporting and following things through. I would almost say it’s criminal.

"The majors get a disproportionate amount of these black box revenues because these allocations are done on market share - they have no better way of doing it. Everyone else is suffering."

If the entire music industry were to use your system, is your proposition that the problem would be eliminated, in theory?

KS: It certainly would eradicate it over time. If individual labels and artists started encoding their masters today, then this would disappear on everything that they’ve encoded. We can encode on a distribution level but there’s always going to be an amount of content that we can’t get to because it’s out there already.

Our thing is that the industry should move to watermarking because it’s a much cheaper, more agile and effective software tool. What we’re not saying is dump fingerprinting. Fingerprinting has a role, watermarking has a role. If you combine the two technologies, then you’ve got the strongest possible opportunity to detect and track everything on a worldwide basis as it happens. If you start using watermarking technology, it will massively increase your opportunity to detect everything. But, probably more importantly, in some respects, is you’ll be able to be transparent about what you’re reporting.

We can monitor every radio station in the world from one computer. So, when it’s played on a Uruguayan radio station, our technology says, ‘Ah this needs to go to the Uruguayan PRO and this happens to be a PRS member and it goes to them. But we can also distribute it at the same time to the label, and to the artists. So artists and labels can know, literally on a by second by second basis, exactly where their music is playing around the world at any time. That is massive. The thing is that people don’t give them that information – and they don’t give them that information because it it causes all sorts of problems, because the artist or label would start saying, ‘Oi, where are my royalties?’

Would you say there are people or parts of the industry that don’t want this solution?

Well, let’s talk about it in terms of the majors and everyone else. The majors get a disproportionate amount of these black box revenues because these allocations are done on market share – they have no better way of doing it. Everyone else is suffering.

With the collection societies, there are some very positive collection societies out there but there are others that don’t want transparency. If they have transparency and a 100% effective recognition of royalty reporting, and you’ve been a consistent performer over the last 10 years, and next year you get a royalty statement that says you’re owed £1 million: ‘Fantastic. But, Mr. PRO, last year you only paid me £200,000. What’s the difference?’ The difference is you’re now getting a proper royalty statement because it’s transparent. Every play has been recognised. ‘So where did my money go for the last 10 years? Oh, you gave it to somebody else, did you? Well, how about this lawsuit?’

What we want is for people to get what they deserve not what someone thinks is a nice allocation for them. That’s fairness.

This is an idea from a music producer, Simon Gogerly. The reason he spent all that time, effort and money getting this together is because he was so incensed, personally, that he and his friends either didn’t get paid, or waited for years to get paid. He said to me the other day that he just got a royalty statement for something happened six years ago!

Why are we paying people on a six-monthly basis? Why aren’t we paying people on a monthly basis? Why is it taking years for people to be paid at all? Or not at all? It blows my mind. We have the technology in our hands as an industry to change things – but a lot of power is held by a small amount of people.

"There's always going to be a need for agencies but it doesn't necessarily have to be a number of agencies worldwide. One agency with the right infrastructure could actually take on the whole market effectively."

By that you mean certain collection agencies…

KS: I’m talking about a combination of agencies and labels.

And, with their backing, is it an easy fix?

KS: I think we can make things dramatically better for people. Article 17 puts it in the hands of CMOs to work with social media platforms. Maybe I’m being very naive, but why aren’t they telling people to use technology that recognises every single play, and why are they not allowing that information to go to the rights-holders? Because they’re not. 

From the independent point of view, is the main reason that they’re disadvantaged by the status quo simply down to the current market share allocation?

KS: It’s the market share allocation and that they’re just not getting the information. They can’t go and question their royalty statements because they haven’t got the information. They take the statements they’re given and say, ‘Thank you very much’ because what else can they do?

Our proposition is: there’s technology today that allows them to potentially question and say, ‘Well, actually, you said, I’ve been played 25,000 times, I reckon it’s more like 60,000. There’s no reason why people can’t have that information.

So, if I’m an independent label, publisher, or even a manager or artist doing it myself, and I implemented your system from my debut track onwards, in theory, I shouldn’t have a black box issue at all.

KS: You would be able to go to your agency and say, ‘I’ve got this information that says that this is when it was played, and that is very different from the report that you gave me.’ Yeah.

Now, the interesting thing is, the agency can say, ‘Oh, we don’t recognise that technology.’ But we are already in trials with some PROs and, eventually, someone will break ranks because there’s a commercial benefit for them as well. If they can say that they’re using technology that is fairer to their members, they are more likely to attract more members.

What we’re doing is chipping at the wall. At some stage that wall will come down. Why do we need all these collection agencies? Why do we need them to take all this money out of the industry and not do a particularly efficient job?

What’s the biggest win for you? That collection agencies adopt your technology to get their own houses in order?

KS: If that happened, Simon Gogerly would have the biggest smile on his face. At some stage, hopefully, this technology is going to be worth something. But that’s not the driving force. The driving force is to get fairness and equality. That’s why Simon invented it.

What’s to stop both sides of the chain using this technology – say a social media platform and a label – and cutting out the agencies altogether?

KS: I think there’s always going to be a need for agencies, or an agent, but it doesn’t necessarily have to be a number of agencies worldwide. One agency with the right infrastructure, and the right payment system, could actually take on the whole market effectively.

But, for an independent record label, they might have 20,000 tracks. Do they want to go and do all the collections themselves? For the independent market, I think there is a need for a collection agency. For the likes of Sony, Warner and Universal? They probably don’t need them. Don’t forget, the majors are paying an average of 15% commission to collection societies, so they can quickly work out that, if they did it themselves, their bottom line would increase dramatically. I just don’t think it’s viable for the independents because it’s too much, at the end of the day. Their time is best spent on the music, rather than accounting. So I think there’s always going to be a need for some sort of collection agency, but you’ve got a lot of industry bodies out there and I don’t understand why we don’t have one platform that everybody uses.