In the music and audiovisual industry, there’s a persistent, shadowy problem: undistributed royalties, often referred to as “black box” royalties. In theory, this mysterious void swallows up millions of dollars each year, leaving rightsholders in the dark about where their money has gone. Estimates vary regarding how much it actually is – the Ivors Academy in the UK estimated it at £500m a year (streaming only), while Billboard in the US estimated it as “at most $250 million”.
No matter what the real figure is, it’s a complex issue with myriad causes. At its core, the problem arises when collecting agencies are unable to identify the rightful recipients of royalties or determine the correct distribution amounts. This can happen for several reasons. One key factor is the disconnect between music assets and their associated metadata. Often, these two crucial elements travel separate paths, making it difficult to link usage data with the appropriate rightsholders. Blanket licensing, where a broad range of content is licensed collectively, further complicates matters by obscuring individual asset details.
Another hurdle is the fragmented nature of information ownership. While labels might hold metadata for recordings, they may not have complete data on songwriters or publishers. This historical oversight, a relic of an industry where labels were once primarily distributors, now hinders accurate royalty distribution.
The challenge is compounded by a range of other issues. Identifying the specific work or recording within usage data can be elusive, especially on platforms like TikTok. Incomplete or missing rightsholder information prevents accurate royalty calculations. Disputes over ownership shares, particularly common in songwriting, lead to further complications. Conflicting mandates, inefficient cross-border claims processes, and even legal disputes between rightsholders and platforms can all contribute to the black box problem.
"The black box problem disproportionately affects independent artists, who often lack the resources to navigate complex royalty systems."
So, what can be done? The solution requires a collaborative effort from all parties involved. Rightsholders must prioritise the accurate and complete submission of metadata, including essential identifiers like ISRCs, ISWCs, and IPI numbers. Understanding the scope of their mandates and staying informed about ownership changes is also crucial.
Rights management organisations have a vital role to play. They must invest in technology and processes to improve data matching, streamline collections, and enhance transparency. Building stronger data collaboration partnerships within the industry is essential. The MLCās āSupplemental Matching Networkā is a welcome step in the right direction in the USA.
Industry leaders and policymakers can drive change by advocating for better metadata access and streamlined licensing processes. They can also champion the use of unclaimed royalties to support the creator community.Ā
While generative AI has raised concerns within the creative industries, it also offers potential solutions to the black box problem. Machine learning can be harnessed to identify patterns in data, improve metadata matching, and even detect anomalies that might indicate lost royalties.
There is no quick fix. The solution requires sustained effort and investment. Thatās why itās important for all parties involved to be on the same page and leverage the latest technology so that the music industry can move closer to a future where creators are fairly compensated for their work.
Ultimately, solving this problem is about more than just money. Itās about recognising the value of creators and ensuring their work is properly rewarded.Ā
The Role of transparency and accountability
Central to resolving the black box issue is a commitment to transparency and accountability. Rightsholders, collecting societies, and platforms must be transparent about their data practices and royalty distribution processes. Clear and accessible reporting mechanisms can empower creators to understand how their royalties are calculated and distributed.
Additionally, independent audits of collecting societies can help ensure that funds are being managed efficiently and fairly. Regular reporting on unclaimed royalties and efforts to locate rightful owners can build trust within the industry.
The Impact on Independent Artists
The black box problem disproportionately affects independent artists, who often lack the resources to navigate complex royalty systems. To address this, targeted support initiatives can be implemented, such as providing free metadata management tools and access to legal advice.
Furthermore, fostering a supportive ecosystem for independent artists, including fair streaming compensation and access to affordable distribution services, can help mitigate the impact of lost royalties.
The music industry is undergoing rapid transformation, driven by technological advancements and changing consumer behaviours. As new business models emerge, the challenge of accurately tracking and distributing royalties will only become more complex.
To thrive in this evolving landscape, the industry must prioritise the development of a robust and transparent royalty ecosystem. By investing in technology, fostering collaboration, and upholding ethical standards, we can move towards a future where creators are fairly compensated for their work.
