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Music streaming royalties- unmasking the money flow



The royalties generated from streaming services require breaking down of levels in which the money flows. The money gets divided amongst the stakeholders viz. artists, songwriters, labels, publishers and the streaming services themselves.

According to the Music Managers’ Forum’s (MMF), Song Royalties Guide, streaming today generates nearly half of the recorded music revenue overall and rising month-over-month. The required amount of fairness in splitting shares is a debatable topic. The argument lies in how the shares should be split amongst stakeholders, per se.

The increasing number of co-writers on songs in some genres create problems in sharing the money in the streaming domain. Perhaps, the biggest factor also lies in the inefficient process that hinders the rightful distribution of royalties.

Often, plenty of music industry institutions are lodged between streaming services and the artists and songwriters. The streaming services negotiate licensing offers with these institutions.

After completion of deals, the services pass data and money to each licensing partners, every month. These licensing partners then pass money to artists and songwriters, either directly or through representatives. This process, therefore, creates a royalty chain.

The royalty chain holds a number of bodies through which money and data pass from streaming services to the artists.


Understanding the flow of royalties 

Despite streaming generating the highest revenue, there isn’t any palpable difference in income for songwriters and artists, points MMF.

With the income through streaming being double than that through physical sales, songwriters should be able to see the difference. But they and their managers believe otherwise.

Royalty chain becomes a complex matter due to co-ownership of songs, the copyrights, territorial licensing and poor data collection. These complexities cause disputes and make it a lengthy affair causing delays in each link. Deductions of money due to inexplicable reasons are also an important factor contributing to the royalty chain conundrum.

Even if the interlocking issues are recognised, ensuring a smooth flow of royalties to artists, are difficult to resolve.


Bridging the differences

To find one solution to all the underlying issues needs attentive reforms. The gamut involving writers, their managers, professional advisors like lawyers and accountants, along with music publishers, collecting societies and streaming services require an immediate plan of action, suggests MMF.

Fixing the inefficiencies in the global digital licensing landscape can be a tedious process. Tracking and tracing royalties is an expensive affair for songwriters. Embracing the required transparency between collecting societies and music publishers will enable free availability of data as a regular practice. Information on ownership of rights, the implication of royalty chain, the occurrence of deduction and delays along the chain are primary requirements.

The music publishers, collecting societies and record labels control the flow of song data. This control affects the streaming services and the artists involved, by causing a common data clash. The clash acts as a reason to delay payments or even have them cancelled in some occasions.

Therefore, a proactive approach by informing the artists in such instances can resolve blockages that hamper royalties from getting through.

The links in the royalties keep on entangling themselves due to the involvement of multiple entities. Today’s approach to the multiple royalty chains for a single stream of a song requires a modern and innovative solution. A shift to a universal platform for licensing of songs will be a sensible effort in understanding and detangling current methods.

While many artists receive payments quickly after their music starts being streamed, the writers’ share takes years. For the current situation, there must be a time frame set for how long writers should have to wait for their payment.


Looking at solutions

There should not have to be a streaming space with unallocated royalties but in practicality, allocating proper revenue is still unknown. Which songs or songwriters should the royalties be allocated to, is still a riddle. Also, there should be no space for the black box in streaming.

The inefficiencies lying in the royalty dissemination creates a reverse Robin Hood system where the writers and publishers in need of money are least likely to receive any. However, the black box contains the royalties owed to smaller writers and publishers.

Inversely, clarity on the income allocation hardly cuts the transparency index from all stakeholders. Acquiring money from the publishers, societies and data processing hubs cannot be attributed precisely. Thus, there need to be better resolutions to address these problems.

Redistributing revenues on the basis of market share is a very weak strategy. A rigorous consultation between the singers and songwriters can better the relationship involving all parties.

The push that publishers and collecting societies need can only be achieved through artists and their managers. The urgent need is to actively pursue the problems that slow the process of payments. The music industry being so inter-mitten requires an equitable share of responsibilities to make a positive atmosphere for all.


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Aakanksha Sharma

Author: Aakanksha Sharma

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