Delve into the music industry’s sordid past, and you’ll find tawdry details of mobbed-up labels and Soprano-style venues. Indeed, crooners like Frank Sinatra were notoriously implicated with organized crime. But the way he explains it, there wasn’t any alternative.
So who’s replacing the mobsters in the digital economy? Welcome to a more sophisticated racket that’s just as lucrative. And it involves billions in unclaimed, unmatched, delayed, or otherwise unpaid digital royalties. And holding the golden bag is a mish-mosh of well-positioned middlemen, including a gaggle of PROs, mechanical rights licensing administrators, and others who mysteriously can’t figure out where that check should be sent.
So who’s holding all this cash?
Like the problem itself, the answer is complicated. And it’s hard to pick out the bad guys. Many times, it’s just simple incompetence instead of actual malice.
Like SoundExchange. Over the years, we’ve blasted SoundExchange for holding hundreds of millions in unclaimed royalties. Indeed, the deeper we clawed into SoundExchange’s unclaimed database, the more we found glaring examples of obvious copyright owners not getting paid. We’ve even found fraudulently claimed royalties — lots of them — fueled by disorganization and maybe even purposeful obfuscation.
Intentional or not, the result ends up being the same. And it turns out that’s just scratching the surface. Now, as Spotify battles hundreds of millions in unpaid royalty claims, a little startup in London wants to shine the light on this dirty butt-crack of the business.
The company is called Paperchain, and their mission is to clean up an estimated $2.5 billion in blocked funds. They’re ready to seriously rock the boat.
+ Live Concerts + Streaming = 73% of the US Music Industry
Paperchain was started in Sydney, Australia, and migrated their HQ to London. That’s still far from the epicenter of the music industry (pick one: New York or LA); though its closer to the rat’s nest of overlapping European PROs (more on that cesspool later).
Here’s just some of the depressing info that Paperchain emailed Digital Music News this morning.
More than 46 million instances of unidentified songwriters or unknown copyright owner ‘Notice of Intents (NOIs)’ have been digitally filed with the US Copyright Office by streaming services since April 2016.
Royalties are unpaid and go into “royalty black boxes” until the owner is identified or dispersed into the industry.
The global value of these royalty black boxes is estimated to be $2.5 billion.
That’s right: $2.5 billion, with a ‘b’. And given an absolute avalanche in plays and associated metadata, this is a problem compounding exponentially every year.
So ask yourself: where’s this $2.5 billion going?
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