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The music industry is booming, but its outdated and costly music rights system needs to change

The music business has always had a tough reputation. Gonzo journalist Hunter S. Thompson described it as “…a cruel and shallow money trench, a long plastic hallway where thieves and pimps run free, and good men dielike dogs.”

That may not be accurate. However, where there is a negative reputation stems from the exploitation of artists. Stories abound of musicians not receiving their fair share of royalties. For example, Solomon Linda, composer of the song that became “The Lion Sleeps Tonight,” was paid only 10 shillings for his work. That’s about 78 pence in today’s money.

In the past, underpayment was often deliberate. But then, as now, lost income was also the result of the cumbersome, byzantine system of music rights registration and supporting laws across both performance and mechanical rights. The Music Modernization Act, passed recently by the House Judiciary Committee in the US will provide significant improvements by reforming mechanical licencing laws to fully support artists and rights owners.

Outdated, slow and often inaccurate

The title to any given piece of music and performance is recorded in multiple, often-conflicting and/or incomplete records of who owns the rights to what music in what territory and for what type of use.

In Europe alone, 28 collection societies collect royalties for public performance rights and mechanical recordings in 28 different markets. This lack of transparency combined with the centralised nature of the industry has led to slower royalty payments or paid inaccurately. As a result, there continues to exist disconnect between the owners of music content, the artists themselves, and the end consumer.

This environment has a negative impact on all participants, with high cost base of administration, revenue leakage for rights owners and complex processes underpinning a convoluted ecosystem.

Artists are not the only victims of this antiquated system. Recording companies and music publishers spend significant amounts of their overhead tracking their artists’ rights. Often, artists must wait for up to two years after their work is purchased before they get paid.

It has not gone unnoticed. There was an industry attempt, the Global Repertoire Database, which aimed to create a single, industry-standard database containing a global view of rights ownership. However, although the sentiment was borne from a desire to create a shared, authoritative means to track and pay royalties, the effort failed.

The ongoing need for a better system of rights ownership information management remains to be fulfilled and arguably the benefits and need for such a solution is ever increasing.

Until recently, data was collected and maintained manually, country by country, with a disconnect between composer and performer. Now things don’t have to be run this way. With some reengineering, the digital network that has turned every smartphone, tablet, and computer into a music store – and music into a business that is growing at pace, with global digital music leading the charge with revenues worth US$14.5 billion, forecast to grow at 11.8% CAGR to US$18.6 billion by 20211 – can also be used to protect the rights of artists, publishers, labels, and other copyright owners. This process is both thorough and secure

Blockchain technology, it really could work

In the US, the Music Modernization Act will fast track mechanical licencing laws into the digital age. This will include streaming and on- demand mechanicals. In existing US law, digital service providers such as Spotify pay both performance and mechanical rights for streaming and downloads…

Link here for full PWC article