Recommended Reading, Industry Insight, Resource

What's The Deal With Black Box Royalties?

Liane Bonin Starr
Liane Bonin Starr on Jun 7, 2018

If the term black box royalties sounds a little ominous, it probably should. Black box royalties, or black box income, have become a blanket term for money – an estimated $2.5 billion – that is earned but never paid out to any artist. Finding a way to get it is, in many ways, like trying to locate a black box at the bottom of the sea – frustrating and overwhelming.

How It Happens

There are several ways money can end up in the black box category. One way is breakage. Breakage occurs when a licensing service like Spotify or Pandora pays money to a label to use its catalogue. When the contract ends, if there is a discrepancy between royalties earned and the initial advance, most licensing services will let the label keep the money, with the hope being that the service will secure a favorable deal to re-up the license. That money, as it's not earmarked for a specific artist or group of artists, is deemed unattributable – and disappears into the label's books. More than 46 million Notice of Intents (NOIs) have been filed regarding unidentified songwriters and copyright owners – and that's just since 2016.

Another time money is sucked into the black box void is when a song by an American artist becomes a hit overseas. If a song has not been registered with the PRO or mechanical collection society in the territory in which it is getting streamed/sold/performed, the society doesn’t know who to direct the royalties to. Occasionally the money will make it to the writer’s home society, but only if they have been provided with the proper metadata to make that connection. Additionally, if a writer never affiliates with a PRO or registers their songs anywhere, royalties earned by their songs will enter the black box as well. 

Getting What You’re Owed

So far, finding a way to break into the black box has been a challenge. While a smaller artist doesn't have the pull to call for an audit that might unearth black box earnings, there's always the possibility a major player who does will demand them. There's also the London-based company Paperchain, which aims to improve the flow of rights data in the digital supply chain. The company has been in "closed beta testing" with some labels, publishers, and undisclosed intermediaries. 

Songtrust is also an important part of breaking the black box. While it's up to your PRO (performing rights organization) to collect every time your song is broadcast, streamed, or performed live, foreign PROs will only send you the money if your songs have been properly registered with them. Outside of the US, mechanical royalties are usually paid by a distributor or retailer, like iTunes. However, if your songs aren’t registered, you won't get paid – and money will be handed over to local publishers.

How We Can Help

An organization like Songtrust can make sure mechanical and performance royalties around the world are collected for you. No matter what, make sure you have a publisher with global reach who can collect both performance and mechanical royalties in your most important territories, and be sure that publisher has direct relationships with collection societies to make sure you get what you deserve.

To make sure you're collecting all of your performance and mechanical publishing royalties globally, register for a Songtrust account today!

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