If the term "black box royalties" sounds a little ominous, it probably should. Black box royalties, or better referred to as unallocated royalties, have become a blanket term for money – an estimated $2.5 billion – that is earned but never paid out to the artist, songwriter, or rights owner. 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 as unallocated royalties. 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 way that 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 collection society or mechanical rights organization 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 collection society or registers their songs anywhere, royalties earned by their songs will enter the unallocated "black box" as well.
Getting What You’re Owed
So far, finding a way to break into the "black box" to retrieve your unallocated royalties has been a challenge. While a smaller or newer songwriter may not have the pull to call for an audit that might unearth unallocated 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 also plays an important part of retrieving unallocated royalties. While it's up to your collection society to collect every time your song is broadcast, streamed, or performed live, foreign societies and organizations 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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We created this guide to answer a simple question: How do songwriters support themselves?
The answer is not as simple as we’d like, but our goal is to make it as clear, transparent and understandable as we possibly can.
Songtrust is more than just a rights management platform and publishing administrator - we’re a team of experts in the music community who strive to educate, support, and provide thought leadership to creators, representatives, and businesses across the music industry.
Our hope is that you’ll finish this guide with an better understanding of the business behind songwriting and have actionable resources to help you be successful.