Collection agencies: They do if for the artists

SoundExchange - roughly comparable to our broken-but-keen PRS - has just published its figures for 2009. Yes, despite burning through nearly $17million dollars worth of musicians' and writers' money on administration, it's taken until now to get the figures out.

MusicAlly has the details:

. They reveal incoming royalties of $204.2 million for the year (up 20% on 2008), outgoing distributions to artists and copyright holders of $155.5 million (up 55%), and operating costs of $16.7 million.

You'll have spotted a gap between what came in, and what went out. It turns out there's gallons of dollars slushing about in SoundExchange's coffers:

The key figure being the $111 million of ‘unpayable funds’

A distribution agency that can't find homes for a tenth of a billion bucks sounds like an organisation that isn't spending its seventeen million admin cream-off very effectively from where I'm sitting.

SoundExchange says it paid out $38.3 million of the $111 million in Q1-Q3 2010.

It's unclear if that $38.3m is included in the "outgoing distributions" - assuming it is, that makes the gap between what's come in and what has gone out in 2009 something around $70m.

The music industry likes to shout about filesharers "stealing" from artists. A collection agency which takes in millions of dollars to distribute to people, then admits it doesn't actually know who that money should be going to might be committing no crime, but seems to be in something of a murky grey area.

SoundExchange offer fairly-expensive olive branches

The initial two offers from SoundExchange to try and find some middle ground in the dispute over US internet music royalties - a capped USD50,000 a year for big broadcasters, and a discounted rate for smaller webcasters - have shown that finally, the royalties body is accepting that if it doesn't bend a little, it's going to be looking at a very dead golden goose and watching a large number of webcasters heading overseas. They haven't, though, quite got the knack of "not throttling" down yet. They're going to have to move further.

SoundExchange caught lobbying

SoundExchange, the group charged with collecting online radio royalty payments in the US, is a non-profit organisation and, under US law, is prevented from funding political activities.

Unfortunately, it turns out that it's been helping underwrite the costs of the MusicFirst coalition.

Wired asked them how they could be doing this, what with the bar on them getting involved in lobbying. The answer was... well, not an answer at all:

SoundExchange Executive Director John Simson dodged the question. "Clearly the Broadcasters (CQ) will do or say anything so as not to pay artists for their work," he wrote in an e-mail. "We welcome a full and open debate before Congress on ending the unfair free ride given over-the-air radio and the granting to artists the long overdue right to be paid for their recordings when they are played."

Wired tried again, this time talking to Michael Huppe, General Counsel for SoundExchange. He suggested that it was all fine:

Funding provided by SoundExchange to musicFIRST is authorized by copyright owners and performers who have chosen to become members of SoundExchange. These contributions come only from our members and not from non-member royalties, and were unanimously approved by the SoundExchange board," Huppe replied when asked about its support of musicFIRST.

If we've got this right, he means that the money they use is somehow theoretically drawn from royalties going to members of the organisation, and not the funds which are held by SoundExchange on non-members' behalf, but it's the board rather than the members who have approved this use of the money.

It's still far from clear if this is even legal, but as Wired points out, even if there is crawl room in the establishing statutes, it's hardly ethical for an entity set up to be a neutral administrative body to be paying for political lobbying.

Internet Radio: three days and off

The new, unrealistically high rates for internet radio royalties are due to start on the 15th of this month. An attempt to get a court order to suspend the new rates has been rejected. Now the last hope is for a new piece of legislation - they're hoping Congress might get something passed before the weekend.

Is SoundExchange offer no robbery?

Following on from the Internet Day of Silence, SoundExchange have offered a compromise on the proposed new royalty rates for American webcasters. It's reduced its demands from the ridiculous to the merely stratospheric, proposing a cap of "just" $2,500 per broadcaster a year.

It's good news for services which offered many channels, but the prospect of a ceiling of two and a half grand might still prove too much for smaller broadcasters; more to the point, the cap will remain in place until 2008. An unspecified month in 2008.

The idea seems to be to derail the protests against the eye-watering demands for royalties and then bring them back - perhaps in as few as five months - when the campaign for commonsense royalties would be faced with having to start from scratch again. In effect, SoundExchange have put the kids' best clothes on for a visit from social services, and will have them back in rags after they've gone.

Meanwhile, LastFM's supposedly principled sitting-out of the day of silence seems to have backfired, as SoundExchange's Jon Simson has decided that they should be paying more, too:

Interesting to note that one of those services, that paid us very low royalties last year, just was sold for $280 million to CBS. Here they are using our music to build a business at a subsidized rate and then they flip it to a big company for a lot of money and we don’t get a percentage of that, where’s the fairness to the performers whose music is being used to create value in these companies?

Well, Jon, it could be argued that the value of Last.FM lies not in the music - for which you have been paid a fair royalty rate, one to which you had agreed - but in the people who use the service. They are the ones who provide the data which Last.FM is based on, it is they - and their community - which CBS has bought, not your music. In fact, I'm sure, Last FM would be content to not pay you any money at all, remove the music altogether, and allow the community to discover new music through their service, and then go somewhere else to collect it from. Of course, once they've gone outside the system they might seek the music from those pesky illegal services. But don't worry, because at least you'll have taken your stand.

Oh, and you know what? The Last.FM user base - the people who built Last.FM - they don't seem to be wining they're not getting paid. Because, presumably, they're happy with a system where everyone benefits a little.

SoundExchange: Looking for Brett Anderson

Last week, we explored how SoundExchange, the body which has taken on for itself the task of collecting and distributing royalties from online radio in the US uses leftover cash to pay off 'loans' from the RIAA for their set-up. And just how much of that money was leftover.

Today, Idolator have flagged up the list of artists that SoundExchange haven't been "able to find" to give their share to. It seems that rather than use the forty cents in a dollar the organisation is creaming off to, you know, seek out the rightful owners of the cash, they're just publishing a list hoping that people might identify themselves.

Call us old-fashioned, but if you're collecting money on behalf of other people, with the promise of passing it on, shouldn't it be your job to find the people you're collecting on behalf of?

So, who's on the list, then? It's available online and includes such obscure groups as the Afghan Whigs, Akinyele, Suede, Ali Campbell, Boy Meets Girl, the Candyskins, Chris DeBurgh - CHRIS DE BURGH - Claudia Brucken... and so it goes on. Doubtless, there may be some slightly more obscure artists on the list, but even if we take a name at random, say, ELIZABETH GUTIERREZ Y TEXAS FIRE, a quick Google reveals that Elizabeth Gutierrez is currently Associate Professor of Piano at UTSA. Her webpage even has a phone number and an email address. Surely SoundExchange should be capable of spending five minutes looking for people who aren't exactly hiding? How difficult can it be to give money away?

(We'll let Ms Gutierrez know there's some cash waiting for her, by the way.)

This list, by the way, is just of people who will lose their entitlement to money if they don't get in touch by the end of June - there's apparently an even longer list of names whose money is "resting" in the SoundExchange coffers who have a bit longer to get in touch. We're puzzled that - since the organisation is making bugger all effort to seek them out, and not bothering to publish a list of the names they've not been able to find, how are you meant to know if you're on the list? Psychic detectives?

It's a funny way for a company believed to be trustworthy with other people's funds to behave.

Living like royalties

SoundExchange are the group, who, in their role as collectors of webcast royalties, have pressed for the ridiculously higher rates which are currently threatening to kick American radio off the net. But they're only doing it because they've got musicians interests at heart, right?

Maybe not: Apparently, only sixty cents out of every dollar they raise has made it to artists; the rest is being held "in reserve for artists and sound recording copyright owners (SRCOs) that have not been identified or located."

So, with all this cash sloshing about in the bank, that's earning interest for the artists, right?

Erm, not according to the organisation's most recent annual report[pdf]:

The administrative expenses of SoundExchange are paid first with interest income earned and then through an administrative charge applied to royalties available for distribution in the form of an Administrative Rate. SoundExchange expresses its Administrative Rate as a fraction, the numerator of which is the Total Annual Expenses less Annual Interest Earned on Investments and the denominator of which is Total Annual Royalties Received. If SoundExchange’s Administrative Rate is less than 20%, SoundExchange shall pay the difference between its Administrative Rate and 20% to repay the principal and interest outstanding on the Promissory Note entered into with the Recording Industry Association of America, Inc. (“RIAA”) for the repayment of costs incurred in the initial arbitrations to establish rates and terms for preexisting subscription services and eligible nonsubscription transmission services. For the period April through December 2004, SoundExchange repaid $575,097 in principal and interest to the RIAA.
SoundExchange’s Administrative Rate for the period April 1 through December 31, 2004 was fifteen percent (15%).

Hmm... so more money languishing around in SoundExchange's bank accounts is good news for the RIAA. Whoever would have thought?

SoundExchange: we're fair

The struggle to get US net radio royalties reduced continues, with collection agency SoundExchange missing the point as it tries to defend the new rates:

Webcasters have a number of opportunities to maximize revenue with a captive audience attracted by music created by artists through banner ads, pop-ups, video pre-rolls, audio commercials and other avenues of revenue generation. While we want internet radio to succeed, it is only fair that artists be compensated for the value of their work, which forms the basis of their business...

"Recent claims by a few webcasters that the process was unfair simply reveal that their complaints are not really about process, but rather about results. Webcasters like AOL, Clear Channel, and others want to impose low rates on artists, rather than accept fair market rates as the law requires. They may disagree with the ruling, but they should be forthcoming about the integrity of the process."

SoundExchange don't even seem to entertain the possibility that some people might be looking to set up online music services because they're enthusiastic about music rather than because they're running their website as a profit-maximising business. And we really must take this opportunity to thank them for pointing out that you can really degrade people's experiences so much in the interests of turning a buck - "scatter your site with pop-up ads - that'll make money."

It's like a debt collector suggesting your protests of not having money to pay him off are empty all the while you're not exploiting the prostitution possibilities offered by your sister.

And interesting, too, to see that SoundExchange is calling for "fair market rates" - it's impossible to see how a flat, centrally mandated, one-size-fits-all revenue pricepoint could be described as a "market rate"; even more so when there are so many broadcasters insisting that the price is more than they are able or willing to pay. In a marketplace, the price should fall to the point where people are happy to pay, surely - or was DCW, my economics teacher, nothing more than a fibbing liar?