SoundExchange Explains $200 Million Bank Balance

Digital Music News vs. SoundExchange

image from www.intothemusic.biz

Last week, Digital Music news reported that SoundExchange was holding $200 million in unpaid royalties due to artists. ""According to IRS returns," wrote DMN. "SoundExchange  was holding the bag on a 'fund balance' of nearly $260 million by the tail end of 2008. Subsequently, SoundExchange executive Laura Williams told DMN that the figure was closer to $200 million at the beginning of 2009 because of ongoing payouts. The organization could not offer more up-to-date figures, due to 'auditing phase' confidentialities."

The article's accusatory tone was picked up by other bloggers ready to throw SoundExchange into the same pot of boiling water reserved for major label bean counters, ticket scalpers and band manager who wear white shoes, smoke cigars and always pay in cash. $200 million in artist money withheld is a great story, if it's true. Unfortunately, Digital Music News' investigation seems to have ended when the juiciest detail appeared and the failed – despite being offered additional documentation – to tell the whole story.

image from www.wpclipart.com The Music Industry Has Enough Villains Without Bloggers Inventing New Ones

How accurate is DMN $200 million figure and where did the money come from? The $200 million reported was SoundExchange's bank balance at the end of 2008 and that "is not remotely related to the amount of funds held for artists and copyright holders who haven't yet registered," Bryan Calhoun, SoundExchange  Vice President, New Media & External Affairs told Hypebot. "That number is more like $39 million – about 19% of the total".

Calhoun offered this break down of the rest of the money:

  • 50% is money in transit – "This money is not being held, it was just in transit through our system when the count occurred, and has since gone out."
  • 11% relate to court cases. – "These royalties are being held pending final court rulings on rates or related issues (i.e. awaiting the final ephemeral rate ruling)."
  • 5% are dubbed Foreign PROs' – "These royalties belong to artists and copyright holders in other countries, but haven't yet been claimed by foreign societies."
  • 10% are "No data" – "These royalties were paid by services in accordance with the law, but the service didn't provide playlist data to accompany them."
  • 5% are 'Bad data' – "These services pay royalties, but send incomplete or bad data which does not provide us with enough information to figure out whom to pay. These include artists marked as 'Various' or 'artist unknown', and copyright holders marked as 'label unavailable' or 'promo".

Obviously, the $39 million number is still far too high," admits Calhoun .

A Surprising 95% Of Artists Fail To Register

Direct notification programs, including social media and online matches and programs with ReverbNation, Sonicbids and TuneCore have notified more than 34,000 artists in the past 6 months, representing over half of the total money which is unclaimed. Still just 5% of the 34,000 artists contacted have registered so far even though some have even been contact 6 times  "We can't send out the money until they sign up, no matter how much we want them to have it," states a frustrated Calhoun.

To go a step farther. SoundExchange does not liquidate unclaimed funds each year like some collection societies do. SX has only had one pool release in 2006, and is still holding funds to cover claims back to their first collection in 1996. Any artist or rights holder who registers with SoundExchange can still claim 100% of the royalties they've earned.

Share on:


  1. Figuring out what you’re supposed to pay them is an even bigger pain in the arse. Worst, most evasive customer service people ever.

  2. I agree. Sound Exchange employees are of the Washington type and do a lot of talk and not much action. I hope that changes. The first suggestion is to hire staff that has some music business experience.

  3. Agreed with Bruce, registration is far too tedious. I’ve attempted a few times for my band and myself, and hit road blocks each time…. and with no “save” button, it leaves you angry at the process.

  4. SoundExchange is at your service – we’re available to answer any questions you may have – just drop an email to account_services AT soundexchange.com or call us at 202-640-5858. I hope your registration has gone through smoothly, and you’re now getting paid. If not, please let us know so we can get you set up.
    With regard to registration, we know that our online registration process is not perfect. It’s something we continue to focus on, and you’ll be seeing improvements. Please send us your feedback with suggestions. You can still print hard copies of the forms and fax, scan and email, or mail them, if you prefer. As for the detailed information we ask for, SoundExchange has to verify we’re paying the correct parties. Because royalties are taxable income, we’re required to collect tax information – we don’t have a choice but to require it. That said, we’re glad to help with the process, and we’ve made a video to walk you through the steps: http://www.youtube.com/watch?v=qiUUIYPKNzk.
    As to the administrative rate, there are serious costs incurred by processing $200 million in royalties – more customer service staff, more technology and data processing help (especially needed to sort through bad data from services; see http://www.billboard.biz/bbbiz/content_display/magazine/opinion/e3i6baa5818ddcc27e116717a5001718a1d, and more printer paper, phone cords, and stamps. Just think about the postage for thousands of checks! Our administrative rate (5-8% range over the past five years) is the lowest of any similar organization.
    Again, don’t hesitate to get in touch with any questions. We’re at dozens of industry events and panels (“http://soundexchange.com/category/calendar/),” host then post open webinars for artists (http://soundexchange.com/2010/04/30/q2y10-webinar-for-artists-%E2%80%93-questions-answers/” and labels http://soundexchange.com/2010/02/25/soundexchange-and-a2im-q1y10-webinar-for-labels-and-sound-recording-copyright-owners-qas-and-video/ and always around via phone or email. We’re here to help – we want to make sure you get paid when you get played.

  5. Hm, thanks for the quick response, but a couple problems with your post.
    1. The Billboard link is 404.
    2. The links following “…webinars for artists” and “…labels” are both 404 from here.
    3. “Postage for thousands of checks” – if the person wants payment by check, at least give them that option and tell them each check cut will be $1 or something.
    I realize you need the SSN and other info for IRS, but I’m giving YOUR COMPANY the info and I have no feeling for how serious or competent you are about privacy.
    4. Not too impressed that every comment to this article which was supposed to answer all the $ questions are all negative about customer support, registration hassle, etc. I realize they’re just anonymous comments, like mine, but even on the internet you can get a reputation. Sounds like there’s some more work.
    If I feel any of my stuff is being played where I could get royalties, I’d consider signing up but for now count me on the fence.
    (Sorry about any typos I’m submitting this without re-reading since in a hurry.)

  6. Apharsathchites: With regards to thousands of checks, reducing each one by a fraction to defray the costs of business is exactly what the administrative fee is for. We’re proud to have the lowest in the industry.
    Tim: Thanks for translating the links while I was away. The ‘bad data’ and ‘no data’ money are being held while they get resolved. Much of it can be properly allocated in time, it just takes line-by-line effort. For example, if we get “Greased Lightning” by “Various Artists” on “The Grease Soundtrack,” our research team can figure out who those artists are and reroute that money, but it results in delays in getting those payments out the door. As for records with no data, we try to get those records from the licensees, at which we are usually successful, but again, it takes time to work through those compliance issues. If there’s no possible way to get the data, we attribute ‘proxy data’ to a limited number of payments; that is, if a streaming independent jazz station can’t provide any reports to go with their payments, we may compile a comparable playlist from other streaming independent jazz stations and distribute based on those. It’s not a perfect system, but we do the best we can while the technology catches up. Things which come in as “Various artists” on “Label Unknown” or “Playlist unavailable” will probably be put into the general fund, and redistributed (one day) to existing registrants on a pro-rated basis. Does that help to clear things up?

Comments are closed.