Streaming services generate mechanical and performance royalties for creators they say they can't identify. It's a major issue for musicians and music publishers. In 2017, Microsoft filed 4 Million "address unknown" notices. How can you make sure you get paid before Microsoft shuts down its music service?
By Dae Bogan of Royalty Claim
Microsoft has announced this week that it will be discontinuing its Groove Music streaming service on December 31, 2017 and re-directing its customers to Spotify.
In the meantime, its global users can still enjoy unlimited on-demand streaming of its library of over 50 Million tracks and effectively generate millions of dollars in additional music industry revenue before it officially shutters on News Years Day 2018.
So, what does this mean for copyright owners? Well, we're not 100% sure.
We know that these last-quarter streams will generate both mechanical and performance royalties for publishers and songwriters whom Microsoft has not yet been able to identify.
We know that in 2017 alone, Microsoft has filed approximately 4 Million "address unknown" Notices of Intent to Obtain a Compulsory Mechanical License under the Section 115 provision of the US Copyright Act on the US Copyright Office because Microsoft did not have sufficient (if any) information on the copyright owner(s) in the songs embodied in millions of sound recordings (tracks) streamed on its platform.
We know that the law also makes it clear that the licensee is not required to pay mechanical royalties until after the copyright owner has been identified. "The owner is entitled to royalties for phonorecords made and distributed after being so identified..." (17 USC 115(c)(1)) What's worse, the law does not require the licensee to pay retroactively for mechanical royalties earned before the copyright owner is identified. "...but is not entitled to recover for any phonorecords previously made and distributed." (17 USC 115(c)(1))
However, rights administrators (in this case, Music Reports Inc.) generally encourages its clients to hold unattributed mechanical royalties in an escrow account, also referred to in the industry as a "black box royalties," in case the copyright owner is later identified.
Nevertheless, it is Microsoft's right under the US Copyright Act to, on or before January 1, 2018, decide to #1 retain and absorb any unattributed mechanical royalties and/or #2 distribute the fund to publishers on a pro rata market share basis. The latter benefits major publishers and leaves small publishers and DIY musicians generally out of the conversation.
Given these facts, it is the Royalty Claim Initiative's recommendation that all copyright owners in compositions take action before December 31, 2017. We recommend that copyright owners begin initiating claims of Section 115 NOIs to determine if there are mechanical royalties held in the black box for them before Groove Music is discontinued.
STEPS TO CLAIM SECTION 115 NOIS
1.) SEARCH FOR YOUR MUSIC - Search Groove Music for your tracks (or sound recording embodying your compositions such as cover version). Go here to search Groove Music: https://music.microsoft.com/explore?target=web
2.) PRE-QUALIFY YOUR MUSIC - If you find your songs and you have never received a mechanical royalty check from Groove Music via its rights administrator Music Reports Inc., then there is a possibility that a Section 115 NOI (Notice of Intention to Obtain a Compulsory Mechanical License) may have been filed for your composition with the US Copyright Office and you should take action.
3.) JOIN ROYALTY CLAIM - Create a free account at Royalty Claim to access the Royalty Claim Platform.
4.) SEARCH FOR YOUR SECTION 115 NOI - Create a keyword using the Artist Name exactly as it appears on the song in Groove Music and search the Unclaimed Licenses databases. (Tip: Search the month before, during, and after the release date of the track to quickly find your Section 115 NOI. The Section 115 NOIs are ordered by month filed and services are required to file within 30 days of distribution, but are sometimes late).
5.) INITIATE A CLAIM - If you find a Section 115 NOI record, you can initiate a claim for free.
6.) AWAIT RESPONSE TO CLAIM - Microsoft's rights administrator will respond to your claim within 10 business days. After completing any next steps provided to you by Music Reports Inc. for matching your composition to the track information, they will determine if any mechanical royalties are due to you. This can take some time, so be patient. Once resolved, Music Reports Inc. will pay the copyright owner (publisher, songwriter, or an authorized administrator).
7.) UPDATE & BE VIGILANTE - Update the claim status and stay on top of the rights administration of licensing of your other works. Deliver music rights and metadata to music rights organizations and data services with TuneRegistry and check for unclaimed entitlements in Royalty Claim.
Note: There is no guarantee that a Section 115 NOI will result in mechanical royalties. However, if you've earned performance royalties and/or master royalties from the song in question, chances are it has also earned mechanical royalties. Only the rights administrator can verify the earning of mechanical royalties.