Hundreds of millions of dollars in unpaid royalties waiting for musicians to claim them

Mark Reynolds
Staff Writer

In October of 2018, the Music Modernization Act (MMA), the largest reform to copyright laws in decades, was signed into law after being unanimously passed through the House and Senate.

This bill updates copyright laws to adapt to the modern world of streaming music. In essence, it helps more people get paid more money for writing, producing and performing music that is streamed online. They also wanted to make it easier for artists to collect those payments.

Every time that a company like Pandora streams a song to a user, they are required to pay a small fee, or “royalty,” to the song’s copyright owners. Performance Rights Organizations (PROs) have existed for a long time to keep track of TV, radio and live performances, but they didn’t cover the internet.

This meant that there were few rules for how much the artists should be getting paid, and fewer for how they would receive royalties. Previously, any unclaimed royalties were held by the music streaming companies. Now, that job has been taken by a company called SoundExchange.

With the passing of the MMA, SoundExchange was designated by the U.S. Congress as the sole organization responsible for collecting and distributing digital performance royalties. 

The company originally started as a division of the Recording Industry Association of America in 2000. Back then, it oversaw royalties from cable and satellite music services, and eventually handled webcasts as well.

As of 2018, SoundExchange has paid over $5 billion in royalties to artists and owners. But there is still a huge amount of money that isn’t getting to the artists.

According to a document provided to Billboard, SoundExchange held $527 million at the end of 2017. A large percentage of that money is due to either data issues or unregistered rights owners. Both of which prevent royalties from being paid.

Many artists don’t realize that they need to register with SoundExchange to get paid for digital royalties. With the passing of the MMA, more money is on the table than ever before. 

Luckily, registration is free. And once registered, rights owners can collect whatever royalties have been held and continue to get paid in the future. 

Streaming has taken over the music industry, and while the MMA was a huge step in the right direction, there are still a lot of flaws in the system that need to be worked out. 

Currently, Spotify, Google, Pandora and Amazon are fighting the increase in payments to artists. Spotify, who are already operating at a loss, argued that while they agree artists should be paid more, the new ruling isn’t the answer.

The one thing that is certain is that streaming is not going away. With “smart” devices being put in every aspect of our lives, we are listening to more music than ever before. And artists should make sure they’re getting paid for it.

Header photo by Mark Reynolds | MSU Reporter.