Streaming Music Royalties
When I heard the announcement of Zach Katz launching Raised In Space with Scooter Braun’s Ithaca Holdings and Ripple, my interest was piqued. Raised In Space is the music industry and technology investment joining forces.
From Raised In Space mission statement it was created to “create a community of experienced music and tech leaders focused on raising the value of music. With the traditional music industry in need of innovation across the entire value chain (creation, registration, distribution, fan-engagement, touring/ticketing, monetization)”
Most of the mechanics of creation, registration, distribution, fan-engagement and touring/ticketing are complex but should not be an insurmountable task. However that last piece of the value chain “monetization” is where the real partnership and burgeoning Internet of Value (IOV) are interesting.
Writers, publishers, record companies and of course the artists are compensated in a complex and sometimes controversial way. How are these paid out and divided among all the parties? Looks like the record companies are in charge of the distribution of earning and usually negotiate to pay out only 2/3rds of the per minute rate. These pay-outs are called royalties.
Did you know that in the United States, royalties are based on a “statutory rate” set by the U.S. Congress! The figure I found was $0.0155 per minute for songs.
Other considerations are in CD sales, live performances, expenses and advance(s) to artists, but the complexity is not in the scope of this post.
Let’s drill down to just IOV and Music regarding the Internet. How are Internet royalties paid out? Well currently it is based on “streams, downloads, physical albums”. I am assuming that the Raised In Space objective with monetization would attempt to move the “download model” to a “real-time streaming model” similar to Coil’s web monetization methods. This is exciting and in real time a writer, artist, publisher can be streamed micro-payments. Welcome to the future.
Music Royalties as an alternative investment
What got me even more excited was how this may be implemented regarding royalty owners. Royalties are payments to owners of property rights to use that property. A note of interest is that royalties are like any business contract and the use of an attorney is suggested. Some artists/writers need money immediately and are willing to sell investors the rights to their future royalties. A great service to sell, bid and buy is Royalty Exchange for investors and for creators another is ASCAP .
I once bid on (but did not win) a production music catalog from a composer whose work is used in several films, hundreds of TV series, and even commercials. The catalog's placements were in Deadpool, Disney's Ice Princess, Old School featuring Will Ferrell, Cutting Edge: Going For The Gold and Blonde Ambition with Jessica Simpson etc… and it was for 100% of the seller's interest in the songwriter's and publisher's share of public performance royalties attributable to musical works in the seller's catalog of songs.
Every time a network airs a television show or movie that uses any of the songs in this catalog, a public performance royalty is generated and is a great alternative investment. However; a 5% administration fee is deducted from each payment.
Could smart contracts and streaming payments help reduce administration fees?
If Raised In Space could remove the friction of royalty payments or further introduce real time streaming payments, I think we would see a great interest and growth in the music industry revenue stream.