SoundExchange Explains $200 Million Bank Balance

Digital Music News vs. SoundExchange

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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.

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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.

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