After it was reported last week that SoundExchange, the non-profit organization that collects and distributes royalties to performing artists, is holding unpaid royalties totaling more than $200 million, the organization has explained the unusually large sum. That royalty money has been collected from satellite and Internet radio providers for years as SoundExchange has struggled to locate the artists it owes, and SoundExchange spokeswoman Laura Williams says that most of the money is being held back with good reason.
Williams told Wired that 50 percent of that money is "workflow" — the amount that has recently been paid in and will go out as scheduled within a few months. This money is not being held, it is simply in transit through the system. Eleven percent is being held pending final court rulings on royalty rates or other related issues, and SoundExchange expects most of that money to be distributed later this year. Five percent is tied up for foreign PROs. These royalties belong to artists and copyright holders in other countries, but haven’t yet been claimed by foreign societies, and another 10 percent is in limbo for lack of data. These royalties were paid by services in accordance with the law, but the service didn’t provide playlist data to accompany them. Finally, another five percent is accounted for by "bad data," which means that services pay royalties but send incomplete or bad data which does not provide SoundExchange with enough information to figure out whom to pay.
The explanation accounts for over 80 percent of the $200 million. This leaves around $39 million that is still owed to artists and labels who have yet to register with SoundExchange, and some of them may not be unaware that they need to do so.
"Obviously, the $39 million number is still far too high, and we’re doing everything we can think of to help reduce it," Williams told Wired. "Our direct notification programs, including those through those social media and online music tools matches, have notified more than 34,000 artists in the past six months, representing over half of the total money which is unclaimed. Of those, only about five percent have registered so far — even [among] those who [have been] contacted six-plus times, that ratio doesn’t go up."
When artists complain they don't get paid we now begin to see the other side of the story. Regardless of wether the money eventually gets paid or not, I wouldn't mind the interest on $200 million.