Online music: Where does the money go?

Even as curating data has become more ubiquitous in all industries, the ability for artists to track the impact of their music online remains difficult. The distribution of revenue from streaming services in the music industry remains ambiguous and artists tend to focus their energy on creating, performing, and marketing.

Rethink Music, an initiative of Berklee’s Institute for Creative Entrepreneurship, published a report (available for download here) this summer that outlined current business standards and practices while illuminating where changes in the industry’s infrastructure will most enable artists.

Technology has completely altered the way music is consumed, but has had little effect on the way the industry is run. The business is a stagnant behemoth. It is clearly to the advantage of major labels that the inner workings of their contracts with streaming services remain confidential.

It’s nothing new; Paul Simon and Dick Cavett discussed it forty years ago on The Dick Cavett Show. Cavett addressed the hierarchy of the music business and asked Simon about the payment structure in the popular music world.

Who takes care to see that you are not ripped off by the people who are supposed to get the money to you? There are stories of rock acts and popular musicians finding that millions have vanished that were supposed to come to them and they’re having to work the rest of their lives out on the road. Do you know of such cases?

“Yeah, of course,” replied Simon, “I mean, you have advisors – you have people that help you – and if you’re lucky, you pick people who are good and who are honest. If you’re unlucky, you don’t, and you lose some money.” It’s a cavalier response that belies the transparency that artists deserve. At the least, luck should not be a factor in this. Paul Simon was more interested in the art form and we need others to collect the appropriate information.

Now the necessary data is being collected. Metric collecting platforms have become ubiquitous throughout the industry. Spotify uses The Echo Nest, Apple purchased MusicMetric before launching its newest streaming service, andPandora recently adopted Next Big Sound. Millions of dollars should not vanish when there are data collecting services readily available, but they do vanish into what is referred to as the “black box” of the music industry.

The report cites three big ways in which this happens. Unique digital records of songs are maintained by ISRC and ISWC codes. These codes are not always linked accurately. Without a common format, songs can be reported separately in different formats. Revenue is therefore not sent to the rightful creator. The “black box” also consumes advance payments that do not reflect actual number of streams or major label equity shares in a streaming service that become liquid.

Resolving these issues are not small undertakings, but they are some of the first ways we can ensure that the music business operates transparently for its content creators.

By Colin Baylor