SoundExchange has finally done something it put off for years. The performing rights organization for digital performances of sound recordings has released royalties that had not been claimed by record labels and artists.
Called a pool release, the distribution of unclaimed royalties will appear on SoundExchange's fourth quarter of 2013 royalty statements as an administrative rate adjustment. Sound recording owners or performing artists who hadn't signed up prior to October will not receive their unclaimed royalties from 2004 to 2008 -- although SoundExchange could have released royalties collected through the end of 2010.
The pool release cleared the relatively small sum of $9.3 million from SoundExchange's books. To put that in perspective, its 2013 distributions should be in the neighborhood of $300 million.
The Copyright Royalty Board, the three-judge body best known for setting the statutory royalty rates paid to SoundExchange, created the regulations for unclaimed funds under Section 114 of the Copyright Act. The rule directs SoundExchange to hold for a period of three years any royalties if it cannot identify or locate a copyright owner or performing artist. After three years, SoundExchange may apply the unclaimed funds to offset administrative costs.
SoundExchange President and CEO Mike Huppe tells Billboard the organization repeatedly delayed releasing unclaimed royalties for a number of reasons. "I think part of it was we were dealing with some of the backlogs that we cleaned up several years ago. Part of it is trying to get the data issues with the services, get them to be reporting and cleaning up their data better. But I think the biggest reason was we just kept wanting to give people a little more time to sign up."
Unregistered labels and artists had been warned a pool release was imminent. In August 2012, SoundExchange released a list, in the form of a searchable database, of 50,000 sound recording owners and performing artists that had not registered and were eligible to receive $31 million of unclaimed royalties. At the time SoundExchange warned unregistered parties they had until mid-October -- two months later -- to register and claim royalties from previous years. "We ultimately gave people most of the next year to still submit their registrations," says Huppe.
Clearing out unclaimed royalties hasn't been easy. In the three years prior to the pool release, SoundExchange engaged in over 150 programs with outside parties.
A matching program literally matches names on SoundExchange's unclaimed royalty list to uses a third party's membership list. CD Baby, MySpace, BandPage, ReverbNation, SAG-AFTRA, AFM and others helped SoundExchange locate royalty recipients. SoundExchange also used internal staff and conference appearances to help locate unregistered artists. Huppe those efforts resulted in 40,000 registrations in the last three years.
SoundExchange acknowledges the pool release may receive criticism. Indeed, SoundExchange's handling of its data, royalties and membership has been a touchy subject over the years. Critics have blamed the organization's efforts to locate unregistered parties as well as its unclaimed balances.
But freeing up unclaimed and unaccounted royalties is a standard procedure at performing rights societies, and Huppe says there will be more pool releases in the future. "It's definitely our intention to make it more regular because it's just good business practice."