In advance of its Form 990 -- the IRS paperwork required of tax-exempt organizations -- being made public in March, non-profit digital royalty distributor SoundExchange has disclosed some of its 2015 balances. (By Nov. 15, or more than 10 months after a given fiscal year, non-profit organizations have to file a 990 with the IRS. A website, Guidestar.com, accesses and posts these forms, thought the process takes time -- thus the March, 2017 release.)
SoundExchange's $469 million balance, as of New Year's Eve 2015, is comprised of $145 million in royalties accrued during 2015, but not yet paid; $112 million in royalty payments that have since went out the door to labels and artists, of which $28 million is in the form of uncashed checks; and $10 million in royalties still shuttling through the matching process.
The remaining $202 million is more or less the heart of SoundExchange's main, and persistent, challenge. In its early days, SoundExchange had plenty of money coming in; it's main problem was getting artists to register and claim their funds. That disconnect created large balances on the organization's books, which in turn drew criticism -- some of it justified, some not. Since then, SoundExchange has made it a priority to let artists know about its services so that it can get payments out the door and into their hands.
According to its advance disclosure, about $136 million in unclaimed royalties earmarked for artists and copyright holders who have not yet registered remained left over at the end of 2015; $38 million where bad data needs to be cleaned up and royalties to various artists compilations need to be matched; $28 million for accounts where there are problems, either due to unfinished paperwork, returned checks, conflicting claims or accounts on temporary administrative hold.
SoundExchange is a performance rights organization created by Congress in 2003 to handle payments of performances of sound recordings when played on radio, and where compulsory licenses are used (i.e. Pandora, the largest contributor to SoundExchange's accounts). Previously, the U.S. only paid publishing on the public performance of songs, which remains the case for U.S. terrestrial radio.
Since digital transmissions are accorded royalty payments, SoundExchange has been appointed as the administrator of those royalties, receiving payments from services like Pandora and SiriusXM, and in turn making payments directly to artists and to labels. Royalties that occur are split 50 percent to the record label, or master rights owner, 45 percent to the recording artists and 5 percent to the musician’s unions for side players on recordings.