To help music publishers deal with the growing number of digital services, Crunch Digital has introduced its new PDX Service to help publishers collect money for their songs' use on cloud-based and other digital music services.
The publisher data exchange (PDX) provides publishers with a way to make catalog information available to digital service providers (DSP) under their direct licenses, capture song usage for reporting purposes and issue statements based on usage and licensed deal terms.
As more digital services have gone the market, publishers have difficulty keeping up with the growing number of DSPs that play their music. "Publishers are asking for a solution that will lead to more accurate payments and transparency," Crunch Digital CEO Keith Bernstein tells Billboard.biz. Crunch Digital was formed in 2008 in conjunction with Royalty Review Council, where Bernstein is co-founder and CEO. Royalty Review Council is a Los Angeles-based firm that specializes in financial consulting services for media and entertainment companies.
At the same time, a DSP may not have the capacity or knowledge to deal with the reporting and payments required of them, says Bernstein. Many of them operate under compulsory licenses rather than going through the effort of direct licensing. "You want to tell the digital services, 'Tell us what you sold and we'll figure out the rest,' because they completely underestimate what's involved."
But a DSP would have an incentive to do direct licenses with Crunch Digital clients, he argues. The DSP would get one data feed representing all publishers represented by Crunch Digital instead. And he believes a better relationship with publishers means less chance of an infringement suit if the DSP does not operates under the rules of the compulsory license.
Crunch Digital's service arrives as cloud services are set to take off in popularity. Amazon and Google launched unlicensed cloud-based storage services that will not pay either record labels or publishers. But Apple's iCloud, which will include cloud-based access to users' personal music collections, will be licensed and result in payments to rights holders. And that's getting publishers' attention. "My phone was blowing up over the weekend before the Monday Apple announced its cloud service," says Bernstein.
Billboard.biz spoke with Bernstein about why there is a need for this PDX Service and how Crunch Digital will work with DSPs on publishers' behalf.
Billboard.biz: Could you talk about the impetus for creating this service?
Crunch Digital CEO Keith Bernstein: The impetus is there is a lack of best practice collection methods in the marketplace for publishers working with digital services. That lack of accurate collection processes has meant less money going into pockets of publishers at a time when they should be collecting everything.
They all talk about piracy hurting sales. I say it's not just about piracy. You can't even collect money from the people that you licensed.
Why is it that publishers' hands are tied in collecting money?
Under the compulsory license, they do not have a direct audit right. Right now digital services' chosen method often time is a compulsory license. The publishers get hit with NOIs [Notice of Intent] and they don't have an audit right.
Without an audit right, what steps can a publisher currently take?
Without a direct audit right, there are no steps, [other than to] litigate, which is an expensive, drawn-out process just to get the money you should have been paid on statements anyway. What's broken is the abuse of compulsory licensing - doing it and not following the rules. One guy had the audacity to tell us they don't follow the rules because it's not a fit for them. We said, "What do you mean it's not a fit? When you issued the license, the [Copyright] Act says this covers physical and digital, here are all the rules, and you're going to get a compulsory license. And he said, "Yes, but the whole process of the monthly accounting and the certified statements of account and all that, it's just not a fit for us." So they choose not to do it.
How exactly will you work with and integrate with DSPs?
Under the negotiations between publishers and digital services under a direct license, they're designating Crunch Digital as their third-party data partner. They're telling the digital service, "We're going to license our music to you at these agreed-upon rates, but as part of the license you have to agree you will work with Crunch Digital as it relates to data management." So they're now negotiating into their deal and telling them they have to work with Crunch Digital because they want transparency and they want to be able to look at their transactions to make sure they're getting paid right.
How much is not being collected? Is there any estimate on what's going to be found?
I don't know if there's any way to estimate it. All I can say is there has been a dramatic tailspin down. The figures look low. One would expect more given the popularity of these subscription services. Where did the money go?