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Transparency and Data Problems Hotly Debated During First Week of SXSW 2016

The music industry has a data problem and it's finally ready to tackle it head on. As frustration grows and lawsuits pile up, the issue has become the most-debated topic in Austin's Convention Center…

The music industry has a data problem and it’s finally ready to tackle it head on. Maybe it’s because of the class action lawsuits brought against such streaming services as Spotify and Tidal in recent week, which has forced the industry’s hand. This week, Spotify settled one lawsuit over unpaid royalties for $30 million in a deal brokered by the NMPA. But data, rights management and transparency have been the primary or secondary topics at more than a dozen panels at SXSW this year.

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The central issue at hand is incomplete metadata attached to song recordings that are licensed to digital distributors — missing publishing information, unclear songwriting splits and the outdated, overly complex system governing it. Those can all delay royalty payments or make them impossible in the first place. For example, if a song with three co-writers is streamed within Spotify, but its metadata only includes information on two writers’ publishers, the service can’t identify where the royalties for the third writer should be delivered. That money is kept in escrow until the rights owner is identified, if it can be at all.

The problem trickles down into many of the issues that songwriters and publishers are frustrated about in terms of timely payment, transparency and efficiency within the music industry. And as frustration grows and lawsuits pile up, the issue has become the most-debated topic in Austin’s Convention Center this week.

Blame has lain at the feet of every stakeholder — streaming services, publishing companies, performing rights organizations, Congress, labels and everyone in between. While the suits wind their way through the courts, the discussions that took place this week at SXSW point to the industry suspending the finger-pointing and rallying to tackle the issue.

“I think we’re turning a corner in the content rights side,” said Vickie Nauman, owner of consulting firm CrossBorderWorks, during a panel titled Fair Music: Transparency in the Music Industry on Friday (March 18). “There is increasing awareness that bad data is a problem, money is being left on the table, we don’t know how much it is, but we have to fix it.”

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In the past, attempts to fix the issue have centered on the idea of a centralized database, most recently with the promising but ultimately doomed Global Rights Database that flamed out in 2014. Lately, that conversation has migrated towards using blockchain technology, which could provide a decentralized, open and transparent system to track, manage and identify this data. But the technology is still new and largely unproven, and the practicality of industry-wide adoption of any solution is still the elephant in the room.

“There are always these group efforts where the industry is coming together to solve a problem,” said John Rudolph of Music Analytics, Inc., at a panel called The Network Effect: Transparency in the Music Industry on Wednesday afternoon (March 16). “I don’t know if I’m a jaded veteran, but that’s been a difficult thing to do.”

One major obstacle with the idea of a centralized database has always been management: who will run, finance and maintain such a massive amount of information.

“In order to get the trust of the rights holders, it has to be something that is not owned by a private company that can be sold to someone else,” Nauman said, pointing to objections raised during the GRD negotiations about handing proprietary data to an outside organization.

At the same panel, attorney Sophie Goossens proposed a joint industry/government solution similar to one currently being discussed in France, where the Ministry of Culture brokered an agreement with industry powers of a Code of Practice, guidelines by which music companies should abide, with an independent, government-nominated moderator acting as a watchdog for compliance.

“Having the companies that know the sector, along with a body that adheres to the best practices and can offer incentives for organizations to opt in, is the best way to get something done,” she said.

That speaks to the other big obstacle: universal (or near-universal) adoption, which contributed to the demise of the GRD as companies began pulling out of negotiations. “The biggest underlying business problem facing metadata is to get the incentive and everybody aligned to fix things,” Nauman said. “Some in the industry don’t believe there are financial incentives to fix the issue.”

But Pledge Music CEO Benji Rogers, one of the leading champions of the blockchain’s viability, estimated at the Network Effect panel that $2.6 billion is left on the table each year. Rogers has proposed a public benefit company to lead a blockchain-based initiative that could solve the data problem by creating a “wrapper” for each song that contains its full publishing and songwriting information, each encoded into the blockchain with a unique fingerprint that would, due to blockchain’s public nature, encourage companies to be fair and open.

“We won’t create a database; that’s pointless,” Rogers said. “It’s about creating a minimum viable data standard that we say, if a file does not contain information on how to contact and pay one of the publishers and performers, it is not a fairly tradable file … If we approach it from every level and create an open system, if you lie about something, you’ll be doing it in public. I believe this will make an incentive to stop putting up bad information and fix things publicly.”

Casey Rae, CEO of the Future of Music Coalition and a panelist at a discussion called The A to Z of Transparency on Thursday (March 17), argued that the sheer amount of money being lost due to the data issue will eventually force labels, publishers and distributors to band together to fix the problem.

“We need the big ships to get over the opacity thing and actually take steps; they don’t have to create the mythical database in the sky, they have to commit to standards,” he said. “It is time for the industry to either get its data house in order or be nudged by some government or other.”

One key issue the blockchain could solve is the overly-complex nature of updating ownership information in an age where catalogs are being bought and sold every day.

“At INGrooves, we were processing millions of changes per month, but every time we instituted a change it had to go out to 400 different places,” said Robb McDaniels, founder of Faction and former CEO of INGrooves. With a public ledger like blockchain, that change would only have to be made once, and would create a permanent record of each alteration.

While the solution is still undefined, there is finally movement in one tangible direction that has emerged from the endless conversations and concerns. Earlier this month, Rogers announced his intention to move forward in creating his public benefit corporation, and confirmed during his SXSW panel that he’s in the process of setting it up.

“An open system is the only way to get this going,” Rogers said. “Is it hard? F–k yeah. But the danger of not doing it is too terrifying to contemplate.”