How Come SoundExchange Is Holding Onto Over $100 Million?

from the questions,-questions,-questions dept

We’ve talked about the ridiculousness of the various music collections societies being involved in the discussions on new music business models. To them, the answer is always the same: add another license and let us collect it. They’re middlemen and they take in tons of money and would only be all too happy to take in more. Some got upset with us in the comments, by noting that some of these collections societies are non-profits. In fact, the new Choruss offering, which we’ve already explained why it’s a bad idea that’s more of a bait-and-switch than anything useful, has been described as a similar “non-profit” collections group.

But, as we’ve noted in the past, supposedly nonprofit collections groups such as SoundExchange (a spinoff of the RIAA) are notorious for not finding artists to pay — even some of the biggest names in the business. Oh, and did we mention that if the royalties go “unclaimed” the recording industry (via SoundExchange) often gets to keep the money? Given that bit of info, it’s perhaps no surprise at all that P2Pnet is noticing that SoundExchange’s own tax returns note that the nonprofit was sitting on over $100 million at the end of 2007, a pretty significant leap over previous years, and a somewhat startling sum for a supposed “nonprofit” in charge of both collecting and distributing funds.

It seems like those musicians sure are difficult to find.

The P2Pnet report also points out that it will be interesting to see how much SoundExchange has spent on lobbying efforts. SoundExchange is actually barred from lobbying the government, but has been ignoring that for years by funding musicFIRST, a recording industry lobbying group that’s trying to add a new license for radio stations to pay (collected by SoundExchange, of course) by claiming that radio is actually a form of piracy.

So, even if Choruss or these other collections societies seem to be designed with the best intentions in mind (and I’m sure they are), it seems that they’re wide open to abuse — which is yet another reason to be quite worried about simply handing over the entire industry’s business model to such an operation.

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Companies: choruss, soundexchange

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Comments on “How Come SoundExchange Is Holding Onto Over $100 Million?”

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Weird Harolds #2 Fan says:


Of course radio is piracy!

Why, nobody’s paying for it!!! In fact, how the radio stations have stayed in business all these years is an economic mystery.

You can’t have people getting free music over the air-waves; that just plain god-damn unpatriotic!! This country is all about taking as much money from other people as you can.

BK (profile) says:

Re: Re:

WH I was thinking the same thing so I looked at the About page and they explain it. ” went online in August, 2002. It was the first Internet web page to carry daily, frequently updated news, stories, features and commentaries on digital media, distributed computing and associated technologies and events which haven’t been spun, filtered and pre-digested by vested corporate interests.

It places special emphasis on freedom of speech, P2P and sharing.”

Weird Harold (user link) says:

Re: Re: Re:

Yeah, and yet the piece is full of opinion, slant, and not too much information really. Just as importantly, it reports on a 2 year old tax return, and doesn’t establish key criteria like how much went through the organization in that year, what the normal level of unpaid / unclaimed amounts are, etc. I see lots of golly numbers and gosh amounts, without reference.

Example: If they collected 1 billion in a year (I have no idea), then their payout rate is 90% – but if their typical year end unclaimed amounts are 100 million, then potentially their payout rate is near 100%. Not explained.

Example: The 101 million is in investments, how long did it take for that amount to accumulate? Example, if they have been investing for 20 years, using the left over amounts of raise additional capital, how much is actually current and due to artists, and how much is income earned through investments rolled over? Not explained.

Example: $800,000 for consultants sounds high – but high compared to what? If they transfered 1 billion in a year, that is drop in the bucket money (or 0.0008% of cash flow). Not explained.

That’s why I say it’s funny, they claim no slant, but there is enough missing information to create massive slant.

I am also wondering why this article needs 10 links to other techdirt articles. Perhaps it was to make us less curious to read the actual posting on p2pnet? Certainly SEO overkill.

Dave says:

Re: Re: Re:2 Re:

This has nothing to do with bias, read the report. No content, just a lot of numbers and someone yelling that we should all panic because of it

100 million is a big number, to be sure, but may be a very small portion of the actual total money that flows through the system.

I’m no fan of the royalty organizations, but this p2pnet article is still crap.

PaulT (profile) says:

Re: Re: Re: Re:

“I am also wondering why this article needs 10 links to other techdirt articles.”

You’ve been making trolltastic posts this long and you never noticed that Mike usually links to previous Techdirt articles? Really? (He usually claims that it’s easier for him to find the previous TD article than dig up the primary link – usually on the original article anyway).

Anyway, as ever you have yet to refute the major point in the article, which is that SoundExchange are well known to be withholding “unclaimed” revenue from artists they claim they can’t find. The list of unpaid artists is here:

There’s a lot of unknowns there of course, but I remember running a little experiment with this list a few months ago. Within a few minutes of Google searches, I managed to get the business addresses and/or management details of the first 3 unclaimed artists I recognised off the list, 2 of them pointing to their current projects. Meaning those “poor, starving” artists who are usually brought up as being the victims of “piracy” are not being paid the money they’re already owed by the industry.

A quick glance at the list tells me that the artists I managed to find haven’t been paid yet.

The basic point raised here is that here we have a supposed non-profit organisation that seems to have problems finding artists to pay, for no good reason. Coincidentally, the same organisation gets to keep any money it can’t pay out. Yet, a similar service is supposed to be a good thing “for the sake of the artists”..? Forgive me for being cynical.

Weird Harold (user link) says:

Re: Re: Re:2 Re:

I looked over the list quickly (scanned as I scrolled) and I didn’t see a whole bunch of name artists.

I also understand that the artists must register with them to get paid. Basically release something that can get played on the air or whatever, and go register.

Also, the list indicated that perhaps only part of the bands or artists listed didn’t register – so you might have the management details for Band X, but a member left last year and never registered with them, so they cannot get paid.

There is still no explaination if this 101 million is specifically owed to this list of artists, or if it is a fund that has built up over years. There is also no indication what the current balance is.

PaulT (profile) says:

Re: Re: Re:3 Re:

OK, here’s 2 problems:

“I looked over the list quickly (scanned as I scrolled) and I didn’t see a whole bunch of name artists.”

Well, I scanned over it and saw Kraftwerk, Mica Paris, MC Ren (one of the founding members of N.W.A.), U.N.K.L.E, Biohazard, Pharcyde, Clint Mansell, Ugly Kid Joe, Type O Negative, RZA, Raekwon (both members of the Wu Tang Clan)… Not exactly unknowns, and that’s not including the large number of house, rave, drum n’ bass and hip-hop artists I recognise from being a fan of those genres during the 90s (like Acen, Age Of Love and LTJ Bukem – hardly household names, but well known within those genres).

Anyway, whether or not they’re known artists, there’s a hell of a lot of them. Even if they were owed $10 each, that’s a hell of a lot of artists losing out, and you can probably be sure that some of them are missing a lot more than that.

As for registering, well maybe that’s where some of them are coming unstuck. Many of the artists are not American, and therefore may not have any idea that there is money outstanding, let alone the process required to collect momey. Hell, it’s possible that some of these artists have never had official US releases so may not have any representation there.

However, that’s hardly the point. If I’m given $100 that I need to hand to someone, you can be damn sure I’m going to find them to let them have their money. This organisation is pocketing millions because they claim they can’t find the (easily located) artists or because the artists haven’t followed a procedure they may not know about? Yet their entire supposed reason for existing is to pay artists? That’s a problem.

MadJo (profile) says:

Re: Re: Re:5 Re:

That’s because they have paid their dues to SoundExchange to be able to get their money.

Yes, indeed ‘famous’ artists generally aren’t on that list, because most of them are signed to labels, and the label will make sure that they extract the money from SoundExchange. But SE refuses to do its job in finding the artists it is collecting royalties for (that includes indy-artists and in some cases even creative common artists.)

SE has shown it can’t be arsed to do its job. If a simple Google search gives you the name and address of most of these artists, and they still claim they can’t find them. Then they are clueless numbskulls who are unfit to run a business.

PaulT (profile) says:

Re: Re: Re:5 Re:

I don’t see Metallica or U2 on the list either, does that mean anything? Not really. How does collecting revenue from an old business model for previous albums invalidate the new one? Does the presence of Kraftwerk on the list and not Jill Sobule somehow mean anything with regard to their relative success? I’m sure you won’t have a coherent answer.

Predictably, you avoid the point. Yet again, I raise several points and you decide to mock a totally irrelevant point rather than answer. Are you going to address anything I said in my previous post, or just avoid it? I’m still interested in how you can possibly defend such a clearly biased organisation that is so obviously withholding money from artists.

Dave says:

Re: Re: Re:4 Re:

Depends on their contracts. their recording contract may state that they only get paid when the amount reaches (for example) $100 and soundexchange is holding on to that money until that point.

If it costs $50 to process and mail a $10 cheque, you’re not going to mail that cheque, are you. Basic business

Weird Harold (user link) says:

Re: Re: Re:5 Re:

Congrats on critical reading skills.

The p2pnet article is slanted as heck because the numbers aren’t presented in context – and I think done so on purpose to create panic and outrage. It’s a cheap sort of trick used by crappy politicians and fear mongering groups for the most part.

Then again, rumor has it that the author is also not exactly an “attorney” even though he attempts to represent himself as such. I could find no entry for this guy in the Tennessee state bar association.

Ryan says:

Re: Re: Re: Re:

So if I’m the head of a large multi-billion dollar company and I see that a single employee has written off $100 million in expenses for things like travelling, do I just say, “eh, that’s a drop in the bucket compared to the company’s revenue…” Or do I think, “there is no reason whatsoever why he should be writing off $100 million in expenses, regardless of the revenue of the company”?

Clearly, if a supposedly nonprofit collection society for the benefit of artists has $100 million on its hands waiting to do something with it, they are not concentrating on paying out to the people they are supposedly representing, no matter what their annual revenue is. But of course you know this, because you cannot be so uncomprehendingly stupid as to believe that $100 million is marginal for a collections agency with very little overhead.

Additionally, I’ve been going back through the site and looking at comments and noticed that you almost always seem to fail to respond to particularly good responses. Anytime a flaw in your logic is pointed out, or evidence provided contrary to your assertions, etc. you are nowhere to be seen. Frankly, you are one of the most pathetic and cowardly commenters I have ever seen on the internet, since you not only act like a troll, but do so with an air of superiority when you are anything but.

If you disagree with the articles or fellow commenters, respond point-by-point with evidence, and keep with the thread instead of abandoning it everytime you are called on to a sufficient degree of competence.

Weird Harold (user link) says:

Re: Re: Re:2 Re:

Remarkable – all that, and you didn’t read the article.

The 101 million isn’t an expense or a write-off. It’s a fund , sitting waiting to be claimed.

At no time am I saying “the expenses (like the 800k) is justified solely on the basis of it being a small number, rather just suggesting that taking numbers that appear big to the average person and peppering them around without reference to the overall flowthru of the organization in a year is misleading. There is no detail presented in the article to say what the consultants fees are for (but there is a ton on innuendo and speculation). Without knowing what they are for, we cannot pass judgement. My only point was that if they turn 1 billion a year, 800k is a very small amount, and perhaps may be in line with other organizations on ratio. I don’t know – but I would want to know more before throwing crap around.

So there you go, point by point. Enjoy.

CmdrOberon says:

Re: Re: Re: Re:

> Example: $800,000 for consultants sounds high – but high
> compared to what? If they transfered 1 billion in a year,
> that is drop in the bucket money (or 0.0008% of cash flow).
> Not explained.

0.0008% = 0.000008

$1,000,000,000 * 0.000008 = $,8000.

I think you mean that $800,000 is 0.08%
of $1,000,000,000.

Anonymous Coward says:

Re: Re: Re:2 Re:

And that’s the problem with Harold — he can’t do the math, but uses his faulty math to try to make his lame points. And now that you’ve corrected him, he’ll completely disappear from this discussion, because he can’t be bothered with facts. Except the ones he makes up.

bob says:

Re: Re:

I seem to recall all the bull shit about the RIAA and outfits like soundstage saying that they are doing this for the artists.
So when the artist does not pay to have a search done to see if he is entitled to any money from the soundstage collections.
Sooundstage gets to keep it.

This is of course done to protect the artist.

Not to shore up the coke and whore money for the Recording company execs.

ehrichweiss says:

Re: Weird Harold's #3 Fan

I need some of what you are smoking.

It’s easy to show with real world numbers that artists make significantly more with concert tickets than they ever do on record sales, even the well known artists.

$25+ per ticket * 100,000 concert goers = $2.5 million
(your previous example used Madonna and $300/ticket so you can start eating that crow right now for giving out that number…thanks for the chuckle)

1 platinum album = 1,000,000 sales * $1 per CD(at most for a WELL known artist) = $1 million.

So, Madonna could do 2-3 shows and make more money in less time than it took for her to make the album in the first place.

Weird Harold (user link) says:

Re: Re: Weird Harold's #3 Fan

Sorry, i wasn’t doing single artist to single artist comparisons. They said that concert ticket sales were the same dollar amount as music sales. So in order to have the same amount of money by concert ticket sales alone, you have to either double ticket prices or double the amount of concerts.

last time I looked, albums don’t sell for $1. I see what you are doing there, but in the end, concerts have just as many middle men and the artists don’t get tons of that money either.

ehrichweiss says:

Re: Re: Re: Weird Harold's #3 Fan

You’re not going to dismiss my numbers by pretending that concerts take $14 out of every $15 on a ticket sale for the “middle men”. There are costs to concerts but there are decidedly few middle men in comparison. Again, I can back my stuff up with numbers(especially since I used to tour with an unknown band that each member cleared $78,000 a year over 10 years ago).

Nice try though.

Weird Harold (user link) says:

Re: Re: Re:2 Weird Harold's #3 Fan

Bring the numbers dude, don’t be shy. The number of real middle men would amaze you.

Remember, this isn’t a question of what just the artist gets, but of all the hangers on, all the middle men, all the song writers, all “that” – remembering that if you aren’t feeding the song writers over THERE, you have to feed them over HERE.

$14 out of $15 on concerts, no. But you ignored what I put up as well – music sales and concerts have the same GROSS income, and to generate the same GROSS income, ticket prices would have to double.

Simple math, nothing complex.

The breakdowns on each side today are different, but the breakdown on the concert side would likely change dramatically if there was no music sales side income.

Weird Harold (user link) says:

Re: Re: Re:2 Weird Harold's #3 Fan

..and the song writer gets a cut, and the producer gets a cut, and the manager gets a cut, and so on.

You can’t take the artist take $1 NET and then try to compare it to gross ticket sales at a concert. It isn’t logical. More importantly (and more my point) is that if the values of music sales and concert sales are the same today, and you want the same total GROSS sales in the future, concert tickets have to double in price (assuming all possible concert dates are played already). Alternately, you could double the number of concerts, or double the number of seats to have the same gross.

If records sales disappeared, the artist net on the concert side would change dramatically, as the vast majority of people on the recording site right now would have to make their money on the concert side instead. They aren’t going away for the most part. So rather than get into a lengthy (and meaningless) discussion about artist nets, I just went with the simple math.

Sorry if it doesn’t meet up to the standards of the board.

Jesse says:

You’re exactly right, there are many middle men. But at concerts you are selling a scarce good rather than something that can be naturally reproduced infinitely. If more people know the music, there is more demand for concert tickets. But I’m sure if it were you, you’d rather alienate the people you are simultaneously trying to convince to give you money.

Stop acting like you know everything about everything. At the end of the day, it doesn’t matter. Complain about piracy as much as you want, do you really think there is any effective way to stop it, without becoming a complete police state? Even if we take it to an extreme like the Great Firewall of China (which, yes, has more to do with censorship than piracy) people find a way through. Whether you like it or not, piracy happens; the best response is to figure out a way to benefit from it. But, hey, bitching about it on Techdirt works, too.

Weird Harold (user link) says:

Re: Re:

No, actually my point is this: You cannot raise the price of concerts endlessly to cover what is lost elsewhere. Let me use Mike’s math here: infinite things are free, and promote the finite things cost money. The problem comes in when you realize that finite is really finite. That price rise goes up and up until the finite thing is affordable only by the people with the biggest bank accounts, because the prices are beyond what people can pay.

Quite simply, you cannot make more Madonna, and if Madonna wants to make her herself and all her middlemen the same money they were making before, she would have to raise her ticket prices significantly (and some would say already has). It’s actually a fatal business model, but they are welcome to it.

But in the end, a discussion of ticket prices isn’t really related to the topic at hand.

RomeoSidVicious (profile) says:

One of the HUGE problems with SoundExchange is the simple fact that, as an artist, you cannot opt out. If I record music and want it to be plated, for free, in the formats that SoundExchange collects for I cannot stop them from collecting. I cannot make my music free if I choose to do so and if I boycott the system in place then SE gets to keep the money. They are profiting off of ignorant unknowns and anyone who disagrees with the system and refuses to participate in their little reindeer games.

The overarching problem is that SE gets to keep the money. There should be an expiry period and after that period any unclaimed money is returned directly to the original payee. Or better yet they should only collect for those who have given them a right to collect for them. What is happening right now, collecting for any and all music, should be illegal. They collect for everything and get to keep the money that is unclaimed. In other words they are making a living off the backs of artists who have no say in the matter, much like WH claims p2p companies are doing.

wheatus (user link) says:

Re: Re:

I can tell you…I am now registered with soundexchange after a worker bee there, whom, I have since had it explained to me by other SX worker bees, was fired for doing things ‘the wrong way’, called me and told me that I had royalties waiting….of course, I was too late to collect from 1996 – 2007…no, no that had all been ‘forfeited’ to the RIAA…you see, they couldn’t find me while I was doing sold out tours of Europe, playing at Prince Charles’ ‘Party In The Park’ and on TV and stuff. And when I got them on the phone to explain…WOW..Have you ever seen the Terry Gilliam Film ‘Brazil’…so the answer is….

They collect your money no matter what you want, no matter who you are…PS….Harold, you have absolutely no idea what the fuck you are talking about.


hegemon13 says:

Ignore feature

I think TechDirt needs to implement an “ignore” feature, so that all of us who want to have a reasonable conversation without the obnoxious intrusion of Weird Harold can simply turn him off. At first, I enjoyed pointing out his ignorance. Now, I am just sick of it, and I don’t even like to click through to the comments anymore. A person who disagrees, who can form a decent argument, and who can add something to the discussion is one thing. WH does not. He simply repeats the same garbage, over and over, even after he has been refuted.

As a child, I had a toy robot. It didn’t do much except run around and run into stuff. When it ran into anything, it turned around 180 degrees and went the other direction. Put it in a hallway facing one wall, and it would just go back and forth, banging its head into the same two walls until the batteries ran out. Reading a Weird Harold thread is a lot like that.

at says:

Historical context

All trolls aside — for everybody complaining about ‘lack of context’ – if you would actually read the damn p2p article and you’ll see that you can get these IRS forms for free, online, in about twelve seconds.

Here’s some context: below is SoundExchange’s reported “investments/Securities schedule” for 2005-2007:

2005: $55,124,892
2006: $74,607,778
2007: $101,327,262

The point being that it’s pretty fishy for a supposedly ‘nonprofit’ organization to sack away almost $50m of ‘investments’ in just two years.

This organization is supposed to be collecting and *distributing* these funds to the thousands of artists it supposedly represents – not sitting on the cash and investing it.

Domenick says:

the 100 million

that money belongs to my friends and i for writing and representing the music industry for the rap artists and alot of other artists.we are the voices of the artists and we wrote all of the music that isn’t really the artists who are on the covers of the albums……yes… alot like fraud.what can we do to prove the money belongs to us?the numbers that are stated in the rap music are the numbers to the pages in our readers digest condensed books.on those pages are the clues that we wrote 9…..all eyes on me…..look for the clues referring to eyes on page 9 in all of the books,before Dec 94 Jan 95.we are the unpaid artists…… God is our witness……the proof is in the writing….DMX…Domenick Michael Unknown…….DMX……All of the new rap music is already on demos that we have……i have demos of the artists that they’ve never heard……because of course,it’s not them…… can contact me at 1-330-942-1958 anytime……i am the RAP industry….if you dont know….now you know!……..

Andypandy says:


Why not make a system where they can monitor every receiver and charge the consumer for each and every track they listen to, then they could also charge for the presenter to be heard so everyone gets paid, but just as long as all the money goes through the MPAA so they can skim the top 90% of funds coming in, as for all of the non profit societies, when i hear non profit the first thing i think about is how much are the people in management or CEO positions being paid and is that related to how much is received in payments for the content creators. Surely if managers receive $1 000 000 a year and get bonuses, and CEO’s get $10 000 000 a year plus bonuses when they take in more than expected, it then becomes a cash cow for the top players and can no longer be called a non profit.

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