Legal Issues

by Mike Masnick

Filed Under:
collections, money

choruss, soundexchange

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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  1. identicon
    Weird Harold, 23 Mar 2009 @ 2:52pm

    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.

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