What a Mess: New Report From Berklee College of Music Looks to Fix an Aging, Fractured Business

The central theme to "Fair Music: Transparency And Money Flows In The Music Industry," a 29-page report being released today (July 14) by the Berklee College of Music and its Rethink Music initiative may just be: What a mess.

The 29-page report, led by associate professor Allen Bargfrede, undertakes a close read of the music industry's many rusty, interlocking cogs -- performance rights organizations, collection societies, subscription services, major labels, digital retailers, publishing companies. This detailed analysis afforded Bargfrede and his contributors an eagle-eyed view of the many problems facing modern artists and their representatives.

The problems identified in the paper, nearly without exception, concern a failure to address and embrace "new" technologies that would give artists and their managers a clear picture of who is listening to what and how much they are owed for it. (Kobalt, the London-based digital services company which sells artists tools with which to monitor real-time usage of their work as well as administration of payments, is an underwriter of Berklee's Rethink Music project.)

One particularly illuminating case study focuses on the confusing and error-filled royalty statements provided to a Grammy-nominated band by its label, which arrived in a novella-sized paper binder that the band's manager had digitized in order to make digestible. "For an artist to try to understand it, it's a complete mess," Bargfrede tells Billboard. "If there's one key takeaway [from the report], it's this inapplication of technology and data standards that are already out there, that could be adopted and readily used, so artists aren't getting 120-page paper statements that they don't understand." That statement, the report points out, was one of four the band would have received that year.

"Fair Music" also highlights the "black box" of royalties that go unremitted to the artists that are generated through their work. One major cause is the lack of a standardized database for musical works that would make it easy for labels and collection societies to identify who is owed what. "Services and [performance rights organizations] that can’t distinguish a rightful royalty recipient... end up placing this money into escrow accounts and eventually distributing these unattributable monies to labels and publishers based on market share," the report reads. "Such monies are usually not shared with artists or composers signed to those labels or publishers, since they can’t be attributed to any rightful creator."

Not to mention the nearly impenetrable laws that oversee performance and mechanical licenses and the subdivisions of recording and composition, all further fragmented by an apples-to-oranges global legal system.

This gets at a more strategic problem underpinning the industry -- opacity and complexity by design. "Keeping things complex is not a bad business strategy," Brian Message, Radiohead manager and former chair of the Music Manager's Forum tells Billboard.

"The corporations that own the labels," says Message, referring to companies like Vivendi, the France-based parent of Universal Music Group, "are conducting licensing practices for their own management and shareholder gain -- and that, as a short term strategy is going to lead to long term problems." Message is referring to large advances paid by streaming services to rights holders like Universal Music Group -- revealed to the public in a leaked contract between Sony and Spotify earlier this year -- that are not considered to be payable to artists if and when a streaming service does not use all of the licenses it paid for over the contract term.

"To some degree, the opacity benefits the people who are creating the opacity," Bargfrede says. "Everyone in that value chain could contribute to helping make this process flow better than it currently does. One of the examples we use in the report is the air traffic control system -- if they had implemented technology that already exists, we wouldn't be looking for [Malaysia Airlines Flight 370] a year later. There's technology that can solve these problems, but in a lot of cases it's not being adopted."

To that end, the report issues several specific recommendations, including the previously mentioned construction of a standardized creator database; legislative modernization around mechanical licenses, neighboring rights and the consent decrees which govern PROs like ASCAP and BMI; the establishment of a non-governmental organization that would oversee a "fair music" certification for businesses; and the use of the blockchain, the technology that underpins Bitcoin, for real-time royalty verification and payment (an idea highlighted just this past weekend in a story from CoinDesk).

Anyone with a working knowledge of the music industry's labyrinthine structure won't be shocked by what they read in "Fair Music" -- but everyone else may be. And the report is only part one; Bargfrede will begin the second installment this fall in partnership with MIT and Harvard Business School.

"Can we bring creators on board, to sign on to an ethical set of standards?" For the sake of artists and their dwindling power, let's hope so.

Update, 3:29PM, July 14: Our report originally failed to mention digital services company Kobalt's underwriting of Berklee's research. This has been added -- Billboard regrets the ommission