Original music industry research presented at the 2018 Copyright & Technology Conference at Fordham Law School in New York City.

1. Daniel Dewar, Founder
paperchain.io
Black Box Royalties
Data Research

2. 2

3. Background
NOI data analysis
Survey insights

4. ● Sound engineer / sound designer
● Data / analytics (“Datalicious”)
● Paperchain
About me
4

5. ● Blockchain!
● We had a solution without fully understanding the
problem
How did Paperchain get here?
5

6. ● Black box royalties
● In particular, Notice of Intention (NOI) filings to the
US Copyright Office (USCO)
The problem — unpaid royalties
6

7. Mechanical licenses
& royalties

8. BEYONCE feat. SEAN PAUL
“BABY BOY”
8

9. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
9

10. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
Reproduction & Distribution
10

11. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
Reproduction & Distribution
Composition Rightsholders
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Hattis Music Group
Irving Music
11

12. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
Reproduction & Distribution
Composition Rightsholders
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Hattis Music Group
Irving Music
Public Performance
12

13. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
Reproduction & Distribution
Composition Rightsholders
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Hattis Music Group
Irving Music
Public Performance
ASCAP Writers
Sean C. Carter
Sean Hennares
Beyoncé Gisselle Knowles
Scott Spencer Storch
Robert G. Waller
ASCAP Publishers
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
13

14. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
Reproduction & Distribution
Composition Rightsholders
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Hattis Music Group
Irving Music
Public Performance
ASCAP Writers
Sean C. Carter
Sean Hennares
Beyoncé Gisselle Knowles
Scott Spencer Storch
Robert G. Waller
ASCAP Publishers
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.BMI Writers
Kamozi Ini BMI Publishers
Hattis Music Group
Irving Music
14

15. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
Reproduction & Distribution
Composition Rightsholders
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Hattis Music Group
Irving Music
Public Performance
ASCAP Writers
Sean C. Carter
Sean Hennares
Beyoncé Gisselle Knowles
Scott Spencer Storch
Robert G. Waller
ASCAP Publishers
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.BMI Writers
Kamozi Ini BMI Publishers
Hattis Music Group
Irving Music
15

16. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
Reproduction & Distribution
Composition Rightsholders
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Hattis Music Group
Irving Music
Public Performance
ASCAP Writers
Sean C. Carter
Sean Hennares
Beyoncé Gisselle Knowles
Scott Spencer Storch
Robert G. Waller
ASCAP Publishers
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Master Use
Subscription
interactive Digital Audio
Transmission
BMI Writers
Kamozi Ini BMI Publishers
Hattis Music Group
Irving Music
16

17. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
Reproduction & Distribution
Composition Rightsholders
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Hattis Music Group
Irving Music
Public Performance
ASCAP Writers
Sean C. Carter
Sean Hennares
Beyoncé Gisselle Knowles
Scott Spencer Storch
Robert G. Waller
ASCAP Publishers
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Master Use
Subscription
interactive Digital Audio
Transmission
Columbia Records
Beyoncé, Sean Paul
BMI Writers
Kamozi Ini BMI Publishers
Hattis Music Group
Irving Music
17

18. ● Royalties paid to songwriter every time their
composition is reproduced
● Includes streaming
Mechanical royalties
18

19. BEYONCE feat. SEAN PAUL
“BABY BOY”
MUSICAL COMPOSITION
Reproduction & Distribution
Composition Rightsholders
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Hattis Music Group
Irving Music
Public Performance
ASCAP Writers
Sean C. Carter
Sean Hennares
Beyoncé Gisselle Knowles
Scott Spencer Storch
Robert G. Waller
ASCAP Publishers
Beyoncé Publishing
Black Owned Musik
Carter Boys Music
Hitco South
Lil Lulu Publishing
Notting Dale Songs
Reservoir Media Music
Universal Music Corp.
Master Use
Subscription
interactive Digital Audio
Transmission
Columbia Records
Beyoncé, Sean Paul
BMI Writers
Kamozi Ini BMI Publishers
Hattis Music Group
Irving Music
Mechanical royalties
19

20. ● Notice of Intention (NOI)
● Compulsory license to use catalog
● Permission of rights owner not required prior to
exploitation
● The “streaming mechanical”
Section 115 of US Copyright Act
20

21. ● Digital service providers (DSPs) pay direct to
publishers or to licensing intermediary
● Fees are determined by Copyright Royalty Board
“Streaming mechanicals”
21

22. ● Secure licenses for works to be used by service
providers
● Collect royalties from DSPs and pay to publishers
Mechanical licensing agents
22

23. ● Licensee must file NOI to rights owner within 30
days of licensing catalog
● If author or copyright owner unidentified, NOI must
be filed to USCO
NOI obligations
23

24. ● Harry Fox Agency —
● Music Reports —
● Loudr —
●
NOI — who files for who?
24

25. ● DSPs may exploit the works
● DSPs pay monthly mechanical royalties to the
licensing agent, who forwards to publisher
● Except where author or rights owner unknown,
monies held by licensing agent
● This is the black box for streaming mechanicals
Once the NOI is filed
25

26. Black boxes in multiple locations
Sound recordings Unidentified performers
Unidentified master owners
Cinematograhic films Unidentified performers
Unidentified master
owners
Music and literary
works
Unidentified publishers
Unidentified authors,
composers, arrangers
(remixers and adaptors)
Unnotified works
Rights Organizations Unmatched usage
26

27. ● Typically across the music industry black box
money may sit in escrow for 3-7 years
● At end of escrow period, monies are distributed
based on market share
Market share distribution
27

28. Quantifying
“unknown” NOIs

29. ● April 2016 — USCO allowed for digital filings of NOIs
● NOI filings made publicly available
NOI digital filings
29

30. ● The current fee is $75 per NOI plus $10 per group of
1-100 additional titles.
● For example, the fee for an NOI that includes 118
nondramatic musical works would be $95
(Title 1=$75; Titles 2-101=$10; Titles 102-118=$10)
Cost of filing NOIs
30

31. DSPs spend $8m-$12m
each on NOIs per year

32. Digital filings to US Copyright Office
32

33. ● Licensee information
● Authorizing entity
● Information About Each Nondramatic Musical Work Embodied or Intended
to be Embodied in Phonorecords Made Under the Compulsory License
What data is included?
Information About Each Nondramatic Musical Work Embodied or Intended to be Embodied in Phonorecords Made Under the Compulsory License
N. Title
[201.18(d)(1)(v)(A
)]
O. Author(s) (if
known)
[201.18(d)(1)(v)(B
)]
P. Copyright
Owner (if known)
[201.18(d)(1)(v)(C
)]
Q. Types of
Phonorecord
Configurations
(already made,
if any, and
expected to be
made)
[201.18(d)(1)(
v)(D)]
R. Expected
Date of
Initial
Distribution
of
Phonorecor
ds (already
made, if
any, or
expected to
be made)
[201.18(d)(1
)(v)(E)]
S. Principal Artist
or Group (engaged
or expected to be
engaged in
rendering
performances
fixed on
phonorecords
already made, if
any, or expected
to be made)
[201.18(d)(1)(v)(F)
]
T. Catalog
Number(s) (used
or expected to be
used on
phonorecords
already made, if
any, or expected
to be made)
[201.18(d)(1)(v)(
G)]
U. Label Name(s)
(used or expected
to be used on
phonorecords
already made, if
any, or expected
to be made)
[201.18(d)(1)(v)(
G)]
V. Date(s) of
Manufactur
e (for
phonorecor
ds already
made, if
any)
[201.18(d)(1
)(v)(H)]
33

34. Problem #1
- NOI filings are useless
in format made
available

35. ● Wrote a script to download, unzip, parse and index
in a searchable database
What did we do?
35

36. 36

37. 37

38. 38

39. 51, 069, 514
NOIS have been filed

40. Higher number of artists, greater representation of titles
Universal Music
Naxos
Warner
The Orchard
Tunecore
Columbia
Sony Music
40

41. ● Human input error
● Character recognition errors (non-Latin characters)
● Inconsistencies in naming conventions (“featuring”,
“feat.”)
● Record-Composition matching
● Publishing information not delivered
Why are owners unidentified?
41

42. Problem #2
- Filings to USCO are
static

43. ● Spotify sued multiple times
● HFA did not have the all of the relevant licenses,
and were unable to properly clear and file the NOIs
within the filing period
● Apple Music suit filed, relates to work distributed by
CD Baby
Legal ramifications
43

44. ● Spotify vs Ferrick case proposed settlement of
$43m
● Wixen Publishing suit ($1.6bn)
● Bluewater Music Services Corp
● $150,000 per infringed work
Assigning a value to filed NOIs
44

45. ● Difficult to quantify
● DSPs are filing full catalogs as a catch-all,
regardless of whether genuine author or copyright
owner is unknown
● Need to determine which filings fall outside the
filing period requirements
Assigning a value to filed NOIs
45

46. ● Spotify vs Ferrick case proposed settlement of
$43m
● Wixen Publishing suit ($1.6bn)
● Bluewater Music Services Corp
● $150,000 per infringed work
Assigning a value
46

47. Global royalty black box
revenue worth $2.5bn

48. NOI black box royalties
worth $50m-$300m

49. ● Reforms section 115 Compulsory license
● Creates Mechanical Licensing Collective (MLC) to
administer blanket license
Music Modernization Act (2017)
49

50. The National Music Publishers’ Association (NMPA), The Recording Industry Association of America
(RIAA), American Association of Independent Music (A2IM), the Recording Academy, the Nashville
Songwriters Association International (NSAI), the Songwriters of North America (SONA), The American
Society of Composers, Authors, and Publishers (ASCAP), Broadcast Music Inc. (BMI), the Production
Music Association (PMA), the Church Music Publishers Association (CMPA), the Music Publishers
Association (MPA), the Council of Music Creators (CMC), the Society of Composers and Lyricists
(SCL), MusicAnswers, the American Federation of Musicians (AFM), SAG-AFTRA, the Association of
Independent Music Publishers (AIMP), SoundExchange, SX Works, the Administrators of Gospel Music
(AGM), the Content Creators Coalition and the Music Managers Forum U.S
Music Modernization Act Support
50

51. Black box is a
sensitive topic

52. ● From market share distribution?
● From being able to monetize catalog without
permission of, or notifying, rights owner before
exploiting works?
● From continuing the practice of black box royalties?
Who benefits...
52

53. ● Given society revenues, shouldn’t technical
deficiencies have been solved?
● This has only been compounded with advent of
streaming
Why do they exist when...
53

54. Streaming dominates royalties
https://medium.com/@RIAA/the-state-of-music-mid-way-through-2017-7e90cad298f9
54

55. ● 2bn+ streams per day
● 1 terabyte + data
● 20,000+ new tracks added every day
● Millions of “data events” per second
https://labs.spotify.com/2017/10/16/big-data-processing-at-spotify-the-road-to-scio-part-1/
Spotify alone generates...
55

56. ● CISAC organizations connect to CIS-NET
centralized database
● Yet they still have conflicts
A central database, but not really
56

57. Problem #3
- Multiple databases of
rights information
- Who has authority?
- Who has access?

58. Industry survey

59. Who responded?
59

60. Majority of respondents aware of unidentified or unattributed royalties
60

61. Awareness of existing lawsuits against service providers
61

62. Causes behind infringements that led to lawsuits
62

63. Aware of instances of missing royalties due to being unidentified
63

64. Majority of respondents do not know where to check
64

65. Majority of respondents do not know how to claim
65

66. Aware of vendors offering services
66

67. What drives more awareness?
Awareness of current missing royalties lawsuits 25.23%
Incorrect Right Owner Identification is Urgent 21.80%
Knowledge on where to check 15.15%
Knowledge on how to claim 14.19%
Incorrect Right Owner Identification to be solved 11.85%
Awareness of Vendors 7.43%
Need for a recording composition DB 2.31%
Knowledge of case of missing royalties 2.06%
67

68. Causes of black box royalties
68

69. Most challenging aspect of royalty collection
69

70. Nearly 40% of respondents think black boxes are worth more than $1bn
70

71. Majority of respondents agree on a centralized database
71

72. But large disagreement on who should fund and administer
72

73. Recap

74. Problems with existing setup
Publicly available NOI filings are
useless in current format
74

75. Problems with existing setup
75
Publicly available NOI filings are
useless in current format
Filings to USCO are static
references

76. Problems with existing setup
For validation - multiple databases
with conflicting authority
76
Filings to USCO are static
references
Publicly available NOI filings are
useless in current format

77. Problems with existing setup
Multiple databases with conflicting
authority
77
Filings to USCO are static
references
Publicly available NOI filings are
useless in current format
Lack of interoperability between databases (API
integrations, CWR - DDEX) with no validation
capability
Inability for recording industry to deliver publishing
information to distributors/DSPs
Record-Composition matching
Lack of transparency in usage/accounting data
shared with writers and artists
Lack of single registration point for works with global
territories
Legacy software interfaces that are cumbersome for
writers and artists to use

78. Solutions in play
● Publicly available lookup tool (SX-Works)
● Music Modernization Act (US)
● Joint PRO efforts to address authority issues in
databases
78

79. ● Startups looking at emerging technology & new
development standards to address issues of scale
and matching
● Some don’t make sense in current music system,
but do in a new system
● Most of them prioritize interoperability
New companies, old problems
79

80. Be curious about new teams
80

81. ● Centralization of database/information is
something the PROs will want to own and control
● Startups will circumnavigate supply chain and
legacy companies if change isn’t fast enough
What do I think will happen?
81

82. Questions
dan@paperchain.io
@danielkdewar
www.paperchain.io