The industry’s new streaming code is aimed at improving trust and transparency between artists and rights-holders.
Here, Tom Allen, president, Downtown Royalties & Financial Services Division (DR&FS), looks at creating an industry standard for royalties reporting…
Earlier this year the UK’s Intellectual Property Office published the UK Voluntary Code of Good Practice on Transparency in Music Streaming. It’s a helpful blueprint aimed at improving trust and transparency between artists and rights-holders across the UK’s recorded music industry.
Industry leaders representing artists, labels, DSPs, distributors, publishers and collection societies, put forward specific best practices that make the music industry supply chain easier to navigate and ensure artists are more fairly compensated for their work.
An essential link in that supply chain is the way royalties are reported, and this code provides helpful guidance within the UK. As the music industry becomes increasingly global, the need for standardised royalty reporting practices goes beyond borders. Industry players outside the UK can contribute to a fairer, and easier to navigate system that benefits artists everywhere by pushing forward similar standards.
Decades ago, artists received semi-annual royalty statements by mail, offering little visibility into the sources of their earnings. While the system isn't perfect today, it’s come a long way. Artists can now access insights into their earnings with detailed breakdowns of streams by platform and territory, and clear, easy-to-understand summaries of balances, headline revenues and what and when they will be paid.
Downtown Music now supports more than four million artists and 5,000 business clients across 150 countries. Collectively, they generated more than 1.5 trillion streams on major platforms in 2023. So, we've processed a massive volume of royalty statements and spent considerable time thinking about ways to make it more efficient, accurate, and transparent.
As the music industry becomes increasingly global, the need for standardised royalty reporting practices goes beyond borders
Tom Allen
As the saying goes, 'what gets measured gets managed.' That’s why being highly intentional about what’s reported in royalty statements is essential to helping artists and rights-holders understand their earnings, and manage their careers and businesses.
Here are the essential elements of a trusted royalty dashboard we think all royalty statements should include:
1. Headline Summary
A clear overview of the artist's financial position, providing essential insights at a glance:
• Opening Balance: The balance carried forward from the previous period
• Payments Made: Any payments disbursed during the period
• Royalties Earned: Total royalties generated in the current period
• Accrued Costs: A breakdown of costs, indicating whether they are recoupable or not
• Reserves Held: Any amounts being held in reserve
• Closing Balance: The final balance after deductions and earnings
• Payment Details: How and when the closing balance will be paid to the artist
2. Revenue Breakdown
Detailed information about where and how the revenue was generated:
• Source Territory: The geographic location of streams or sales, including exchange rates for international payments
• Consumption Date: When the content was streamed or sold
• Reporting Date: When the royalties were reported to the rights-holder
• Catalogue Information: Specifics on which tracks or albums contributed to the revenue
• Exchange Rates: Any currency exchanges and the rates applied
• Consumption Model: Whether the earnings came from physical sales, premium streams, ad-supported streams, family plans, radio, etc
3. Royalty Breakdown
A detailed look at the royalty calculations for maximum transparency:
• Gross Revenue: The total revenue that royalties are calculated from
• Share: The artist’s or writer’s share for the track or composition
• Royalty Rate: The percentage or rate applied to the gross revenue
• Deductions: A clear explanation of any deductions that have been applied
• Mechanicals: Whether mechanical royalties were deducted before or after master royalties, along with the specific amount
• Reserves: Any reserves being held back on a specific line item
• Royalty Amount: The final amount payable to the artist or writer after all calculations.
4. Cadence
Royalty reports should be delivered with greater frequency:
Frequency: Ideally, reports should be issued at least quarterly, if not monthly, to give artists a more consistent view of their earnings.
This level of detail allows artists to see not only where their revenue is coming from, but also how their audience engages with their work across different platforms and formats. By splitting out data in this way, artists can better understand their business, including which territories or DSPs are strongest for them, which revenue streams provide the most value, etc. By including specific line by line calculation, it also builds trust, providing full transparency on how the royalty has been calculated, and not hiding behind a single number.
Our goal at Downtown and Curve is to shorten the payment cycle to artists and writers – thinking about how we can simplify the royalty and payment process, reducing the burden on labels and publishers to report more often. We recognise that the ability to report on a monthly cadence is a big ask for a lot of labels and publishers, with relatively small royalty and finance teams, so we’re looking at the tools, and thinking about how we can make as much of this process ‘set it and forget it’ as possible. Making the flow of capital quicker into the hands of those who are stimulating the market – artists and writers – can only be a good thing for a healthy industry.
Adopting a comprehensive, industry-wide standard for reporting royalties across labels and distributors globally would streamline processes, and provide artists and rights-holders with a much clearer understanding of their earnings. And that would foster a whole lot more trust that benefits everyone in the music industry.
