When we think of royalties, we think of Beyoncé and piles of cash accumulating in bank accounts as the latest hot single racks up airplay and downloads. But the reality is different. If music is an ancient pursuit, the pursuit of royalty checks follows close behind. And the latter pursuit is, indeed, marked by archaic paper-chasing.
Late last year, Hyperwallet announced a partnership with USA Media Rights, a music and media rights company, with the hope of improving the process of delivering royalty payouts. And while royalty payouts may seem like bean-counting — the number of times a hit single’s been played or a movie’s been shown — it’s often more like cat-herding.
In an interview with PYMNTS, Hyperwallet VP of Strategy and Business Development Tomas Likar explained how royalty payouts are marked by the vagaries of various legal provisions, scheduling and infinitesimal payouts. “People still have to hunt for their royalties, and they still have to wait — three to six months is often the best case,” said Likar. “Sometimes, they may have to wait a couple of years.” As such, royalty distribution is another industry that appears poised for FinTech disruption. Likar described royalties as a payment segment that is “five to 10 years behind” the kind of digital payment methods that have been introduced in other arenas.
Illustrating Hyperwallet’s role in the royalty payouts continuum, Likar told PYMNTS’ Karen Webster that the company works with “performing rights organizations — PROs, for short — who typically represent artists and work on their behalf.” The process is one where an artist in the U.S. signs up with one of the major PROs, and the latter will service the artist’s entire portfolio. However, the process is never completely flawless, Likar explained, and royalty hunters like USA Media Rights still need to track down overdue royalty payments from other PROs or geographies.
The issue here, said Likar, is one of transparency. Artists receive a check at the end of the month — or, in some cases, the end of the year — but don’t know what has gone into calculating that payment. Hyperwallet, on the other hand, aims to deliver royalty payouts as quickly as possible, for as much of the full value as possible, and with transparency. That’s tough to do when working alongside PROs that have more than 1 million members in the U.S. alone and are receiving hundreds of thousands of low-value payouts for “long-tail” artists every month.
But in improving the royalty experience for those long-tail artists, said Likar, the complexity lies in the artists’ expectations. Many have other jobs in the gig economy (e.g., Uber, Airbnb) and have become accustomed to the digital payment options available there. In gig work, Likar said that independent contractors often “get paid in a much faster and frictionless way.”
And while royalty distribution is not directly tied to the gig economy ecosystem, the industries have begun to overlap. PROs still think that they are competing solely with other PROs. But as Likar explained, artists are finding new earning opportunities “across all types of freelancer and content platforms,” and disruptors are starting to emerge in the space.
As an example, Likar pointed to the Australian marketplace AudioJungle, where artists can monetize their tracks to buyers who need music for movies or other commercial projects while eliminating middlemen. Royalty payment innovators are also moving toward real-time payouts in place of monthly checks. Given that “30–50 percent of royalties get lost on the way to the artists,” Likar observed: “In this digital age, it’s amazing that we still have to go through these old-school processes.”
The royalty distribution industry is changing. Large digital media players like Spotify are establishing direct relationships with the artists, and those platforms have come to represent the bulk of artists’ exposure (and downloads and clicks) to their global audiences. PROs will need to find new ways to compete.