Unclaimed Royalties

In-Depth Explanation

What are Unclaimed Royalties?

In the music industry, Unclaimed Royalties (often referred to colloquially as "The Black Box") are funds generated by the commercial use of a song that are sitting in a bank account at a collection society because the society doesn't know who to send the money to.

This happens when a song is streamed, broadcast, or sold, but the metadata attached to the audio file is missing, incomplete, or contains errors. The computer systems cannot match the usage data to a registered copyright owner, so the money goes into holding.

How Do Royalties Become Unclaimed?

Unclaimed royalties are almost entirely the result of bad Metadata. Common scenarios include:

1. Missing ISWC: A song is uploaded to Spotify with an ISRC (identifying the audio), but the songwriter never registered the song with a PRO or mechanical society to get an ISWC (identifying the composition). Spotify pays the mechanical royalty to The MLC, but The MLC doesn't know who wrote the song, so the money sits unmatched.
2. Typographical Errors: The songwriter's name is spelled "John Smith" on the audio release, but registered as "Jonathan Smith" with their publisher. The computer fails to make the match.
3. Missing Split Sheets: The songwriters never signed a Split Sheet. Writer A registers the song claiming 100%, but Writer B registers the same song claiming 50%. The society freezes all royalties until the dispute is resolved. If it is never resolved, the royalties remain unclaimed.
4. No Pub Admin: An independent artist releases their own music globally but doesn't have a Publishing Administration deal to collect international mechanical royalties from foreign societies like GEMA (Germany) or SACEM (France).

The Size of the Problem

The scale of the unclaimed royalty problem is massive. In 2021, when The Mechanical Licensing Collective (The MLC) was officially launched in the United States, streaming services (Spotify, Apple, Amazon) transferred over $424 million in historical unmatched black box royalties to the new organization.

This $424 million represented money generated by songwriters that the streaming platforms simply could not pay out due to bad metadata over the previous decade.

What Happens to the "Black Box" Money?

Collection societies cannot hold onto unmatched money forever. By law, they must eventually liquidate the funds. The process generally works like this:

1. The Holding Period: The society holds the unmatched money in an escrow account for a set period (usually 2 to 3 years), actively trying to match the data or waiting for a songwriter to claim it.
2. The Liquidation: Once the holding period expires, the money is officially liquidated.
3. Market Share Distribution: The society takes all the liquidated money and distributes it to the publishers and labels who did have accurate data, based on their overall market share.

Why this is devastating for independent artists: If an independent artist doesn't claim their $500 in mechanical royalties within three years, that $500 is liquidated and a huge percentage of it is essentially handed to massive corporations like Universal Music Publishing and Sony Music Publishing because they hold the largest market share. The indie artist accidentally subsidizes the major labels.

How to Prevent Unclaimed Royalties

Preventing your money from entering the black box is straightforward but requires administrative diligence:

1. Always sign a split sheet before leaving the studio.
2. Register your songs with your PRO before you upload the audio to your digital distributor.
3. Ensure your spelling is identical across all platforms.
4. Sign up for a Publishing Administrator to collect your international mechanical royalties automatically.