Unclaimed Royalties

In-Depth Explanation

Unclaimed royalties (often called "the black box") are funds generated by the commercial use of a song that sit in a collection society's bank account because the society cannot identify or locate the rightful copyright owner. This happens when metadata attached to the audio file is missing, incomplete, or contains errors, preventing computer systems from matching usage data to a registered rightsholder.

How Unclaimed Royalties Work

When a song is streamed, broadcast, or sold, multiple parties owe royalties to the songwriter and publisher. Streaming platforms like Spotify and Apple Music pay mechanical royalties to The Mechanical Licensing Collective (The MLC) in the United States. Performance royalties flow through PROs like ASCAP and BMI. International royalties route through foreign societies like GEMA (Germany), SACEM (France), and PRS (UK).

If the metadata attached to the usage data does not match a registered copyright owner, the money goes into holding. The society places the funds in an escrow account and attempts to match the data. Common causes include:

• Missing ISWC: A song is uploaded with an ISRC (identifying the audio recording) but the songwriter never registered the composition with a PRO or mechanical society to obtain an ISWC. The MLC receives the money but cannot identify who wrote the song.
• Typographical errors: The songwriter's name is spelled "John Smith" on the release but registered as "Jonathan Smith" with their publisher. The matching algorithm fails.
• 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.
• No publishing administrator: An independent artist releases music globally but has no publishing administration deal to collect international mechanical royalties from foreign societies.

Collection societies cannot hold unmatched money indefinitely. By law, they must eventually liquidate the funds. The process works in three stages:

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

Real-World Example

In January 2021, when The MLC officially began operations in the United States, streaming services (Spotify, Apple, Amazon) transferred over $424 million in historical unmatched black box royalties to the organization. This $424 million represented money generated by songwriters that the streaming platforms could not pay out due to bad metadata over the previous decade.

The MLC has since built a Matching Tool and Claiming Tool that allows members to search for unmatched royalties and propose matches. However, significant amounts remain unclaimed. If an independent artist does not claim their $500 in mechanical royalties within the holding period, that $500 is liquidated and a large percentage is distributed to major publishers like Universal Music Publishing and Sony Music Publishing based on their market share. The independent artist effectively subsidizes the major labels.

Why It Matters for Independent Artists

Independent artists lose more money to the black box than any other group. Major labels and publishers have dedicated administrative teams that register metadata correctly across all platforms. Independent artists often handle their own registration, and mistakes are common.

The single most effective action you can take is registering your songs with your PRO before you upload audio to your digital distributor. Ensure your spelling is identical across every platform. Always sign a split sheet before leaving the studio. Sign up for a publishing administrator (like Songtrust or CD Baby Pro Publishing) to collect your international mechanical royalties automatically.

Use our Streaming Royalty Calculator to estimate how much your music generates, then verify that you are actually collecting every dollar through proper registration. Read our guide on the best royalty collection services for independent artists to compare your options.

Related Terms

• Royalties
• Metadata
• ISRC
• ISWC
• Publishing Administration