This is a guest post by Tracey Melnick, VP, Royalty Services at music distributor and payments firm Stem. She believes that finance teams like hers can “be the engine” that can power a fairer, more sustainable and more profitable music business – if the industry can unite around a modern finance framework.
Four years ago, I was the SVP of Finance and Operations at an independent label in New York. Over the course of my career, I’ve been in the office until 3 am with my entire team combing through thousands of paper royalty statements (yes, actual paper!) line by line. I still have people calling me with questions about royalties at companies I left years ago.
Every step of the way, I’ve recognized the same pattern – if labels had better supported their finance departments, they would have been better able to maximize the value of their releases. Right now, we’re entering a period of innovation. Apple Music and Amazon are raising subscription rates. Musicians are finding new ways to sell their work. UMG, TIDAL and Deezer are partnering to develop new streaming payment models. Finance can be at the heart of this. We deeply understand the economics of our business.
Look at what Spotify for Artists did for music marketing by giving more people access to more streaming performance data. When artists were able to see who listened to their music and how they discovered it, they were able to double down on successes they might otherwise not even have known occurred. The data showed them wins that had, up to that point, been invisible. Now every DSP is offering more data to artist teams and the entire industry is better for it.
Music finance teams can drive positive change
If music finance teams are empowered to do the same thing for earnings and royalties, it will have an even wider and more substantial impact. We’ll turn technological change into a constant opportunity instead of a constant challenge. With more resources and more sophisticated software, we’ll see where disruptions are happening and where opportunities are being generated. For too long, labels have reacted to technological changes defensively. It took us too long to come up with a response to illegal downloading, user generated content, and so many of the biggest changes of the last two decades. Data will help us put labels on the offense.
Maybe even more importantly, data will help artists properly understand their value. Over the years, I’ve had friends who are artists call me up and say, “I think I’m getting fucked. You know about finances. Can you help me?” Sadly, what I usually discover is that these artists have very little visibility into their own business. Even the ones who can show me accurate statements often don’t understand everything behind the accounting. This isn’t okay. It’s important that we build technological innovations and payment systems to inform and empower all artists, no matter the level of their career or their financial literacy.
The fragility of financial processes hurt labels and artists
When I first got into this business, I didn’t know how hard it would be. I had been working in corporate finance but it didn’t suit me. I had to be in music, even if it meant I would have to stay at the office until 1 am, sorting through deals written on the backs of napkins and various DSP/physical statements. I loved music and wanted to help artists make a living from their art.
Since then, I’ve put in my time at independent labels, rolling up my sleeves, pulling all-nighters with my team, and making sure everyone gets the royalty statements they’re owed. What I’ve experienced is unfortunate. Traditional royalty processes hurt finance teams and the musicians we want to pay.
I’ve experienced countless examples of the fragility of our processes. We’ve depended on antiquated software or tried to fuse together our own clunky Excel equivalents — and crash-prone Excel simply doesn’t function in the streaming era. Even when we do have software expressly built for royalties, it runs into problems. Once, when my team wanted to get a preliminary calculation on our statements, the program we were using crashed, losing all our work – and the software company’s support team didn’t have the resources to return our calls due to the overwhelming call volume they were dealing with.
And artists themselves are justifiably upset. They lose trust in us when the statements they only receive twice a year arrive late – and too often, are inaccurate. I’ve put in enough time to know that, as much as I love music, we need to do better. Without a properly functioning finance framework, the ripple effects of delayed payments and the uncertainty of artist finances impact the entire industry’s ability to operate seamlessly. We need to do better for the people who work in music finance, for the labels who depend on us, and most importantly, for our artists.
How empowering financial teams will make music fairer
After years of experiencing this, I want more. It’s time to adopt systems that will alleviate the stress on finance teams. That means:
- Giving artists access to earnings data and income-management tools. In ten years, no artist should be in the dark about the details of their financial status.
- It’s time for labels to stop processing royalties semi-annually and start processing them monthly. This will require buy-in from everyone, not just finance departments, but labels as a whole. In ten years, artists should be receiving income in the same manner as people in every other industry are today.
- Artists shouldn’t have to cross their fingers waiting for sporadic lump-sum payouts. In ten years, targeted deals should work for non-superstar artists who want both creative freedom and a dependable income.
I joined this industry because I love music and the artists who make it. The longer I’ve been here, the more I’ve learned to love the people behind the scenes. We do everything we can to help artists, even when that means making big sacrifices. That’s why it’s going to be so important to change the way we do royalty processing.
Because outdated processes aren’t just unfair to us, forcing our teams to solve impossible problems. They also get in the way of what we want to do – make this a better industry for everyone. Labels and artists should be partners in making this business fairer and more sustainably profitable. Finance teams can be the engine that makes that partnership work.
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