Thought Leadership

Fixing Royalty Payment Distribution in the Music Industry: Part 1

TL;DRRoyalty distribution doesn’t have to be tedious, slow, and expensive. In this 2-part series, Hyperwallet’s royalty business development lead, Justin Butler, breaks down 5 ways digital payments can help improve royalty distribution. In this post, Justin will focus on ways to empower your recipients and put them in control of their payout experience, and he’ll explain the benefits of improving your royalty management process.

Did you know royalty payments originated in medieval Europe back when the feudal system was flourishing? During that time, land owners would collect income from peasants through rents or profits from farming. While wheat and cash were the dominant forms of royalty payments back then, paper checks and wire transfers became the preferred payment method once modern banking services came onto the scene. Now, with the increasing demand for access to financial tools on mobile devices, royalty payments are evolving even further, especially in the music and media industries. From wheat and checks, to PayPal and prepaid cards, the push to improve royalty distribution and offer faster, more digital royalty payment options is here – is your organization ready to embrace the change?

Let Payees Update Their Own Payment Information

When it comes to upgrading your royalty payment process, it’s important to look for a solution that empowers your recipients to self-serve and self-manage how and when they collect their royalties. Over time, recipients such as artists and songwriters may have changed their home or business address, bank account, or contact information. In some instances, they may have old contracts on file in your systems with incorrect information concerning their representation and/or personal information. Handling the information management of hundreds (or even thousands) of artists is nearly an impossible task for royalty distribution organizations; finding a way to empower your recipients and give them the tools they need to handle this task on their own is critical.

With digital royalty payment platforms, music streaming services, record companies, and performance rights organizations (PROs), can avoid all the trouble associated with updating royalty recipients’ information. This hands-off approach to provision and update payment information will not only help reduce your organization’s administrative expenses, but can also decrease the probability of payments being returned.

The music industry is also no stranger to unclaimed royalty payments. Similar to royalty payments in other industry segments, such as those in the energy sector, royalty dollars do not always reach their rightful recipients. While unclaimed, lost, or delayed payments may be common causes, problems with mismatched records is also a prevalent one. Self-serve digital royalty platforms that make it easy for recipients to manage their own contact details, can go a long way to increasing the probability of royalty funds reaching artists, publishers, or songwriters without delay.

Share the Benefits of a Flexible Payment Schedule

The frequency of royalty payments is often included in the royalty contract agreement. In most cases, record labels pay royalties twice a year, while music publishers typically pay between 2 to 4 times annually. PROs pay somewhere between 4 and 10 times a year. Royalties are also subject to payment thresholds and other conditions, under which payments are not distributed.

Organizations can considerably reduce the logistics and administrative cost associated with the individual payout distribution of royalty payments using digital payment technology. These platforms can distribute payments in near real-time rather than on a fixed schedule, allowing royalty recipients to collect their earnings at their convenience. But it isn’t just the recipients that benefits from this easy distribution; royalty distribution organizations can also reap the benefits through lower administrative expenses and better accounts payable management.

Digital payment platforms also make it easier for royalty distributors to monitor any payments that are made to their recipients, as per their signed agreements. Whether you have a small- or large-scale payout need, a payout provider like Hyperwallet can handle the swift distribution of royalties via bulk batch payment instruction uploads or in real-time using REST API calls.  Moreover, digital payment platforms allow you to send funds simultaneously to multiple recipients on the payment schedule of your choice. Embracing a flexible payment schedule via a digital payment platform can have a positive impact on your organization’s reputation and the satisfaction of your recipients.

Empowering your recipients and improving the efficient disbursement of funds are just 2 ways payout technology can help fix royalty payments at your organization. In part 2 of my deep dive on royalty payments, I’ll take a closer look at the importance of offering payout optionality, how payout technology can help simplify tax reporting, and ways to speed up global royalty disbursements.

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