Streaming services such as Spotify , Deezer , Tidal or Apple and Amazon Music pay hundreds of millions to the various rights holders for the music available on their platforms.

Sometimes, however, only part of the money reaches the actors to whom it is due.

In mid-February last year, for example, various streaming services and other digital music providers in the USA transferred exactly $424,384,787 to a newly established collecting society.

Benjamin Fisher

Editor in Business.

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This princely sum was composed of old and unallocated royalties from the management of the so-called "mechanical" reproduction rights.

Through these, composers and songwriters are involved in the digital or physical sale and stream of a work.

The "Mechanical Licensing Collective" (MLC) as a company, in turn, has the task of finding the appropriate authors for these payments, which have not yet been assigned.

No bill, no payout

The case revealed an American peculiarity in the complex web of rights management.

Such a society has existed in other countries for a long time.

Or there is – like the Gema in Germany – one that covers both the mechanical rights and the “performing rights” that are relevant when a work is performed in public.

In the USA there were previously only companies for the performance rights such as ASCAP or BMI.

Of course, this does not mean that no money was paid to songwriters and publishers from the exercise of the mechanical rights.

"Several billion dollars have certainly flowed during this period," says Thomas Theune, Director of Broadcasting and Online at Gema.

Before the MLC was founded, agencies were sometimes commissioned to collect the funds, and many rights holders – above all the publishers of the industry giants Universal, Sony and Warner Music – took it into their own hands.

"Only where no invoice could be issued, for example because works could not be clearly identified or the shareholdings in musical works were not clear at the time of invoicing, could remuneration sometimes not be claimed."

This is how Spotify & Co pay out

Like the still young US company, Gema in Germany does not exercise all copyrights to the streaming services.

With the rights of its own members and those that have been transferred via reciprocal agreements with foreign collecting societies, the share is “well below 50 percent”, according to Theune.

In principle, streaming services such as Spotify and Co distribute around two thirds of their sales to rights holders.

A little more than 50 percent of the collected revenue goes to the recording side, is paid to labels or distributors and through them to performers.

Accordingly, publishers and songwriters receive a significantly smaller share, from which the collecting societies also receive a share.

Complicated publishing business

There is a lively discussion in the industry about the distribution relationship between the recording on the one hand and text and composition on the other hand and how appropriate this is in a largely digital market.

Theune notes that from the "music-on-demand area", which also includes video streams and downloads, "significantly more than 100 million euros" are now distributed via Gema each year.

But this sum is "out of proportion" to the total income that the music industry generates through streaming.

For comparison: 1.96 billion euros were turned over with music recordings in Germany - audio streaming contributed 68.3 percent.