Synchtank report: rights management organisations face the risk of 'drowning in data' if they do not adopt high-performance systems

By Emmanuel Legrand

 

The increasing volume of data linked to the digital consumption of music on a wider range of platforms poses an existential threat to rights management organisation that face the prospect of "drowning in data" if they do not adopt scalable, high-performance, cost-effective and cloud-based infrastructures capable of processing data on an exponential scale and at high-speed, as well as performing complex calculations with high levels of automation.

 

  These are the conclusions of the report 'Drowning in Data - Royalty accounting and systems in the digital age', released on April 6 by Synchtank, a UK-based company providing music rights management, licensing and administration software solutions. The report takes a look at the issues facing performance rights organisations (PROs), music publishers and their teams "in trying to tackle ever rising volumes of data coming from an historic number of income sources."

 
  "We really want to wake people up to these challenges because they are only going to become more pronounced," explained Emma Griffiths, Marketing Manager at Synchtank. "We constantly hear about the growth of streaming and increased opportunities across emerging markets, UGC, social media, etc. What we don’t hear about is the underlying infrastructures which are struggling to keep up and are not positioned to maximize the value of copyrights. Regardless of what system or technology you use, you need to be prepared."

 

 A robust royalty management system

  It also looks at the trends behind this data explosion, and how rights holders, artists and songwriters "are losing out on what could be billions of dollars of revenue because of poor data management and a fragmented rights and payment landscape, the growing demands for transparency and how these issues can be addressed with a robust and modern royalty management system."

  The report highlights at the new opportunities for rights holders that will drive industry growth over the next decade and beyond, each of which needs to be paired with their own set of data issues: Short-form video platforms such as TikTok or Triller; Home fitness, with the likes of Peloton aiming for global audiences;  Meditation and well-being apps, such as Calm; Podcasts, which carry an increasing amount of music; Live streaming and virtual worlds, with apps such as Twitch; Esports and online gaming, with Fortnite and Minecraft as examples of services where games meet music; Smart speakers, the usage of which is growing; AR/VR, with Facebook-owned virtual reality music game Beat Saber being a taste of what could happen; 5G, which should allow faster networks and more bandwidth for data, including for music and video streaming; SVoD and OTT, with the rise and rise of platforms such as Netflix or Disney+.

 

Growing demands for transparency

  "The changing music consumption model from purchase to subscription, alongside the dramatic increase in licensing opportunities with a myriad of partners, has had a momentous impact on the make-up of a music publishing royalty statement. Increasing revenue is dependent on the ability to process exponential growth in data, which could be hundreds of trillions of data lines for PROs within five years and hundreds of billions for music publishers. The more companies meet industry demands for greater transparency, the more volumes of data will be generated," notes the report.

  For PROs and publishers, one of the key challenge will be to adapt their systems to adjust to the growing volume of data while the amount of each transaction is dropping. Data supplied by the UK's PRS for Music shows that between 2009 and 2019, data lines required to earn £100,000 of revenue exploded over the last six years and has continued to grow, while the revenue per line of sales statement data has dropped dramatically, from over £0.1 in 2009 to £0.00001 in 2019.

Data lines for £100,000 revenue

Revenue per data line

  Faced with a fragmented rights and payment landscape, PROs and right management companies will have to look at the best options for their infrastructure needs. The report looks at the pros and cons of building proprietary systems versus buying (or licensing) existing systems. And it gets tricky with established companies that have been using "legacy systems" and upgrading them to build extra functionalities.

 

Opting for a hybrid solution

  "While the need for a new royalty management system might be very clear, companies then face the dilemma of whether to buy an existing solution, build a system themselves or go for a combination of the two – a hybrid solution. Music publishers and administrators looking for a new system to take control of their data issues will most typically opt for a hybrid solution, one that combines an off-the-shelf product with an existing in-house system," reads the report. 

   For those who have already invested in an in-house system or have unique requirements, the report claims that "a hybrid approach makes logical sense and is something that modern systems can easily accommodate." One of the main advantages of building an in-house system is that "the software does exactly what is required because the company can control the spec." 

 

  However, the report notes that creating a proprietary software, rather than buying in already-established software, "will take a lot longer and comes with a substantial risk of over-runs and spec degradation to hit deadlines," as many PROs have discovered in recent years.

 

Rapidly expanding data

  Buying into an existing system has its own pros and cons. The biggest advantage is that it avoids going through the trial and errors that building a new system usually entails. According to the report, "business critical software that is proven and can be bought in will generally be quicker to install, have far greater functional capabilities than a custom-built system." It will have also been through rigorous testing and can be upgraded frequently to stay current in the market.

  "This is particularly important in the music royalty sector where data is rapidly expanding and there are different monetisation strategies that can further complicate the process of creating software that requires specialised data and development," according to the report.

  In its conclusions, the report states that "an integrated, modern, high-performance and secure royalty system will allow a company to unlock the potential of their catalogue and be competitive in the marketplace. It will increase efficiencies and reduce costs." 

 

Tried-and-tested solutions

  For some companies, the idea that their data issues "are unique and can only be answered by creating a purpose-built, in-house system" could prove "expensive and high-risk and will require constant overhauls to keep the system up to date."

  "The cheaper and more efficient solution is undoubtedly to buy a system as it will be reliable, low-risk, highly-customised, have been tried and tested, and will continually evolve to meet new industry trends and demands. It will keep a company competitive and relevant, while saving money and generating more revenue. It will also contribute to the wider industry environment as it will be able to communicate with other systems," reads the report.

Here are some of the additional findings from the report:
  > Ever-rising data volumes, increasingly fragmented rights, and an historic number of income sources are creating unprecedented challenges for music publishing royalty and finance teams.

 
  > While global music publishing revenue is forecast for a 5-10% CAGR (Compound Annual Growth Rate) over the next decade, the volume of data that publishers and their systems will have to process during that time will grow at a higher rate of 20-30% or more per annum. 

  > Increasing revenue is dependent on processing exponential growth in data, which could be in the hundreds of trillions within five years for PROs and hundreds of billions for publishers.

  > Much of the industry’s expected revenue growth over the next decade will come from emerging territories and regions, making it vital for companies to have a royalty system that can track income and payments on a global scale. 

  > Despite efforts to promote standardisation and interoperability, poor data management and antiquated, siloed royalty systems are causing significant duplication, inefficiencies, data matching problems and a fragmented payment landscape. As a result, the industry could be losing out on billions of dollars in revenue. 

  > Access to data is everything. Artists, songwriters and their managers now expect full earnings transparency, while rights holders increasingly want to leverage data to drive operational decision making. 

  > The growing data volumes, complexities and transparency demands have increased the need for robust technology and all of these issues can be addressed by an integrated, cost- effective, cloud-based royalty system that is powerful, scalable, automated, adaptable, supports standardisation and accommodates multiple data sources. 

  > Companies face a dilemma whether to build their own system or buy an existing solution. The self-build route is incredibly high risk, could cost 10 times more than buying in and take 15 times longer to build, and may not be future-proof. Whichever solution is chosen, there needs to be a clear path to Return on Investment.