After numerous discussions this week, it was with amazement that I realized that record labels even when dealing directly with the mobile operator or digital stores provide full master tracks and then are happy to just receive sales reports in excel spreadsheets, with no traceability or transparency whatsoever. Hold on a minute… is this not open to both human error and underhanded abuse? The answer is yes.
Apparently, the mobile operators and online digital retailers contractually insist that the labels provide content in this way. Do any other industries trust their digital retailers in such an easygoing manner? I doubt it. So why do record labels allow online retailers and mobile carriers to do so and insist in their contracts? I cannot understand why labels, which are suffering serious declines from traditional hardcopy sales, could or would allow their digital revenue streams to be so non-transparently reported when there are a plethora of solutions available.
Labels point to their monthly audit rights. But as one large music distributor recently outlined to me, they never use them due to the expense necessary to carry out such audits. So with the current state of affairs would the record labels know if they were being under reported to on sales figures from digital retailers? The simple answer is no they would not and do not. Surely this is plain insanity having no true knowledge and control over whether the digital sales figures provided to them are correct?
I have recently heard of some content producers beginning to start using new technologies to ensure that they are receiving correct and transparent digital sales reporting. In fact, it was recently brought to my attention that a large international film studio had implemented such a service insisting that all digital retailers mobile and online wanting to sell its content had to accept content via its new OMMS system. This client then waited for a carriers report before presenting the carrier with its own correct report, which showed that the carrier had under reported sales figures by on average 30%. Evidence of similar under reporting percentages is also evident across both carriers and online music retailers.
Let’s presume the majority of digital retailers have also been under reporting sales. I’m not in any way stating that this under reporting is intentional or malicious…just that it is a fact that under reporting is rampant. This leaves a large revenue percentage that content owners have not been correctly paid on.
Also, if digital retailers and carriers are under reporting, then where does this leave the MCPC PRS and collection societies in general?
So, are record labels going to start insisting on transparency in digital sales reporting for their music? Probably not until they get away from their previous sad negotiation status. It will only come about if labels unite and agree industry standards for reporting, which are totally transparent and use the latest technologies to aid them in doing so. To successfully ensure transparency in digital sales reporting labels need to leverage their ownership of content and insist that digital music retailers and carriers adhere music industry reporting standards (once and if the music industry can unite to sort them out?).