Royalty Accounting Is a Pain. Stem Wants to Make It Easy
Last year, Milana Rabkin Lewis, co-founder and CEO of the distribution company and payment platform Stem, was among those who read a series of frustrated tweets from the rapper Meek Mill. “I haven’t got paid from music, and I don’t know how much labels make off of me!” Mill wrote in a since-deleted thread. “How much have you spent on me as an artist? How much have you made off me as an artist?”
“Why can’t he know that?” Rabkin Lewis asks. The problem has frustrated her since she was an agent at United Talent Agency and saw “just how messy the whole process” of royalty accounting was. “We were working with major artists who realized they had no visibility into when they were going to get paid and how unrecouped they were,” she recalls.
Part of the reason she started Stem in 2015 was to provide artists with more transparency. Now Stem is debuting Royalty Services, which aims to distill labyrinthine Excel spreadsheets into digestible dashboards and will be available to labels outside of Stem’s distribution network. (Some of the major labels also have their own version of a dashboard, though managers say they can be tough to navigate.) Users can view summaries of overall costs, earnings and recoupment status. They can drill down into more granular data — to determine which streaming platform or track is generating the most money, for example — with a click. And the process of linking bank accounts and sending money to partners is straightforward.
“It’s easy to see which song is doing the most each month on which platform, how much you’re making, when you will recoup,” Rabkin Lewis says. Stem’s chief product officer Brendan Kao calls the new dashboard “the next step in our mission to improve financial clarity for the entire music industry” for both labels and artists.
Royalty accounting has been a source of artist frustration for about as long as there has been a music industry. “The mystique of the music business is that, though profits are huge, accounting is incomprehensible,” CBS boss Walter Yetnikoff wrote in his memoir. Another company hoping to inject more transparency into an industry known for opacity is CreateSafe, which made a Record Deal Simulator freely available online so artists can input their advance, recording and marketing costs and get a rough estimate of how many streams they need to generate to recoup their deal.
If anything, royalty accounting has only become more complicated in today’s digital environment. Artists often release more music with more partners than in the past and work with more producers. And revenue comes from multiple streaming services as well as platforms like TikTok and Twitch. “We’re also seeing this trend of the admin and the responsibility of paying people out going more downstream,” Rabkin Lewis adds. “Motown pays out Quality Control, for example, but there are so many layers of people that need to get paid after that,” from artists to producers to engineers, and “often the people downstream from the major have no software.”
Quality Control has also started using Stem’s technology, as has Fool’s Gold. Rabkin Lewis says she hopes to have 50 clients by the middle of 2023. “Stem’s software makes royalty data easy to read to the point that I actually want to log in myself to look at trends,” Quality Control co-founder Kevin “Coach K” Lee said in a statement. “With any other solution, I would wait for my team to generate a report and then wait again while they pull the important details out of a massive spreadsheet.”
Justin Blau, best known as the DJ-producer 3LAU, is the founder of Blume Music, another label that quickly signed on to use Royalty Services. “We used to hire an accounting firm,” Blaus says. “We’d send them everything, they’d send paperwork back, and then we’d send payments manually to each rightsholder.” This system was “inefficient,” Blau continues, to the point that it was “just obnoxious.”
He was quick to sign up for Stem’s new product: “A lot of artists have been waiting for this.”