Photo Credit: DMN Pro Data
When it comes to handling accounts payable and royalty commitments, mishandling data can lead to catastrophic legal consequences. Incorrect or missed payments can trigger copyright actions and content removals—with time-consuming litigation soon following. A flexible payments partner becomes integral to avoiding legal mayhem — here’s a closer look.
Let’s take a peek at the data from Digital Music News’ ongoing litigation tracker to see where legal issues in the music business fall. Around 55% of all pending litigation cases since August 2024 have had copyright issues at their core. Coming in at 15% are contract and other disputes, followed by Antitrust/Federal Issues at 10%, with Patents and Trademark legal issues bring up the rear at 9% of pending litigation.
More than half of all music industry lawsuits involved copyright-related disputes in 2024. Copyright disputes include allegations of copyright infringement, but also all issues tied to improper accounting or non-payment issues. This is where having a flexible payments system can help businesses avoid these issues in the first place.
A well-oiled payments and financial automation platform can help any music business avoid this common pitfall. Just recently, DMN and Tipalti joined forces to deepen the focus on proper financial accounting and payment processing, two key components to minimizing legal liabilities. Tipalti offers full tracking and accountability, with disputes more quickly understood and resolved before they reach the litigation state.
So how can music businesses avoid these common pitfalls? Here’s a quick checklist to assess.
Does your system account for all triggered licenses within your model framework, including performance, mechanical, synchronization, and territory-specific licenses? A detailed examination of your application, model, or platform with an industry attorney or top law firm is a good first step here. Once a business sets sail, being wary of overly-aggressive claimants who may try to stretch the definition of a specific license—especially in novel use cases—becomes paramount.
Are you identifying and establishing connections with all payees for specific applicable licenses, including rights organizations, labels, publishers, and artists and songwriters themselves? For a number of triggered music licenses, an artist or IP owner often works through an intermediary to collect and administer royalties. In the case of performance licenses, publishers and songwriters in the United States often work with performance rights organizations (PROs) like ASCAP, BMI, SESAC, GMR, or AllTrack.
Does your system appropriately bucket various licenses and payee relationships into matching territories and blocs? This is one area in which Tipalti stands out. New territories often introduce different licensing and payout requirements. Having a payment platform that can incorporate these modifications on-the-fly means compliance—and fewer legal headaches as the company expands into new territories.
Does your system tie all creator and rights owner contracts with actual payout calculations and terms? Is the system prepared to process and handle disputes when they arise, including conflicts over IP ownership? If contractual terms change, then payments may also change as well. Structuring contracts from the beginning to smartly connect into a payments platform like Tipalti reduces headaches and administrative overhead when contract obligations change.
Conflicts over IP ownership are a near certainty in the music business, though different companies deal with these issues in separate ways. For example, a conflict on YouTube could freeze all monetization for the channel until a resolution is reached. For all platforms, a uniform process in handling these disputes should ensure that royalties aren’t being paid to the wrong party and that legal liabilities aren’t created.
With the right payments platform that documents all transactions and their calculations—everyone in the payout chain is able to look up specific transactions, payouts, and royalty calculations through a unified interface. A flexible payments platform reduces legal liabilities and is a necessity to scale your business and take it to the next level while avoiding costly legal action.
