Distribution and payments startup Stem — which helps artists like Frank Ocean and Brent Faiyaz collect digital revenues — has unveiled a new feature that allows clients to automatically track and recoup expenses before splits are paid out on music releases.
Stem’s new Recoup Rules feature works like this: If a manager or label fronted $25,000 for a music video for an artist’s new single, they would be able to setup a Recoup Rule for that $25,000 to come out of the initial earnings for the song. Once that threshold is reached, the additional earnings would go into a reserve account, which would then be split among the appropriate shareholders for the track once the Recoup Rule is closed.
“Royalty accounting has been made to feel complex and burdensome. It scares most independent managers, artists and labels, to the point where they punt handling it so no one gets paid,” said Milana Rabkin Lewis the CEO of Stem in a statement. “Our goal was to demystify and streamline the accounting process. This is the latest step in our journey to modernize the music industry and give music business owners the tools, capital and technology to manage their operations more efficiently and on their own terms.”
Stem clients will be able to recoup across multiple releases, add external earnings such as physical sales, publishing and synch to bring down the total recoupment amount and provide collaborators and shareholders with monthly recoupment updates. Clients will be able to raise their recoupable amount (in the event additional expenses are accrued) and once a Recoup Rule is closed splits will be paid out to shareholders accordingly.
“We’ve been wanting to build this for a couple of years,” Lewis tells Billboard, explaining the company has spent six months working with managers, accountants, and lawyers on how to build the best version of the product — which has been in private beta since February. “Our goal is to iterate on this every couple weeks and release enhancements to it,” Lewis says, adding that Stem’s next priorities are around producer agreements and dollar-one agreements.
Last year, Stem launched Scale, a financing product that allows the company to deploy over $100 million in advances to its indie artists and record label clients. To date, the company says it has received requests for over $60 million in advances from acts including Faiyaz, Justine Skye and Billy Lemos, among others.
“I hope people copy us, after we launch splits a lot of people copied us,” Lewis says. “It helps us push our mission forward.”
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