Who are Standard Innovation? And, what’s the black box?

With all the hype around AI, Standard Innovation was a deliberate play on words. We believe most businesses don’t need new technology to solve their data problems — they simply need clear guidance from experts who know how to navigate the confusing world of technology and get the most from their data. Too often we see organisations struggling to move forward as they’re stuck in the latest hype cycle, and subsequently lack focus. We help to cut through the noise and offer practical ways to make progress - after all, not everything needs AI to deliver value. And whilst everyone else gets caught up in the arms race to adopt AI, we believe that focused efforts in areas that matter will make a much bigger difference to the bottom line, whilst preparing for the future.

There’s no such thing as data, only knowledge and value.

We make sense of data to embed knowledge and create value for your business. Let’s break this statement down. All businesses collect data, however data is only useful when it’s transformed into knowledge - which often isn’t easy. You might have part of the puzzle but not all of it. However, once you have accurate knowledge, and you put that in the hands of an expert in their field, you get clarity of thought, and with that you’re one step closer to taking action and delivering value. Getting to a position of clarity in any project or initiative accelerates time to value.

Take it to the bridge

The music industry has been publicly disrupted time and again, it's an industry that has defined decades, generations and personal moments for humanity globally. But it’s also an industry that has had issues with distributing value to where it belongs. When the internet took off, peer to peer sharing disrupted the value chain, and the pivot from physical to digital music required the industry to re-invent itself again. The rest of this article focuses on some of the current challenges in the music industry, which is something we’re passionate about at Standard Innovation, as we exist to solve the data challenges that deliver more value to where it belongs.

What’s the black box?

One of the areas that Standard Innovation is focused on is royalty attribution - particularly for mechanical and performing royalties. Mechanical royalties ensure songwriters and music publishers are compensated when their work is reproduced and distributed, typically in audio-only formats like streaming, digital downloads, CDs and vinyl records.

There are trillions of streams every year on Digital Service Provider (DSP) platforms such as Apple Music, Spotify and YouTube music, resulting in billions of dollars to be distributed as royalties. Using streaming as an example, there are a number of different royalties that are generated when you stream a song. The diagram below is oversimplified, but gives you a feel for how the value chain operates. In addition to this there are neighbouring royalties and sync royalties with regional differences on how royalties are distributed. When you consider the number of artists, the number of countries and the number of businesses and organisations involved - its a huge ecosystem.

As consumers, our interface with music is pretty simple: we listen to the radio or pick up our phone and stream a song. What happens behind the scenes to compensate artists, song writers and publishers is actually incredibly complicated. Revenue from the DSP’s (Apple Music / Spotify) is shared on a market share basis rather than per stream - with big tech taking a big slice. There are then non-profit and for-profit organisations in each country who are responsible for matching and distributing royalties, and depending on the royalty type, there are different organisations involved before getting to rights holders.

One of the main challenges with the system is that there are royalty attribution issues across the entire value chain, stemming from metadata issues, a fragmented royalty distribution ecosystem, volume and scale, complex agreements and outdated systems and processes. Overall, royalty attribution sits at around 90% - meaning there are hundreds of millions of dollars sitting in black boxes at various points of the ecosystem. Progress has been made to improve match rates, but the ecosystem is incredibly complex and it can take months or even years to attribute and distribute royalties to where they belong. After a period of time, un-matched royalties are distributed based on market share, meaning there are rights holders not getting the value they deserve. It’s estimated that there is roughly $2.5bn of unclaimed royalties sitting in these black boxes.

So why is Standard Innovation interested in this sector? It’s essentially a big data problem. And we run towards big data problems like this. It’s also an industry with a distorted balance of power - big tech are making a huge amount of money. Apple Music generated $10bn in revenue in 2024, and are estimated to have paid out $5.2bn to rights holders, making a $4.8bn profit, but value isn’t getting to where it should be.

When you consider what’s happening now with AI, and how content is being processed by LLM’s - it’s going to be a really interesting landscape in the future and we’re committed to helping rights holders and content owners get the value they deserve.