How does calculating royalties from digital music sales differ from how it is done for physical sales?
Kohn: Today, with the advent of iTunes, eMusic, MSN Music, Yahoo! Music and Napster, a transaction is not 20 crates of CDs or record albums to a record store. It’s not just one distributor sending out to record stores around the country. It’s 200 services generating hundreds of millions of transactions. The software that existed in the past dealt with relatively large transactions, which you invoiced for. You don’t invoice for every single download. That would be insane. Are there other new challenges? In the physical world, you’re not dealing with tracks–you’re dealing with albums, and you have a UPC code, which was a very standardized system developed for the purpose of sales transactions. An ISRC [International Standard Recording Code] is associated with a particular track [but] has nothing to do with sales transactions. There are duplicate codes; codes get improperly entered. So there’s lots of mistakes. Record companies get paid for tracks they don’t own all the time, because App
