Artist and management community applaud Sony Music’s decision to pay artist royalties on unrecovered pre-2000 recording contracts

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By Chris Cooke | Posted on Monday, June 14, 2021

The artist and the management community have both welcomed Sony Music’s decision to start paying royalties to artists with recording contracts prior to 2000, even though those artists have yet to ‘recoup’ their recording contracts. ‘origin. The Major’s big announcement comes amid heightened debate over the intricacies of record deals, in part sparked by the big conversation around the streaming economy that took place during the COVID pandemic, and in large part because of the #brokenrecord and the #fixstreaming campaigns.

In a note to artists and managers on Friday, Sony Music said, “As part of our continued focus on developing new financial opportunities for creators, we will no longer apply existing unrecovered balances to artists’ income. and participants generated as of January 1, 2021 for eligible artists and participants around the world who signed with SME before the year 2000 and did not receive an advance from the year 2000. Through this program, we are not modifying existing contracts, but choosing to pay on existing unrecovered balances to increase the ability of those who qualify to receive more money for the use of their music ”.

Under a conventional recording contract, a label invests in the recording, release, distribution and marketing of new music, in exchange for the appropriation of all copyright on the recording. sound created in the process. The label then exploits these rights for profit, committing to share any income with the main artists who made the recordings. The share that the artist gets varies considerably from agreement to agreement, although under conventional recording contracts the artist would receive a minority share from the more lucrative sources of income, which today include streaming.

Another key part of a recording contract is recovery. A label is generally allowed to recover any cash advance it pays to the artist upon signing a contract – and also often some of its other upfront costs – out of the sums collected by exploiting the recording rights, before making new payments to the artist. Under a classic “royalty deal”, these upfront costs are specifically recouped from the artist’s minority share, meaning that the label often makes a profit on a deal (from its majority share) before that the artist has recovered and begins to receive new payments.

In the big old debate about the economics of streaming – and how streaming revenues are distributed among the different stakeholders in the music community – a key topic of discussion has been how the money allocated by streaming services. Streaming recording rights are split between the label and the artist. . While every contract is different – and artists who work with distributors rather than labels probably get the majority of that money – on a classic recording contract, the artist will typically receive a minority share. not exceeding 25%. Many artists argue that this is not fair.

Heritage artists have generally made their voices heard on this point to date, although they often argue that they are speaking on behalf of new artists rather than musicians of their own generation. Although, arguably, it was heritage artists who were the most flouted by the system during the rise of streaming.

While new artists certainly face great challenges in building a business around their music, when it comes to choosing a business partner to work with on their recordings, there are now many other choices available. And while the majors always negotiate hard, modern record deals tend to pay slightly higher royalties, and artists might be able to negotiate terms on which they get ownership of the recording rights afterwards. some time.

Meanwhile, heritage artists – whose catalog has become more lucrative simply because streaming removes both logistical and transactional barriers when it comes to monetizing old recordings – are stranded on contracts from 20th century recording which generally pay lower royalties and make no provision for the rights to revert to the artist.

In many cases, there is also a lack of transparency about how old agreements are interpreted and whether additional deductions that made more sense in the physical age are still being applied to artist royalties. And, of course, many artists never got their original contracts back, so all streaming royalties are just being compared to old debts.

All of this has fueled the argument that fair remuneration for performers should be applied to streams, as is the case when recorded music is broadcast or performed in public.

When ER applies, artists have a statutory right to payment when their recordings are used, and this payment is made through the collective licensing system. If applied to streams, it would mean that artists would receive at least a minimal reduction in any streaming income directly through a collecting society, regardless of the royalty rate paid by their label, and even if they didn’t. never recovered on their recording contract.

The organizers of the #brokenrecord and #fixsteaming campaigns in the UK have called for a rewrite of copyright law – so that ER applies to the so-called provision of copyright element and therefore to flows. So far, more than 220 artists – including big names in heritage – have signed a letter calling for such a change.

Most labels – majors and independents – oppose applying ER to streams, and some in the artist and management community have also expressed concern about the potential unintended consequences of such an approach. Once the costs of administering REs on streams are factored in – alongside the inefficiencies of the collective licensing system, certainly on a global scale – new artists who have negotiated more favorable deals with labels or distributors could in fact be in a worse situation.

Some argue that, because it is really the heritage artists who are the losers in the current system, a better approach would be for record companies to address the issues with old recording contracts in terms of royalties and recovery. During the parliamentary inquiry into the streaming economy, it was noted that the Beggars Group applies a modern streaming royalty rate of 25% to every recording in its catalog, ignoring what any old recording contract says. on royalties. And it also cancels unclaimed balances after fifteen years.

Beggars boss Martin Mills has previously called on majors to follow his company’s lead on royalty rates and clawbacks, something Beggars Group general counsel Rupert Skellett pointed out in his testimony. to the parliamentary inquiry.

Sony, of course, didn’t go that far, just focusing on unrecovered balances and, technically speaking, choosing to pay royalties on unrecovered accounts rather than writing off those unrecovered balances entirely. Nonetheless, it is an important decision that will put pressure on Warner Music and Universal Music to follow suit. It also potentially weakens the argument that there is a need to apply RE to streams (from the perspective of heritage artists, for session musicians, RE is the only way for them to get a piece of the pie. digital).

Sony’s announcement has been hailed by the UK’s Music Managers Forum and Featured Artist Coalition, both of which have campaigned for years for labels, and in particular the majors, to correct the inequalities in old music contracts. discs. Indeed, both groups have called for the write-off of unclaimed balances after a specified period in their joint submission for parliamentary scrutiny, endorsing the approach taken by the Beggars Group, as well as recent measures taken by BMG to combat unfair contact terms for older recordings in catalogs it has acquired over the years.

MMF boss Annabella Coldrick said Friday: “This is a very important, timely and welcome initiative from Sony Music. MMF has been calling for a more gradual approach to tackle outdated contractual clauses, including a write-off of historical unrecovered balances. It is imperative that artists signed in the analog age can also benefit from the rise of online streaming. We hope that forward-thinking initiatives from companies like Sony, BMG and Beggars will help accelerate the pace of reform across the sector. The momentum for change really looks like it is accelerating ”.

Meanwhile, the FCC Board of Directors said, “We applaud Sony Music Entertainment’s announcement and look forward to the rest of the recorded music industry following suit. We have long campaigned for unrecovered balances on advances to be written off after a specified period of time. It is therefore welcome that Sony has taken steps to do so today. We welcome this move towards a more artist-friendly model and hope Sony will apply this adjustment on an ongoing basis ”.

“Tackling the problem of obsolete and odious contract terms, such as decades-old balances and regressive royalty rates, is at the forefront of the FAC’s agenda. These old-age contractual terms are totally inappropriate for the modern era, and we passionately believe that challenging these contracts is the key to a fairer future for artists ”.

The Association Of Independent Music also welcomed Sony’s announcement, declaring on Twitter: “We welcome this positive initiative from Sony Music, which cancels unrecovered balances for heritage artists, a practice widely used in the independent sector. We hope this news will encourage others to follow, to make fair digital trade a global standard ”.

Sony says artists who qualify for what it calls the Legacy Unrecouped Balance program will be notified in the coming weeks. The devil will be in the details, of course, regarding how many artists benefit from it and how the new royalty payments work.

Although Sony’s note on Friday says eligible artists will also be able to use existing royalty payment tools available in the US and UK – and expected to be rolled out elsewhere – through which they can expedite payments or get advances on projected revenues.

The memo concluded, “We are driven by our mission to provide artists with the best levels of service. The program we are announcing today is part of that ongoing work and builds on our initiatives and investments in modernized contracts, flexible tuning options, advanced data and analytical insights for creators and more ”.

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