To really help black artists, music companies could start by adjusting historical record deals
If the major labels won’t raise royalty rates, they might at least consider writing off unrecouped debt for heritage artists. Indie label Beggars Group offers a model to doing so
). Every additional percentage of royalty cash that major labels hand to heritage artists immediately reduces these valuations, because catalog income is a cast-iron indicator of perpetual future revenues in the streaming age.I caught up with Mills last week for a brief chat. He confirmed that Beggars some time ago raised its own base streaming royalty rate for most heritage artists to 25%, which it considered “the fair and right” thing to do. Mills shared my skepticism about the prospect of the majors implementing a similar royalty rate rise. He acknowledged: “In some respects it’s obviously easier for Beggars to do this as we don’t have outside shareholders saying, ‘What are you doing with my value?’ — We can make our own decisions.”
The second of Mills’ five suggestionsback in 2016, the one about writing off unrecouped balances for heritage artists, may be slightly more likely to at least engender discussion within modern major labels.Something worth knowing about record deals: When an artist agrees a royalty rate with a label, they often also agree an advance of money. This becomes a debt for the artist, paid back to the label in accordance with the act’s own royalty percentage. In other words, if we agree an 20-80 royalty split, I advance you $10,000, then your music generates $20,000 in gross receipts, you’ll still owe me $6,000 — because your artist’s share of that royalty income (20%) only amounts to $4,000. This is one reason why some artists can remain unrecouped, and therefore receive zero regular royalty income, even after their deals become profitable for a record label. (It’s worth noting for balance that, over the expanse of record industry history, most artist signings have actually resulted in a financial loss for record companies.)
Mills tells me that as a matter of policy, Beggars wipes off all unrecouped debt on advances 15 years after the firm’s “active relationship” with an artist ends – i.e. after the last record of an agreed contract is released. In 2016, Mills challenged the majors to do the same thing, 20 years after their own “active relationship” with each artist comes to a close. headtopics.com
Prominent black voices in the music industry are now advocating for a similar outcome, against the backdrop of a wave of social justice protests in the US. Ron Sweeney, a veteran lawyer who has represented the likes of Sean “Puffy” Combs (and Bad Boy Records), as well as James Brown, Public Enemy and DMX, just
published a 12-point public plan for the majors to address racial inequality.Point eight on that plan: “With respect to black artists signed to you prior to 2000, that are no longer signed to your companies, zero out their unrecouped royalty balances and let their royalties flow to them so they can support themselves.”
The majors doing so remains unlikely, but there is at least a modicum of reason for hope for Sweeneyet alon this topic. In 2018, in a magnanimous move that surprised many in the music business, Sony Music dismissed unrecouped artist balances whendistributing profits reaped from its sale of $768 million in Spotify shares.
In doing so, Sony ensured that every penny of the portion of that $768 million it shared with artists (though to be in the region of $300 million) actually landed in the pocket of those acts, as opposed to remaining within its company coffers.Universal Music Group, with a headtopics.com
, subsequently said it too would ignore unrecouped balances when paying out profits from its Spotify shares, which are yet to be sold. Warner Music Group did notpaying out $126 million of its Spotify share money in summer 2016, meaning a chunk of that money, in reality, stayed within WMG’s bank account.
Of course, calling for major record companies to wipe off debts for artists signed decades ago may fall on deaf ears, just as calling your bank today and asking for your legally binding mortgage contract or loan agreement to be written off may result in the line going dead. Yet, if they’re serious about making moves that financially further the causes of the black creative community right now, the majors have a delicate culture vs. commerce equation to consider: how much unrecouped debt would Universal, Sony and Warner have to write off in order for a wave of elder artists — and their families — to start earning regular income from their recorded music for the very first time?
Tim Ingham is the founder and publisher ofwhich has serviced the global industry with news, analysis, and jobs since 2015. He writes a weekly column for Read more: Rolling Stone »
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