BMG’s chief executive Hartwig Masuch has been taking his latest potshots at the three major labels, this time focusing on whether their cost structures will prove unwieldy as deals tip more in favour of artists, from frontline catalogue to renewals of existing deals.
“The deals for big hits today are much more aggressive than people think. We all know the cost of that [frontline] part of the business will drastically go up as artists have a higher demand on the share of royalties they get, and you have to translate that into your business model,” Masuch told MBW. “In my view, some of the most talked-about companies haven’t made enough effort to do this so far. The shit will hit the fan sooner rather than later.”
In truth, Masuch only has an outsider’s opinion of how those labels have been approaching this issue, as do we all, but his other question is whether the analysts touting sky-high valuation for majors are taking these and other factors into account. Because catalogue… “There is a large question mark over when those historical deals terminate or have legal reversions, because when those things happen you’ll see an incredible rise in royalty payments,” claimed Masuch.
“A lot of rights from big catalog deals will revert to artists; and those deals won’t renew with a headline royalty rate of 25% minus packaging deductions; they will clearly change so [the artist gets] above 50% of digital income.”