This is a guest column by David Martin, CEO of the Featured Artists Coalition – the UK trade body that represents the rights and interests of music artists. Here, he argues that labels can build more trusting relationships with artists and fans alike by modernising their contractual agreements with artists – and calls on Universal to follow in the steps of its major label rivals with regards to disregarding  some artists’ unrecouped balances.

Artists and labels can be prolific partners.

All good partnerships require two things; trust and respect.

Last month’s move by Warner Music Group to disregard un-recouped balances on artists’ accounts, marked a step forward in the fight for a fairer music economy.  It follows Sony Music Entertainment’s lead after an almost identical announcement in summer 2021, and represents the realisation, at least in part, of one of the key aspects in the FAC’s campaign to modernise the industry for creators in the digital era.  Whilst we welcome the news from Sony and Warner, it is only one step, and if we’re to move to a place that is genuinely equitable, we will need to see a larger leap of faith from our label partners.

David Martin, FAC

When discussions about the state of the music streaming economy gathered pace in early 2020, partly fuelled by the shutdown of live music, much focus was placed on the circumstances of artists who had signed historical deals with legacy terms.  The artists locked into these contracts, put pen to paper at a time when streaming wasn’t even envisaged, let alone the dominant format, accounting for more than 62% of global recorded music revenues and 83% of UK music consumption.

Contract terms that were originally designed when many of today’s most successful streaming artists weren’t even born are wholly unfit for the modern, digital era and too many artists from the past receive nothing as a tiny royalty vanishes towards paying off a seemingly never-ending debt.

Paltry (often single digit) royalty rates, negotiated for a completely different model of music production and distribution, coupled with advances that remain on artists’ balances decades after labels have broken even, create a double whammy for legacy artists.

These two facets of artist-label deals must be consigned to history.

However, the FAC has always been clear that any remedies to the above problems must avoid adversely impacting those artists who have successfully negotiated modern terms.  This is why, in our 2020 evidence to the DCMS Select Committee, submitted along with the Music Managers Forum, we called for two clear measures to modernise contracts;

  • Pay a more favourable royalty to artists on all recordings – for example, so that legacy artists are paid the same royalty rate on old recordings as most new artists are on newer recordings.
  • After a set period of time, e.g. fifteen years, labels should write off any unrecouped costs that the artist is still paying off.

Pretty simple really, right?

Contracts fit for purpose

It’s important to recognise that it’s not only since the increasing prevalence of streaming, in the early 2010’s however, that these terms should have been recognised as archaic and outdated.  Apple launched the iTunes download store in 2003, long before streaming became a format that looked likely to take hold on a global scale.   Once physical production and distribution were no longer required as a means of getting music to fans, the contractual agreements that the recorded music sector had been built on were really no longer fit for purpose.

That’s not to say that the physical costs have completely vanished, especially for many indies, for whom physical formats still make up a greater proportion of their income, nor that there are no costs associated with digital distribution of music.  However, we can no longer accept as credible, the argument that costs have not decreased or production and distribution costs have been replaced by other label expenses.

The music industry likes to think of itself as innovative, creative and forward thinking.  So why, almost 20 years after the launch of iTunes, are we debating contractual terms and label practices that were designed for physical music formats of the 1960s?

In light of all of this, and considering the steps taken so far by Warner and Sony regarding unrecouped balances, the obvious first question is “where are you Universal?”.

Is the world’s largest music company really, financially unable to take the step forward that its counter parts have calculated to be viable for their businesses? Or, do they somehow not have the resource to put into developing a fairer, more equitable solution for artists, nine months after Sony made its move? It’s hard to believe either explanation for a company whose initial public offering on the Amsterdam stock exchange saw its market capitalisation reach almost $53 billion.

“Magic years” and the small print

The second question of Sony and Warner’s policy on recoupment, is “what about the small print?”.

In 2015, the Beggars Group took the decision to wipe out unrecouped debts on artists’ accounts after 15 years following the last release.  So, why have Sony and Warner decided that 2000 is a magic year? What’s the logic? Is this a move that is more about the optics for the policymakers scrutinising our sector, rather than a genuine step towards more artist-centric practices?

Beggars apply their policy on a rolling basis, meaning that twice yearly, a new cohort falls into the “happier artist” category.  Considering this approach, the move from two of the three major labels feels somewhat like a diet version of an artist friendly approach.

Furthermore, the wording in both Sony and Warner’s statement is…carefully crafted.  Neither have committed to wiping out the debt, instead they plan to “pay through” or “disregard”, which importantly means that debt will stay on accounts and there will be no contractual obligation to adhere to the policies further down the line.

This brings us to the second point from our evidence to the DCMS Select Committee; royalty rates.  In September 2021, ahead of the Government’s response to the DCMS Select Committee’s Report, we published a White Paper, where we reiterated our calls for the wiping out of unrecouped debt and for the implementation of a minimum digital royalty rate.

Again, Beggars and many other labels have already set modern digital royalty rates.  For policies on unrecouped balances to really be worth something to artists, it must be accompanied by the application of a modern, digital royalty rate.

In reality, there is no reason for modern labels choosing not to at least match the Beggars model. A model which is successfully implemented by thousands of other record labels all over the world.  This is money that the labels have already written off in their own accounts.  Surely the benefit of artists feeling truly supported by their label, viewing them as genuine partners at a time when competition to sign new talent is, according to the heads of the labels themselves “fiercer than ever”, does not need to be elucidated.

And what about the fans? As we have seen with the ongoing legal case between Four Tet and independent label, Domino, fans really don’t like it when they think that artists are not being treated fairly by record labels – in this case, the debate was initiated in specific in reference to that modern, digital royalty rate.

“Good versus Evil” is not helpful

The seemingly never-ending feud between labels and artists, like some sort of Marvel good versus evil story, majors versus indies, creators versus rightsholders, really doesn’t serve any of our purposes.  Nor does it allow us to maximise the potential across our whole industry to the benefit of all parties.  Fans don’t like it, policymakers don’t like it and music makers certainly don’t like it.  However, unless artists are treated fairly and their value truly recognised, we are never going to able to cooperate effectively, as colleagues and business partners, with mutually beneficial shared goals.

The FAC has now taken its seat on the UK Intellectual Property Office convened Contact Group, alongside other industry partners and Government representatives.  This Group is providing oversight to the broader package of work arising from the Government’s response to the DCMS Select Committee’s Report into the economics of streaming.  This also includes two technical working groups and three pieces of research into rights reversion, contract adjustment and equitable remuneration.

We genuinely welcome the chance to work with our colleagues from the major and independent label communities and the publishing and collecting society sectors, as well as our counterparts representing other music creators.  We will work together in good faith, towards solutions that improve our industry’s overall success.  We are focused on an evidenced based approach that stems from analysis and seeks to avoid unintended consequences.  Anything else would be a failure of the FAC’s responsibilities towards our members.

However, Government Ministers have been clear that legislation to drive necessary change remains on the table should the industry fail to get its own house in order.  Whilst I hope we, as an industry, can show the best of ourselves, the FAC will fight for regulatory measures if our sector remains in deadlock on this issue, without significant and quick progress.

I want us to unite as an industry and make the necessary changes, so that we can start to overcome the wider challenges we face following almost two years of shutdown and in light of the enormous, broader societal problems that have huge ramifications for all parts of the sector.

We truly believe that artists and labels can be prolific, productive and mutually beneficial partners, however that isn’t going to happen without a real rebalancing and an acceptance that the status quo simply is no longer acceptable.  It just requires a little trust and respect…

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