Historically, controlled composition clauses were forced upon artist-composers by US record labels, bestowing the former a 25% discount on the statutory rate for mechanical royalty payments at the expense of the latter.
Although use of controlled composition clauses is limited to physical releases, such financial chicanery is still, according to BMG’s estimates, displacing around $14m that should have been paid by labels to creators.
A not insignificant sum, especially in the current climate, but also an important statement on principles of fairness. I certainly hope that other US record labels who haven’t yet addressed this point also update their contracts as well as removing the cap on the number of tracks per album (relevant for physical releases).
In the words of BMG’s CEO, Hartwig Masuch: “It is unacceptable for the record industry to continue to apply deal terms which are solely designed to reduce the incomes of musicians. We have heard a lot during the coronavirus crisis of initiatives by music companies to support artists. The best way to support artists is not to subject them to unfair terms in the first place”.
I suspect few music managers would disagree with Hartwig’s stance, and it’s heartening that an increasing number of forward-thinking label and publishing executives are committed to changing and rebalancing the commercial dynamics between “rights owners” and artists.
Martin Mills at Beggars Group, for instance, suggested 5 key reforms for labels almost 5 years ago, including a minimum 15% royalty for digital exploitation for all existing contracts (low but with no further deductions), a writing off of unrecouped artist balances after 20 years, and the cessation of “breakage” in licensing negotiations when tied to “market share”.
As Martin eloquently put it, “Practices in negotiation which leave the artist poorer, confused and alienated should stop.”
An overhaul of legacy contracts was also at the heart of Kanye West’s online “manifesto”, published in mid-September, which suggested artists should own and lease their copyrights to label or publisher partners, and that those partners should assume the role of “service provider” rather than “rights owner”.
Of course, many new artists, especially those coming through via streaming services, have already made this shift. They are retaining ownership of their masters, they are working with label services or distribution companies, or striking new types of partnerships with record labels.
The challenges are far more pronounced with legacy contracts, designed for an analogue age and now shoehorned into a digital era.
And while stopping inequitable US practices on physical sales is one thing, some of the more significant market-wide changes – as outlined and identified in the MMF’s Dissecting The Digital Dollar publications – are needed in this area. Covid-19 and the collapse of live music has only instilled a renewed urgency to these conversations.
As we push for greater transparency around licensing, the MMF will continue to be at the heart of such debates – as will the European Music Managers Alliance, of which we are proud to be a founding member – watch this space for more news on how you can get involved in these discussions.