The Music Managers Forum has long campaigned for a fairer, more transparent music industry that operates in the interest of artists and fans. We published Dissecting the Digital Dollar parts 1 and 2 to further that aim regarding streaming. Both are available from here. These bite-sized extracts summarise each issue and propose practical courses of action for managers and artists. The second of these extracts will look at Sharing the Value of Digital Deals. Licensing deals done between on-demand streaming services and record companies, music publishers and CMOs are complex involving substantial advances and other payments.
There are 3 elements of a licensing deal with a streaming service – equity, advances and other fees. Managers felt that whatever the legal situation there was an ethical case for rights holders to share in the income from equity stakes (once realised), unrecouped advances (so called breakage) and any fees received that are more than the cost of delivery of that service (such as supplying the music files). In essence all income should be in the royalty pot.
We support the WIN Declaration that requires labels to “account to artists a good-faith pro-rata share of any revenues and other compensation from digital services that stem from the monetisation of recordings but are not attributed to specific recordings or performances”
Furthermore how the share is calculated should be completely transparent. If that were not the case then rights holders might be tempted to cut worse deals in revenue terms in exchange for more equity. Indeed in what is a mature market with monthly accounting some rights holders say that advances are irrelevant and outdated and reduce royalty rates and over complicating accounting.
Actions for Managers/Artists:
- Ask your label if they share breakage with artists and, if yes, how it appears on royalty statements.
- If Spotify floats on the stock market the 3 majors and the independents (through rights agency Merlin) have equity and will therefore be entitled to cash from the sale of their shares. Support the MMF and FAC in requesting full transparency as to how that money will be shared with artists.
- When negotiating deals make sure there are provisions in the contract for sharing of the above points of income and particularly how such a share would be calculated.