SA music industry pay shock
THE South African Music Rights Organisation (Samro) has painted a shocking picture of poor pay in the industry, with almost R500 million leaving the country in the past five years due to a lack of local music on radio stations.
The organisation, backed by MPs yesterday, called on the government to tighten the regulations to force radio stations to play more local music to avoid tens of millions of rand in royalties paid to overseas artists.
The two parties are pinning their hopes on the Department of Trade and Industry’s review of the local content policy, which is currently under way.
They believe this review will help save hundreds of millions of rand leaving the country in future.
The portfolio committee on arts and culture said it was unfair that local radio stations were not sticking to the current quota of 80 percent local music.
Samro said failure by radio stations to play local music was costing the industry almost R100m a year.
Samro chief executive Sipho Dlamini was briefing the portfolio committee on the state of the music industry when he told MPs that out of the funds generated by the industry in the last five years, R469m in royalties went to overseas artists.
“One of the biggest difficulties, one of the biggest pains we have, is to pay large amounts to overseas composers,” said Dlamini. If radio stations stuck to the quota, there would be more royalties flowing internally, he said.
He said in France the creative and arts industry contributed seven times more to the GDP than manufacturing. This was because the government had stringent regulations on local content.
In Europe, the creative and arts industry contributed more jobs than telecommunications because they promoted local content.
Dlamini called for more local music to be played on radio stations for the benefit of local artists. In giving a breakdown of the royalties paid between 2009 and 2014, Dlamini said the numbers did not look good for local artists.
While R134m was paid to local artists in 2009, a total of R78m in royalties went to overseas artists. In 2010, the industry paid R133m to local acts, but R83m went out of the country.
Dlamini said in 2011, R136m went to local artists and R86m went offshore. In 2012, an amount of R133m in royalties was paid locally, while R72m left the country.
The chief executive said in 2013 local artists received R121m in royalties and overseas musicians R72m. Last year, a total of R138m in royalties was paid in the country and R76m paid outside.
Dlamini said this should not be allowed to continue.
Chairperson of the portfolio committee Xoliswa Tom said they needed to get to the bottom of the problem.
She said they had to ensure that the regulations in place were complied with by all radio stations.
It was unacceptable that local artists were not getting much-needed airplay on radio in order to make a living out of their hard work.
MANY artists in the music industry stick to the belief that a recording deal with a major record label is the only route to commercial success, and they are happy to sign on the dotted line as long as the other contracting party is one of the famous majors.
On the other hand, many artists view recording labels in a negative light – as devious organisations seeking to exploit inexperienced and unsuspecting artists in order to entrap them in one-sided recording deals for the best years of their recording careers.
The commercial reality is that onesided deals do exist. There is no obligation on a party to a contractual negotiation to ensure that both parties achieve an equally beneficial contractual arrangement. When entering into a new business venture, the parties seldom invest the same capital or assume the same level of risk, and in the music industry the parties are usually vested with uneven negotiating power.
It is up to artists to completely understand their rights, negotiating power and commercial expectations, and to conclude a deal which will benefit their careers in the long run. When you sign a contract, you are generally considered to be bound to the terms of the agreement, whether you may later claim that you did not read it or fully understand the implications of the agreement. This well-established legal principle is known through the Latin expression caveat subscriptor, or “let the signer beware”.
Many examples exist where artists put pen to paper too hastily without fully appreciating the possible long-term consequences. Allanah Miles, the Canadian singer-songwriter who recorded the hit song Black Velvet in 1989, signed a recording deal containing the dreaded “crosscollateralisation” clause. In terms of her deal, she would only start sharing in the profits generated from the commercialisation of her first record, after all recording, marketing and distribution costs for her first three albums were recouped fully from her royalty share.
As fate would have it, her first album was a major success and Black Velvet was the song most played on radio worldwide for quite some time. After the success of the first album, her record label overextended with expenses for the second and third albums, and those albums were not commercially successful. In the end, Miles did not earn any performance-based royalties for the playtime her hit song (and hit first album) generated.
Toni Braxton’s well-documented financial troubles were also largely spawned from a poorly negotiated deal which contained a similar clause.
One of the other minefields to be navigated is the all-important issue of ownership of rights in original music and the artist’s intellectual property (IP). These rights represent the keys to the kingdom of commercial success in the music industry. Most record deals will include assignment of rights clauses in terms of which artists are expected to transfer all of their rights in their original works as well as their IP rights to the label upon signature of the record deal.
In this way, record labels seek to acquire the right to exploit original music commercially for the duration of the copyright therein (this could be 50 years from the death of the author). The deal could also include an assignment of rights in the IP of the artist, which may include the rights to the artist’s name, trade marks, likeness and so forth.
The difference between those artists who control the rights in their own music, and those who do not, can best be seen in the state of affairs of the estates of the recently deceased and legendary artists Michael Jackson and Whitney Houston. Jackson’s estate received more than $700 million in revenue due to the continued exploitation of his rights in his music and his image rights since his death in 2009.
Jackson guarded the rights in his music well and he wrote or co-wrote most of his own music, and owned the copyright in these works as the author thereof. Whitney Houston did not write or own the rights in the music she performed. At the time of her untimely passing in 2012, her estate was rumoured to be in dire straits – $20m in the negative.
The above represents only some of the major issues an artist should consider when there is a proposed recording deal on the table.
The effects of a written agreement may be long-lasting – long enough to affect an entire recording career and beyond. Artists should also bear in mind that record labels depend on finding and cultivating future stars almost as much as they do on maintaining successful agreements with existing, signed stars. Profits generated from successful acts are often spent in the promotion and development of new talent. Arista Records, the first label to sign Houston in 1983, announced an increase in gross annual profits from $35m (when signing Whitney) to $400m in the 1990s, largely due to this star’s success. This underlines how important a commercially successful act can be to a record company.
The bottom line is that artists and record labels are interdependent. If a label is not interested in engaging in earnest and meaningful negotiations with an artist in order to address the concerns of both parties concerned, the artist would be well advised to head for the door, rather than reaching for the pen.
Recording companies have adapted their business models in the wake of the digital and online revolution and the rampant effect that piracy has on legitimate record sales, and nowadays they seek to gain a more comprehensive commercial investment in an artist that goes far beyond a traditional recording contract.
Artists should also adapt their business models and educate themselves on their rights and potential revenue streams. Seeking advice in this regard from industry experts and IP lawyers is a good place to start before putting pen to paper on any deal.
A well-negotiated record deal with a major recording company can elevate an artist to the highest levels of commercial success as a major studio remains a juggernaut of the music industry, with the financial, marketing and strategic means and know-how to establish and maintain a star in a very competitive industry.
For some artists, however, a deal with a major may not be as important as a deal with an independent record label which could allow for more creative control and IP ownership for the artist.
Other artists may utilise the internet to promote themselves and launch successful careers in entertainment, through online portals such as YouTube or social media websites. Rebecca Black’s success and that of megahit Gangnam Style may be seen as examples of this.
Artists certainly have options available apart from the conclusion of major recording deals, and they should be alive to the possibilities of crafting their own creative business opportunities – as much as the writing, composing or performing that next big hit.