Settling Artists’ Accounts
Is Sony’s decision to begin paying royalties to acts with balances a recoupment coup for the label, as well as its acts?
IN AN INDUSTRY WHERE
smart executives look for angles others don’t see, Sony Music Group’s June 11 announcement that it would begin to pay royalties to artists with unrecouped balances that were signed to its labels before 2000 and haven’t received an advance since, was greeted with surprise, enthusiasm and also a bit of cynicism.
The move, part of Sony Music’s new Artists Forward initiative, is designed “to increase the ability of those who qualify to receive more money from uses of their music,” the company said in a letter to its partners obtained by Billboard. The label will not modify its contracts or even adjust the balance — just ignore them in order to prioritize “transparency with creators.”
It’s hard to find anyone in the industry who doesn’t like Sony’s idea. The cynical take is that the company isn’t leaving as much money on the table as it might seem: Most acts that dominate the charts in the streaming era were signed more recently, and the more popular ones have either recouped or received another advance in the last two decades. The amount of money involved will almost certainly be dwarfed by the $4.87 billion in recorded-music revenue Sony made last year. “If you have been unrecouped for that long,” says one artist lawyer, “Sony probably doesn’t care about your royalties.”
Many artists affected by the policy will care quite a bit, though, and the sheer number of acts involved means the money will add up: A source familiar with the program says some could receive thousands of dollars — and in some cases tens of thousands of dollars — a year. (How much this costs Sony will ultimately depend on sales of albums by the artists involved.) In 2015, Beggars Group instituted a similar policy, partly because many older artists were seeing an uptick in royalties from streaming, but, in some cases, not one that would be significant enough to pay off their unrecouped balances. “What inspired it was seeing what catalogs were earning £500 or £5,000 [$700 or $7,000] every six months because of streaming,” says Beggars founder/chairman Martin Mills. “That seemed significant enough to pay through to the artist, but not significant enough to worry about it making much of a dent in a halfmillion-pound debt.”
The move also positions Sony Music, the second-largest of the three majors, as artistfriendly at a time when both a streaming-driven industry boom and increased attention on racial justice issues have put a spotlight on the unfairness of some recording contracts. “The public has become more aware of artist issues, and the current social climate might have been behind this move,” says Cedar Boschan, a royalty expert and forensic accountant.
Boschan points out that decades ago, when the CD boom focused attention on older artist contracts, MCA eliminated unrecouped balances and raised royalty rates for artists on Chess and Checker, and other labels instituted various other reforms. This could be the beginning of another such wave: BMG is reviewing contracts of labels it has acquired, a source says that Warner Music is also considering its options and Universal has said it is committed to looking into legacy contracts, too.
This move could help Sony Music forge closer relationships with legacy artists when some are looking to terminate the copyright grants to their sound recordings (which Sony hasn’t allowed) and others are thinking about selling rights or royalty streams. With more players than ever bidding on music assets, including an array of institutional investors, this move makes Sony stand out as a potential partner. It “gives Sony a pole position,” says Allen Kovac, a veteran manager and founder/CEO of Better Noise Music, “if a chance to buy an artist’s rights becomes available.”