Breakage: ‘Where is the indies’ share?’

The past few weeks have brought some progress to the debate over transparency in deal-making between major music companies and large digital platforms.

Following the leak of a  2011 North American contract between Sony and Spotify, (in order), Sony, Warner and Universal made statements promising that they share advances from digital services and any subsequent ‘breakage’ with their artists.

Managers have applauded the move by the majors, while keeping fingers crossed that it represents the first step in a new age of transparency – “an open discussion – however difficult – of all the issues that concern us”.

The Worldwide Independent Network (WIN) launched its Fair Digital Deal Declaration last year.

Signed by over 1,000 indie labels, it promises 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’.

Now the CEO of WIN, Alison Wenham, has penned a reaction to the majors’ recent statements – issued at Midem 2015 – which you can read in full below.

One of her most pointed concerns regards historical breakage – presumably from the likes of Spotify and YouTube – that was obtained by the majors on the basis of their market share.

Wenham says this market share strength, and therefore the size of the obtained guaranteed revenues, was inflated due to those indie labels tied to the majors on a distribution deal.

And, therefore, she argues, shouldn’t these indies have seen a share of the spoils?

We note with interest recent declarations from the majors about breakage.

Whilst we applaud any moves to offer a fair percentage of digital revenues to artists, it is telling that there are no specifics in these recent statements from these corporations.

And isn’t it a coincidence that when you’ve been waiting so long for a major that accounts breakage fairly, suddenly three come along at once?

We don’t know how long these policies have been in place, how much of the revenue they are actually sharing, whether this applies to all types of non-unit revenue, or how this money is distributed across their catalogues. We don’t know what analogue-era deductions are still getting made against digital income. As usual these facts are withheld.

The independent music sector, on the other hand, is next month celebrating the first anniversary of the Fair Digital Deals Declaration, a Worldwide Independent Network (WIN) initiative, which is a statement of commitment made by record labels to treat their artists fairly in agreements relating to digital exploitation of artists’ work in recorded music agreements with third parties.

This declaration makes it clear that signatory companies will share the benefits of dealing with digital services fairly and clearly with artists.

This Charter has been signed by over 1,000 indie labels who all promise 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’.

This amplifies our commitment to fairness and transparency, and to ensuring a sustainable economic relationship between the independent recorded music industry and their artist partners. A healthy commercial relationship based on mutual trust and partnership between artists and labels is critical to the long-term financial health of our industry.

But all this noise does highlight another major issue. Firstly, where is the independents share of this money?

For all those labels distributed by majors – either directly or through a major owned or controlled distributor – where is their share of advances, guarantees and breakage?

Majors have been leveraging the market share of their third-party distributed content when negotiating with DSP’s simply to inflate their market share and therefore their cut of the digital pie. We do not believe that these distributed independent companies are always getting their share of this income, which is rightfully theirs.

With independent market share increasing all over the world on digital services, the digital pie is still being carved up by the majors’ demands and the indies are nearly always last at the negotiating table.

Ironically, services who do invite the independents in at the beginning, rather than as an afterthought do better in the marketplace – think Spotify versus MySpace.

As a sector we have always embraced new ideas and have supported new ways of thinking and technology. We have been the driving force behind global innovation in the digital music sector and it is not an exaggeration to say that without independent music these companies would not have a viable business.

Yet we are often still treated initially as the poor cousins when it comes to participating in revenues that should respect our innovation role and our market share.

We have never demanded unreasonable advances or crippling royalty rates that do not allow new companies to develop their businesses.

We have always been open to licensing our music on fair and equitable terms. Our approach to working with digital services and technologies has always started from a collaborative standpoint rather than an adversarial one.

All we have ever asked for is a level playing field and recognition of the critical importance of our contribution.

All we have asked for is fairness.

It is time for the major players on both sides of the supply chain to reflect on the deals they have with the independent music sector and to ask themselves whether, on both a commercial and moral level, they are doing the right thing to sustain a relationship that is critical to the long-term success of their own businesses.

Alison Wenham
CEO, Worldwide Independents Network (WIN)

Music Business Worldwide

Related Posts