There’s been an increased level of scrutiny of the artist-label relationship in the streaming age in the UK this year, and the global music business has been watching the developments in the market very closely.
Back in January, a cross-party UK Parliamentary group called the Digital, Culture, Media and Sport Select Committee (DMCS), questioned the country’s major label heads during an inquiry into the Economics of Music Streaming, the findings of which resulted in a major label-critical report published in July.
At the start of December, a politician who sits on that committee proposed a bill ( it ended up being rejected) that contained a number of changes to the law that would have monetarily benefitted artists, including the introduction of ‘Equitable Remuneration’, which would have seen a proportion of an artist / musician’s streaming revenues bypass their label agreements (including unrecouped balances) and paid to the performer direct.
Meanwhile, a legal battle is also currently being waged by an individual artist against an individual label in the UK, the result of which could set a precedent for some of the issues being argued on opposing sides of the Economics of music streaming debate.
That record company is Domino, the independent label home to rock stars like Arctic Monkeys.
The artist suing Domino is electronic musician Four Tet, (Kieran Hebden), over a deal he signed with the label in 2001.
Hebden alleges that Domino has incorrectly interpreted his deal when it comes to the share of streaming revenue he should be getting.
As explained in great detail by Chris Cooke over at Complete Music Update, the argument comes down to both parties’ interpretation of the definition of a “sale” versus a “license” in his contract.
Domino had been paying Hebden 18% of revenues generated by his records on streaming platforms, but he claims that he should get 50% as per the terms of the contract (which doesn’t actually specify income from streaming, because streaming wasn’t a mass market proposition at the time of the contract being signed).
As explained by CMU, his contract includes an 18% royalty rate for download sales, which Domino argues should also apply to streams.
Hebden claims, however, that streams should be paid at a 50% royalty rate based on the terms surrounding licensing revenues within his contract.
Specifically, his contract states that revenues generated by “licensees outside the UK” – will see a 50% royalty rate paid to the artist and, that if Domino licences “any recording hereunder for use on a flat fee basis – ie any basis other than one of a royalty per record based on the price of the recording – then [the] company shall account to [the] artist for 50% of the net proceeds received by it”.
Domino argues that Hebden has misinterpreted the terminology around licensing in the contract.
Additionally, the label argues that the royalty rate set for downloads should apply to streams because “a stream to a consumer involves the download by the consumer of data packets” and that “streaming differs from some other forms of downloading in that the record acquired by the consumer is not permanent but transient”.
The case took a turn in November when Domino removed the three Four Tet albums – Pause, Rounds and Everything Ecstatic – at the centre of his lawsuit from music streaming services.
Last week, a judge ruled at a hearing that Hebden would be allowed to amend the lawsuit to include a new claim for breach of contract over Domino’s removal of his albums.
Hebden’s legal represtantives also argued that the removal of the albums creates a restraint of trade dispute.
As cited by CMU, notable restraint of trade cases include the precedent-setting Schroeder Music Publishing Company Limited –v- Macaulay, as well as famous cases involving Frankie goes to Hollywood, the Stone Roses and George Michael.
“Digital exploitation is now the mainstream method of exploitation of sound recordings, and a refusal to digitally exploit effectively leaves those recordings sat gathering dust on the metaphorical shelf for the remaining life of copyright.”
Sam Carter, Hogarth Chambers
Speaking at the hearing last week, Hebden’s lawyer, Sam Carter of Hogarth Chambers, called the removal of the albums “a deliberate, cynical and outrageous act”.
Added Carter: “Digital exploitation is now the mainstream method of exploitation of sound recordings, and a refusal to digitally exploit effectively leaves those recordings sat gathering dust on the metaphorical shelf for the remaining life of copyright [70 years].
“That runs fundamentally contrary to the intentions of the parties when entering into a recording contract. The timing of the act just before a trial to determine the proper rate for digital exploitation also makes the defendant’s cynical motivation clear.”
The case is set to be heard in January in the UK’s Intellectual Property Enterprise Court, but as noted by CMU, due to the complexities of the case following the additional claims, Domino has proposed that the case should be transferred to the High Court.
CMU reports that Hedben’s lawyer explained at the hearing that transferring the case to the High Court won’t be financially possible for the artist.
As CMU’s Chris Cooke writes, ‘his potential liabilities to cover the other side’s costs would significantly increase’, meaning that, ‘a transfer to the High Court, therefore, would kill the case’.
This case, and the possible outcome of it being killed if it were to head to the High Court because the artist is unable to afford the legal costs, are especially significant in the context of the Copyright bill proposed by Labour politician Kevin Brennan at the start of the month because of the benefits it would give artists.
Under Brennan’s ‘contract adjustment amendment’ proposal, an author could claim “additional, fair and reasonable remuneration from the person with whom they entered into a contract for the exploitation of their rights… in the event that the remuneration originally agreed is disproportionately low compared to all subsequent revenues derived from the exploitation of the rights”.
In other words, a songwriter or artist – such as Hebden – could potentially renegotiate the terms of an old agreement with a label or publisher – such as Domino – by law, if the remuneration they originally agreed to is deemed “disproportionately low” compared to industry standards at the time of them wanting to renegotiate.
Additionally, Brennan’s bill proposed that ‘Equitable Remuneration’ should be written into UK law – which would see ER applied to streams, aligning the way artists are paid their streaming royalties with the way royalties are paid to artists from radio play in the UK.
Currently, 50% of recorded music royalties from radio in the UK is paid directly to performers via a collection society – bypassing artists’ record label deals, and therefore also bypassing any recoupment charges those artists might owe their label/s for previously-paid advances.
“I believe there is an issue within the music industry on how the money is being shared out in the streaming era and I think it’s time for artists to be able to ask for a fairer deal.”
In a series of tweets in November, Hebden wrote: “I’m so upset to see that Domino Records have removed the three albums of mine they own from digital and streaming services. This is heartbreaking to me. People are reaching out asking why they can’t stream the music and I’m sad to have to say that it’s out of my control.”
He added: “I have an ongoing legal dispute with Domino over the rate they pay me for streaming that is due to be heard in court on 18 Jan.
“Earlier this week, Domino’s legal representative said they would remove my music from all digital services in order to stop the case progressing. I did not agree to them taking this action and I’m truly shocked that it has come to this.
“I signed with Domino over 20 years ago, in a different time before streaming and downloads were something we thought about.
He continued: “I considered the people who ran Domino to be my friends and to be driven by trying to create a great musical community. As a result, Domino own three of my albums forever. Music I created that’s important to me and to many of you too.”
“I believe there is an issue within the music industry on how the money is being shared out in the streaming era and I think it’s time for artists to be able to ask for a fairer deal.
“It’s time to try and make changes where we can. I’m not driven by the money, but I have to make a stand when I am experiencing something that’s simply unfair.”
Music Business Worldwide