Welcome to Music Business Worldwide’s weekly round-up – where we make sure you caught the five biggest stories to hit our headlines over the past seven days. MBW’s round-up is supported by Centtrip, which helps over 500 of the world’s best-selling artists maximise their income and reduce their touring costs.
The headline MBW went with on our explosive story earlier today did the job: In historic move, Sony Music is disregarding balances for heritage catalog artists.
But were we feeling a mite more mischievous, we might have gone with: Sony Music just voluntarily reduced its revenues to ‘do the right thing’. Will Universal and Warner follow?
This gets to the crux of what will be a fascinating aftermath to Rob Stringer and co’s decision to effectively write off unrecouped balances for qualifying artists signed to Sony Music before the year 2000.
Stringer’s making a smart gamble: that a small reduction in Sony Music’s margin today is worthwhile if it means that his company establishes a long-term reputation amongst the artist community – where power keeps growing – for generosity and fair dealing. (Quick math: if there’s, say, 2,500 legacy Sony artists who will benefit, and they’re paid through an average of $5,000 to $10,000 each per year that they weren’t getting before, the move will cost Sony Music $12.5m to $25m per annum.)
This gamble is in itself reduced, of course, by the continued growth of streaming, and the perennial plumping-up of record company profits that directly results.
Stringer’s also smart enough to know that a “voluntary reduction in revenues” today is a heck of a lot harder a prospect to swallow for his rivals, namely Warner Music Group – now a public entity on the NASDAQ – and, especially, Universal Music Group… which is about to go public in Amsterdam, and is looking to nail the biggest debut day valuation possible for current Vivendi shareholders.
It could be argued that Stringer has just plunged his competitors into a Catch-22: If they match Sony by dismissing legacy unrecouped balances, they risk facing public investor uproar; if they don’t match Sony by dismissing legacy unrecouped balances, they risk facing widespread artist upset.
A tricky balancing act.
MBW’s pro tip as we track this story in future: Even if Universal Music Group now follows Sony by disregarding unrecouped balances for heritage acts, don’t expect it to look like UMG is trailing its rival.
When you’re market leader, perception is everything – and second is nowhere.
Think back to summer 2018, when Rob Stringer made the unexpected announcement that Sony would be paying through over $250 million to artists from its Spotify share sale, while ignoring these acts’ unrecouped balances.
Warner Music Group didn’t do the same, continuing to allocate its Spotify equity money against unrecouped artist accounts. It was a more selfish look, but it bulked up WMG’s coffers.
Universal went in a different direction. In November 2018, UMG, like Sony before it, publicly committed to ignoring unrecouped balances when it sold its Spotify stakeholding. (UMG still hasn’t sold that stakeholding; its current value is about $1.6 billion).
Universal didn’t issue a standard press announcement to confirm this plan. Instead, Taylor Swift announced it as part of her new Republic Records deal, suggesting it was the most vital component of her fresh agreement with UMG. “There was one condition which meant more to me than any other deal point,” wrote Swift at the time. “As part of my new contract with Universal Music Group, I asked that any sale of their Spotify shares result in a distribution of money to their artists, non-recoupable.”
Far be it for MBW to suggest this was all a fictional scripted distraction tactic concocted by UMG and the artist (one that directly amplified Swift’s own key brand attributes of being a savvy business person unafraid to stand up to The Man).
Who knows? Swift may well have slammed fists on tables, overturned desks, and threateningly hovered pens over rival record contract offerings – as uncharacteristic beads of sweat abseiled down Sir Lucian Grainge‘s brow. Or maybe not.
Fact of the matter is: at the time, everyone was so dazzled by the Folklore artist’s version of events, most forgot to even contemplate that Universal’s Spotify payout policy was, in essence, an emulation of a pioneering move by its biggest rival.
This tale, ladies and gentlemen, is further proof that – as much criticism as they take out there – the major record companies don’t half contain some very clever brains.
Talking of major record companies and clever brains, this week also saw Universal Music Group announce a new alliance with independent music powerhouse, [PIAS].
UMG will be passing over a package of finance to Kenny Gates’ company, but won’t be getting equity in return… for now, at least.
In very-possibly-not-unrelated-but-also-possibly-unrelated news: Until the second half of 2022, UMG is banned from buying into any assets (and signing any artists) that the European Commission forced it to dispose of in the wake of its acquisition of EMI Music in 2012.
Elsewhere this week, Believe floated on the Euronext Paris stock exchange, as video gaming phenom Roblox began a legal tussle with music publishers following a $200 million-plus lawsuit by the latter against the former.
Read on to catch up on MBW’s biggest stories from the past five days…
1) IN HISTORIC MOVE, SONY MUSIC IS DISREGARDING UNRECOUPED BALANCES FOR HERITAGE CATALOG ARTISTS
Sony Music has today (June 11) made an announcement that will be talked about by the music business for years to come.
In a letter sent to thousands of artists today and obtained by MBW, Sony Music Entertainment (SME) has announced the launch of a new initiative called “Artists Forward”, which it says focuses on “prioritizing transparency with creators in all aspects of their development”.
SME’s landmark new policy under “Artists Forward” is called the Legacy Unrecouped Balance Program. The letter confirms: “As part of our continuing focus on developing new financial opportunities for creators, we will no longer apply existing unrecouped balances to artist and participant earnings generated on or after January 1, 2021 for eligible artists and participants globally who signed to SME prior to the year 2000 and have not received an advance from the year 2000 forward.”
2) Universal Music Group and [PIAS] strike strategic global alliance
Independent music company [PIAS] and Universal Music Group (UMG) have struck a strategic global alliance.
As part of the deal, Universal has committed to providing [PIAS] with an undisclosed package of funding. In return, UMG will be able to access [PIAS]’s international distribution network through its recently rebranded distribution and services division, [Integral].
Unusually for a deal like this, Universal Music Group isn’t taking an equity stake, even a minority equity stake, in [PIAS]: The indie company remains fully controlled by [PIAS] co-founders, Kenny Gates and Michel Lambot.
3) Believe is a public company, as CEO Denis Ladegaillerie rings bell on Paris stock market debut
Yesterday (June 10), distribution and services company Believe officially went public today (June 10), debuting on the Paris Euronext.
The company floated 14.35% of its equity via its IPO, raising €300 million in the process.
Subsequent to the IPO, TCV will continue to own 41.67% of Believe, while the music company’s founder and CEO, Denis Ladegaillerie, will own 12.62%. Another major shareholder, Ventech, will own 17.08%.
4) ROBLOX SAYS $200M+ COPYRIGHT LAWSUIT IS BASED ON A ‘FUNDAMENTAL MISUNDERSTANDING’. MUSIC PUBLISHERS DISAGREE.
Video gaming platform Roblox has responded to being hit with a $200 million-plus copyright infringement lawsuit from music publishers in the US, noting its “surprise and disappointment” at being sued.
News of that lawsuit broke yesterday (June 9). It’s being spearheaded by the National Music Publishers’ Association, and backed by indie and major publishers such as Concord, Downtown, Kobalt, Hipgnosis, Reservoir, and Universal Music Publishing Group.
Responding to the accusation of widespread music copyright infringement on its platform, a Roblox spokesperson told MBW: “As a platform powered by a community of creators, we are passionate about protecting intellectual property rights – from independent artists and songwriters, to music labels and publishers – and require all Roblox community members to abide by our Community Rules.”
5) SNOOP DOGG JOINS DEF JAM AS EXECUTIVE CREATIVE AND STRATEGIC CONSULTANT
Calvin Cordozar Broadus Jr., professionally known as Snoop Dogg, is joining Def Jam as Executive Creative and Strategic Consultant.
With an immediate focus on A&R and creative development, Snoop Dogg’s new role at the label will see him act as a senior strategic advisor.
He is based in Los Angeles and reports to Universal Music Group Chairman & CEO Sir Lucian Grainge and Def Jam interim Chairman and CEO Jeffrey Harleston.
MBW’s Weekly Round-Up is supported by Centtrip, which helps over 500 of the world’s best-selling artists maximise their income and reduce their touring costs.Music Business Worldwide