Managers react to leaked Sony and Spotify contract

bw_Volker_200x281A host of music managers have signed an open letter (which you can read here) to European policy makers after running out of patience with “out of date, redundant formats and business models”.

The International Music Managers Forum raises concerns over the “impossibility” of ensuring artists are fairly remunerated for their work in the digital world, commenting on terms revealed within Sony’s contract with Spotify that leaked earlier this week.

In the contract, the IMMF points out that Sony earns ‘Advertising Inventory’ – meaning free and discounted advertising – as well as a sizeable advance (up to $42.5m over three years).

Overall, Sony benefits from lower marketing costs, a big chunk of guaranteed income every year (with question marks over how much is distributed to artists) and also owns a share in Spotify.

“Should this alter the basis upon which royalties are shared between labels and artists?” asks the IMMF.

Speaking to MBW, IMMF vice-chair, Volker May (pictured), explained: “The labels are getting all manner of collateral benefits from supplying the artists music to digital platforms, benefits which are not shared with the artists (performers or writers).

“It’s not like black-box income [the cash that’s reportedly sitting unclaimed thanks to problems with data] which is by definition, unidentified. These collateral benefits are like payment in kind.”

However, the ability to counter what Volker May calls “out of date, redundant formats and business models” is a losing battle thanks to “the relative weakness of artists in terms of negotiating with other industry stakeholders”.

“This makes it extremely difficult for artists and their representatives to lead modernisation in the music industry. We see the opportunity of digital and we want to grasp it,” adds the letter.

The answer lies outside the music industry, says Volker May.

“At some point we will all have to put our hands up and ask for outside intervention,” she added. “Be that alternative methods of distribution, or intervention by policy makers. We addressed our open letter to policy makers not to the labels, so that gives some insight into how we are running out of patience with the old back office systems evolving.

“There are two awkward counter-intuitive phenomena in the digital music age: i) royalty statements have not become any easier to verify, and ii) the stage at which risk capital is investing in artists is later in their careers, whereas generally digital has freed up investment.

“It’s hard not to see a link. This should be of interest to policy makers who are interested in seeing a diverse and open market for music creators to trade in.”

Volker May hopes the future holds simplified licensing, “where users of music know where to buy music rights, and the terms for licensing music reflect the licensing of music on a granular level, and labels and publishers compete based on transparency, there are some out there already.

“A lot of the issues in the music industry arise from the failure to fully seize the digital opportunity to restructure business practices and deal terms to reflect the changed environment,” he added.

“Opening up music finances and revenue streams for artists would make it easier for more artists to share more music with more consumers, this means more competition. Is competition something the labels embrace?

“Without the music the label has nothing to sell, without an agreement to pay the artist, the label does not have the music. We want labels to monetise music, we just want them to ensure that when they do so, as per their deals with the artists for the music, they share all income with the artists.”

In a statement, Sony replied to the managers’ letter, saying: “Sony Music historically has shared digital breakage with its artists, and voluntarily credits breakage from all digital services to artist accounts.

“Under the Sony Music ‘Breakage Policy,’ SME shares with its recording artists all unallocated income from advances, non-recoupable payments and minimum revenue guarantees that Sony Music receives under its digital distribution deals.

“This applies to all revenue under digital catalog distribution agreements, whether or not the guarantees, advances or ‘flat’ payments can be associated with individual master transactions.”

Read the IMMF’s Open letter on ‘Record Label and Music Publisher Deals in the Digital Market’ through this link

 Music Business Worldwide

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