In the following MBW blog, Nick Lawrence (pictured), founder of UK-based business management and accountancy firm BigStar, explains why he believes that modernization of the royalties system is long overdue.
Hustle is a strong word to use. And if there was a royalties hustle going on in the entertainment industry… well you might expect the accountant to be in on it, right?
But here’s the thing, any accountant (or business managers, for our friends over in the US) worth their salt knows that they earn a better living when the industry’s in good health. When the financial mechanics in motion are fair, and people get paid properly, on time, in full.
And when I say people, I mainly mean the artists. Those who provide the baseline talent upon which the whole ecosystem is built. After all, without the artists, there is no industry.
Which is exactly why I’m bringing it up. I run an accountancy and business management business and work with artists from across the spectrum of entertainment.
A mix of big, established names, and those who have it all ahead of them. And, aside from just making sure my client’s finances are in the black, I genuinely care about their careers, their ambition, and that the industry treats them correctly. So the whole royalties situation vexes me.
The problem isn’t the amounts. It’s not even that the timings and distribution of the royalties is so tightly controlled (although that is a part of it). It’s the fact that the artists don’t have control.
They don’t have a say on when they get paid, even though it’s their hard earned cash. Nor are they afforded full transparency of a payment: the understanding exactly how the amount in their account relates to what they might be owed. Instead they are tied into an antiquated system that just hasn’t evolved with the world.
“There is the perception that royalties are ‘perks’ of the industry – and indulgence for a cushy, glamorous career. But frankly, that’s rubbish.”
I think perhaps there is the perception that royalties are ‘perks’ of the industry – and indulgence for a cushy, glamorous career. But frankly, that’s rubbish. Royalties are the equivalent of wages hard earnt, a delayed recompense for hours of graft: the writing and playing and rehearsing and gigging, often for many years before they get sight of any money at all.
I appreciate that they aren’t the only means of income for an artist, but imagine if your wages were only paid twice (or, at best, quarterly) a year. Well, that’s very much the system we have at the moment in the music industry.
And this whole issue is brought into sharp focus during pandemic times, which has essentially cut off many of those other means of regular revenue (live tours and the festival circuit).
Two paydays a year just isn’t enough. Of course, if you’re an artist who already has a profile and an established fanbase, perhaps you can make those two paydays last. Or perhaps royalties don’t matter so much in the midst of the other commercials deals you have in place.
But what if you’re up and coming, making your way, potentially on the verge of a breakthrough? And what if those bi-annual or quarterly paydays don’t correspond with when you need to pay your bills, whatever they might be?
You may have all the money you need on the way for work that you’ve already done, but for essentially arbitrary reasons you’re not allowed to have it yet. What might otherwise be a minor cash flow headache might just become a career-ending migraine. And that just seems like a massive waste of talent.
Now, just in case you think I’m being blinkered or unreasonable… yes I know that calculating royalties is a major undertaking. And yes I know you need specialists who are able to do it. But even so, the payment timings are arbitrary. I won’t go as far to say there’s some nefarious reason behind it, but I will say that the simple fact that it hasn’t modernised is tantamount to a hustle – a way of bulldozing artists into a financial structure they have no say in, and are held to simply as a consequence of doing what they love.
“The lack of transparency is the antithesis of good modern financial practice.”
Worse still, the lack of transparency is the antithesis of good modern financial practice. At BigStar, we give our clients full cloud access to all accounts at all times so they can see exactly what’s coming in and going out.
By contrast, when a royalty payment comes in, often you have no idea why that figure is what it is, or the fees it may have incurred on the way. And aside from preventing either artist or accountant/manager from checking everything as it should be, it also has other knock-on effects, such as making accurate financial forecasting extremely tricky.
Which I guess brings me to the bit where I propose a solution – if what i’m about to say constitutes a solution. To my mind, it’s just a few obvious improvements. Firstly, modernisation. It’s totally overdue. The whole thing needs to be made fully transparent to all parties, and give true agency to the people who it should be designed to serve: the artists.
They should absolutely have a say on the means, frequency and calculation of payment. The slow (but by no means common) shift to quarterly payments is inching in the right direction, but there’s no reason why it shouldn’t be monthly. It should. And by the way, none of this represents innovative thinking; it’s nothing that a thousand people haven’t thought of before. But that doesn’t make the need for change any less necessary.
And in case you were wondering.. yes I do have vested interest in all of this. Just maybe not the one you think. Changing the royalties system won’t mean I get paid any more. What it will mean is that artists on my roster – and especially those working hard towards a breakthrough – won’t have this outdated and unnecessary financial system to hurdle while building their careers. In other words, they can be that bit freer to concentrate on what they do best.
And that’s good for everybody, me included.Music Business Worldwide