In June, protests erupted in the music industry as record executives questioned the company’s long history of racial inequity. Ron Sweeney, a seasoned music lawyer, came up with a proposal that he said could help labels begin to atone for past injustices: “Regarding black artists who signed you before 2000,” he said. he writes, “… and let their royalties flow to them so they can support themselves.”
Sony Music Entertainment appeared to be taking a step in that direction for all of its historical performers on Thursday. In a letter addressed to the partners of the company obtained by Rolling stone, Sony said it “will no longer apply existing unrecovered balances to performers and attendee income generated on or after January 1, 2021 for eligible performers and attendees.”
While the word “unrecovered” may make some eyes glow, the term can be of crucial importance to artists. Traditionally, when an artist signs an agreement with a record company, that company pays them a deposit. The label may also promise other forms of financial support, from covering recording costs to marketing budgets to funding a radio campaign.
However, artists will only receive royalties on their album. after the exit allows the label to recover its initial investment or to recover. (Although in some cases all costs incurred by the label may not be recoverable, depending on the artist’s influence in negotiating a deal.)
Deeds can be focused on maximizing the size of their prepayment – both because it is immediate cash, and also potentially because it gives them bragging rights in an industry where the hype is the motto – rather than their long term earning potential. This is where recovery begins to cause headaches.
To recoup a recording contract at a traditional music industry royalty rate – in recent years managers say it’s probably between 15 and 20 percent – an artist must have significant commercial success. According to a Record Deal Simulator set up by the CreateSafe company, if a label signs an artist for a 20% royalty and distributes $ 1,000,000, the artist must generate 1.3 billion streams – which is not no big deal – before royalties can be generated. If actions do not exceed this threshold, streams will not earn them any new income.
Sony has not said it will “wipe out” unrecovered balances, as Sweeney suggested, and the company has made it clear it is not “changing existing contracts.” However, in an effort to “create[e] more payment opportunities for our long-time artists… worldwide, “Sony has pledged to” pay on existing unrecovered balances to increase the ability of those who qualify to receive more usage money of their music ”.
In order for an artist to start receiving royalties even if they are not recovered, the deed must have signed with a Sony company before 2000. In addition, artists must not have received a deposit from the company since 2000. The letter does not say how many artists would be affected or how much money would start going to artists under the new plan.
There is precedent in the music industry for transferring royalties or other forms of income to artists even though they are still in debt to their labels. Beggars Group, which includes a large group of independent labels, said Rolling stone Last year that it resets unrecovered balances 15 years after the company has terminated its active relationship with an artist, allowing royalties to begin being paid to that act.
Additionally, Sony and Universal Music Group have said that when they sell their shares in Spotify, a portion of the profits will be distributed to artists regardless of their recovery status. Sony sold about half of its shares in the streaming giant in 2018.