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Managers welcome label commitments on breakage

By Chris Cooke | Published on Friday 5 June 2015

Following much chatter of late around so called ‘breakage’ in the digital music space, the Music Managers Forum has welcomed commitments made by all three majors to share unallocated advances paid by streaming services with their artists.

As previously reported, the spotlight was put back on the advances streaming services pay to the big music rights owners when an old Sony/Spotify contract was leaked last month.

The multi-million dollar advances are recoupable for the streaming services, but non-refundable, which means if it turns out the royalties owed to the label in any one year, based on revenue share or per-play minimum rates, are less than the advance already paid, the record company pockets the difference. This cash is the ‘breakage’. But does it share that extra loot with its artists pro-rata based on what music was actually streamed?

Warner Music has long insisted it shares this money with its acts (and breakage payments have cropped up on royalty statements), while the many indies which signed up to the World Independent Network’s Fair Digital Deals Declaration last July also committed to “account to artists a good-faith pro-rata share of any revenues and other compensation from digital services that stem from the monetisation of recordings but are not attributed to specific recordings or performances”, which would include breakage.

Sony and Universal have generally been quieter on the issue. But almost as soon as its Spotify contract leaked, Sony put out a statement insisting it was sharing those big bucks advances with artists. And this week Universal Music – now the odd one out – likewise officially stated it was a breakage sharer.

Then a memo from Universal Music Publishing outlining how the American publishers’ direct deals with the streaming services will work – if US regulators allow them to start licensing digital directly – stressed that “we will adhere to a standard of transparency with our performance rights licenses by sharing with our songwriters terms and all monies under such licenses” including “unearned advances”.

With pretty much all the rights owners now committing to share breakage, the UK’s Music Managers Forum said yesterday: “[We] welcome the addition of Universal Music Group and Universal Publishing to the list of companies that will pay breakage to artists. Warner Music, Sony Music and the independents who signed the WIN charter have been doing the right thing in this area already – some for up to six years. The change comes as the voice of the artist has taken centre stage with public statements from the newly formed International Artists Organisation after years of campaigning by the [UK’s] MMF and the Featured Artists Coalition”.

The statement goes on: “Many have spoken as the voice of the creator in recent years but the only people who can realistically make that claim are the artists themselves. The IAO have our full support in carrying out this task and shining the light of transparency in all the dark corners of a music business that would not exist without artists’ creativity. We hope that we are seeing a new beginning and welcome an open discussion – however difficult – of all the issues that concern us and to replace a broken ecosystem with one that recognises the value that all parties bring to the table”.

The statement concludes: “It is said you can’t make an omelette without breaking a few eggs. We want to see more eggs broken and put to work baking a bigger pie that is sliced up fairly – with all the ingredients in it”.

All three majors going public on breakage shows that the big music rights owners are feeling the heat in the ‘transparency’ debate, though much about the way digital services are licensed remains unclear. Including what exactly “sharing breakage” means, and how far back the sharing goes, given advances exceeded actual streaming income way more in the early days of those services.

If and when Spotify rolls on with its IPO, the equity the labels have in the service will be contentious once again in the artist and songwriter community. So, if we’re going stick with the MMF’s metaphor, there are still plenty more eggs to break. Especially now Bieber’s stopped throwing them all at his neighbour’s house.

But hey, this is BBC Music Day, people! It’s no time for breaking eggs. Let’s all hold hands for once and hum ‘Bohemian Rhapsody’. See, everything seems much better now, doesn’t it?