Universal Music Confirms It Will Begin Paying Royalties To Unrecovered Heritage Artists
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By Chris Cooke | Posted on Friday, April 1, 2022
Universal Music has, as expected, confirmed that it is following the lead of its major label rivals, who in turn have followed the lead of some independent labels, by pledging to pay through royalties to artists on the heritage not recovered. The mega-major lists its commitment in this area in its 2021 annual report, published yesterday.
When artists sign with labels, they usually receive a cash advance which is then recoupable from royalties subsequently owed to them under their recording contract. Depending on the specifics of this agreement, some of the other initial costs covered by the label may also be recoverable. This means that when the artist’s records start making money, the artist’s share of that money – which is often a minority share – initially pays off any unrecovered balance.
It can take years for this unrecovered balance to be paid off. Indeed, in many cases, the artist never “recoups”, meaning that the artist’s tangible income from these recordings is any monies advanced by the label and any remuneration that the artist is directly owed under copyright law through the collective licensing system (which relates to the broadcast and public performance of music).
Of course, a label would argue that the artist’s broader business also benefits from their investment and marketing, unlocking a load of other revenue streams, and that’s a valid argument.
Nevertheless, unrecovered heritage artists are often harmed when they see their label earning from their catalogs while their share of the money is still used to pay off old debts. And all the more so in the age of streaming, where the catalog has become extremely valuable, primarily as a quirk of the business model.
This led to calls from the artist community for uncollected balances to be canceled after a period of time. Notably, because a label usually realizes a profit on an artist’s investment long before the artist actually recoups, because on a conventional deal, the label gets the majority of the revenue from the recordings. Some Indies have led the charge in this area, with Beggars notably known for writing off unrecovered balances after fifteen years.
Sony Music was the first major company to commit to unrecovered heritage artists, smartly announcing its intention as the UK Parliament’s Culture Select Committee was still working on its big report on the streaming economy. It hasn’t technically canceled unrecovered balances like Beggars, but it does pay royalties to unrecovered heritage artists whose contracts predate 2000.
This was welcomed by the select committee, which wrote in its final report: “In a positive move, Sony recently announced that it would ‘pay from existing unrecovered balances to increase the ability of those who qualify to receive more money from the use of their music’ for deals made before 2000, although at the time of writing Universal and Warner have not followed suit.”
“We urge Universal and Warner,” the report continues, “to revisit the issue of unclaimed balances with a view to allowing more of their legacy artists to receive payments when their music is streamed.”
Warner Music then announced that it was making essentially the same commitment as Sony via a report on environmental social governance it released in February. At that time, Universal insiders reported that a similar pledge would appear in the Environmental Social Governance section of its then-compiling annual report.
And, indeed, it is. In a section dedicated to Universal’s environmental, diversity and artist wellness initiatives, the mega-major also announces the launch of a “goodwill program” that will allow it to pay royalties to “certain” artists. inherited with unclaimed balances.
“Continuing to build on a tradition of legacy artist support programs,” the annual report states, “in 2022, UMG is proud to launch a global goodwill program for select legacy featured artists and songwriters with unrecovered balances”.
“By not applying their unrecovered advances to royalty returns for any period beginning January 1, 2022,” it continues, “eligible creators and their immediate heirs who have not received any payments since January 1, 2000 will begin to receive royalties, subject to certain conditions. In the coming months, UMG will contact eligible artists and songwriters.”
If you’re wondering how Universal is an “industry leader” when it comes to supporting legacy artists, despite being late enough for royalty payments through unrecovered legacy deeds , the major’s annual report then brags about its previous artist support initiatives. . Well, one initiative in particular, really.
“As part of its previous artist support efforts,” the annual report continues, “in 2001, UMG donated $2 million to the R&B Foundation, creating the Motown/Universal Music Group Fund – enabling long-term continuity of Foundation financial assistance programs, such as in the form of grants to artists in need of financial and medical assistance”.
While obviously the devil is in the details regarding these commitments to pay royalties to unrecovered heritage artists, these commitments have nonetheless been well received by artists, songwriters and their managers.
Although these artists, songwriters, and managers usually point out that it’s just one of the many things they’ve been pushing for in recent years to make the music industry more artist-friendly.
Responding to Universal’s announcement, the CEOs of the UK’s Music Managers Forum and Featured Artists Coalition – Annabella Coldrick and David Martin respectively – said this morning: “CAF and MMF welcome this positive announcement from Universal Music Group”.
“The write-off of unrecovered balances should benefit many artists and songwriters who signed deals in the pre-digital era,” they added. “We look forward to seeing the full details of these proposals, as well as discussing the progress of other much-needed reforms to the recorded music market.”